Maui Homes Used as Legal Vacation Rentals

Posted by Alex Cortez on Saturday, February 28th, 2015 at 12:41pm.

To kick off our 'Ask a Question' feature, below is a question asked by a client who is interested in building a Maui luxury home to use as a short term rental property.

Question:  I would like to purchase a vacant lot in Maui Meadows and build a home for vacation rentals. Is that allowed? And if so, when I sell the house, is the permit transferable to the new owner? Is there a value added for having the permit?

Answer: Great question(s). First, to give some background, The Short-Term Rental Home Ordinance 3941 became effective in May 2012, which in essence allows for single-family homes to apply to legally operate as vacation rentals. The ordinance effectively allocated a number of permits per district, which are as follows:

District Maximum Number Issued (up to mid 2014)
Hana 48 7
Kihei, Maui Meadows, Wailea, Makena 100, but no more than 5 in Maui Meadows 23, including all 5 in Maui Meadows
Makawao, Pukalani, Kula 40 4
Paia, Haiku 88 28
Wailuku, Kahului 36 4
West Maui 88 24
Molokai No Limit 9
Lanai No Limit 1
     
Total 400 100


In addition, in order to protect the housing market, the Council added the following provision in Section 19.65.030, Paragraph O:

"Short term rental homes shall be limited to single-family structures existing and constructed at least 5 years prior to the date of application for the short-term rental home permit"I

And lastly, to answer the question regarding ability to transfer permit to subsequent owners, Section 19.65.030, Paragraph I:

"A permit shall not be transferable; provided that, a permit may be transferred upon the death of the permit holder to an immediate family member as defined in section 19.65.030(D)(2)(a)", which defines such as the the parents, spouse or partner through a civil union, children and their spouses, siblings, stepparents, stepchildren, adopted children and their spouses, and hanai children.

So to answer our reader's question, it would not be a viable options as all allocated Maui Meadows permits have already been issued and the property needs to be built at least 5 years prior to the date of application. Furthermore, the permit would not be transferable in a sale to the a new owner, hence no tangible value would be added (at least arguably so). Lastly, please keep in mind that although a property may otherwise meet all requirements set by the County, if it is located within a subdivision, the CC&R's may restrict the use as vacation rentals (for example, One Palauea Bay in Makena and essentially every Wailea home subdivision).

Have a question - whether about the purchase of a home for vacation rental use or the Maui real estate in general? Contact us at 808.385.5034 or fill out the form below:

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**Disclaimer:  The information above is NOT to be construed as legal advice. For advice about taxation, real estate law, Maui County procedures, etc., please consult with a qualified professional with expertise in that field**

 

Specializing in Makena and Wailea real estate, Alex Cortez is fully dedicated to representing his clients ethically and diligently. Contact him at 808.385.5034 or Alex@MauiRealEstateSearch.com for more information.

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