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New Member 1 posts since
Feb 10, 2012
Currently Being Moderated

Feb 10, 2012 11:02 AM

Hawaii Trying to Kill VRBO

Hi,

 

I just wanted to make you aware of some important legislation that will affect all Hawaii VRBO owners.…...Basically Your Owner Rights are About to be Taken Away........Currently pending before Hawaii Legislature are two Bills, SB 2089, and HB 1707, that will REQUIRE YOU TO GIVE UP MANAGING YOUR OWN PROPERTY and have a realtor collect your income rather than you.  I think our attention and action is urgently needed to voice opposition to the passage of these Bills.

 

Here is a little more detail and links:

 

This is for all "non-resident" owners regardless as to whether they have followed the law and paid taxes.  The new laws REQUIRE you to only rent through a realtor/property manager and the realtor MUST collect ALL your rental money (you do not directly receive the money from rental of your property).  You may not know that property managers in Hawaii charge up to 40% of your gross revenues.  This would be a huge financial loss to property owners.  There is no provision in the law to allow "non-resident" owners who have already been operating legally (getting a Hawaii business license, tax I.D. number and paying all collected taxes) to be exempt from complying with this new law.

 

Here are the links so you can read the bills for yourself.  Please also read the "testimony" which is primarily property management companies who want it passed (obviously with a bit of conflict-of-interest since they will monetarily benefit from its passage).  Both of the Bills were introduced into the House and Senate in January.  It seems that the real estate community knew about this Bill given the volume of "testimony" from them, but almost no response in opposition from any property owners.  I think property owners do not know about the Bills and we are trying to at least let other VRBO owners who self manage be aware of this threat to your continued ability to operate your own rental and receipt of monies.

 

 

 

Senate Bill 2089

http://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=SB&billnumber=2089

 

 

 

House Bill 1707

http://www.capitol.hawaii.gov/measure_indiv.aspx?billtype=HB&billnumber=1707

 

 

If you want to voice your concerns to the next Committee to vote on this it will be the (CPN)  Senate Committee on Commerce and Consumer Protection; (TOU) House Committee on Tourism has already passed it but they should still hear from owners; (CPC) House Committee on Consumer Protection and Commerce; (JUD) House Committee on Judiciary; (FIN) House Committee on Finance  

 

Committees with individuals email addresses

http://www.capitol.hawaii.gov/committees/committees.aspx?chamber=all

 

 

All representatives in the House and their email addresses

http://www.capitol.hawaii.gov/members/legislators.aspx?chamber=H

 

 

All reps in Senate and their email addresses

http://www.capitol.hawaii.gov/members/legislators.aspx?chamber=S

 

The House representative who introduced the Bill is Cynthia Evans.  The Senate representative who introduced that bill is Josh Green.

 

If I can answer any other questions you have, let me know.  We believe there are many other ways for the state of Hawaii to be sure they collect tax revenue than through this extreme measure that benefits Property Management Companies at the expense of individuals who own and rent their own units.  

 

At all levels of government, whether it be state or federal, the consequence for not paying taxes when due is to impose interest/penalties on past due amounts.  If it is willful fraud, the agency will then pursue criminal action.  At no level does any other government agency require that your salary/income be received by a third party.  We all are bound by law to pay taxes that we owe and if we do not comply those same laws impose penalties (interest, fines, or jail for fraud).  Hawaii already has laws that require any person selling accommodations to collect Transient Accommodations tax (TAT) and GE tax.  If there is a non-compliance of that law, the "crime" is for not paying one's taxes.

 

HOWEVER, these new proposed laws now make the "crime" not hiring a realtor/property manager and the penalty for non-compliance is $1,000 a day!!!  If the state's motive is to collect taxes, there are already laws to do that and enforcement is what is needed, not a law that property owners must hire a realtor manager and then relinquish all rights to manage their own property.

 

It's hard to believe two bills like this are actually close to becoming law! 

 

  • New Member 11 posts since
    Feb 11, 2012
    Currently Being Moderated
    1. Feb 11, 2012 5:59 PM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    Hi  thanks for the post, I can not believe that know one else seems to be dialed in to this issue. Both Bills SB2089 or HB1707 will kill VRBO in Hawaii , there are over 900 VRBO owners in Ka'anapali alone and yet all these owners seem oblivious to the threat. They have amended HB 1707 and sent it back for second reading with a 7 commitee members voting in favor of the Bill as amended. A recent survey of property managers on the island put their fees in the 35 to 40 % range. In the end they maintain the Bill is there to deal with the perceived notion that VRBO owners are collecting but not remmitting GET and TAT taxes. I am suprised that VRBO.com has not spoken out. They stand to loose a massive chunk of revenue if either of these Biils pass.

