2.3 Hawaii Property Management & Nonresident Owners
Key Takeaways
- HRS Section 521-43(f) requires any owner who lives outside Hawaii or on a different island to designate, in the rental agreement, an agent on the SAME ISLAND as the unit.
- A property manager who handles others' rentals for compensation must hold a Hawaii broker license or operate under a principal broker; mere on-site resident managers can be exempt.
- Client funds — security deposits and rents — must sit in a separate Hawaii trust account with no commingling, and deposits return within 14 days of move-out.
- Hawaii's Transient Accommodations Tax rose to 11% effective January 1, 2026, and all four counties now add their 3% county TAT surcharge on top.
- HRS 521 caps the security deposit at one month's rent and sets 45-day landlord termination/rent-increase notice for month-to-month tenancies.
The Same-Island Agent Requirement
The most distinctive Hawaii property-management rule sits in the landlord-tenant code, HRS Section 521-43(f), not the license law. It states that any owner or landlord who resides outside the State of Hawaii, or on an island different from where the rental unit is located, must designate in the written rental agreement an agent residing on the same island as the unit to act on the owner's behalf.
Critical Hawaii Rule: Off-island and out-of-state owners must name an on-the-same-island agent in the lease. "Somewhere in Hawaii" is not enough — a Maui condo owned by a California investor needs a Maui agent, not an Oahu one.
| Element of 521-43(f) | Requirement |
|---|---|
| Who triggers it | Owner outside Hawaii OR on another island |
| What must happen | Designate an agent in the rental agreement |
| Where the agent lives | Same island as the rental unit |
| Purpose | A reachable local contact for emergencies and service of process |
Why it matters on the exam. The rationale is consumer protection: tenants must reach a real person fast in a hurricane, flood, or habitability emergency, and legal notices need a local address. The statute is satisfied by naming the agent in the lease; if the owner does not, the tenant gains remedies and the owner cannot enforce certain provisions until cured.
Who May Act as a Paid Property Manager?
Managing other people's rental property for compensation is a licensed activity in Hawaii.
| Status | Can manage for others? |
|---|---|
| Licensed broker | Yes, independently |
| Licensed salesperson | Yes, but only under a principal broker |
| Unlicensed on-site resident manager | Limited exemption for the building they live in/manage |
| Unlicensed third party for a fee | No — unlicensed activity |
Trust Accounts and Client Funds
A property manager handling rents and deposits is holding other people's money, so Hawaii imposes strict trust-account discipline enforced by the Real Estate Commission.
| Requirement | Standard |
|---|---|
| Separate account | Client trust account in a Hawaii bank |
| No commingling | Manager's own funds stay out |
| Per-tenant accounting | Track each deposit and ledger |
| Deposit return | Within 14 days of move-out, itemized |
| Records retention | Generally three years |
Commingling — depositing rent into the broker's operating account "just for a day" — is one of the fastest paths to license discipline, even if no client loses a cent.
Vacation Rentals: Taxes and County Rules
Short-term (transient) rentals carry a heavy and recently increased tax stack. As of January 1, 2026, the state Transient Accommodations Tax (TAT) rose from 10.25% to 11%. On top of that, every county now levies its county TAT surcharge of 3%, and the General Excise Tax (GET) applies to the gross rent too.
| Tax on a transient rental | Rate (2026) |
|---|---|
| State TAT | 11% |
| County TAT surcharge (all four counties) | 3% |
| GET (Oahu, with 0.5% county surcharge) | 4.5% |
| Approximate combined burden | ~18% |
| County | Vacation-rental posture |
|---|---|
| Honolulu (Oahu) | Strict registration; minimum stays in many zones |
| Maui | Registration and active enforcement; phase-outs debated |
| Hawaii (Big Island) | Zone-dependent permitting |
| Kauai | Limited Visitor Destination Areas |
Trap. GET is charged on the gross rent, and the TAT is charged on the gross rental proceeds before deducting expenses — so a manager cannot net out costs first. Many out-of-state owners under-withhold and face penalties; the manager's accounting must capture the full stack.
Landlord-Tenant Law (HRS Chapter 521)
Hawaii's Residential Landlord-Tenant Code (HRS Chapter 521) governs the manager's day-to-day relationship with tenants. Memorize the hard numbers — the exam loves them.
| Provision | Rule |
|---|---|
| Security deposit cap | One month's rent (an extra amount may apply for tenants with pets under recent amendments) |
| Deposit return | Within 14 days of the tenancy ending, with an itemized statement |
| Landlord termination notice (month-to-month) | 45 days |
| Rent-increase notice (month-to-month) | 45 days |
| Tenant termination notice (month-to-month) | 28 days |
| Landlord entry for repairs or showing | 2 days' notice, at reasonable times |
| Habitability | Landlord must keep the premises fit and livable |
| Retaliation | Prohibited against tenants who exercise legal rights |
Worked example. A Big Island manager wants to raise a month-to-month tenant's rent and, three weeks later, enter to show the unit to a prospective renter. The rent increase needs 45 days' written notice, so it cannot take effect in three weeks; the showing entry needs only 2 days' notice. Confusing the two notice periods is a classic distractor.
Penalties for Non-Compliance
| Violation | Consequence |
|---|---|
| No same-island agent named (521-43(f)) | Tenant remedies; certain lease terms unenforceable until cured |
| Commingling trust funds | License discipline by HREC |
| Late deposit return | Tenant may recover the deposit plus damages |
| Unpaid TAT/GET on a rental | State tax penalties and interest |
Scenario. A California owner of a Kauai condo signs a lease but names a property manager who lives on Oahu. That violates 521-43(f) because the designated agent is not on the same island as the unit. The fix is to designate a Kauai-resident agent in the rental agreement — proximity, not mere statehood, is the test.
An investor living in Oregon owns a rental condo on Maui. Under HRS 521-43(f), whom must the investor designate in the rental agreement?
A landlord wants to raise the rent on a month-to-month tenant in Hawaii. How much advance written notice is required?
As of January 1, 2026, what is the Hawaii state Transient Accommodations Tax (TAT) rate before any county surcharge?