Illegal Vacation Rental Owners Keep Breaking the Law with 30-Day Rental Scam!

At a recent Oahu Vacation Rental group meeting, illegal vacation rental owners and Realtors were distraught and angered when their attorney told them the bad news that their sham 30-day vacation rental model was illegal if they charged a daily rate or restricted their guest’s occupancy for less than 30 days. Many of the illegal vacation rental owners want to ignorantly believe that they are allowed to offer one short-term rental (less than 30 days) once a month, but the attorney said that’s not allowed and illegal vacation rentals would be violating the law if they did.

The attorney also disappointed the group when he told them their belief that the Honolulu Short-term Rental zoning law violates their constitutional property rights was bogus and has no legal merit. The attorney cited a 1926 US Supreme Court ruling (Euclid v. Ambler) that affirmed there was valid government interest in maintaining the character of a neighborhood and in regulating where certain land uses should occur, including short-term rental businesses.

Keep it Kailua has received numerous inquiries regarding the recent news that the DPP and the Kokua Coalition (dba Hawaii Vacation Rental Owners Association) signed a settlement agreement and what it means in regards to the recently adopted Short-term rental ordinances 19-18 and the so-called 30-day rental sham.

We asked our legal team to analyze the agreement and give their opinions.

Our legal team unanimously believes the Hawaii Vacation Rental Owners Association made a gigantic mistake in filing their lawsuit and their subsequent negotiations with the City. The court-approved agreement had no significant impact on the ordinances, but it did substantially strengthen the law and will help the DPP issue more violations and fines.
The new agreement (sanctioned by the Federal Court) declares unpermitted short-term rentals cannot offer a rental whose price is based on a less than 30-day occupancy. In other words, they must offer the property based upon a minimum “30-day” rental and any offer that is based upon less than 30 day occupancy is illegal.

The agreement stated “solicitations and offers to rent property violate Ordinance 19-18 if the price paid for the rental is determined, in whole or in part, by an anticipated or agreed upon occupancy of the property for less than thirty days”.
The agreement also specifies that it is illegal for the property owner or their representatives to limit the actual occupancy to less than 30 days or conditioned the right to occupy the premises for the 30-day rental period on the payment of additional consideration.

It’s only a matter of time that every vacationer will learn that they have the legal right to stay on a property for a minimum of 30-days, regardless of what price they pay, or what they told owners would be their expected arrival and departure dates.

According to the agreement, renters are also allowed to leave a property at any time during a 30-day period, but they also have the right to reenter property during the same 30 day period and no other party, including the owners, are allowed to utilize the rental property.

This is a detail many unscrupulous Realtors and Illegal vacation rentals owners have not been disclosing to the renters. The owner and their representatives will try to trick the renters into giving them their arrival and departure dates. They then will quote the illegal vacation rental based upon the guest’s estimated length of stay, but not explain to them they are actually renting for 30 days. This trick gives the renters the impression that they are paying for a less than 30-day rental, which of course fits their travel plans and makes the lodging more attractive than staying in legal accommodations.

Only after the renters have committed to the short-term rental, do the owners or Realtors request the renters to sign a 30-day rental agreement, which they call a “formality” required by the City zoning laws. The rental agreement’s start and finish date is made after the trip is agreed upon and is at the discretion of the property owner or their representative, not the guests. One of the unethical tricks proposed at the recent Illegal vacation rental meeting was to slyly make the ending date of a fraudulent 30-day contract the same date the short-term rental guests proposed to depart. That way if the guests find out that they are entitled to stay longer on the property during their stay, it will be too late for them to do anything legally about it.

Of course, this scam and deception is illegal. It not only breaks City and County Zoning laws, but we also believe it is in violation of State of Hawaii statutes for deceiving the consumer and violates Landlord-tenant laws. We recommend complaints be direct to not only the DPP, but also the State Consumer Affairs office and the Regulated Industries Complaints Office (RICO).

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Lawsuit is Frivolous

In our opinion, the recent lawsuit filed by the Hawaii Vacation Rental Owners Association (HVROA) vs. the City & County of Honolulu is frivolous and has no merit.

It appears to us the purpose of the lawsuit is a desperate attempt to delay the enforcement actions by the City against illegal vacation rental owners and the unscrupulous Realtors who manage them.

