HomeMy WebLinkAboutCOM 0600.043 2022-2024 p/FG
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June 17, 2024
Council Committee on Finance
Matt Kaneali'i-Kleinfelder, Chair
Cindy Evans, Vice Chair
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MEETING DATE: June 18, 2024
TIME: 1:00 pm
PLACE: Kona •i C-, -s:
RE: Comments on Bill 104 (Draft 5)
Dear Chair and Committee Members: a )
I am a resident of Kona and a Property Manager of residential long-term rentals. I also
rent a room on my primary residential property to a long-term tenant.
I appreciate the work you have done to attempt to provide a real incentive for
homeowners to offer their property on the long-term rental market. However, a couple of the
provisions in the draft bill will have a contrary effect when implemented.
1. Section 4(m)(3) and 4(m)(4) provide that upon sale of a property, the tax assessment
is canceled, "retroactive to the date of the classification, but for not more than the current year,
and all difference . . . shall be payable with a ten percent penalty."
Hawaii law protects tenants in leases and any conveyance of a property does NOT
terminate a current lease. Any new owner takes the property subject to the lease and must honor
it. As applied, this retroactive application and penalty will only incent homeowners to NOT
renew current leases that come up for renewal when they are contemplating a sale, rather than
selling the home with a lease in place, thus causing displacement of individuals who may have
otherwise had long and good standing with the landlord and many renewed leases on the
property. This provision is unreasonably punitive and works contrary to the bill's intent.
I would suggest that as the classification already requires an annual claim filed with the
department of finance and evidence of a signed lease or excise tax payments, rather than punish
rental owners who sell actively rented property, the bill could include an affirmative duty to
report any change of tenancy that does not result in a 6 month or longer lease, within 60 days of
any existing lease (or holdover tenancy) termination. Failure to do so would trigger a breach of
the classification retroactive to the lease termination of the prior tenant or date of classification if
a lease was not provided with the annual claim renewal. This 60-day window also allows for
repair and maintenance that may need to be done between tenants. Please see sample verbiage
below:
(m) Breach of long-term rental class.
Comm. No
1 Ref.To:
Ref. Date JUN 1 8 2024
(3) Failure to enter into a new 6-month or longer lease or file a Notice of Change of
Facts with the department of finance within 60 days of the termination of any
lease or holdover tenancy to the same tenant for which the property was
previously eligible.
(4) Upon breach of the classification as stated in number (m)(3) of this subsection,
the tax assessment shall be canceled retroactively to the date of the lease
termination for which the property was previously eligible if provided with the
renewal claim or to the date of classification, but not for more than the current
year, and all difference in the amount of taxes that were paid and those that would
have been due from the assessment in the higher classification shall be payable
with a ten percent penalty.
This puts the responsibility for reporting on the owner and only penalizes owners who
fail to actively replace a long-term lease or take advantage of the classification by silence.
2. The requirement that all dwelling units be leased may also work contrary to the
intent of this bill. Section (k) requires that"all dwelling units on long-term rental properties
must be leased."
Many folks have more than one dwelling unit and would be willing to rent a room or unit
to a long-term renter but would like to keep something open for relatives to stay when visiting.
Requiring that ALL units on a property be leased may keep many units from being offered on the
market. Perhaps revising the eligibility to read:
(k) Eligibility for long-term rental class.
(2) All dwelling units for rent on the property must be offered for long-term
leases.
This ensures any rental activity on the property will be only for long-term tenancy, but
doesn't force an owner to rent all dwellings.
3. The final comment is regarding the principal residence of the owner. (k)(3) says this
class will not be disallowed because of the owner's primary residence on the same property. This
seems to conflict with proposed Bill 174. For a homeowner renting to a long-term tenant on the
same property as their primary residence, how do you determine if they qualify for the long-term
classification or the homeowner classification?
Perhaps (k)3 should be removed if Bill 174 passes? For the record, I support Bill 174 as
well —with clarification on this point in Bill 104.
Thank you for the opportunity to testify.
Respectfully submitted,
Jennifer Wilkinson
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