Hawaii Property Owners Challenge Coronavirus Ban on Vacation Rentals

A lawsuit has been filed in Hawaii against the County of Maui, its mayor, and the director of the Maui County Planning Department by vacation rental Hawaii property owners who claim that the defendants have unlawfully banned short-term rentals on Molokai island.

The Maui Vacation Rental Association (MVRA) and seven Hawaii property owners say that the defendants’ setting a permit cap of zero and putting a cease to any existing short-term vacation rental home operations should be deemed unlawful by the court.

The plaintiffs claim that most short-term rentals on Molokai went through a demanding permit process and made investments based on the promise that they will be able to operate and extend their permits in the absence of complaints. The Hawaii property owners argue that the short-term rentals remit taxes, provide jobs to the community, and rental options for visitors.

The Hawaii rental lawsuit states that the right to own and rent property is a fundamental right recognized under the United States and Hawaii Constitutions and that the property owners are entitled to due process and other protections.

MVRA notes that, in 2012, Maui County enacted a comprehensive Ordinance 3941 which created a new category of permitted use called Short Term Rental Homes (STRH) and set out guidelines and steps for permits including the location and proximity guidelines, various performance based standards, and homeowner duties.

“As implemented and applied, Ordinance 3941 required all owners of real property in the County of Maui who lease their homes for less than an initial term of 180 days to obtain a permit, unless exempted from the application of the ordinance by variance, special ordinance, or formal and informal grandfathering of established rights,” the Hawaii rental lawsuit goes to state.

According to the plaintiffs, since the passage of Ordinance 3941, a total of only 26 STRH permits have been granted in Molokai – of which 17 are still active. They claim that nine of these permits either expired, were not renewed, or that the owner has since sold the property.  

MVRA says that the legalization of short-term rental homes has helped to meet an established need for the Molokai tourism industry, allowing small businesses to flourish. They state that less than 1% of Molokai’s residential housing has been granted a STRH permit to allow for short-term rental uses. 

The Hawaii rental lawsuit states that people have been successfully and peacefully renting their homes and properties in Molokai on a short-term basis for decades. The plaintiffs maintain that short-term rentals are popular with travelers who are seeking a different experience than that offered by traditional hotels. 

The plaintiffs allege that the Maui County Council passed Bill 22 and the mayor signed Ordinance 5059 on March 10, 2020, which has the effect of shutting down all STRHs on Molokai until Dec. 31, 2020, even if there are valid permits that go beyond December 2020.

The plaintiffs maintain that the bill has caused all vacation home rentals to be banned with no due process and the defendants cannot cite any legitimate public benefit served by imposing a regulatory ban that limits long established and approved rental rights of the permit holders of Molokai.

The Hawaii property owners’ lawsuit says, “The Ordinance is an unconstitutional restraint on property rights, its broad application unreasonably impairs previously granted property rights, and its application does not serve any legitimate public purpose or benefit.”

In addition, the Hawaii property owners state that the Maui Planning Department has also stated in writing and by its conduct that it is taking actions to discriminate against out-of-state owners and to discourage interstate travel, which is in violation of the U.S. Constitution and violates the contract clauses of the Hawaii and Federal Constitutions.

“Ordinance 5059, and its application is inconsistent with and conflicts with other zoning provisions and County approvals that were granted and issued to the permit holders on Molokai,” the Hawaii property renters go on to state.

In a similar lawsuit filed by Hawaii property owners and residents, plaintiffs challenged Hawaii’s quarantine extension related to COVID-19.  The plaintiffs in that action claim that their constitutional rights were violated when the governor extended the quarantine order.

Some of the plaintiffs in that lawsuit are residents who are unable to leave Hawaii to visit loved ones, while others are out-of-state residents who have property in the state. Those plaintiffs maintain that the order has violated their rights under the Fifth and Fourteenth Amendments by the denial of their right to travel as well as equal protection.

Are you a property owner who has been denied the right to rent your property? Leave a message in the comments section below.

The plaintiffs are represented by Terrance Revere and Magdalena Bajon of Revere and Associates Honolulu.

The Hawaii Property Renters Lawsuit is Maui Vacation Rental Association Inc., et al. v. County of Maui, et al., Case No. 1:20-cv-00307, in the U.S. District Court for the District of Hawaii.

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