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For Buyers: Short Term Rental Info

Posted July 2019 by Honolulu Board of Realtors

After years of debate about the challenges with short term vacation rentals including Beds and Breakfasts (BB) and Transient Vacation Units (TVU), City Council unanimously passed Bill 89 and Bill 85 to increase regulations and enforcement of the industry.

Bill 89 would allow an additional 1,715 property owners to rent out individual rooms in their residences, but not the entire home. Although this appears to be an increase in approximately 800 permits, it results in a significant decrease in the total number of short-term rentals on Oahu which is estimated at 10,000. In addition, the bill may have effectively shut down the loophole that allows illegal TVUs to rent for less than 30 days. This particular provision in the bill needs clarification due to conflicting statements made by a council member.

Bill 89 is also a first-time attempt to address enforcement issues by requiring hosting platforms such as VRBO and Expedia to remove listings that do not display a valid nonconforming use certificate on the advertisement. Fines for illegal operations start at $1,000 per day and go up to $10,000 per day for repeat violators. BB owners must have a homeowner's exemption, are allowed only one property to operate as a BB, cannot be located within 1,000 feet of another BB or TVU, and must have a General Excise Tax and Transient Accommodations Tax license.

Although City Council passed Bill 85, an additional enforcement and penalty bill, Council Chair Ikaika Anderson and Council Member Heidi Tsuneyoshi voted in opposition after a city attorney testified about potential legal conflicts between the bills. Mayor Caldwell has already publicly expressed support for Bill 89 but has remained silent with respect to Bill 85.

HBR supported the increased regulations but highly recommended postponing the implementation date to October 2020. The B&B and TVU industries have operated for 30 years without strict enforcement. To expect property owners to become compliant by August 1, 2019 (the implementation date in the bill), is not only unreasonable, but unfair and unrealistic. Deferring the effective date for all components of the bills to October 2020 would have provided both owners and visitors to Hawaii adequate time to adjust to the new law as well as provided the Department of Planning and Permitting (DPP) enough time to anticipate enforcement. The City Council did not accept the proposed amendment offered by HBR.

Post TAT License Number in Advertisements
by Department of Taxation, July 2019

The Department of Taxation would like to remind all owners, operators, and plan managers of transient accommodations such as hotel rooms, timeshares and other rooms let on a transient basis that they are required to conspicuously provide their Transient Accommodations Tax (TAT) license number in all advertisements for that transient accommodation, in print or online, either directly in the ad itself or by electronic link. Failure to provide the number in this manner for an ad for a transient accommodation means that transient accommodation and its operator are in violation of Section 237D-4, Hawaii Revised Statutes.

Any operator of a transient accommodation who fails to provide their TAT license number in this manner will be issued a written warning by the Department of Taxation for a first offense. However, if the failure to provide the number is not corrected by amending the ad or taking it down, the operator of the transient accommodation will be fined $500 per day per transient accommodation in violation. For second violations, the fine increases to $1,000 per day per transient accommodation in violation. For third and subsequent violations, the fine can be $5,000 or higher per day per transient accommodation in violation.

The Department strongly encourages all operators of transient accommodations, as well as real estate and rental managers who may be conducting the day-to-day letting of units on behalf of the operator, to make sure that TAT license numbers or electronic links to those numbers are conspicuously provided in all ads for transient accommodations. The fines for violations can quickly escalate in severity for you or your clients if you are not compliant. The Department has staff checking publications and websites on a daily basis and issuing warnings and fines to violators. Please avoid incurring these heavy fines by ensuring all advertisements you post conspicuously provide the transient accommodation’s TAT license number or an electronic link to it.

For more information, please see Section 237D-4, Hawaii Revised Statutes and Sections 18-237D-4-01 through 18-237D-4-35, Hawaii Administrative Rules. To report a violation please call the Special Enforcement Section at (808) 587-1456 or email us at Special.Enforcement.Tax. Section@hawaii.gov.

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