landlord/tenant Q&A

Q. I see that our neighbors have built one of those monster houses and I can’t imagine that there will be enough “related” individuals to fill up a 13 bedroom, 6 bath home. The owner also built it under an “owner builder permit”. So can he rent it out once the house is ready? I have a feeling we will be having a huge number of new people and cars in our neighborhood.

A. When your neighbor applied for the Owner-Builder Permit he would have been notified that one restriction under the present law is that you are not able to sell, lease or offer to sell or lease the property for a period of one year after completion of the construction.

The date of the final inspection approval by the county will determine when the work is deemed completed. Also, if a person obtains an owner-builder exemption more than once in a two-year period, that person is presumed under the law to be in violation of the exemption requirements.

The one-year period would not apply if you intend to rent to one of your employees, if the estimated valuation of the work to be performed, as reflected in the building permit, is less than $10,000 or if the sale or lease is caused by an eligible unforeseen hardship as determined by the Contractor’s License Board.

The board will determine the eligibility of an unforeseen hardship claimed by an owner. To obtain a Hardship Exemption, an owner must submit a written application “prior to selling, leasing, or offering to sell or lease the property” describing the nature of the unforeseen hardship.

The application shall include supporting documentation detailing the hardship, such as:

• Evidence of unemployment compensation
• Tax returns
• Medical records
• Bank statements
• Divorce decrees ordering sale of the property
• Mortgage default letter
• Bankruptcy filing

The Contractor’s License Board must notify the owner-builder in writing of its determination within 90 days of receipt of the completed application. If the Board determines that an unforeseen hardship does not apply to your circumstances, then you will be limited to waiting one year after the completion of the construction or improvements. The state has established fines for owner-builders who fail to comply with the requirements of the law. (Note: House Bill No. 1927 H.D.1 amends Chapter 444, Hawaii Revised Statutes (HRS). Signed into law on June 14, 2011.)

Therefore, based on the current law your neighbor will not be able to rent out the property for a period of one year after the completion of the construction – unless he is experiencing some unforeseen hardship and has submitted the written application documenting the nature of the hardship. You may not be able to determine if he applied for an exemption unless you check with the Contractor’s License Board.