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?