The lawsuit is actually a “Motion” for a temporary restraining order (TRO) to delay the City from enacting the new enforcement ordinances (19-18 Bill 89) against illegal vacation rentals (which have been illegal since 1987). We believe there is no actual legal “complaint” against the ordinance and a Judge shouldn’t entertain this motion unless it was connected to an actual challenge to the ordinance. We don’t see any valid cause for action.

Overall, HVROA has little going for them and they use a lot of attorney “double-talk” to try to make a case.

A major portion of the suit claims the new ordinances and/or DPP regulations cause legal long-term rentals (30-days plus) to be “illegal” if tenants are not physically on the property for 30 consecutive days. This is absolutely ridiculous. No Honolulu ordinances or DPP Administrative regulations make legal long-term rental illegal. The HVROA lawsuit cites the following Q&A section of the DPP’s website:

Question: To comply with the law, people will be advertising only 30-day stays. But, in follow-up conversations, they will offer daily and weekly stays. How will you know who’s doing this to skirt the law?

Answer: Advertising is a new violation, but actually staying in a home for less than 30 days is still a violation. The DPP will continue to monitor for occupancy violations. Also, just as a caution to homeowners, Governor David Ige recently signed House Bill No. 807 (Act 114), which makes it a misdemeanor offense to knowingly make a false statement to a county inspector.

Obviously, the DPP’s Q&A’s are not the verbiage of the Land-Use Ordinances and are also not DPP’s administrative regulations. Even HVROA lawyer, Greg Kugle, admitted the new ordinance appears to allow 30-day rentals according to a Star-Advertiser article. It’s pretty clear the Q&A is only meant to be informative and help explain the new ordinance and indicate how certain situations would be affected. The average person would understand the DPP would consider the length of stay of a visitor as evidence of a less than a 30-day rental, but additional evidence may be necessary to issue a violation (short-term rental ads, confession by the guests, etc…). In our opinion, HVROA claims that a Q&A on a website is statutory in nature is rather idiotic!

The DPP and Corporate Counsel has repeatedly stated to the public that tenants of a long-term rental are not required to be physically on a property for 30 days or longer in order to not be considered a short-term rental, but the tenants must be given full possession and tenant rights to the property at an agreed-upon lump sum for at least 30 days. They can come and go as they please for at least 30 days and there can not be any additional rental or rental fees based upon the length of stay for at least a month.

Sadly, we have observed numerous illegal vacation rental owners and unscrupulous Realtors offer and create fraudulent 30-day contracts or other unlawful schemes to hide a less than a 30-day rental. If the evidence proves the contracts are fraudulent and/or a property owner/agent knowingly offers or provides a short-term rental, then a notice of violation should be issued.

The motion for a TRO should be denied by the Court and illegal vacation rental owners should simply stop breaking the law or face significant fines for their actions!

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LYING TO A DPP INSPECTOR JUST GOT SERIOUS!

On Jun 25, 2019, Governor Ige signed Act 114 that makes all false statements in written, printed, electronic, or oral form, to a state investigator or a county inspector during an investigation into compliance with any state law, rule, or regulation or any county ordinance, rule, or regulation a State violation. (Haw. Rev. Stat. §710-1063.)

The violation is punishable by up to 30 days in jail and a fine of up to $1,000. (Haw. Rev. Stat. § 706-640, §706-663.).

The new law will apply to guests, property owners, and Realtors who lie to the Department of Planning & Permitting (DPP) inspectors during illegal vacation rental investigations.

It was a common practice for illegal vacation rental owners and property managers to tell their guests to lie to DPP inspectors and claim they were “non-paying” friends or family visiting Hawaii.

Realtors will not only face stiff fines and sentences but will certainly lose their Real Estate and Brokers licenses as well.

We thank the Governor and the State Legislature for passing this important new law that will help us regain our residential neighborhoods!

 

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IT’S THE LAW!

