THE SENATE	S.B. NO.	1131
THIRTY-SECOND LEGISLATURE, 2023		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TIME SHARE PLANS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds the mainland-based phenomenon through which certain companies evade county taxes and regulations regarding time share units has started to erode communities on the island of Maui. The legislature finds that the new phenomenon of flexible ownership interests, primarily propagated through time share limited liability companies, has emerged, as vacation homes have been masquerading under the guise of joint homeownership.

The legislature finds that a time share plan, as regulated under chapter 514E, Hawaii Revised Statutes, allows an entity to purchase a small interest in a property and provides that entity the right to occupy the property for a period proportionate to the size of the entity's investment. The legislature finds that this is similar to the new joint home ownership model, which allows buyers to purchase shares in a limited liability company and use the purchased properties as second homes. While this system theoretically requires the occupants in a unit to be the owners of the unit, the legislature finds that the effect of this type of arrangement on a neighborhood is essentially the same as one that allows rotating occupants, and does not require a consistent group of neighbors.

The legislature further finds that the shares in these new entities can be sold, which adds to the speculation effect of these homes on other homes in the neighborhoods they occupy. The legislature believes that these entities, finding a loophole in Hawaii law, are aggressively rushing into Hawaii's market to buy residential homes to convert them into pseudo-vacation rentals that, in all likelihood, will soon be exploited even further. The legislature therefore finds that this model of joint second homeownership poses a direct threat to the State's residential communities. If the State fails to take action, this threat will grow, expand, and have a dire effect on Maui's already over-speculated housing market.

The legislature recognizes that St. Helena and Sonoma, in California, have attempted to amend their laws to treat these new entities as time share plans. The legislature finds that this State should follow the example of those municipalities, as both the State and the counties need the power to extend rules and regulations governing time share units to these new entities, and the counties need the power to impose taxes upon the owners of these entities in the same manner that they would impose taxes upon owners of time share interests.

Accordingly, the purpose of this Act is to subject any fractional ownership plan for a joint homeownership limited liability company, or any other entity, to the time sharing provisions of chapter 514E, Hawaii Revised Statutes.

SECTION 2. Section 514E-1, Hawaii Revised Statutes, is amended by amending the definitions of "time share interest" and "time share plan" to read as follows:

""Time share interest" means any interest, including a fractional ownership through a joint homeownership limited liability company or other entity, in a time share unit or plan [which] that entitles the owner or holder thereof to the use, occupancy or possession of a time share unit on a periodically recurring basis.

"Time share plan" means any plan or program, including a fractional ownership plan for a joint homeownership limited liability company or other entity, in which the use, occupancy, or possession of one or more time share units circulates among various persons for less than a sixty-day period in any year, for any occupant. The term time share plan shall include both time share ownership plans and time share use plans, as follows:

(1) "Time share ownership plan" means any arrangement whether by tenancy in common, sale, deed or by other means, whereby the purchaser receives an ownership interest and the right to use the property for a specific or discernible period by temporal division.

(2) "Time share use plan" means any arrangement, excluding normal hotel operations, whether by membership agreement, lease, rental agreement, license, use agreement, security or other means, whereby the purchaser receives a right to use accommodations or facilities, or both, in a time share unit for a specific or discernible period by temporal division, but does not receive an ownership interest."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2050.

Report Title:

Time Shares; Fractional Ownership Interest; Joint Ownership Limited Liability Companies

Description:

Amends the definitions of "time share interest" and "time share plan" to include any fractional ownership plan for a joint homeownership limited liability company, or any other entity. Effective 7/1/2050. (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.