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Property owners sue over Molokai rental ban action

Permits set to expire at end of year; owners look to get them reinstated

The Mother Ocean vacation rental is pictured on Molokai, where the short-term rental cap has been reduced to zero. Homeowners and the Maui Vacation Rental Association are suing the county over the decision. MAUI VACATION RENTAL ASSOCIATION photo

The Maui Vacation Rental Association and four Molokai homeowners are filing a federal lawsuit against the county over a bill to ban short-term rentals on Molokai.

The homeowners and their attorneys said Monday that the decision canceled the operations of 17 families, many of whom had operated legally for 15 years or more.

“We are taking this action because even though my homeowner clients did nothing wrong and had no complaints against them, the county decided to make the number of STRHs permitted on Molokai to be zero,” said Honolulu attorney Terrance Revere, who filed the lawsuit in federal court late Friday. “Instead of grandfathering in existing permit holders, they told my clients — with no due process whatsoever — that their STRH permits were being yanked away.”

The bill, which the Maui County Council passed unanimously in February, eliminated short-term rental permits on Molokai, which previously had no cap. The 17 existing permits will remain valid through the end of the year.

Dayna Harris of Molokai Vacation Properties, one of the affected businesses, said in a news release that “most people on Molokai didn’t even know it was on the table to shut them down.”

Council Vice-Chairwoman Keani Rawlins-Fernandez of Molokai said she believed the council's action in setting a cap of zero short-term rental permits was legally sound.

“Some prominent business owners didn’t even know they are no longer allowed,” Harris said. “I am still getting Molokai people wanting to book short-term homes for next year and I have to tell them sorry, Molokai people don’t want them, don’t you know?”

But Council Vice-Chairwoman Keani Rawlins Fernandez of Molokai said that the community had “petitioned the council for an STR cap of zero for years.”

“Discussion began in 2017, and finally passed this year with overwhelming support from Molokai and other Maui County residents along with the submission of a petition with nearly 900 signatures in support,” she said in an email Monday.

Council Member Tamara Paltin, who chairs the Planning and Sustainable Land Use Committee, recalled how the committee traveled to Molokai to talk to residents about the legislation.

“The majority of the people that had no financial interest, no skin in the game, were pretty much unanimously against it,” she said. “The only folks that were for it were folks that had a financial interest in it.”

She said the committee made a unanimous recommendation after hearing the frustration of the community and visiting neighborhoods where vacation rentals were located.

“I think the committee made the right call,” she said. “I am hoping that it goes through the court and trial process quickly so we can get clarity on the situation.”

Homeowners argued in the lawsuit that they had to go through “a rigorous permitting process and made investments to rent properties.” They said that many Molokai residents and businesses are dependent on tourism “and have been harmed by the elimination or uncertainty surrounding these legal vacation rental homes in resort areas.”

Both the Molokai Planning Commission and the council “failed to show any evidence” that the permitted properties were negatively impacting neighborhoods, they said.

Jen Russo, executive director of the association, said in a news release that frustration over high costs of living and the lack of affordable housing have “created attacks on legal vacation rentals that are simply not supported by facts.”

“Unfortunately, these attacks won’t affect the problems they’re supposed to solve,” Russo said. “The members are prepared financially to go all the way with this lawsuit, but we sincerely hope we can resolve this amicably with the county long before then.”

Revere said that Maui Vacation Rental Association got involved because “many fear they’ll be next.”

“This (Molokai) case should protect short-term rental operators in Maui, which is why our members are coming to the aid of the Molokai 17,” he explained.

Rawlins-Fernandez said that only one of the 17 property owners lives on Molokai; property tax records show that most hail from California as well as Oregon, Colorado, Alaska, Maui and Oahu.

She pointed out that the short-term rental permit renewal process for Molokai is conducted annually, “so renewal is never guaranteed.” However, the council left open the option for current short-term rentals to convert to bed-and-breakfast operations — which must have an owner on site — so they could still collect revenue.

“It’s unfortunate to learn of this frivolous lawsuit filed by Maui Vacation Rental Association dismissing the longstanding wishes of our Molokai community at large,” she said. “After reviewing the alleged violations cited in the press release, I am confident it is without standing and that our Corporation Counsel will achieve its immediate dismissal from court.”

Planning Director Michele McLean said she couldn’t comment directly on the lawsuit. However, she was able to address general concerns about the Molokai decision being the start of a countywide phaseout.

“As you know, we did outreach earlier this year about phasing out short-term rentals, and I think that outreach might’ve helped instill that fear,” she said. “But as I said to people who’ve contacted me about it, I stand behind that outreach effort because that was a really big policy issue and it would be wrong for us to head in any kind of direction without getting community feedback.”

McLean said most opposed any sort of phaseout, but the pandemic put any decisions on hold. Around the same time, the council put forward a bill to lower the district caps for Maui and Lanai, which is pending before the Maui Planning Commission.

“I think reducing the caps is a reasonable thing to do because again, it doesn’t affect any existing operations or applications that are pending,” McLean said. “In terms of what we might do after COVID, it’s impossible for me to say right now because our economic landscape, our tourism landscape, has changed so dramatically.”

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

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