Hi Fairwayshomeowner,
Totally understand your situation. This bill has been very difficult to understand. As KBR suggested you may wish to send a request to join the fb team where we collaboratively work together to unravel what is going on with the bills and this work helps us all understand what exactly we are facing and how to interpret and respond.
I offer here my letter for your review which is one way to "understand" and to respond to the bill. Unlike others, for example Blackburied, I deliberately chose to stay clear of naming the various HRS statutes, rather to instead speak only to the business related principles so I think you will be able to follow my letter's meaning more easily. You can still send your letters anytime until Tuesday morning. So please feel free to take from here what is helpful (and anyone else can do so to, the point is to ensure that each Senator and each Representative see the number of voices maintaining a strong representation here).
Dear Senators and Representatives,
I am writing to request your support. Please do not pass HB2078 SD2 HD2 during the floor vote on Tuesday April 10. Later today you will start to receive hundreds of letters of opposition to the this measure from both nonresident owners of legal vacation rentals and real estate professionals.
A measure of this type will have severe adverse impact to the Real Estate Sales industry as well as to dramatically change the options available for Hawaii's tourists. An estimate based on survey of over 150 nonresident owners of legal TVRs suggests that approximately 70-80% of these permitted vacation-zoned units are owned by nonresidents. Realtors are already aware of the adverse impacts this pending legislation (and other related bills - HB1707, HB1706, SB2089) have had. Recently released figures on the impact to the recovery that has been underway are extremely concerning:
Are you aware that the Condominium Sales improvement trend has now stopped? In February the recovery has reversed. Island wide average year-to-year comparison dropped in February by 18.48%. This is in contrast to an overall housing market recovery underway.
Using availability of past month's sales data for Maui, from Realtor Association of Maui:
Ytd comparisons 2011 to 2012, total sales volume for condominiums has dropped 35% (while home sales ytd comparison volume has risen 35%).
Using availability of same data for Oahu:
Ytd comparisons 2011 to 2012, total sales volume for condominiums has dropped 23% (while home sales ytd comparison volume has risen 20%).
Passing this measure to send to your Governor for signature, will have a catastrophic effect on the real estate recovery. As of February, due to foreclosures and excess supply, the Maui the absorption rate for condos was pegged at 14.5 months. The market simply can not afford more inventory and foreclosures. We urge you to please consider all of the consequences and vote in the best interests of all citizens involved.
Meanwhile, and as I'm sure you are aware, the Hotel industry's financial health has continued to make gains and recover to pre-2008 levels, following the financial crisis in late 2008. There can be no suitable reason to sacrifice an important category of tourism accomodation options, to harm the recovery of the real estate industry, nor to pass a measure of questionable constitutionality that is in violation of our NAFTA treaty.
We support the intentions of new regulations enabling Department of Taxation to improve GE and TA tax collections. We believe the State has a responsibility towards its vacation visitors, and as such we must work together to ensure adequate provisions are in place for Consumer Protection. At this point we have been consistent in our vision.
In summary what we can agree to:
A. Support tax remittance and compliance efforts
1) Pay all GE and TAT taxes owed.
2) Provide relevant information to condominium associations or equivalent that will be forwarded annually to DOT.
3) * Owners are split on agreement/disagreement of placing registration ID in internet advertising.
B. Consumer Protection for vacation visitors
1) Maintain in proximity of the property a local contact.
2) Maintain with condominium associations or equivalent the local contact information of all rentals' owners, where the on-island owner may designate his/herself as the local contact.
3) Provide the consumer (rental guest) the name and contact info of the local contact in both the written rental agreement and in prominent display within the rental unit.
A best practices principle in working together is that each party should explain their needs but allow the party who is required to perform to determine the most effective way to achieve compliance. For example, we would not propose to dictate how Hawaii Real Estate Laws HRS467 or HRS521 or HRS514A/B should be revised, rather we would suggest the end goal that would work best from our viewpoint. On the flip side of this equation, while we can agree that legislators and agencies can require us to support Tax Department efforts, we suggest that it must be effected in a manner that does not overburden our business (so as to kill the chicken that lays the egg). An example of this was a requirement for all non-residents to use PMs as a way to help the Department of Taxation to collect taxes.
So below I cite areas of concern and what we desire as the end result.
