Tuesday, May 21, 2013

Musings: Abuse Chronicles 17

There's a certain sense of entitlement expressed by many vacation rental wannabes — an attitude that is fed by the attorneys who serve them. Which leads us to Pulelehua, a story that again underscores how lawyers who previously worked for Kauai County have inordinate influence on the TVR approval process.

In this case, it's Lorna Nishimitsu, who successfully appealed — stretching the truth and threatening “a taking” in the process — when the planning department quite properly denied her client's application for a TVR certificate.

Her client was William Morgan, a Realtor from Del Mar., Calif., who developed two other TVRs in the same Wainiha neighborhood — Hale Hina and Banana Beach, previously detailed in Abuse Chronicles 10 and 12, respectively. In June 2004, Morgan and three others bought the property they later named Pulelehua for $1.47 million. He then proceeded to flip it several times through a series of tax-free property exchanges involving numerous tenants in common, the same timeshare-type investment strategy he employed with the other two properties.

When Morgan initially bought the Pulelehua property, the structures were not fully legit. In 1997, the county's engineering department had issued a violation notice for illegal ground floor alterations and additions to the main house and guest house. The files also state “elevation certificate has not been submitted to date.”

Photos published on the 2004 real estate listing document the continued existence of those violations. This picture of the illegally enclosed ground floor bedroom actually bore the caption “downstairs storage:”

Another photo shows the guest cottage's illegal full kitchen with stove:

In October 2004, Morgan, through his agent, Matt Hunter, sought a $71,000 building permit ostensibly to remove the illegal downstairs enclosures and replace them with “breakaway walls.” The previous month, prior to any alterations being done, architect Ron Agor had helpfully provided an elevation certificate for “finished construction.” The work got its final approval in July 2005.

On Sept. 30, 2008, Morgan applied for a TVR certificate, claiming the use started on April 1, 2006. Though the law required him to document TVR use prior to March 2008 through a rental reservations log, proof that general excise and transient accommodation taxes had been paid, and a sworn affidavit, his application included none of this. Instead, he submitted only copies of a GE and TAT license for an unnamed business that was started April 1, 2005.

On April 24, 2009, planning inspector Bambi Emayo sent Morgan a letter informing him of several violations, including a full kitchen within the guest house, constructing the kitchen without proper permits and use of the guesthouse as an additional dwelling unit. Morgan was ordered to immediately cease and desist all vacation rental activities and use of the guest house as a dwelling unit. He was directed to remove cabinets, cooking appliances and the electrical and gas supplies to cooking appliances. He was also directed to submit an “acceptable plan for compliance.”

On May 7, Lorna Nishimitsu sent a letter to the planning department on Morgan's behalf in which she submits a “plan for compliance” that is essentially a denial that anything is wrong. In one section she claims (emphasis added):

Having expended approximately $100,000 to bring the guest house into compliance with the Planning Department's directions so that the registration of the single-family dwelling as a transient vacation rental could proceed, our client would not have placed the coffee maker and microwave oven within the guest house structure such that it would result in denial of the nonconforming use certificate for the dwelling (i.e., the main house.)

Curiously, the building permit on record for the guest house renovations was valued at just $28,000.

Lorna also argued that only the main house needed to be in compliance to get a TVR certificate, not the entire property. Under this reasoning, you could be running an auto wrecking yard in a residential zone, but never mind, so long as the house itself is in compliance.

On May 12, Lorna submitted a formal appeal to the planning department. In it, she makes at least two spurious claims. One is that Morgan had shown “by a preponderance of the evidence” that the house was being used as a TVR prior to March 2008, and he had “satisfied all the requirements” of the TVR ordinance. In fact, as I noted earlier, his application was missing nearly all of the requirement documentation.

Another is that Morgan had been unable to bring the cottage into compliance because it was being occupied under a rental agreement issued by the previous owner — an agreement that he could not terminate until its term expired on March 1, 2008. In fact, the house was being rented under a month-to-month agreement, one that had begun in March 2006, under Morgan's ownership. He ultimately gave the tenant a vacate notice effective March 1, 2008, even though the woman was just about to give birth and had nowhere else to go.

Lorna then goes on to claim that denial of the TVR certificate “will result in a substantial decrease in the value of the subject property,” even though it wasn't a TVR when Morgan bought it. As a result, Lorna claims, the “denial represents a taking without just compensation” in violation of the state and U.S. constitutions.

