July 6, 2012 | Scott Innes
Mayor Alan Arakawa signed into law on May 25, 2012 the bill that establishes new regulations to allow short term rental home permits for private homes. It ends what has been a 20 year battle to set up regulations and a simplified permitting process. It creates a process that home owners can work within to comply. What was formerly known as “Transient Vacation Rentals” is now being called Short-term Rentals and regulated under Maui County Code, Chapter 19.65, Short-Term Rental Homes (Ordinance NO. 3941, Bill No. 35 (2012).

What does the new law mean for homeowners?
The short-term rental home permit is required to allow vacation rentals or short-term rentals in private homes. Applications are now being accepted at the Department of Planning. Stringent enforcement will go ahead after the initial application period to allow home owners time to comply with the law. There are benefits for applying for permits before the end of 2012 including allowing multiple permits for people with properties valued at over $3.2 Million Dollars, a waiver of the 500′ trigger that requires Planning Commission Review, and caps on the number of permits allowed in each area. After December 31, 2012 only one permit is allowed per person.

A Property Manager is required. If the property is not self-managed it requires a manager who has an active Hawaii real estate licensee and lives or has an office within 30 miles of the property.  
The permit holder can manage the property themselves or appoint an immediate family member as a property manager. They do not have to be a licensed agent if they manage the property themselves and live within 30 miles. If they don’t live within 30 miles they must hire a licensed Hawaii real estate agent whose home or office is located within 30 miles of the rental property. Most properties will need an agent. The property manager must answer the telephone at all times, be  physically present at the home within one hour following a request, enforce house policies, and collect all rental fees.

Taxes and Short-term Rental Homes
Homeowners must have GET and TAT tax licenses and file and pay State of Hawaii income taxes. If the property has a homeowners exemption they will lose it with this permit. The property tax class and tax rates have not yet been set but most likely will be the Hotel or a Commercial tax rate. For 2012 the commercial tax rate in Maui County is $6.90 per $1000 dollars of assessed value. The non-resident Residential rate for 2012 is $5.75 per $1000 of assessed value. For someone considering a Short-term Rental Home Permit they will want to talk to their CPA or tax advisor about the tax ramification of getting a permit.

Key Features of the Short-Term Rental Home permit
  • Applicant is a natural person, a trustee of a family trust, or a 25% member of a corporation or LLC with all members being related by blood, adoption, Marriage, or Civil Union
  • GET & TAT Taxes are paid on rental income
  • Maximum of two dwellings per lot are allowed
  • Maximum of six bedrooms on the property are allowed
  • Property must be at least 5 years ago (New homes do not qualify)
  • The entire structure can only be rented to one entity or group (no room rentals)
  • Only 1 permit per person (waived if applications submitted before 12/31/12)
  • Permit is non-transferable (except to immediate family members upon death)
Enforcement and Ramifications for Current Operators
Maui County is hiring two new enforcement officers to enforce the law. Current operators are not targeted initially to give them time to get in compliance and apply for the permit. If you are operating a short-term vacation rental in a private home you should start the process and apply for the permit before 12/31/12. Maui County monitors websites for short-term rentals in private homes. They have a list of all current operators and they know who you are. They will go after those operators who continue to operate and do not apply for permits. In the meantime, there is a grace period which will allow you to continue operating even though you don’t yet have a permit. The key fact being that you need to get the process started or they will come after you later. Once enforcement begins operators without permits will receive a first warning to take down any advertisement or website within 7 days. If it is not taken down they will receive a notice of violation with fines of up to $1000 per day and be banned from applying for a permit for 5 years.  If you are operating a short-term rental and you have a homeowners exemption (technically you should not) you will lose that property tax exemption and be subject to more taxes. If you are now operating and looking for a licensed real estate agent as a property manager, please contact us for help with the process.

Permit Application Process
The application process requires real planning and documentation. All requested documents must be included with the permit application or they will not accept it. The benefits of this new law is that permits are processed with less agency review and have a quicker turnaround time – estimated at 60-90 days unless Planning Commission review is required. A filing fee of $650 includes the first years permit and you can buy two more years at the time of application for $200 per year.  Permits will be automatically renewed at the end of the term if there have been no violations. The application package will need to include the following:
  • A Short-Term Rental Home Inspection Report by SSHI certified inspector or Department of Public Works Miscellaneous Inspection Report
  • A Site Plan of the property and Floor Plans of the structure(s) used for Short-term rentals
  • Notice of Filing mailed to all neighbors within 500′ of the property
  • Notification Sign posted on the Property
  • Submission of subdivision private conditions, covenants, or restrictions (CC&R’s) and a letter from the Homeowners Association
  • All building permits on file are complete. If not, you will need certification from a licensed architect or a Department of Public Works Miscellaneous Inspection Report certifying that the property meets building code standards when it was constructed.
  • Agricultural properties will need an extra Special Use Permit (SUPZ) from the State but no farm plan.
  • Planning Commission review is under certain circumstances and the permitting process will take longer.
Planning Commission review is required under certain triggers, usually if a number of neighbors protest or if there is an existing Short-Term Rental Home Permit holder within 500′ of the property (waived if you apply by 12/31/12). If 2 or more protests are from 2 or more adjacent neighbors, or if more the 30% protest with 500′ when there are more than 40 neighbor parcels, or if 15% protest within 500′ when there are less than 40 neighbor parcels, Planning Commission review is required including an opportunity for public testimony. Also, Planning Commission review is if there is a variance. Hana has an extra trigger for Planning Commission review if the property has more than 3 bedrooms.

Why Apply Now?
There are benefits for homeowners who apply for a permit before December 31, 2012. The law limits the number of permits to “one” per person. Applicants who apply before the end of the year can apply for an unlimited number of permits as long as all the properties are valued at $3.2 million or above. So, let’s say you own 5 oceanfront homes valued at more than $3.2 million each on Maui. You can get 5 permits if you apply now and you meet all other requirements. There is no limit on the number of permits you can get if you apply before the end of the year. After December 31 there will be limit of one permit per person, although a married couple could get two permits – one in each of their names, even after December 31. The key fact being that if you want multiple permits you need to apply now.

There is a 500′ trigger for Planning Commission review (a much longer process) if there is an existing permit holder within 500′. This rule waived if you apply by December 31, 2012.
There are CAPs on the number of permits allowed in each area of Maui. They are; 48 for Hana; 100 for Kihei-Makena; 40 for Makawao-Pukalani-Kula; 88 for Paia-Haiku, 36 for Wailuku-Kahului; 88 for West Maui: and 4 for Maui Meadows. Through this whole legislative process there was a group of Maui Meadows homeowners who were adamantly opposed to Short-Term rentals. The result was that the squeaky wheel got the grease and the County Council limited the number of permits to 4. If you have a home in Maui Meadows you and want to get a permit you need to apply now. The County Council will review the number of CAPs in each area when capacity has reached 90% of available permits.

Help with the Application Process and a Licensed Real Estate Agent
The application process is detailed. You will need help from competent professionals including a licensed real estate agent, an architect, and a property inspector. It will need someone who is detail oriented and can navigate the process through the Planning Department. Not all homeowners will want to compete the application themselves and will need to hire someone to do it. They will also need to hire a licensed agent as a property manager. I would like to offer my professional services to you including the application process and as your licensed Property Manager on Maui. Please contact me to discuss.


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