Hawaii wants to leave Canadians in the cold
State targets off-island rental property investors in grab for cash; new law would ignore digital age and turn back clock on free trade deal
by Adam J. Leamy, Vancouver Sun April 2, 2012 (excerpt)
…The Hawaii state legislature has taken dead aim at NAFTA and the provisions it requires of the state, and the protections it affords Canadians who make cross-border investments in vacation rental properties….
Four bills are advancing through the Hawaii legislature that target off-island, i.e., Canadian, owners of vacation rental properties. Senate bills (SB2078, SB2089) and House bills (HB1706, HB1707) require off-island owners of vacation rental properties to turn over the management of their rental property to some form of on-island licensed real estate broker or salesperson, managing agent, rental agent, or condominium hotel operator. Curiously, local, on-island owners of vacation rental properties are exempted from the bills and their provisions.
Legislators say the measures ensure tax compliance, but the only evidence of non-compliance is anecdotal, and provided by the above-noted licensed real estate brokers or salespersons, managing agents, rental agents, or condominium hotel operators. The state has no data to suggest this is the case, and in a classic case of "legislate first, get facts later," says it will under-take to find out.
Legislators say the measures enhance consumer protection, but the only evidence on that front is again anecdotal, and again courtesy of the same group of usual suspects who stand to gain when the state grants them a monopoly to rent out all privately owned vacation condos.
And what a monopoly it will be. Testimony on these bills has revealed that the commissions Hawaii property management firms charge to proper-ties under their "care" can be 30, 40, and 50 per cent, with all manner of hidden costs and property abuses. It's hard to see how those commissions will decline, or how quality and service will increase once a state-legislated monopoly is in place.
An exemption has been proposed for "non-residents," i.e., Canadian cross-border investors, but it has been so error-ridden, it beggars belief that it's intended to be effective, or survive. Moreover, it would only be accessible to Canadian investors if they subscribed to some additional process that the state has yet to identify.
But such an exemption, for Canadians, is a non-starter anyway. The North American Free Trade Agreement (NAFTA) did away with all this, through the "national treatment" protection to cross-border investors. As NAFTA specifies, under Article 1102, "Each Party shall accord to investors of another Party treatment no less favourable than that it accords, in like circumstances, to its own investors, and investments of its own investors, with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments."
NAFTA goes even further: "The treatment accorded by a Party means, with respect to a state or province, treatment no less favourable than the most favourable treatment accorded, in like circumstances, by that state or province to investors, and to investments of investors, of the Party of which it forms a part."…
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