Rooting out, cracking down on illegal short-term rentals

County reviews its options; firm hired to catch scofflaws

Online rental websites make it easy for owners to advertise their short-term rentals to a wide swath of travelers. -- The Maui News illustration

The county Planning Department hopes that a company that specializes in rooting out illegal short-term rentals will help them crack down on the problem over the coming months.

Planning Director Michele McLean said the department expects LODGINGRevs, a Colorado-based company hired by the county earlier this year, to produce its first list of potentially illegal operators by the end of the month.

“This is a new technology, a new business that’s emerging because of the problem with these uses,” McLean said Thursday. “And this is happening all over the country.”

On Nov. 6, Maui County voters will get to decide whether to increase illegal rental fines from $1,000 to $20,000, and $10,000 every day of violation after that. But in the eyes of some residents, no amount of fines will do any good until the county can chase down those who have yet to pay up.

Tricky business

The easiest way for the county to find illegal short-term rentals is through advertisements, usually online. Other times it’s through complaints from residents.

Illegal operators get a notice of warning first, giving them seven days to shut down. If the county finds no evidence of continuing operations after a week, the case is closed.

“We still go back and look every now and then, but if we can’t find any more ads, then it’s closed,” McLean said. “If we do find continued evidence of advertising or operation, then we send a notice of violation.”

That means $1,000 in initial fines and $1,000 for every day of violation after that. Unfortunately, McLean said, operators keep finding new ways to avoid detection.

“Some only put their ads up after our business hours or on weekends when we don’t have our inspectors on duty,” she explained. “Some of them put up ads that cannot be viewed by Hawaii IP addresses.”

Since some ads don’t come with an address, the department uses aerial imagery and exterior photos of the home to pinpoint the location. However, some operators take exterior shots of homes that aren’t theirs, leading the department to cite properties that belong to full-time homeowners.

That’s where LODGINGRevs comes in. Last year, the Maui County Council set aside $80,000 to find a company that could track illegal rentals. LODGINGRevs finalized a contract with the county in April. The company can extract data from photographs to locate properties and can overcome such problems as sites blocking Hawaii IP addresses, McLean said.

“The situation in general is, if we can’t continue to find those ads, it’s hard for us to confirm that they are still operating,” McLean said. “That’s why this contract is going to be so helpful, because that’s one of the things they will do. They will continue to monitor those properties to see if those ads go back up.”

McLean said the county is “expecting to get a couple thousand identified properties” when LODGINGRevs comes out with its first round of results at the end of this month. She said that the contract with LODGINGRevs is for one year, and if this trial run proves successful, the county may extend it.

Neighborhood nuisance

In Norm Kaufman’s Kaanapali neighborhood, one homeowner has been operating an illegal short-term rental long enough to be saddled with more than $2.2 million in fines from the county. Kaufman’s frustrated that it’s gone on so long, a pattern he feels has been repeated in his neighborhood and others — county officials issue the warnings, operators ignore them and the fines grow to preposterous amounts.

“I think the reason it happens is because the county doesn’t do anything to enforce it,” said Kaufman, president of the Kaanapali Golf Estates Homeowners Association.

The association has around 375 members, and Kaufman said he’s aware of about five or six illegal short-term rentals “who do it frequently.” Kaufman said illegal short-term renters have been disruptive, bringing large groups, loud music and lots of alcohol to the neighborhood. The area is zoned residential and “does not allow short-term occupancy outright,” according to McLean.

While the association can impose fines on members, it faces the same problems as the county — for some illegal operators, it’s just the cost of doing business. And, sometimes renters are complicit.

“What happens is these people that do this habitually will tell the people that are renting, ‘If anyone knocks on the door, tell them you’re friends of ours,’ “ Kaufman said.

Residents have called county inspectors but are starting to feel like it’s a waste of time.

“We had a situation next door to where we live,” Kaufman said. “The county sent an inspector out. He knocks on the door, the people say, ‘We’re friends of the owner.’ The inspector gets in a car and leaves.”

It’s part of the reason Kaufman’s not convinced bigger fines will do the trick, especially when illegal operators end up owing hundreds of thousands never collected by the county.