  • anja Senior Contributor 1,560 posts since
    Aug 9, 2011
    Currently Being Moderated
    2. Feb 11, 2012 10:55 PM (in response to tman5)
    Re: Hawaii Trying to Kill VRBO

    I don't know the data, off hand, but there are thousands  of property owners in the State of Hawaii that do not live in the State of Hawaii...and thus...many are not up to date with local politics. I am not certain if the Moderators permit political discourse. This is very political and there will be differences of opinion depending on "Party".  These two local politicians {Evans & Green) have been engaged in this for some time...so I'm not certain why it has not been raised here, earlier. There has been only some local news in Hawaii generated and ...many of us who do live in the State of  Hawaii, especially those in the "transient" rental business,  have been aware of the "war against vacation rental owners" for some time now. It started a few years ago when rental strife was the issue between residents against "transient" rental property owners... with the "support" of individual local politicians trying to shut down "transient" rentals outside "commercially-zoned" districts on a couple of the islands.  New laws were passed....some owners were shut down....some got "permits" issued. It then progressed to local politicians enforcing higher property taxes than residents have to pay to the State if the owner does not  live in the State.  And, it then turned to force private property owners living outsite the State of Hawaii to hand over managment of their "transient" vacation home to a third-party managment. I am a resident of the State of Hawaii, thus my rental business is not directly affected by this new Bill. However, I will most likely be indirectly harmed, IMO.  My and everyone else's property value will probably plummet again if this thing becomes legislation.  Property owners living outside Hawaii will end up with too much personal loss....most likely be forced to sell....some may even foreclose...and the real estate market will dive here, again, and we all will be slammed.  I'm angry and even ashamed of what these politically motivated individuals and their politically motivated counterparts in Government are doing to this State - which depends on its tourism. I believe that this Bill will harm the individual property owner in Hawaii who is not a full-time resident here and it will harm the rest of us who are...the entire real estate market....and for that reason, we ALL have something to worry about --- I stand in support of killing this BILL.  I will write, again, to the Senate {I have done so on the two other related issues ...I wrote to the Governor of Hawaii....but he's another case {this State is in trouble because we have representatives that are "asleep at the switch"}.  The real problem is not being addressed...over spending, bad managment of taxpayers monies...government overreaching into the private sector and now private property owners....to tax them more...instead of cutting back government spending and managing the State. It's the same story everywhere in the country.

  • sodamo Contributor 260 posts since
    Nov 5, 2011
    Currently Being Moderated
    3. Feb 12, 2012 3:38 AM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    If and when this goes into effect, I feel it will be a slippery slope to also prevent resident owners from operating their own vacation rentals, the licensed real estate people and management companies will insist on total control. I doubt HA/VRBO sees much harm as the property managers will still advertise.

  • marym Active Contributor 463 posts since
    Feb 10, 2011
    Currently Being Moderated
    4. Feb 12, 2012 7:04 AM (in response to sodamo)
    Re: Hawaii Trying to Kill VRBO

    I was just wondeirng if any rep. from VRBO or other similar company was part of that testimony - to sort of stick up for private owners' rights....and then I remembered that it probably wouldn't matter to them anyway - they get their advertising $$ from private owner or mgt. company anyway....

  • kristin.r Contributor 116 posts since
    Jun 1, 2011
    Currently Being Moderated
    5. Feb 12, 2012 11:21 AM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    I have recently found out about this from a trip advisor destination expert for Kauai.   I don't see how this could be good.  I read alot of the letters in support and it seems certainly like many local's want the rentals stopped in their communities. I can understand if people are angry about the illegal vacation rental who are outside the VDA...its illegal so enforce it.  If you are within the VDA it shouldn't be that hard to find out who is not paying their taxes....its the law so enforce it.  This doesn't affect me one way or the other.  I do have a management company who collects the rents and pays my taxes.  I am sure there are many though that cannot afford to have a management company and likely will be forced to sale.  If I had a mortgage including the very high condo dues plus having to pay 25% to 40% to a management company, I don't think I would have it rented enough to cover all of that.  Hawaii needs to enforce the current laws.

  • sodamo Contributor 260 posts since
    Nov 5, 2011
    Currently Being Moderated
    6. Feb 13, 2012 3:14 PM (in response to kristin.r)
    Re: Hawaii Trying to Kill VRBO

    I can understand some of the local resentment, after all who wants to live next to a party house!!!! If owners would limit the number of guests then I would think they'd be more welcome, but when cramming 8 plus into a 3 bedroom, chances are it is not mom, dad and their kids.