1) Owner-Manager (Owner) and on-island contact; Roles, definitions and limitations. As we operate today, our local contact is used on an as-needed basis, however owners retain the full management responsibility of the rental. The local contact is used rarely and sparingly. They are not involved in securing new clients, booking the rental, scheduling housekeeping, maintenance, guest relations or management of the unit itself. This local contact is retained simply to perform as-needed tasks as determined by the owner. Therefore we are concerned with use of language that calls the person an "agent" or when that person's activities are referred to as "management". As this level of support is generally not needed we are opposed to this type of role. We strongly suggest you change the name of this assisting party to be "on-island contact" and specify that the function of this person is not management, rather its "roles, responsibilities and duties are determined by the owner and that the on-island contact also serves as the emergency contact for the rental and its guests".
We see no need for a real estate licensed individual for this role and definitely no need for handling of guest monies or payment of taxes. This person does not perform the role of a Licensed Real Estate professional Property Manager.
Past requirements of various bills that would cause uncessary harm to owners are itemized below.
2) Unequal application of the regulations to owners dependent upon residency. There are very few instances where there is a valid need to distinguish between a resident and nonresident owner. Where the bills create different business conditions on the sole criteria of residency, and in some cases where residency has no effect on the need to perform, such as payment of taxes, or for consumer protection matters, it has created conditions of restraint of trade. We believe that higher law than HI state law will rule in favor of our position. We desire to craft measures that meet all parties' needs in a way that does not create for any party involved unjustified discrimination, restraint of trade, unwarranted harm, inability or severe thresholds to perform.
3) Required use Licensed Property Manager. When a careful evaluation of the facts is performed, it is unjustified to impose this, and further to impose it exclusively upon nonresident owners.
4) Compliance with the latest revision's language for 1:1 owner:agent. Allows that an owner may use an agent (which we reject that term in favor of use of term called on-island contact) as long as that on-island contact has no more than one party for which it provides services. Per prior correspondence I believe you understand this complication (with extreme ramifications) and you are conferring for inputs from other involved parties. We hope to achieve an agreeable solution that reflects actual market conditions for available qualified employees or independent contractors to perform the role of on-island contact. We hope that the bill shall eliminate any type of restriction of the current nature described in SB2078 HB2 SB2. We would like to operate without this restriction and with our current on-island contacts' support as I have described in 1) above regarding Owner-Manager and on-island contact.
* 5) Placement of Registration ID in website or online advertisements. Some owners are concerned this information posted on the internet may lead to identity theft. However we can also see how it may provide efficiencies to the Department of Taxation efforts to audit rental activity and improve compliances. And we understand that this information is already available to the public and that its value for identity theft purposes is limited. We recognize that this information could also be a tool for use by the Department of Planning and Permitting. So we would like to offer our willingness to work with the legislators on this point if in fact it produces substantial benefit to either the DOT or DPP. A suggestion is that if this becomes law, it is applicability should be to all ads, print ads and internet ads since without this requirement the possibility for cheating remains.
6) Requirement of local contact name and phone number in sales advertisements. It would be very useful if someone would please explain to us who this could help and what its intended purpose is. We can not see or guess of any benefit but we do see significant problems. We have opposed this previously and explained our concerns. To start, this information is already made available to the DOT per items B.2) and B.3) above. Next, the purpose of an advertisement is to attract a potential customer. The name and phone number of our local contact has no practical value at this point in time. Its presence in the ad may result in a confusion of who to call, which, in the worst turn of events may result in a lost sale to the owner. Employees may not appreciate or be willing of having their names and phone numbers posted on the internet. It invades their privacy, may result in unwanted and unattended to phone calls, and it serves no purpose for them or their employer (the owner). Finally it is simply not a consumer protection measure. Posting this informaton on the internet ads is not acceptable.
I believe this covers all of the areas for which we have significant objections.
Beyond this we feel there are other areas where we could collaborate. For example, we have ideas that we believe would be of value to DOT for reducing tax fraud or compliance problems. Additionally we feel that the bills involved (various versions of HB1706, HB1707, SB2078 and SB2089) have not made the best effort at addressing the entire scope of rentals where tax compliance is insufficient. It would have seemed appropriate that relative to tax compliance issues, there is no reason for distinction between resident or nonresident, legally permitted or illegal and unpermitted, owner managed or Property Manager managed, or for special exemptions by any of these categories to support the DOT efforts. Each of these categories would present opportunity for the DOT to improve collection levels. If you or the DOT are interested to know our ideas of how improper remittance levels could be detected, we would like to work with you on this.
Thank you for this opportunity to allow us to share our concerns as well as our desires to support the states efforts to support tax collections and maintain excellent consumer protection for the vacation visitors.
Regards,
a nonresident owner of a vacation zoned rental on Maui
worldwide leader in online vacation rentals
