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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