Bill 89 was signed by Mayor Caldwell (Passed by the City Council 9-0) on June 25th. We believe it will make a significant impact on the enforcement actions of the City against illegal vacation rentals. The majority of the enforcement actions by the Department of Planning and Permitting (DPP) will take effect on August 1st, 2019 unless another date is stated for that provision. Here is a summary from our legal team on how the enforcement measures in the new Land-Use Ordinances (LUO) will work:

  • Advertising, soliciting, offering, and/or knowingly providing an illegal rental is a civil violation: The previous land-use ordinances required the DPP to actually physically catch someone renting an illegal vacation rental and prove they compensated the owners.
  • Property owners who list their properties on social media or any advertisements as a short-term rental must display their non-conforming certificate (NUC) permit number or their registered B&B number (new permits will not be issued till Oct. 2020) or face a violation and fines between $1000 to $10,000: The previous LUO had no advertising requirements and advertisements could not be used solely for issuing a violation.
  • The existence of a short-term rental advertisement will be prima facie evidence and the burden of proof is on the owner to establish that the property is not being used as an illegal short-term rental: This provision places the burden on the property owner to prove they are not advertising an illegal vacation rental.
  • Advertisement means any form of communication, promotion, or solicitation, including but not limited to electronic media, direct mail. newspapers, magazines, flyers, handbills, television commercials, radio commercials, signage, e-mail, internet websites, text messages, verbal communications, or similar displays, intended or used to induce, encourage, or persuade the public to enter into a contract for the use or occupancy of a bed and breakfast home or transient vacation unit: The advertisement definition enables the DPP to not only utilize website advertisements as evidence for issuing a violation but all forms of solicitation which will require a permit or NUC number.
  • Realtors and Illegal vacation rental owners cannot create fraudulent 30-day contracts, intently provide less than 30-day rentals by giving refunds or rebates, rent a “short-term rental” once every month, or create schemes that exclusively “reserve” a property for 30 days, but is not a 30-day rental: All of these scams were illegal in previous ordinances, but it was difficult for the DPP to prove. The new ordinances make any solicitation of these scams a violation.
  • Property owners will receive a $1000 fine for their first violation: The previous LUO required the DPP to issue at least two separate violations before a fine could be issued.
  • Recurring Violations will escalate to $10,000 per day and the DPP director may impose an additional fine in an amount equal to the total sum received by the owner for operating an illegal short-term rental: The previous land-use ordinance was limited to only a $1000 fine and many illegal vacation rental operators looked at the fines as the cost of doing business.
  • All hosting platforms must only offer “permitted” short-term rentals on their website and must submit monthly records of their listed short-term rentals to the DPP (takes effect Oct. 2020): This provision will not be implemented till October 2020. Airbnb and Expedia have threatened to sue the City for this provision, but it appears they cannot sue until the provision takes effect in 2020. Hopefully, most of the illegal vacation rentals will be shut down by then. The provision was modeled after Santa Monica’s zoning laws that the US 9th Circuit Court has already upheld. The US 9th Circuit Court is the same court that would likely adjudicate a Honolulu lawsuit. Most legal experts believe any lawsuits from Airbnb, Expedia, and illegal vacation rentals owners will have little merit.
  • If any provision of this ordinance is held invalid, the invalidity does not affect other provisions or applications of the ordinance: This is called a “Severability clause” and if a single provision is invalidated for any reason, the other enforcement measures will still be enforceable.
  • Any LUO violations that involve a Realtor may be submitted to the State of Hawaii Regulated Industries Complaints Office (RICO). Realtors and brokers can have their licenses revoked and face significant fines.

Land Use Ordinances are the law and cannot be modified or changed unless done so by the City Council and signed by the Mayor. Amending land-use ordinances is a very long and difficult process. The likelihood that there could be any significant changes in LUO such as additional permitting of TVU’s, etc.. in the next 5 years is highly unlikely.

 

 

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The Fake 30-Day Lease Vacation Rental Scam

Here is how some shady Realtors and illegal vacation rental owners are trying to scam the City Officials and avoid violations with fake 30-lease contracts.

The following is the “fine-print” found in some unscrupulous Oahu Real Estate Firms’ lease agreements:

SPECIAL TERMS FOR OAHU 30-DAY RENTALS ONLY

LAND USE ORDINANCE COMPLIANCE: In accordance with City and County of Honolulu Land Use Ordinance section 21-10.1, this property is provided to you, exclusively, for a period of 30 days or greater. You are electing to occupy this property for the exact days outlined in the booking details. By law, the property cannot be rented to or occupied by other tenants during any portion of the 30-day term. If you should choose to occupy the property for additional nights within the 30-day rental term, a full payment of any additional charges must be made prior to such occupancy. We (Realtors) may modify the actual dates of the 30-day or longer Rental Period at its discretion up until the Arrival Date.