That's right. Not being given something you wanted, but never actually had — and never even proved you were qualified to receive — amounts to “a taking” in Lorna's world.

Worse, the planning department caved and went along. In a June 26, 2009 letter, former planning director Ian Costa advised Lorna his office had reviewed her appeal and decided that Morgan's application “will now be recommended for approval before the Planning Commission.”

The planning commission affixed its rubber stamp on July 14, 2009, with the staff-recommended caveat that the TVR certificate “is not evidence of compliance with any and all pertinent zoning and use regulations.”

So Morgan got his TVR certificate. 

And though multi-family rentals are illegal on the North Shore, Lorna continues to submit the renewal applications as if the owner is also entitled to rent out the cottage that she previously claimed was not part of the original application:

The SFR is rented either independently of the guest house or with the guest house. The guest house is not a stand along rental.”

The internet ads, meanwhile, tell the real story, that this is an illegal multi-family rental:

We had two families for a total of 10 people and we had plenty of room in the kitchen and living area. We also used the "tree house" which was nice as well. The tree house is detached from the main house and you can feel a little disconnected from the main house.

Internet ads also tell of visitors using the “tree tunnel” — a dedicated beach access that Morgan has heavily landscaped to discourage public use — to reach “Banana Beach” so they can swim, body surf, boogie board and snorkel in waters that are extremely dangerous and lacking any lifeguard:

We were so excited to "discover" the "tunnel" leading to the almost private beach where we spent almost all of our time. 

A beach that many residents no longer want to use, because it's now filled with the visitors from the three mini-resorts that Morgan developed and all the other TVRs along that stretch of sand.

Oh, and btw, do those look like "break -away" walls on the "downstairs storage" to you?


Anonymous said...

liars, stealers and cheaters! how shame!

Dawson said...

"Not being given something you wanted, but never actually had — and never even proved you were qualified to receive — amounts to “a taking” in Lorna's world."

Those words define not only the core of Abuse Chronicle 17, but the collective mindset of all those involved in the TVR abuse industry -- property owners, agents, realtors, lawyers, local contractors and government officials. And it is indeed an industry.

In their minds, what they want from Kaua'i is theirs for the taking. Laws and regulations are annoyances to be worked around; fines and punishment are part of the cost of doing business.

What is being chronicled on this blog is nothing less than the chronic corruption that has resulted from the de facto collusion of business and government.

Anonymous said...

Send them to jail! Shame on Lorna Nishimitsu. Shame on Morgan. Shame on Ron Agor. Shame on Ian Costa. TAX Evaders! Fraudsters! Putting people in danger. Polluting the North Shore with inadequate septic tanks.

There should be multiple checks to ensure compliance & not circumventing of the laws and rules.

Save our beaches for the people!

Anonymous said...

How do Lorna, Jonathan Chun, Walton Hong etc sleep at night? Is the $ worth selling out the island for sleaze bags? Have another drink Lorna. You won't feel a thing.

Anonymous said...

How about reporting this to the Hawaii BAR? If this is the type of crap we can expect from 'attornerys', they should be disbarred. Bernard, stop singing and starting acting. Or, are you hands too dirty? It's very interesting, Bernard, how silent you've been through this series. These are air-tight, in-your-face violations. Many of these happened on your watch by your lackies, I mean managers. Do something or move out of the way and fade into the sunset.

Anonymous said...

so if I hire an attorney and threaten a lawsuit - I can get whatever I want...

good to know.

Anonymous said...

You have to hire the 'right' attorney, they probably won't hand you the list at the planning department but ask anyway.

Anonymous said...

A "taking" is a legitimate claim when govt action causes the lack of ANY use of the property. It does NOT mean when the value decreases because of govt action. I.E., govt action that takes a house for a road is a taking by imminent domain and deserves fair compensation. A neighbor's property value effected by more road noise from this road is not a taking because there is still use of the property.

Anonymous said...

Which house had the long term renter? The cottage with the illegal kitchen or the main house?

Anonymous said...

I tried to told you all that all of these scum bag GOBAGs are terrorists in a multinational criminal organization on Kauai.

Anonymous said...

Joan, would you put on your list to investigate:

Greg Smith's "Ag vacation rental" in Wailua Rise, Koumoo Road?

Greg lives in Arkansas, has a web site for his "TVR" that he claims as Ag land.

Ask A. Bandmann, who is a cop, what it's all about, too. He guards Greg's property like his life depends on it.

