Bankruptcy blamed on county law

KAPA‘A — Several people planning trips to Kaua‘i have recently reported receiving correspondence from a vacation rental company that apparently skipped town last month.

In a letter dated June 25, ‘Anini Aloha Vacation Rentals and Management tells a prospective guest that “we will be unable to accommodate you in the rental property you booked.”

‘Anini Aloha says it closed its Kaua‘i offices June 1, has “ceased all business operations” and is in the process of filing for bankruptcy. The company, a division of Arizona-based Solcrest Properties LLC, blames a controversial county law regulating vacation rentals.

“Due to the passing of an ordinance by the Kaua‘i County Council, several properties on Kaua‘i were recently denied a permit to operate as a vacation rental unit,” the letter says. “This affects most properties that are zoned as agricultural, which includes many homes on ‘Anini Beach.”

‘Anini Aloha says the county has sent out cease and desist orders to the affected homeowners, preventing the company from renting the properties without risking fines.

About half of the properties located on ‘Anini Beach are designated as “ag,” half as “urban,” Councilman Tim Bynum said Sunday. He said this will likely cause financial hardship for some owners if it has not already.

“Regardless of that, you still have to act responsibly when you have business commitments,” he said. “Even if they were having financial difficulties, they could have handled it better.”

“Drawing a line in the sand” and moving forward would have been a better option for the vacation rental ordinance, said Bynum, who cast the lone “no” vote against the bill when it was passed in early 2008. He favored grandfathering in existing vacation rentals, rather than taking a step “backward” and creating the possibility for situations like this one to occur.

Some of the other council members shared his concern, but compromised with their colleagues to get the bill passed.

Some former council members, including Shaylene Iseri-Carvalho and Mel Rapozo, have said state law prohibits vacation rentals on ag land primarily because it is a commercial use. But attorneys representing landowners said the law has a provision that says prior lawful uses must be recognized and a county-imposed blanket exclusion begs a lawsuit.

The final version of the bill provided a nexus to the state land use law by stating: Pursuant to Hawai‘i Revised Statutes Chapter 205, no non-conforming use certificate shall be issued for any single-family transient vacation rental located on land designated agricultural by state law.

The approved bill provided two exceptions: The unit was built prior to June 4, 1976, or the applicant has a special permit under state law.

The letter from ‘Anini Aloha says that failure to obtain a non-conforming use certificate by March 30 means the vacation rental is illegal.

However, an amendment to the bill now being considered would let the county enter into a “non-enforcement agreement” with vacation rental owners on ag land while an important ag land study is being completed. That study, which has an uncertain completion date, could result in a determination that some vacation rentals are on property unfit for farming and a new classification may be in order that would possibly allow them to continue to operate.

But while all this plays out, vacation rental operators and prospective guests have apparently been caught up in the mix.

Corey Sullivan, who booked his stay through ‘Anini Aloha for an upcoming honeymoon in September, points out that the letter the company sent “explicitly states they will not be processing refunds.”

“I had attempted to contact the company for a number of weeks to ensure my rental agreement was still in place and I received no response,” he said in an e-mail, explaining what had occurred prior to receiving the company’s notification.

Although he paid nearly $500 for a deposit, Sullivan said he is thankful they did not receive his entire payment before closing their doors.

“I am quite concerned considering we were already on a tight budget for our honeymoon and being out the additional $500 puts us in a bind,” he said. “I not only trusted my money, but also the once in a lifetime I will get to enjoy a honeymoon with my newly wed wife.”

Sullivan adds that he was fortunate enough to have an “accommodating” property owner, Ric Adkins, who was also allegedly deceived by the company.

“He has completely restored my faith in the entire vacation rental process,” Sullivan said.

Whether Sullivan will receive the $500 back from ‘Anini Aloha is still up in the air.

‘Anini Aloha owners Frank and Teresa Klenner could not be reached for comment.

The pair say in their letter that the majority of their rental properties “were on those highly desirable agricultural properties,” and that they “had no choice but to close our offices on Kaua‘i.”

They also say they “will be forwarding your name and contact info to the owner of each property, so that they can contact you directly regarding your booking.”

This flies in the face of statements made in an article last week that other property owners were having a difficult time contacting their renters.

Mary Paterson has said that complaints have been filed with the Department of Commerce and Consumer Affairs Regulated Industries Complaints Office, but an employee there confirmed Thursday that ‘Anini Aloha was “not in our system.”

County spokesperson Mary Daubert said the Kaua‘i Police Department had not been contacted about the issue as of Thursday. “Those who are in this situation should call the police to report it, and then KPD can follow up,” she said.

For more information visit www.hawaii.gov/dcca, www.kavaassociation.org, www.kauaigovonline.org/COKForms/tvr_log.aspx or call KPD at 241-1711.

• Coco Zickos, business and environmental writer, can be reached at 245-3681 (ext. 251) or czickos@kauaipubco.com