PROPERTY USAGE CHARGE: Guest understands and agrees that the Rental Charges are determined based on Guest’s planned Arrival and Departure dates, and that Owner and Agent incur significant costs based on the number of days that Guest actually occupies and uses the Property. Guest further understands and agrees that in the event that they occupy the Property for more days than specified, based on the Arrival Date and Departure Date, that Guest will pay an additional Property Usage Charge, plus state and county General Excise and Transient Accommodation Taxes thereon; and Guest authorizes Agent to charge their credit card on file for the full amount of that Property Usage Charge (if any), plus taxes, plus a Credit Card Processing Fee of 3.5%.

A Declaratory Ruling from the DPP Director said this is ILLEGAL!

The guest’s’ rental charge and their rights of possession of the property are restricted by their “planned Arrival and Departure dates”. And if they stay longer than their “planned Arrival and Departure dates”, they are charged a so-called “Property Usage Charge”

It’s time for the Board of Realtors, RICO and the State Attorney General to prosecute these Realtors!

Bills 85 & 89 (Menor version) will make these types of scams a violation. Please support these bills!

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PLEASE TESTIFY – Wednesday April 17th, 2019 at City Council Honolulu Hale – 10AM

Aloha Neighbors;

We need a strong showing of residents who want to keep Kailua a residential community.

These bills will set the future of our residential, agriculture and apartment zoned neighborhoods.  This is crunch time. We must all step up to the task of saving O’ahu’s Neighborhoods – that means attending  & submitting testimony at the hearing:

Honolulu Hale,  Council Chambers, Wednesday, April 17, 2019, 10:00 am

Click here for Meeting Agenda

Please Support  Bill 85 CD1  (14th public hearing item on agenda)

  • Will NOT allow more vacation rentals in our residential neighborhoods
  • Provides tools for the enforcement of illegal vacation rentals, including higher fines
  • Holds hosting platforms liable for listing illegal short-term rentals and requires them to remove illegal listings
  • Requires short-term rentals with non-conforming use certificates to list certificate number on all advertisements
  • Aims to protect housing for locals and not more tourists and out-of-state investors
  • Protects the residential character of our neighborhoods and our community
  • Stops tourism sprawl

Please Oppose Bill 89 CD1 (15th public hearing item on agenda)

  • Makes short-term rentals (mini-hotels) conforming land use in  residential zoning
  • Allows all residential properties to operate as a vacation rental for less than 30 days a year (with very little oversight)
  • Approximately 4,000 homes can be used as an owner-occupied short-term rental (fake B&B’s)  year-round
  • Long-term renters of ohana units, studios and in-law suites can be evicted for short-term rental use
  • Short-term rentals can cluster in neighborhoods with no distance separation
  • Increases housing costs, prices locals out of the market, and takes away affordable housing for LOCALS
  • Promotes tourism sprawl in residential communities and the country

Sign up to speak and submit testimony today

Please submit your testimony TWO ways:

1)  Sign up to speak & submit separate testimony for 85 CD1 (support) and 89 CD1 (oppose) through the Council click here for Internet submission form

2)  To be sure that the committee members see it in time, submit your testimony directly to each individual councilmember on the Planning Committee.  Cut & paste these into your address line:

kmpine@honolulu.gov  htsuneyoshi@honolulu.gov    ianderson@honolulu.gov

mformby@honolulu.gov  manahan@honolulu.gov  cafukunaga@honolulu.gov

akobayashi@honolulu.gov   belefante@honolulu.gov  rmenor@honolulu.gov

Please Attend the Hearing and testify in person – nothing is more persuasive.

Even if you do not register to speak, you may offer oral testimony – it will be requested by the Chair at the end of testimony.  Under the state Sunshine Law, you will be allowed to testify.

See you at the hearing.

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CRITICAL PLANNING COMMISSION HEARING

CRITICAL PLANNING COMMISSION HEARING
September 5, 2018 – 1:30 pm

Mission Memorial Building – 550 South King Street

The Honolulu Planning Commission will hear resolutions RES. 17-052 CD1, RES. 17-163, RES. 17-164, RES. 17-301, and Mayor Caldwell/Department. of Planning & Permitting (DPP) Omnibus Bill.