     

    David

  • anja Senior Contributor 1,560 posts since
    Aug 9, 2011
    Currently Being Moderated
    7. Feb 14, 2012 1:33 AM (in response to sodamo)
    Re: Hawaii Trying to Kill VRBO

    I too can understand how  local  residents can become angry if there are frequent disturbances...and frequent violations of HOA rules...and violations of  any local ordinances that affect the peace and security of others. This most recent leglislation is aimed at the State securing GE and TAT from those  Owners......but it does not seem they  have any evidence that Owners living outside the State are not paying their GE and TAT {I stand corrected if I am wrong about that....I read the .pdf file that was included and could not find that there was any evidence...there does not seem to have even been a basic research into the matter.} Why not just enforce the law that already exists?  It's easy for the State to find every single vacation rental here...just look at the listings...and do a cross check on the property / Owner for tax filing....and go after those who are guilty of tax evasion?  Perhaps there are actually only a few guilty ones.  But, this legislation will affect them all...and harm many. There seems to be another agenda set up by the real estate corps....who do not like the competition the Internet has fostered...and it is they who stand everything to gain with this legislation to boost their profits {especially while they are not doing so well with the housing market}.

  • New Member 11 posts since
    Feb 11, 2012
    Currently Being Moderated
    8. Feb 14, 2012 3:58 PM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    February 14th 2012 Re: SB 2089 and HB 1707 I have read both Bills and the amendment to Bill 1707 and I am astounded and appalled that the Hawaiian Legislative Branches are considering passing these Bills.

     

    After reading the submissions to the legislators it is clear where the battle lines are drawn and who stands to benefit. Both the Hawaiian Association of Realtors and The Hawaiian Real Estate Commission have come out against these Bills noting that there are already laws in place regarding the collection and remitting of GET and TAT taxes and finding that these Bills are overkill. The other side has a very strong contingent of Rental Property Managers. These Rental Property Managers trot out the contention that millions of dollars in GET and TAT are being collected but not remitted by scofflaw owners or even worse, not collected in the first place. This flies in the face of the most recent audit of GET and TAT which found that a vast majority of owners were in compliance. What is really at issue for the Rental Property Managers is the fact the Vacation Rentals By Owner and other similar business models are putting downward pressure on their ability to a charge 30/45 % to manage a person’s vacation rental. The fact that Bill HB 1707 passed in Committee by a vote of 9 for and 0 opposed and was sent back with amendments for second reading tells you how those arguments played out. By legislating away the rights of owners to manage their own properties this legislation will hurt tourism. Who will end up paying a portion of the increased cost brought on by the monopoly the Rental Property Managers will enjoy and the fees they charge? The consumer is who! When you increase costs and prices you lessen demand which will have a negative impact on tourism in general and Hawaii as a whole.

     

    Do I have a vested interest? You bet! But so do you! If you are an investor, say a Hawaiian who lives on Oahu but has a vacation rental on Maui your rights as an owner are about to be abridged. If you are an investor from the US mainland or a foreign investor you also lose as it will now cost 30 to 45% more to have your rental property. If you are a Hawaiian developer and hope to sell your finished properties to investors, your offering now makes less sense to investors which will cost you sales, increase the time you take to sell your property and make you think twice about starting a project in the first place. If you own Hawaiian real estate you will also notice a further softening in your values as the removal of many investors from the equation will hurt all property values ( as if the last few years weren’t hard enough). If you are a Hawaiian tax payer these Bills will have very little upside but they will definitely hurt the economy. And lastly, if you are a consumer and the cost of a vacation rental has now increased you also suffer so you may shorten your stay or you may vacation elsewhere. Once again, who wins? Oh yes, the Rental Property Manager.

     

    Many jurisdictions such as Arizona, Nevada, California and Florida are welcoming investors and have seen investors help stem, to some degree, the blood bath of the mortgage meltdown and subsequent market collapse. In a similar vein the US Federal Government is looking to bring in a provision that provides for an extended stay residential visa ( a non employment visa) for people that invest more than $600,000 in US residential real estate. It appears that the only individuals that are looking to limit the scope of ownership for investors in the United States are to be found in the Hawaiian Senate and House of Representatives. So you have 49 states open for business, Hawaii not so much.

     

    There is no question that GET and TAT need to be collected and paid. While there are laws in place to deal with collection and filing there could also be provisions put in place that would require owners to post their business license or tax number in their advertising which would allow for greater accountability.

