The front page article in this Sunday’s Maui News is about Maui County’s crackdown on illegal vacation rentals and bed and breakfasts. Are you feeling panicked yet? Chances are, your vacation rental is legal, especially if you are staying at one of the vacation rental resorts in Kihei, Wailea, Maalaea, Lahaina or Kaanapali. Many of those condo complexes are already zoned hotel/resort and are grandfathered in for vacation rental purposes (as long as the owners declare it as a vacation rental to the County for tax purposes – this would roughly quadruple the property taxes compared to if it is owner occupied).
The illegal ones may be in condo complexes that have long-term (longer than 6 months) rental restrictions, or in residential neighborhoods (though there are some that are permitted in residential neighborhoods).
|The entrance to popular vacation rental property ‘The Palms at Wailea‘.
Its sister property, Wailea Palms which is directly next door,
does not allow vacation rentals (the AOAO has a minimum 6 month rental policy
and the County of Maui’s property tax rates are adjusted accordingly).
Why does the County care if a property is zoned for vacation rentals or not? The property tax rate is much higher than if the property is owner-occupied or even a long-term rental. Also, the County limits the number of vacation rentals and bed and breakfasts in residential neighborhoods to keep pacify the neighbors (when someone applies for a vacation rental or b&b permit, the neighbors have a say in it).
The danger of renting an illegal or should we say un-permitted vacation rental or bed and breakfast is that if they are found out by the County, they have five days from receiving their notice to shut down operations, or will be fined $1000/day they continue operating. This means that your booking would be cancelled. In high season, this would be disastrous as everything is booked up well in advance. You may end up pitching a tent on the beach (oh right, on many beaches that’s also illegal). In the past the County has relied on disgruntled neighbors reporting these rentals, but now they are stepping up the ante, finding them on vacation rental sites, such as VRBO, Homeaway, Flipkey, Airbnb etc.
How do you as the renter ensure your vacation rental is legal?
– Are you paying taxes on your rental? Are you paying the correct taxes? There should be 9.25% TAT (transient accommodations tax) and 4.167% GET (general excise tax) for a total of 13.417% – these numbers are slightly different if it’s a timeshare property).
– Does the rental listing and your rental agreement have a tax ID listed? Is it valid (check on this website
, does the company/owner name correspond with the name on your rental agreement)?
– What are the County’s property records
showing for your rental’s address (sometimes this can be tricky to look up)? Look up the address on Google maps, does it look like a residential neighborhood? Again, there ARE some permitted vacation rentals/b&bs in residential neighborhoods, but they should have a permit they can show you.
– Can I see a copy of your permit? If this is a rental in a residential neighborhood, they will need to have one.
When in doubt, ask.