Each resolution will be voted “recommended” or “not recommended” by the Planning Commission on its own merits. Regardless of the outcome of those votes, they will all be forwarded to the Honolulu City Council and entered as bills. Those having been ‘recommended’ by the Planning Commission need only a 5-4 Council majority to pass and those ‘not recommended’ need a 6-3 super-majority to pass the Council.

These 5 proposals were made by Honolulu City Council and the Honolulu Dept. of Planning & Permitting and addresses the issue of short-term rental businesses in our single-family residential and apartment neighborhoods.

Keep it Kailua supports RES. 17-052 CD1 and RES. 17-164 that add enforcement tools to assist the DPP with shutting down illegal vacation rentals and reverses the loss of homes in our neighborhoods. We oppose RES. 17-163, RES. 17-301 and DPP Omnibus Bill that will allow the proliferation of “so-called” B&B’s and vacation rentals in our residential and apartment neighborhoods. Keep it Kailua and other residential housing advocates are trying to protect Oʻahu’s housing stock and our community’s residential character. We recommend these three proposals be voted down so that they would need a 6-3 super-majority to pass the Honolulu Council.

Please do the following:

1.) Submit written testimony to the Planning Commission in opposition to 17-163, 17-301, and DPP Omnibus and in support of 17-52 and 17-164. This must be done by Friday, August 31 3:30 pm at the very latest. The easy way is to email it directly to info@honoluludpp.org

In the subject line of your testimony, state “Support 17-52 CD1 and 17-164 and Oppose the 17-163, 17-301 and the DPP Omnibus Bill”. State your reasons in the text body of your email. Focus on how vacation rentals (non-owner occupied and owner-occupied) reduce the housing supply for residents and raises housing costs for everyone. Please do this today!

2.) Attend the Wednesday 9/5/18 hearing – and express your support for 17-52 CD1 and 17-164 and your opposition the 17-163, 17-301 and the DPP Omnibus Bill. This is very important, so don’t be shy. It will take many voices with similar messages to convince the Planning Commission to do the right thing. But they will listen!

Please Share!

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Hawaii’s Housing Experts Claim: “Airbnb is distorting the truth to promote its financial interests”.

No Airbnb2


Star-Advertiser
Editorial – Island Voices

By Reverend Bob Nakata of the Faith Action for Community Equity, Victor Geminiani of Hawai‘i Appleseed Center for Law and Economic Justice, and Rene Berthiaume of Hawaiihousing.org

February 12, 2017

Airbnb is a $30 billion behemoth whose business model has depended on ignoring local regulations in the name of growth and profit. It claims the number of vacation rentals in Hawaii is minuscule compared with the total number of housing units, but in fact, that total number is irrelevant. The appropriate comparison is how many units are needed to house our residents.

A recent report by the state Department of Economic Development and Tourism determined Hawaii will need 65,000 more homes by 2025.

That estimation is similar to the Hawaii Housing Finance and Development Corporation’s (HHFDC)’s projection that between 2015 and 2020, we have a housing shortage of 29,500 units. The Hawaii Tourism Authority estimates over 27,000 vacation rentals in the state are advertised online. The overwhelming number of these rentals are illegal. Every home used illegally as a visitor lodging business is one less home for our residents.

In tight housing markets with low vacancy rates, any reduction in supply naturally increases rents, particularly because neither the market nor the public sector can quickly add to housing stock. Airbnb indirectly reduces the affordable housing supply by reducing the overall housing supply of units available for long-term rentals.

A recent HHFDC report indicated an alarming drop in rental listings over the last three years for both multi-family and single-family units on all islands. In some areas, advertised rental housing listings have dropped by 80 percent, with the number of single-family listings in Kauai at less than 10 percent of the number available three years ago.

Another recent study by Honolulu’s Office of Community Services indicated that at 80 percent of occupancy, the average Airbnb unit in 2015 would bring in about 3.5 times more than for a long-term rental to local residents.

Now more than ever, we need state and county cooperation to ensure any housing, whatever the number of units, stays as residential. We need to encourage landlords to rent to residents trying to find affordable housing, rather than incentivize them to convert units to vacation rentals.

