Sunday, March 24, 2013

Musings: Abuse Chronicles 10

How does a house that never was a vacation rental — a house that for years got Kauai County property tax deductions for being owner-occupied — still manage to score a TVR permit, making it attractive to Southern California real estate speculators who reaped a cool $355,000 in three months by flipping it in a short sale?

It happened like this. Once upon a time — April 10, 2003, to be exact — Liz and Bruce Farnsworth paid $1.25 million for a house at 7316 Alealea Rd. in Haena.

According to neighbors, the Farnsworths lived fulltime in the house. According to county property tax records, they took a $96,000 annual homeowner's exemption — aka a “Permanent Home Use Credit”— for the years 2007, 2008, 2009, and 2010.

On. Oct. 14, 2008, shortly after the county adopted its TVR ordinance, Liz Farnsworth applied to the county for a nonconforming use certificate (NCU) to operate a TVR. Her file is lean, lacking virtually all of the documentation required by the TVR law. There's no owner affidavit, no record of any rental history, no proof that any general excise or transient accommodation taxes were paid.

Her application claims the TVR use started on May 10, 2000 — predating the house's final building inspection and encompassing the years the couple received permanent home use tax credits. Furthermore, the GE license says the business began Jan. 1, 2008.

Despite the contradictory and missing documents — and the presence of an illegally enclosed room on the ground floor in the flood zone — the county granted Haena Hale an NCU permit on June 22, 2009. The Farnsworths continued to live in the house and never used it as a TVR. Nor did they renew their TVR certificate for the years 2009 or 2010.

It was “all g” for the Farnsworths until 2011, when money troubles hit hard. With foreclosure imminent, they placed the house on the market with Hawaii Life Realtors for $1.7 million. The MLS described it as a “short sale” and notes: “Home is owner-occupied and easy to show.” It also describes the downstairs enclosure:

The ground floor space has been efficiently laid out with an enclosed work space/exercise room complete with a loft - whimsically crafted lava rock outdoor shower is adjacent. A covered space for 1 car is augmented by an enclosed storage space that can also house another vehicle.”

Here's a picture of that enclosed ground floor, which the county apparently missed during the original TVR inspection:

On Sept. 29, 2011, Liz Farnsworth submitted an application to renew her 2011 TVR certificate. She attached a hand-written note explaining she missed the July 31 deadline because “I have been out of the country for six months for work.” Inspector Vil Balisacan approved her late renewal on Oct. 7, and also allowed her to retroactively renew her permits for 2009 and 2010, as evidenced by the sequential numbers on checks paid and receipts given for those applications.

With the TVR permits thus secured,  7316 Alealea Road LLC — a real estate investment company formed by Del Mar Realtor Bill Morgan — bought the house for $875,000 on Dec. 5, 2011. Shortly thereafter, Internet ads began appearing for Hale Hina. Three months later, he flipped the house for $1.23 million, netting $355,000. His company also bought and sold two other TVRs in the area.

Coldwell Banker completed the house's transition from residential to commercial property by assuming the job of renewing the 2012 permit, and providing “professional management.”

Which is how a house that previously was occupied by two fulltime residents came to be a mini-resort that “sleeps 8,” with the promise that even more can be accommodated:

King size beds (1), Queen size Beds (2), Baby Cribs (1) Can be rented and delivered upon request. Pack-n-play available if desired., Sleep Sofa or Futons (1) Day bed.

And though several ads describe it as newly remodeled, no building permits for such work could be found.

Yet another ad proclaims:

You won't see any high rise, timeshare resorts here, just a contrast of multi-million dollar beach homes and tin-roofed island shacks.

With the multi-million dollar beach homes functioning like resorts, and the tin-roofed shacks scant remains of a once vibrant local neighborhood.

25 comments:

Anonymous said...

Boy I bet the administration wished Shay was still around to distract you.. Great report, what an embarrassment of county government.

Anonymous said...

Question is what are they doing about it? Who if any will be held accountable? Whose bright idea was it to grandfather in these tvrs? They opened the floodgates for abuse. Despicable realtors are culpable. Planning Department needs a major housecleaning. Responsibility lay at the feet of many.

