A provision in HB1740 permanently restricts how HHFDC-exempted units can be rented, sold, and occupied—and most Hawaii property owners haven't heard about it yet.
Most Hawaii real estate and property management professionals don't realize that HB1740—a bill ostensibly about housing finance—contains a buried provision that creates a permanent legal obligation on every unit it touches. Once recorded, this deed restriction never expires and binds every future owner.
Section 3 of HB1740 amends Section 201H-38(a)(2)(B) to require a perpetual deed restriction on any housing unit exempted under HHFDC programs. Here's what "perpetual" means in plain terms: the restriction runs with the land forever, survives every sale, and applies to every owner who comes after you.
The restriction imposes three core requirements:
No short-term rentals. Any lease must be a minimum of one year. This eliminates vacation rental, corporate housing, and seasonal income strategies entirely.
Resale limited to Hawaii-domiciled residents. You cannot sell to an out-of-state investor, a corporation, or anyone without established Hawaii domicile. This shrinks your buyer pool and may reduce resale value.
Continuous occupancy requirement. The owner must maintain Hawaii domicile as a condition of ownership. This prevents absentee ownership and complicates situations where owners relocate for work, family, or retirement.
If you develop, manage, or invest in HHFDC-exempted housing projects, this applies to you. Developers must record the restriction at the time of initial sale. Property managers inherit compliance obligations. Investors face permanent resale and rental restrictions they may not have anticipated.
The restriction is not optional and applies upon approval of the Act. Once recorded, it becomes part of the property's chain of title and binds all successors in interest.
For developers: You must budget for legal compliance and disclosure. Every buyer must understand they cannot resell freely or rent short-term. This affects your marketing, your closing timeline, and your liability profile.
For property managers: You need systems to verify occupancy, monitor lease terms, and document compliance. You may face liability if an owner violates the restriction without your knowledge.
For investors: Your exit strategy is constrained. Resale is limited to Hawaii-domiciled buyers. Short-term rental income is off the table. If you relocate, you may violate the occupancy requirement. These are permanent restrictions, not temporary incentives.
The obligation takes effect upon approval of HB1740. The deed restriction itself is perpetual—it has no sunset date and no expiration clause. This is a permanent feature of any property it touches.
If you own or manage HHFDC-exempted units, review your deeds now. If you're considering involvement in such projects, understand these restrictions before you commit capital or sign contracts. The restriction is not negotiable and cannot be removed without extraordinary legal action.
Source: HB1740, Section 3, amending Hawaii Revised Statutes Section 201H-38(a)(2)(B), pages 7–8.