     

    As stated in the Real Estate Commission’s submission to the Legislature Feb 2nd 2012

     

    This bill “creates an unnecessary but new specialized license of property managers within the real estate licensing statute of Chapter 467, Hawaii Revised Statutes ("HRS"); • changes the legislative policy set forth in the exceptions to the real estate licensing statute that an individual, i.e., a natural person and not an entity, who, as an owner of any real estate , may handle the management and sale of their own real estate without a real estate license or without retaining a real estate licensee (§467-2 (1), HRS); and • creates ambiguity with a current regulated area of condominium hotel operators as set forth in §467-30, HRS.”

     

    As for my vested interest, I have a rental condominium in Ka’anapali, I have a business license, I file Federal and State taxes and I collect and remit GET and TAT. I am considered a foreign investor and I will be taxed higher, both in income tax, property tax and in future capital gains tax. I knew and accepted these realities before making my investment decision. Bills SB 2089 and HB 1707 are happening “after the fact” and as such were unforeseen as no other jurisdiction has sought to fetter private home ownership in this way. I am in negotiations to purchase a second vacation rental in Maui but these changes to the personal  ownership rules have me considering other options. I have been in touch with at least one other who is planning to collapse their conditional sale rather than deal with both the increased cost of ownership and the potential capital losses that these Bills would engender. 

     

    I have managed my own property using the likes of VRBO and Homeaway and I hire Hawaiian residents for all my rental needs. I have a long list of happy renters from Hawaii, the mainland, Australia, Canada, Japan and the UK. My rental rates are reasonable and I provide a cost effective alternative to Hotel fees. I furnish my rental with many extras that the hotels don’t and my renters value the difference. I believe as an owner you should have a choice, the owner benefits, the consumer benefits and the State benefits. Mahalo,

  • Contributor 38 posts since
    Feb 16, 2012
    Currently Being Moderated
    9. Feb 18, 2012 4:45 PM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    Hi Crusing,

     

    Thank you for your post.  We are trying to get organized and stop this legislation.

     

    Please send an email to sayno@stophb1707.org so we know how to contact you and encourage all others to do the same.

     

    We will be updating owners with where the bill is headed next and who they should contact.

  • kristin.r Contributor 116 posts since
    Jun 1, 2011
    Currently Being Moderated
    10. Feb 18, 2012 11:13 AM (in response to ajh)
    Re: Hawaii Trying to Kill VRBO

    AJH, I have email you and will await some communication.  There is someone else that is launching stop HB1707.  I will let you know who that is and what they are doing once I receive some communication.  They are trying to hire a lawyer to defend this.  They are trying to get as many homeowners as possible.  Mahalo Kristin

  • jwe Contributor 284 posts since
    Feb 18, 2012
    Currently Being Moderated
    11. Feb 18, 2012 11:01 PM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    Thank you Cruisin, Kristin, and everyone else who has expreseed concern over this issue.

     

     

    If we are going to succeed in opposing or overturning this bill we need to organize and share info.  Some folks are trying to fight it but seem to want to remain anonymous, which I think creates more obstacles to communication.

     

    We need to establish:

     

    • an overall leadership committee
    • a public relations task force to attempt to get the  word out to a sympathetic national journalist.  (I'd love to see an article in a  national newspaper)a web site task force
    • a legal task force - to look at the legal aspects and  begin a search for legal representation  (as an aside, has any other state  passed anything even remotely similar?)
    • a task force to work with Homeaway to communicate to other HI property owners and to see if we can combine forces (possibly they will make a financial contribution to the cause)

     

     

    The best ambassadors for the Hawaiian islands are  those property owners who live off-island and rent their property directly to  the public.  They may be Hawaii's best kept secret.

     

    These individuals, individually and as a group, are  incredibly enthusiastic about HI and convey that enthusiasm to potential  visitors every day.  The result is increased tourism to HI and economic benefits  throughout the islands.

     

    The members of this group that we have been honored to  meet and know are also an incredibly conscientious and honest group.  I suspect  that they are more honest than those who have been recently questioning their  honesty in paying HI TAT and GET taxes.

     

    Are there some individuals in the group that don't  meet this standard.  Certainly, just as there are some drivers who run red  light.  But just because some drivers run red lights, it does not make sense to  require everyone to hire a chauffer.

     

    HB 1707 directly attacks the property rights and  questioning the honesty of a group who are Hawaii's best ambassadors.   HI has  a winning formula in place.  If they change it, they do so with great risk of  unintended consequences.