“You might as well make it a million dollars — it doesn’t matter,” he said. “It’s a dog with a bark but no teeth. . . . By them not doing anything, they’re forgoing income which they’re entitled to get. A lot of income.”

Mike Moran, president of the Kihei Community Association, said raising fines “couldn’t hurt,” but he also agreed it does little if the county can’t follow through. Moran has long heard the Planning Department attribute problems with enforcement to a lack of staffing, which is why he’s supportive of having an outside contractor like LODGINGRevs track down the illegal rentals.

“It couldn’t hurt to raise the fine. It might intimidate some people, and if they do catch somebody and really fine them and publicize them, that could work,” Moran said. “But I think mostly if there’s no enforcement, the fine isn’t going to be that big a difference.”

Both he and Kaufman wondered whether illegal operators should face harsher punishments. Kaufman suggested putting a lien on the homeowner’s house, or going after renters who knowingly book illegal places. Moran pointed out that people who don’t pay fines in other areas, such as for traffic violations, can be arrested.

“And I realize that’s criminal, but maybe this is criminal too,” Moran said.

Upping the efforts

McLean believed the notorious offenders who ignore county warnings and rack up hundreds of thousands in fines were the exception rather than the norm. The illegal operation in Kaufman’s neighborhood, for example, is going to litigation and has taken longer than usual, she said. People usually pay up, and most fines are under $10,000, she said.

Council Chairman Mike White said that “the county is not missing out on as much money as the state, because the state collects way more money in TAT (transient accommodations tax) and GET (general excise tax) than county does in property taxes from any kind of vacation operation, including hotels.”

“Where the county is missing out is we have the responsibility to safeguard our communities being impacted by these vacation rentals,” White said.

When asked if he thought the department had been lax in its enforcement, White said that “we’ve given them resources, but my feeling is the resources probably were not adequate to provide a robust level of enforcement.” He said he hoped that the council’s approval of two compliance inspectors and one clerical position to the department would help with the workload. The department found emergency hires for the inspector positions and is recruiting full-time employees, McLean said.

Recently, the department met with county attorneys to discuss enforcement. They agreed to be more proactive in pursuing fined properties. After getting a violation, operators have 30 days to appeal; on the 31st day the department is supposed to send the matter to the county attorneys, who will write a “demand letter” to cease operations.

“In the past, we didn’t always send it to them on Day 31,” McLean said. “Whenever we sent it, they didn’t always jump on it right away like they will now. In the past, after the demand letter was sent, it could have languished, but now they will be on top of it and send the matter to litigation if it’s not resolved after the demand letter received.”

Options that don’t involve going to court can include turning the bill over to a collection agency. McLean said filing a lien could also be an option, though that would “just be an encumbrance on the property in the event that they want to sell the property.”

McLean echoed Kaufman’s concerns about renters who claim to be family or friends to cover for illegal operators. That’s why it’s often hard for inspectors to prove an operation is illegal by going to the property, she said. However, she didn’t think the answer was to go after the renters, believing the operators were more to blame.

When asked about concerns that the fine increases would useless without enforcement, McLean said, “I think that argument was valid up until earlier this year.”

“Now that we have the process established with the county attorneys, and now that we have this contractor, it’s going to be really hard for people to get away with it or for things to fall through the cracks,” she said.

White, who proposed the charter amendment earlier this year, still believed the increase in fines would “provide a significant deterrent to those who are basically ignoring our laws.”

“It gives us a great opportunity to really put some teeth to the enforcement action,” he said.

A bill is in the works to change the County Code if the charter amendment to increase fines passes. Both the code and the charter allow for $1,000 in initial fines and $1,000 every day after that.

To view a list of lawfully operating condos, apartments and planned developments, excluding hotels, visit mauicounty.gov/121/Planning-Department. Under “Hot Topics,” select “Short-Term Occupancy List.” To see a breakdown of permitted transient vacation rentals, short-term rental homes and bed and breakfasts, visit mauicounty.gov/1377/Short-Term-Rentals.

* Colleen Uechi can be reached at cuechi@mauinews.com.

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