Anonymous said...

incompetent inspectors.
+
incompetent planners.
=
incompetent administration.

Anonymous said...

FRAUD and Tax Evasion are against the law. Send them all to jail!

Anonymous said...

What we all should be doing is copy and paste this information and sen it to te IRS, Department of Justice, and the State of Hawaii AG.


The IRS can audit their records and fine them for back taxes.

The State of Hawaii AG can go after GE back taxes and criminal charges.

The county should go after property taxes on these white collar criminals instead of raising property taxes on people who abide by the laws. These tax cheaters are apart of a huge criminal network on Kauai.

The Department of Justice can go after Rackets by all that are involved. This is a serious white collar criminal organization that thumbs their noses at federal, state, and county laws.

Something needs to be done, they got away with stealing gas and other crimes. So I say if 20 people on Kauai forwarded all this Information to the above named federal departments then something will be done.

I will forward this information today!

Anonymous said...

Impeach the Mayor and his Admin. The county Of Kauai is not only a FAILURE but is involved in criminal activities.

Anonymous said...

= CRIMINALS

Anonymous said...

Ian and Imai should be held responsible for this mess not moved to other county jobs in a big cover up. Disgusting.

Anonymous said...

Just from reading your posts, it sounds like the application required lots of paperwork that needed verification. No easy task for those inspectors who also had to enforce the law against all sorts of people, some of whom have no problem lying and cheating. Not to say that mistakes or worse didn't happen, but I could see them being overwhelmed and not bothering to check the documents as carefully as Joan did.

Anonymous said...

doesn't seem like they even bothered to require the required documents, the paperwork is required of the applicant, right?, not planners, how hard to actually do the job they were there to do, oops guess they did. ...the implications of the failures are astounding.
3 years of renewal in 1, nifty.

Anonymous said...

Which council person is gonna step up to the plate to fix the obviously flawed travesty or outright fraud that planning has perpetuated in the implementation of the TVR ?

Anonymous said...

Follow the money. Someone chose to overlook deadlines, paperwork and their duty to ensure conformity to the spirit of the ordinances. What was the motivation for this? Is anyone asking questions? Mayor, council members, AG, etc? Or, is everyone running for cover and trying to sweep this under the carpet because so many hands were in the cookie jar?

Anonymous said...

The administration and the mayor are the laughingstock all around. Together we can fudge it all.Has the Mayor said anything about the Abuse you are exposing?

Anonymous said...

@3:39 it wouldn't surprise me if they got swamped with applications by owners trying to beat the deadline and just didn't bother checking the paperwork.

Anonymous said...

interesting how the inspector's were specifically assigned to just inspect the TVRs, yet abysmally failed to do the task they were specifically assigned to do...

monumental failure of the administration's imposed planning director and his staff...didn't they bring back Mikey to do just the TVR's? FAILURE.

Anonymous said...

Yeah and then look at some of the ones they denied for real stupid reasons - or because someone at Planning didn't like 'em, my guess. Or maybe they was busy inspecting that rice cooker and with other political payback. Totally corrupt.

Anonymous said...

so did they deny ones that didn't offer malasadas/golf outings/surf boards or alcohol or ones that didn't hire the 'right' consultant?

awesomely corrupt.

Anonymous said...

somebodies getting fat

Anonymous said...

greedy and cunning, he had become a pig of some importance...

Anonymous said...

Joan, is this yurt legal?

http://www.kimosvacationrentals.com/photos/

It is behind some guy's property

Joan Conrow said...

It's totally illegal. They did not even apply.

Anonymous said...

thank you joan for answering the Yurt Question

Anonymous said...

so this yurt is earning income, not paying real estate taxes, not paying GET taxes and the Planning Department does nothing.

sweet job for a pig.

Anonymous said...

Utterly proves the hypothesis that there NO rule of law not only in the country, but in Kauai County. This goes beyond a mere "oops" or two. This is fraud: the intent can be proven, and I hope that the new prosecutor will seriously look into this, and indict where appropriate. Great reporting! Mahalo

Anonymous said...

7316 Alealea Rd is in Wainiha not Haena!