Hawaii to allow counties to ban Short Term Rentals

[vacationtime1]

Can they use eminent domain to buy individual timeshare deeds? I am not sure that is how eminent domain works. The value of the underlying property is far more than just $x multiplied by the number of weeks sold.

Can they use eminent domain? Yes; it would be for a public purpose.

Valuation of units: The value of a timeshare unit (i.e. a 1/51th interest in a condo) is what that individual timeshare unit would sell for in the open market -- its fair market value. Which for the projects we would be discussing is $1, $0, or negative. Only a timeshare salesman would argue that the fair market value of a timeshare is something other than what it sells for.

 

[geist1223]

Salem Oregon amended its Zoning Laws/Regulations over the past few years to encourage Higher Density Housing. They also have asserted more control over the Building Permit Process. Several years ago a long time Chinese Restaurant shut down when the Owner got too old to run it and no one in the Family wanted to take over. It sat empty for several years. The Restaurant and Parking Lot occupied about 1/2 of a square City Block on one of the main streets. It finally sold. The Buyer wanted to tear down the old Restaurant and put in a single story Office Building. The City modified his plans and required 2 floors of Apartments to be built over his Office Building. If he did not agree then he would not get approval. So he agreed and he is now a Landlord and got Tax Breaks on his Property Tax. In the Main Downtown Shopping area a Nordstoms shut down several years ago. It was been rebuilt as Apartments. So there are a number of ways a City/County can encourage/assist in adding Higher Density Housing.

 

[dioxide45]

Can they use eminent domain? Yes; it would be for a public purpose.

Valuation of units: The value of a timeshare unit (i.e. a 1/51th interest in a condo) is what that individual timeshare unit would sell for in the open market -- its fair market value. Which for the projects we would be discussing is $1, $0, or negative. Only a timeshare salesman would argue that the fair market value of a timeshare is something other than what it sells for.

But theuy wouldn't be using eminent domain on individual timeshare deeds. They need the underlying land and perhaps the structure. That has more value than individual weeks do to some vacationer from Wisconsin.

An equivalent full ownership residential condo would not sell for $5,100. Timeshare has a rather complex legal structure that isn't easily removed. They need to ultimately dissolve the timeshare program at which time all individual deeds turn in to tenant in common. Those owners now have different rights. I don't see them ever using eminent domain to try and take tens of thousands of individual deeds. That simply isn't realistic.

 

[vacationtime1]

But theuy wouldn't be using eminent domain on individual timeshare deeds. They need the underlying land and perhaps the structure. That has more value than individual weeks do to some vacationer from wisconsin.

Our timeshare deeds include a 1/51 interest in an individual unit, various easements, and a 1/51000 interest in the common areas of this hypothetical 1000 unit development. We own the common areas.

 

[dioxide45]

Our timeshare deeds include a 1/51 interest in an individual unit, various easements, and a 1/51000 interest in the common areas of this hypothetical 1000 unit development. We own the common areas.

So what. That doesn't make the units only worth $5,100 as whole ownership condominium.

 

[vacationtime1]

So what. That doesn't make the units only worth $5,100 as whole ownership condominium.

Hawaii would not be buying a "whole ownership condominium". It would be buying 51 timeshare deeds -- which we agree are worth very little.

 

[dioxide45]

Hawaii would not be buying a "whole ownership condominium". It would be buying 51 timeshare deeds -- which we agree are worth very little.

So they will have people living in timeshares? Who will be paying the maintenance fees on all those weeks? Will they have to pay the nightly Hawaii timeshare occupancy tax for every night they are there?

 

[vacationtime1]

So they will have people living in timeshares? Who will be paying the maintenance fees on all those weeks? Will they have to pay the nightly Hawaii timeshare occupancy tax for every night they are there?

The idea is that the timeshare is "decommissioned" (the CC&R's repealed, the HOA dissolved, etc.) and the building becomes apartments. Ownership tbd, but initially the State of Hawaii.

No MF's; no occupancy tax. But probably rent to pay.

 

[dioxide45]

The idea is that the timeshare is "decommissioned" (the CC&R's repealed, the HOA dissolved, etc.) and the building becomes apartments. Ownership tbd, but initially the State of Hawaii.

No MF's; no occupancy tax. But probably rent to pay.

I find this scenario while, questionably, legally possible. It is highly improbable. And by highly, I mean practically impossible. First they would need to fight the challenges of eminent domain which the state would drag on for years and they would be likely to lose. The main argument would be that timeshares with the plan to convert and sell as individual units are not only worth their underlying value as a vacation unit. We often see timeshares payout larger residuals (in the thousands of dollars) when they cease being a timeshare. Then they need to pay the hundreds of thousands of dollars in costs to collapse the timeshare. This isn't cheap.

The state is free to step in and buy the weeks on the secondary market until they get enough control to vote to dissolve the timeshare. However, with that they would need to cover the maintenance fees until they have full control.

They would also need to look to balance this against the loss of tourists that previously occupied those units and the loss of dollars to the state there.

 

[ScoopKona]

The idea is that the timeshare is "decommissioned" (the CC&R's repealed, the HOA dissolved, etc.) and the building becomes apartments. Ownership tbd, but initially the State of Hawaii.

No MF's; no occupancy tax. But probably rent to pay.

There will still be maintenance fees and property tax. But it will be cooked into the rent.

My favorite Auntie is pushing 90-years old. She maintains that Hawaii would have zero problems if hotel/timeshare/vacation-rental developers were forced to build five units of nearby housing for every hotel room (or equivalent -- 15 residences for a three-bedroom timeshare). "That takes care of employee housing instantly," she said.