Airbnb lodgings are often concentrated in affluent neighborhoods that have long been gentrified, but are increasingly moving to areas often seen as local low-income housing. Last year, Airbnb solicited homeowners in Ewa Beach and Waianae to turn their houses into vacation rentals by direct-mailing postcards to residences. Increasingly, our beaches and public lands are being advertised on the site.

Airbnb claims that the majority of its rentals are only occasionally rented out and that low occupancy rates imply property owners are using the rentals as their residence. A close analysis shows a different picture. The majority of Airbnb’s lodging units are entire home rentals on Oahu that are being advertised as available year-round. While Airbnb portrays its owner-occupied units as a room or even a sofa that is occasionally rented, the vast majority are cottages, attached apartments and studios that could be rentals for residents.

Airbnb also claims that if allowed to collect the transient accommodations and general excise taxes from its short-term rentals, that would significantly increase tax revenue for the state. This is highly questionable. A 2015 San Francisco Office of Economic Analysis study found that for every 1,000 units lost to illegal short-term tourist rentals, the city’s economy loses more than $250 million each year, far exceeding benefits from taxes from visitor spending and vacation rentals. The loss of revenues comes via people dislocated due to unavailable housing.

The same factors would occur for Hawaii. In addition, taxes would still be collected by legitimate visitor lodging businesses and by owners collecting rents for long-term rentals to local residents.

Airbnb is distorting the truth to promote its financial interests. While some vacation rentals are not necessarily bad, the proliferation of TVUs brought about by online business models are taking away long-term units from our housing stock and harming our residents.

Reverend Bob Nakata of the Faith Action for Community Equity, Victor Geminiani of Hawai‘i Appleseed Center for Law and Economic Justice, and Rene Berthiaume of Hawaiihousing.org picked apart Airbnb’s report that claims illegal vacation rentals are “immaterial” to Hawaii’s residential housing market.

Housinghawaii Face Logo Appleseed logo

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Airbnb’s Dirty Tricks (nothing new)!

Laura-Thielen-wide-2My Vacation Rental Work-Group Bill Was Gutted and Replaced – Ouch!

March 23, 2017 By Senator Laura Thielen

The Airbnb and vacation rental bill is becoming one of the “down to the wire” bills that will be decided in the mysterious Conference Committee process.

But yesterday, things got a bit more interesting and, for me, a little personal.

In the first half of Session the House took Airbnb’s proposed bill, amended it a bit, and moved it to the Senate. Meanwhile, the Senate moved the Airbnb bill to Ways and Means, where it died. So Airbnb didn’t have a Senate bill move to the House.

But my vacation rental bill did go to the House. SB 704 established a working group of community, industry, vacation rental operators, state and county to identify:

How vacation rentals are affecting our housing market today, and if they keep up this growth rate, in the future.
How to protect state and county funded affordable rentals from becoming vacation rentals (it’s happening already folks – your tax dollars at work!).
How to manage vacation rentals in this Internet world.
How to protect safety of residents and visitors (disaster preparedness), and the Hawaii visitor brand.
Last week our Senate Committees posted the House Airbnb bill for a hearing. But the Senate Committee Chairs also posted a proposed Senate Draft 1. By doing this, everyone had notice before the hearing that the Senate was considering dramatically changing the bill. Everyone sees the changes. The public has the chance to testify at the hearing on BOTH the original bill and the proposed draft.

We held the Senate hearing yesterday, and voted to pass the Senate proposed draft, with some changes based on the public testimony.

Meanwhile, in the House… They posted notice to hear my vacation rental bill. Then at the hearing:

Your Committee has amended this measure by deleting its contents and inserting the substantive provisions of House Bill 1471.

Ouch.

Gut and replace, with no advance notice. My bill is now the Airbnb bill, as modified by the House.

If both bills pass their final committees, they will end up in conference committee. We’ll see what comes out. IMHO, this is an issue people will have to watch very closely up to the very end.

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Honolulu Department of Planning & Permitting issues $300,000+ fine

City seeks crackdown on illegal vacation rentals

http://www.hawaiinewsnow.com/story/32190357/exclusive-illegal-vacation-rental-fined-300k

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