Q. I just finished doing a major renovation to my home – I added a master suite with a bathroom. I did the work under an Owner-Builder permit and the cost ran about $20,000. My intention was to continue living in the home but situations have changed and I have decided to put it on the market for rent. When I started talking with a Realtor friend about renting out the home, she mentioned that I may not be able to rent the property for a period of one year. What is going on? Don’t I have the right to rent out my home if I choose to?
A. The answer to that question will be determined by how your “situation has changed” or to whom you intend to rent the property. HRS 44-2 defines owner-builders as individual homeowners who act as their own contractor for building or improving their residence for personal use or use by their immediate family. As an owner-builder, a homeowner acts as its own contractor. However, all electrical and plumbing work must be performed by contractors licensed to perform that work.
When you applied for the Owner-Builder Permit you would have been notified that one restriction under the present law is that you are not able to sell, lease or offer to sell or lease the property for a period of one year after completion of the construction. The date of the final inspection approval by the county will determine when the work is deemed completed. Also, if a person obtains an owner-builder exemption more than once in a two year period, that person is presumed under the law to be in violation of the exemption requirements.
The one year period would not apply if you intend to rent to one of your employees, if the estimated valuation of the work to be performed, as reflected in the building permit, is less than $10,000 or if the sale or lease is caused by an eligible unforeseen hardship as determined by the Contractor’s License Board.
The board will determine the eligibity of an unforeseen hardship claimed by an owner. To obtain a Hardship Exemption, an owner must submit a written application “prior to selling, leasing, or offering to sell or lease the property” describing the nature of the unforeseen hardship. The application shall include supporting documentation detailing the hardship, such as:
• Evidence of unemployment compensation
• Tax returns
• Medical records
• Bank statements
• Divorce decrees ordering sale of the property
• Mortgage default letter
• Bankruptcy filings
The Contractor’s License Board must notify the owner-builder in writing of its determination within 90 days of receipt of the completed application. If the Board determines that an unforeseen hardship does not apply to your circumstances, then you will be limited to waiting one year after the completion of the construction or improvements. The state has established fines for owner-builders who fail to comply with the requirements of the law.