Renting Unpermitted or Illegal Units in Hawaii

[Dustin Williams]

Unpermitted units in Hawaii are super common. You can probably drive down nearly any residential street in Hawaii and pass several unpermitted units. If you go on Craigslist to look for a rental, many of them are for unpermitted units. I’ve been shopping for a property to purchase as a rental and, unsurprisingly, many of them have unpermitted units.

I’m wondering what the legal liabilities of renting an unpermitted unit in Hawaii are. I’ve been scouring the internet (including BP) and I haven’t found much Hawaii-specific information. Here is a summary of what I’ve found:

1- If the tenant were to open a dispute, some states could order the landlord to return all rents back to the tenant because the landlord never had the authority to collect rents for the unit in the first place. I think this sort of think can happen in California, but I can’t find anything about this sort of thing ever happening in Hawaii.  Does this happen in Hawaii?

2- Some communities, upon discovering the unpermitted unit, will require the landlord to remove the tenant and remove the unpermitted unit from this property. Under this scenario, the landlord would not only lose the rental unit, but could be responsible for breach of lease agreement with tenant and for paying tenant’s relocation fees. Does this happen in Hawaii?

3- Landlord could be fined for violating zoning/building permit requirements. Does this happen in Hawaii?

3- Hazard/liability Insurance companies will likely take your money for the premiums for a policy written as a multi-family property, but then if tenants in the unpermitted space were to cause damage or someone got hurt, that the insurance company would refuse to pay because the unit was unpermitted or not up to code. Can anyone confirm this is the case?

I called the Landlord-Tenant Code office in Hawaii (the people who handle tenant-landlord disputes) to see if they could answer my questions, and they could not. I asked specifically if they commonly deal with disputes that arise from unpermitted spaces being rented out. The person I talked to said she was not aware of any.  I called the planning/zoning office and they could only tell me whether or not the property could legally have two units, not much else.  I also called a local real estate attorney’s office to see if they could give me any information about landlord's liabilities on renting unpermitted. Their response was the lawyer could consult with me for $300-$400 per hour.

It seems that unpermitted units are accepted in Hawaii and that enforcement of proper permits doesn’t really happen here. It seems that disputes between landlords and tenants over unpermitted spaces are rare. I don’t want to rent an unpermitted space due to potential liability, but if it is accepted in Hawaii and lots of people do it without issue then maybe its just overlooked and not really that big of a deal here?

[Loren Clive]

This happened to a client of mine. Her tenant called the County to report her illegal units. All she did was take out the extra stoves, get the County to sign off on the inspection, then put everything back in and started renting it again. 

There was no return of rents #1, yes for #2 but she just rebuilt them afterwards. The tenant was already not paying rent, hence the dispute, and in breach of her lease.

#3, first one, not sure?

#3, second one, I"m sure your insurance agent could answer this question. My thought is, how would they know it was unpermitted/not up to code??

Soooo many people rent unpermitted spaces it's not an issue. You're really overthinking this in my opinion. Maui is not the mainland, Dustin.