Smith is from Little Rock, Arkansas. Being a good ole boy himself, has no problem bragging about who he knows on Kauai--from inspectors, county workers to cops, to firefighters.

Been going on since I can remember--maybe 15 years now. I'm tired of watching the years of these county workers, inspectors and cops cozing up to this Mainlander who seems to do as he pleases...line those pockets.

Anonymous said...

Smith's got advertisements on YouTube with spots about the "Smith Hale" Ranch.

Yeah, I remember when Smith convinced a woman to put her 2 horses in one of the pastures so the land could pass as Ag land--that's exactly what he said, heard it with my own ears.

Which is it Ag land or TRV? Smith's making out like a bandit @ $1,500/week. Check out web sites.

Anonymous said...

Here's a listing for the Smith Hale Ranch TVR: http://www.squidoo.com/KauaiVacationRentalByOwner

Anonymous said...

And here's the youtube listing:

Anonymous said...

i watched the council meeting and heard Alfred Castillo and Maunakea Trask---what are they doing? Seems like they want to stop any action that will look into the abuses that have occurred. I just don't understand what their motives are, so with Ako! There must be people they need to protect---or something close to that. It's just outrageous that they are not attempting to assist the council to get things going---don't they understand that wrongdoings must be stopped. The County of Kauai will be paying out a lot of $ if people get hurt or lose their lives due to floods and huge waves! What's with Castillo, what kind of county attorney is he--seems like he isn't qualified for the job!!!!!!

Anonymous said...

"There must be people they need to protect" - yup their friends, it just sucks when they try to use the law to protect the guilty.

Anonymous said...

Why attack the private attorney here? Looks like Lorna was just doing her duty to zealously represent the client through this mess.

The real culprit yet again, would be whatever deputy county attorney, most likely Mike Dahilig, who decided that the planning department should cave-in to Lorna's demand letter. Like Hoosier said...its either malfeasance or misfeasance - but with all this monkeybusiness...I'm leaning toward the former.

Anonymous said...

How could this ever have been considered a taking? There was never complete loss of use.

What kind of lawyer is this guy? Hope his next employer has or will read all about his exemplary service his has done for this county.

Anonymous said...

Or Ian Costa just made the decision on his own.

Anonymous said...

Jetplanes and the internet are to blame. On another topic, notice how nice the weather's been? http://raisingislands.blogspot.com/2013/04/another-study-predicts-drier-future-for.html

Anonymous said...

You think it's bad here? Watch this:


Elizabeth Warren is a hero! A smart politician who is going after the really big crooks on Wall Street.

Anonymous said...

as far as I know...Smith Hale has been sold to the Hindu Monestary for some time now...

Anonymous said...

Anonymous said...
as far as I know...Smith Hale has been sold to the Hindu Monestary for some time now...

May 23, 2013 at 8:14 AM

Last I heard, Smith is leasing the land to the monks.

Anonymous said...


Is airbnb illegal on Kauai? - no law against it yet it causes the number of vacation rentals to exceed the number recommended in the comprehensive plan...

Anonymous said...

These abuse chronicles are very important as they are starting to get the county's attention. Great work to all !
I am a 20 year resident on Kauai and agree that this
Unenforced TVR system is truly a pathetic example of our local government at its WORST !. So to help our elected official do their job here are a few easy steps that will eliminate illegal TVR's.
1. Hire 3 summer interns to identify all the vacation rentals on Kauai. Generally they are numerous listings under the local realtors , VRBO and rental agencies. Simply cross reference them to the existing permits and contact the agents and owners and issue cease and desist orders via mail and post them on the properties. The Real estate agents are licensed and can't aid and assist these violators or risk loosing their license.
2. To make sure these "agents" are providing all the nessesary information regarding their activity the county should review the rental booking logs and commissions which will provide all the info one needs to solve the problem.
While the "musings" makes for interesting reading about individual properties the solution to the problem rests with the people who benefit financially by assisting home owners in breaking the law. Put them on notice along with the individual owners and this ongoing illegal activity will come to a pretty quick stop.

Anonymous said...

So... it's disgraceful that visitors are using a beach that is treacherous and has no lifeguard, but it's also the case that residents don't want to use the beach anymore because it's used by visitors. Really... there are legitimate concerns about improperly granted NCU Certificates, but why pretend that beaches without lifeguards are a problem? Why suggest that a tsunami would create a liability in a TVR but not pose a grave threat to everyone else?