What Landlords Need to Know

Legal Requirements for Off-Island or Foreign Property Owners

In Hawaii, foreign property owners must comply with specific regulations regarding property management if they are renting out their property. If a foreign owner does not provide an on-island manager, they could face significant consequences.

According to Hawaii Revised Statutes Section 521-43(f), any owner who resides outside of Hawaii, or on another island than their rental property, is required to designate a local property manager residing on the same island. This agent acts on behalf of the owner within the state.

Hawaii Revised Statutes Section 521-43(f) provides: "(f) Any owner or landlord who resides without the State or on another island from where the rental unit is located shall designate on the written rental agreement an agent residing on the same island where the unit is located to act in the owner's or landlord's behalf."

Penalties for Non-Compliance

Fines: Owners who fail to comply with this regulation can face fines. While specific amounts may vary, non-compliance could lead to fines up to $10,000, based on similar infractions regarding short-term rental regulations.

Revocation of Rental Permit: Failure to have a designated on-island manager can jeopardize the owner’s ability to legally operate their rental, resulting in the potential revocation of their rental permits.

Legal Action: The state may take legal action to enforce compliance, which could involve additional fines and costs associated with any legal proceedings.

Conclusion

It's critical for foreign property owners in Hawaii to follow the local laws regarding property management to avoid severe penalties. Having an on-island manager is essential not only for compliance but also for the effective management and maintenance of the property.

While an HOA plays a role in maintaining community standards, it does not share liability for a foreign owner's failure to comply with HRS 521-43(f). The responsibility lies with the property owner to ensure compliance with the law.

• Attorney Nathan Natori's Opinion about the On-island Manager Requirement
• Landlords who reside outside Maui are required to have a Maui property manager handling the rental.
• Property managers need a real estate license in Hawaii if they engage in leasing activities or the collection of rents.
• "A broker's license is not required to manage community associations in Hawaii; however, condominium association managers must register with the state." according to allpropertymanagement.com.
• In Hawaii, homeowners associations (HOAs) that are self-managed do not require a real estate license. The Kuau Bayview Board does not engage in leasing activities or the collection of rents, or even property management. However, if the HOA hires a property manager, that manager must hold a valid real estate license to operate legally.
• Check the Hawaii State Professional & Vocational Licensing website to see if someone has a real estate license.
• Mandatory Seller Disclosures for Hawaii Residential Real Estate by Attorney Nathan Natori

Security Deposit Withholding in Hawaii

Legal Requirements for Withholding
In Hawaii, a landlord cannot legally withhold any portion of a tenant's security deposit without providing proper documentation. If a landlord intends to retain part of the deposit, they must notify the tenant in writing. This notice should include:

1. A detailed explanation of the reasons for withholding the deposit.
2. An itemized list of deductions.
3. Receipts or estimates for any costs incurred.

The landlord is required to return the security deposit or provide the written notice within 14 days after the tenant moves out. If the landlord fails to provide this documentation, they forfeit the right to retain any part of the deposit.

If a landlord does not follow these legal requirements, the tenant may have grounds to take legal action. This could include filing a claim in small claims court for the return of the full deposit.

In summary, landlords in Hawaii must provide receipts and proper documentation to legally withhold any portion of a security deposit. Landlord Tenant Handbook