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Selling Advice

Owner-Builder Reminders

Pictured home: 16-4018 Ohiohi St. Keaau, HI 96749

Sellers naturally become concerned when they perceive their bottom line is shrinking. Whether prices rise or fall, the issue of an owner-builder exemption presents itself in very interesting ways. It’s an issue that could potentially affect sellers, buyers, agents, landlords, and tenants alike.

Owner Fines

Remember, the State provides an exemption for an owner-occupant who wants to be their own contractor. Briefly, HRS 444-9.1 provides that a home built with an owner-builder exemption/permit may not be sold or leased for a year following the final inspection (or from a verifiable date when the home was completed). Multiple owner-builder permits should not be issued concurrently. Selling prior to the one-year statutory requirement may result in a fine of $5,000 or 40% of the value of the home for the first offense and up to $10,000 or 50% of the market value for subsequent offenses.

Realtor Fines

Fines may be assessed against the seller and any REALTORS® involved. The law is very clear on this point. If sold prior to one year, REALTORS® could be fined for aiding and abetting an unlicensed contractor. They could even face license revocation. Although not specifically stated, a buyer might also find themselves included in an investigation by the Department of Commerce and Consumer Affairs.

Exceptions

Before 2010, the law was silent about situations where a hardship or mitigating circumstances forced early sale. It was also not specific as to property sold prior to the final inspection or properties without permits. Any property sold prior to the one-year anniversary with an owner-builder exemption (exempt from using a contractor) falls under the provisions of the statute. In a busy market, it’s not uncommon to find non-compliant homes for sale.

The intent of the law is to avoid unlicensed work, but without exceptions built into the law, an already unfortunate situation (illness or death, for instance) could be easily exacerbated. DCCA is required to investigate every complaint, but the statute now provides a vehicle for a distressed owner to request an exemption prior to selling.

Unpermitted Structures

Permit amounts under $10,000 are automatically exempt. Sellers should keep in mind that listing an owner-builder property without an exemption (if you can find an agent brave enough to do so) will result in extremely diminished showing interest.

Issues related to unpermitted structures or areas are always foggy. Because permitting problems are so common, it is best to keep in mind that the intent of the statute is to deter unlicensed activity. It would certainly not be a stretch to assume the provisions of the statute apply. The owner-builder statute is not meant to be a vehicle to generate a complaint about every permit inconsistency.

Verify and Correct

There are numerous reasons a permit record might be incorrect. If you need a permit correction to facilitate a sale, remember, owner-builder provisions apply. Ask your agent for advice on this matter. Most do a good job in helping explain the requirements. Verifying and correcting permits ahead of time provides everyone involved with peace of mind. Happy permitting!

About the Author

Denise Nakanishi

Denise Nakanishi is a REALTOR Broker with Hawai'i Life. Denise Nakanishi is one of Hilo's most acclaimed real estate agents. She reached the rank of Major in the US Army and is now known by many as "Major Mom." The nickname fits–not only does Denise bring the discipline and mission-oriented attitude you'd expect, she's also caring and compassionate, always looking out for her clients like they're her own family. Having made the Big Island her home since 1987, Denise combines her extensive knowledge of the area with a sharp focus on customer service and the results speak for themselves. She's the recent recipient of the Best East Hawai`i, Best of Zillow, Chairman's Circle Award, President's Circle, Top Producing Agent since 2001, and Realtor of the Year awards. Denise stays ahead of the curve because she's passionate about education–she served as Education Chair for Hawaii Island REALTORS® for many years. She's one of Big Island's best real estate resources, known for her weekly article in the Hawaii Tribune Herald. Denise leads Team Nakanishi for Hawai`i Life, who is committed to their family, work, and community. In her little time away from work, Denise is a committed runner and Grandy. She also devotes many hours to various Veterans' Organizations, the East Hawaii Cultural Center, and the Hawaii Island REALTORS®. You can email me at denise@hawaiilife.com or via phone at (808) 936-5100.

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