     

    We  bought property in Maui in the 1980's instead of  buying in Mexico or the Bahamas because we were confident my property rights would  be protected in HI.

     

    We love Hawaii and the Hawaiian people

    However we are not willing to own property, or even (in the future) visit a state that takes away our property rights.  I sometimes wonder if our property rights would be better in Russia.

     

    We believe that what the Hawaiian legislature is doing in totally un-American.  We have many fond memories of owning our condo in HI for 20 ++ years, but will sell if the legislation passses.  If we do, we will always have the memories of HI and when HI property owners enjoyed the same protection of property rights as provided in the other 49 states.

     

    This legislation would be terrible for everyone - even those who think they will benefit at our expense.

    Lets organize and fight this travesty

  • Contributor 34 posts since
    Feb 19, 2012
    Currently Being Moderated
    12. Feb 19, 2012 6:56 PM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    Aloha cruisn9,

     

    Thank you for speaking up against this travesty.  I only learned about this today but I have already written testimony and sent it to the Senate Committee CPN and to all senate and house members.  It is my personal belief that if the state is not receiving taxes collected, it is much more likely to be from residents who are flying under the radar than from us non-resident owners who typically have only one or two properties. Here is my testimony:

     

    Members of the Senate Committee on Commerce and Tourism

    Members of the House Committee on Tourism

     

    Re: Testimony re Senate Bill 2089 and House Bill 1707

     

    Honorable Committee Members,

     

    It is with considerable dismay that I offer my testimony.  My name is ___.  I am a resident of the state of Alaska and a very frequent visitor to the great state of Hawaii.

     

    A few years ago, a friend and I decided to refinance our principal homes in Alaska and use part of our equity to purchase a condominium in Ma’alaea, Maui.  We have invested in the Hawaiian economy and we have taken an unoccupied, virtually derelict condo and made it into a wonderful asset for the community. We use the condo for our own visits several times a year, contributing heavily to the Hawaii economy.

     

    When we are not personally using the property, we rent it out to our friends and relatives as well as to some vacationing tourists, using the website VRBO.com to do so.

     

    We are registered with the State of Hawaii and possess business licenses in good standing.  We collect and pay Hawaii taxes totaling 13.25% - we do not charge a mark-up to compensate ourselves for doing the bookwork – and we have submitted all taxes timely to the State of Hawaii as required by law.

     

    These proposed bills are an enormous disservice to responsible homeowners and vacation rental owners like us.  This bill would enrich Hawaiian realtors for nothing more than being a funnel through which our tenants submit rental monies to us.  If enacted, it would add a huge and expensive layer of middlemen to a process that is currently working well and would be an enormous drain on our meager revenues, making it likely impractical for us to continue to do business. 

     

    We own one vacation rental unit.  The gross proceeds from our vacation rentals essentially pay for housekeeping, on-island agent retainers, taxes, association dues, lease fees, utilities and upkeep and maintenance.  Most condo buildings (at least in our vicinity) are 40+ years old and require constant maintenance.  There is virtually nothing left over.

     

    If we are forced to use a realtor as a go-between for our guests, their fees (which I understand are routinely 25 – 40% of gross receipts) would cripple our modest operation.

     

    These bills are a travesty! They are a transparent vehicle to enrich realtors at the expense of those of us who have invested in Hawaii in good faith and who follow the rules.  The individuals that these bills are ostensibly aimed at will continue to fly below the radar and the treasury will see no material benefit – only the realtors will profit!

     

    Please do not pass these bills.  They do nothing to improve your economy and, in fact, will likely shut down many small operations like ours because we cannot afford another enormous layer of expense!

     

    Sincerely,

    ________

    Owner and Visitor

  • jwe Contributor 284 posts since
    Feb 18, 2012
    Currently Being Moderated
    13. Feb 19, 2012 7:16 PM (in response to cruisin9)
    Re: Hawaii Trying to Kill VRBO

    We now have a Facebook Group where you can post and reply  "Stop HB 1707"

    To join the group you first need to be signed up with Facebook.com:

     

    To join a group, click Ask to Join Group at the upper right side of the group's page. You can also be added to a group by a friend who is already a member.

     

    Since groups require admin approval for you to join, there may be a delay of up to a day to confirm your request.

  • Contributor 34 posts since
    Feb 19, 2012
    Currently Being Moderated
    14. Feb 19, 2012 7:27 PM (in response to jwe)
    Re: Hawaii Trying to Kill VRBO

    Is that page already set up?  I just did a search for it on FB and came up with nothing.

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