Regrettably, June 24, 2005, Republican Gov. Linda Lingle signed HB 1308–Relating to Land Conservation, AKA "The Legacy Lands Act," AKA "The Conveyance Tax Increase."
This new law increases the cost of selling a home in Hawaii and penalizes the seller if the buyer is an "investor." While the goal of this new law may seem well-meaning, the implementation of this law has some serious issues that have not been addressed, specifically the surcharge for "investor" purchasers:
The bill, Section 247-4 (2) (Second section) "For the sale of a condominium or single family residence for which the purchaser is ineligible for a county homeowner’s exemption on property tax:
- (A) Fifteen cents per $100 for properties with a value of less than $600,000;
- (B) Twenty-five cents per $100 for properties with a value of at least $600,000, but less than $1,000,000: and
- (C) Thirty-five cents per $100 for properties with a value of $1,000,000 or greater."
The issues that have not been addressed:
- Who shall determine the purchaser’s eligibility? It can take over a year for the tax office to grant a homeowner’s exemption.
- Will there be a "supplemental tax assessment" if the purchaser fails to qualify for the homeowner’s exemption? If so, who will pay, buyer or seller?
- The home seller is paying the conveyance tax yet the buyer’s exemption status determines the amount of the tax. Will we have a two-tiered home pricing structure and will "investors" be discriminated against?
- What are the legal ramifications of a purchaser making a false statement regarding their eligibility?
- Is there an opportunity for fraud? What prevents an investor purchaser offering to make a statement that he/she qualifies for the exemption, saving the seller the surcharge then asks for a "kick-back" of all or part of the savings.
These are some administrative and/or legal issues that are unanswered in the language of the new law.
Walt Harvey (R), ABR, CRS, GRI, SRES, ePRO, QSC. is a Broker-Associate with East Oahu Realty and works with his wife Arla. They specialize in residential, commercial and investment real estate and can be reached on their Web site: http://www.coastalhawaii.com Have a real estate question? Email at: mailto:walt@coastalhawaii.com or call 375-8959. Walt also is a board member with the Grassroot Institute of Hawaii and Small Business Hawaii.
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