A second lawsuit seeking to stop the city from implementing its new vacation rental ordinance was filed Friday, this time by condominium owners of the Waikiki Banyan condominium complex.
The lawsuit, filed in Hawaii Circuit Court, said the twin-tower, 876-unit Waikiki Banyan has been operating as a condominium hotel since it opened in 1979 and “has continually offered its guests the typical hotel/
resort experience with condominium style suites.”
The complex on Kuhio and Ohua avenues has a front desk, concierge
services, a convenience store, taxi stand and even “Waikiki’s largest recreation deck featuring a pool, two hot tubs, a children’s playground, a tennis court, snack bar and barbecue grills.”
The vacation rental ordinance, which took effect Aug. 1, makes it illegal to advertise an unpermitted rental for less than 30 days. No new permits or exemptions have been issued since 1989, although about 1,700 new permits will be allowed beginning in October 2020 under a separate section of the new ordinance.
Ordinance 19-18 Opens in a new tab also increases the maximum fine for advertising or operating an illegal rental to $10,000 a day from $1,000 daily.
A number of the units have exemptions and therefore are allowed to operate legally, but most do not. The Association of Apartment Owners of Waikiki Banyan wants a permanent injunction preventing the city from imposing its new ordinance on its owners.
The lawsuit stated that 89% of the units in the complex operate as short-term vacation rental units. “These owners purchased their units with the belief, understanding and expectation that their units could be rented out short-term, i.e. less than 30 days,” the lawsuit said.
During its 40-year existence, “no owner, vendor, operator or the (homeowners) association has ever been cited or sent a notice of violation for operating, allowing, advertising or managing short-term rentals in the Waikiki Banyan,” the lawsuit stated.
It said the city Department of Planning and Permitting, which is in charge of enforcing the ordinance, refers to the Waikiki Banyan as a hotel on at least three different occasions on its website.
With the units no longer being offered as short-term rentals, condominium owners are experiencing “significant loss of rental income” of $200 to $400 a night, the lawsuit said.
“Without this rental income, many owners will be forced to immediately sell their units,” the lawsuit stated. “With so many units simultaneously up for sale, prices are expected to plummet. Losses are estimated to be $30,000 plus per unit.”
But it’s not just the operators and its associate businesses who will feel negative financial impacts. “As a result of the ordinance, the city and state will lose millions of dollars in tax revenues and hundreds if not thousands of people will lose their jobs,” the lawsuit said.
Waikiki Banyan representatives met with DPP officials July 29 and were told they could not obtain an
exemption from the new ordinance for all the condominium complex’s owners. Some of the property owners argue that it’s a fairness issue because short-term vacation rentals are allowed in buildings on the makai side of Kuhio because they are in a precinct designated for hotel-resort use while they are not permitted on the mauka side, which is in a precinct designated for residential-business use.
DPP Acting Director Kathy Sokugawa, when asked by the Honolulu Star-Advertiser about the point last week, said the Waikiki Special Design District was created in the 1970s in part because people worried that the area was being overrun with
hotels, which led to the
creation of apartment and mixed-use precincts for those on the mauka side
of Kuhio.
The association’s law firm is Porter McGuire
Kiakona and Chow.
A spokesman for the city said officials could not comment because they had not yet reviewed the lawsuit.
The Waikiki Banyan action is the second challenge to the new ordinance.
The Kokua Coalition, the group of “30-day rental” operators also known as the Hawaii Vacation Rental Owners Association, filed a lawsuit Aug. 1 seeking an injunction to stop the city from enforcing the new ordinance against its property owners.
The coalition is arguing that its clients have been allowed by DPP to operate 30-day rentals, where operators rent to a single customer every 30 days, regardless of how long they actually stay Opens in a new tab.
A motion for a temporary restraining order is scheduled to be heard Thursday in U.S. District Court.