If Hawaii is able to turn timeshares into apartments, that will be interesting. My only concern is that timeshares are typically built on some of the most attractive real estate in the entire county. I think many people connected with the real estate industry would lose their minds if oceanfront property becomes affordable housing.

 

[davidvel]

I find this scenario while, questionably, legally possible. It is highly improbable. And by highly, I mean practically impossible. First they would need to fight the challenges of eminent domain which the state would drag on for years and they would be likely to lose. The main argument would be that timeshares with the plan to convert and sell as individual units are not only worth their underlying value as a vacation unit. We often see timeshares payout larger residuals (in the thousands of dollars) when they cease being a timeshare. Then they need to pay the hundreds of thousands of dollars in costs to collapse the timeshare. This isn't cheap.

The state is free to step in and buy the weeks on the secondary market until they get enough control to vote to dissolve the timeshare. However, with that they would need to cover the maintenance fees until they have full control.

They would also need to look to balance this against the loss of tourists that previously occupied those units and the loss of dollars to the state there.

I agree with you that the value of a single timeshare week x total weeks x units is not the appropriate valuation of the property. Under eminent domain, the value of the property must be determined by its best and highest use. A dilapidated TS, with enormous annual dues, poor amenities and low demand is certainly not the best and highest use. The best and highest use is not the use the government is going to use it for. As an example only, if the best use of the property would be to have it redeveloped to sell condos, SFH, or other high end development, and the property would be worth X to a developer, than X would be the valuation.

The government can exercise ED, and if value is not agreed on, a trial would take place to determine it. Each owner would receive their pro rata share.

 

[rickandcindy23]

I agree with you that the value of a single timeshare week x total weeks x units is not the appropriate valuation of the property. Under eminent domain, the value of the property must be determined by its best and highest use. A dilapidated TS, with enormous annual dues, poor amenities and low demand is certainly not the best and highest use. The best and highest use is not the use the government is going to use it for. As an example only, if the best use of the property would be to have it redeveloped to sell condos, SFH, or other high end development, and the property would be worth X to a developer, than X would be the valuation.

The government can exercise ED, and if value is not agreed on, a trial would take place to determine it. Each owner would receive their pro rata share.

Hey, maybe Rick and I will get like $30,000 for our three weeks. That would be a nice hunk of change. I actually think the Koa units we own would be worth over $1,000,000 as a wholly-owned unit.

 

[VI Guy]

Just my uneducated 2 bits...but timeshares are not rentals....they are "occupied" by their owners.

 

[dioxide45]

I agree with you that the value of a single timeshare week x total weeks x units is not the appropriate valuation of the property. Under eminent domain, the value of the property must be determined by its best and highest use. A dilapidated TS, with enormous annual dues, poor amenities and low demand is certainly not the best and highest use. The best and highest use is not the use the government is going to use it for. As an example only, if the best use of the property would be to have it redeveloped to sell condos, SFH, or other high end development, and the property would be worth X to a developer, than X would be the valuation.

The government can exercise ED, and if value is not agreed on, a trial would take place to determine it. Each owner would receive their pro rata share.

I find it rather odd that anyone would support a large scale takeover of private property. That's the kind of stuff they do in places like Venezuela.

Sadly, we know that eminent domain isn't all it's cracked up to be. That case that made it to the supreme court (Kelo v. City of New London) where the land was taken trough ED, well it still sits as a vacant lot.

 

[geist1223]

I guess I am dim. I do not see the County Government taking on True Timeshares - whether they are Deeded or part of true Point Systems. They would be tied up in the Federal Court System for years and spend millions of dollars in attorney fees. I think they will be after Condos that are 100% owned by one family and Houses that are rented out for a large part of the year.

But then I have spoken out in the past that the Hawaiian Government should shut down all Rentals except for Hotels and Timeshares. Also do away with AirBnBs and VRBO. In Salem AirBnBs are only allowed if the owner lives permanently in the Residence.

 

[JIMinNC]

I guess I am dim. I do not see the County Government taking on True Timeshares - whether they are Deeded or part of true Point Systems. They would be tied up in the Federal Court System for years and spend millions of dollars in attorney fees. I think they will be after Condos that are 100% owned by one family and Houses that are rented out for a large part of the year.

But then I have spoken out in the past that the Hawaiian Government should shut down all Rentals except for Hotels and Timeshares. Also do away with AirBnBs and VRBO. In Salem AirBnBs are only allowed if the owner lives permanently in the Residence.

I totally agree that condos and houses in primarily residential areas in Hawaii should not be allowed to be used for short term rentals and though channels like AirBnB and VRBO. It is my understanding that New York City has a similar law to what you mentioned in Salem, Oregon, where AirBnBs are only allowed if the owner is in residence. That preserves the right of the owner to rent out extra rooms to help with the mortgage and/or other housing costs. I believe AirBnB sued and the case was thrown out, so it would appear to be a defensible approach based on that.

What I don't agree with is classifying whole ownership condos in vacation resort areas like Kaanapali and Kapalua in the same way. I was surprised to see Kaanapali Alii and Honua Kai on the list. Those were designed and built as ocean-oriented luxury vacation condos that now sell for millions of dollars. There were built to be used as investment and short term rental resorts. Trying to put those into the longer term housing pool would result in rents that will likely be unaffordable for the people who they are trying to house. That makes no sense. The priority should be to make sure housing originally built as permanent housing is used for that purpose and not try to convert properties that are best suited to housing tourists.