Second Home Buying - Use the Professionals

By: Sanjog Gopal

Many of us like to think that one day we will be buying our second home - some of us already have one. Exotic homes often beckon us to foreign shores, but there is always slight trepidation when buying a property overseas, some of their laws are different to ours. Will we be protected? Will the land or strata regulations suddenly be changed? Can clauses be altered after contracts are signed and established? Can the government over-rule existing laws? What are our rights?

These are all valid questions and 'security of the law' is one of the reasons why many of us still buy in USA; we are familiar with, and know the laws in our own country. Or do we?

Recently a group of vacation home owners in USA were served with shut down orders. This brings it home to any of us that are planning to buy property that we must take ethical professional advice, and ensure that we are operating within the law of the land - and within the law of the counties and cities!

Often when we are planning to buy a vacation home in a newly developed area, several points may be overlooked by the local authorities in their enthusiasm to bring new business to their area. The authorities in question are not willfully practicing deception, they are practicing good will!

At the time these little bylaws are not too important, and can be ignored to encourage the pending rush of tourism into the area. It is a hospitable gesture on behalf of the region's hierarchy to do a favor and waive aside a few administrative conditions; after all, tourism will be lucrative for the newly developed area and its people.

But, like many rules that go unbroken and unnoticed by one or two people, when the whole town is doing it, then the situation becomes a nuisance. People complain - heads must roll etc. This is what has happened in USA, over in Hawaii and shut down orders for many vacation homes have had to take effect from Jan. 1st. 2008.

Maui County Officials ordered hundreds of vacation home owners to stop renting their homes, because they were renting them without a permit. This practice of renting without a permit has been permissible under previous county administrations. Owners were allowed to operate vacation rental homes while they were waiting out the permit approval process.

The Maui Vacation Rental Association sued Maui County in the U.S. District Court, but the judge was obliged to carry out the law, although commenting that 'it did not seem fair'. Consequently 900 of a possible 1200 units have been shut down with an estimated loss of up to $100,000 per year in rental income.

The reason that was given for the lack of permits was that the growth in the number of vacation homes brought too much noise into the neighborhoods. It had also increased the realty prices to a level that Hawaiian residents found difficult to afford.

This problem of pricing the locals out of the realty market had happened years ago to a small holiday island off the French coast. The solution was to enforce two different levels for property prices, one for newcomers and one for residents.

This controversy is now actually damaging the island's tourism and suits from property owners seeking damages could further harm it. However, there is a lesson to be learnt here.

When buying a vacation home anywhere, including in the USA, be prepared to follow the law of the land. Get everything in writing (i.e. in this case, that you CAN rent while waiting for your rental permit to be approved) and only enact what you can back up with written permission.

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