- Associated Press - Thursday, August 6, 2015

HONOLULU (AP) - Maui County has slapped a half-million dollar fine on the owner of a popular boutique hotel as part of a settlement involving 30 alleged permit violations.

Michael Baskin, the owner of the 14-room Paia Inn, said Wednesday that he’s not acknowledging wrongdoing but wants to resolve the issue and have as good a relationship as possible with the county and community.

Baskin said he’s done his best to comply with a new vacation rental ordinance he believes is confusing and flawed.

Reviewers on the travel site Trip Advisor rate the quaint inn in the sugar plantation town of Paia among Maui’s best hotels. Travel and Leisure listed it among the nation’s most romantic hotels in 2012.

The county says Baskin illegally converted a garage and shed into bedrooms and rented more rooms than allowed, among other violations. The county said Baskin will have to pay an additional $500,000 if terms of the agreement are violated.

The penalty comes while Hawaii’s counties struggle to regulate a thriving vacation rental and bed-and-breakfast industry as increasing numbers of travelers seek accommodations outside traditional resort areas. The sector has exploded in popularity with the introduction of online rental sites such as Airbnb and Vacation Rentals by Owner.

Maui County in 2009 adopted a law to streamline its permit process and cap the number of permits.

On Oahu, Honolulu hasn’t issued new permits for short-term rentals since 1989 even though hundreds of new vacation rentals have come on the market since then.

The Honolulu City Council has repeatedly considered legislation to update its regulations, but council members haven’t been able to agree on new measures.

The Paia Inn differs from a typical vacation rental in that it’s built around a small hotel on the town’s main road that dates to 1927. Baskin expanded by buying three 1930s-era wooden plantation homes next door and renting out rooms.

The inn’s main building, which currently has five rooms, is a commercial structure with retail stores and a restaurant on the first floor. The three properties next door are on residential lots and require vacation rental permits. All the rooms are managed together under Paia Inn.

Baskin said it’s complicated, but “it’s also what makes our place so interesting and charming. It’s not a typical resort.”

Will Spence, the county’s planning director, said authorities launched their investigation after neighbors expressed concerns to a county councilman. “We were quite surprised when we did the site visits as to the kinds of things that we saw,” Spence said.

One property had a garage that was converted into two units with two kitchens, he said. They found a storage shed was converted into a rental while another illegally built storage shed was being used as a rental, Spence said.

Baskin said the property records show the garage was two units going back to 1932, the first shed was built before the county introduced building permits in the 1950s, and the last shed was actually an open-air gazebo that has since been removed.

Spence also said one house permitted for three bedrooms actually had nine, while another permitted for three bedrooms had four.

Baskin said he submitted amended applications to address the number of rooms, but the county never processed them. The issue was resolved through mediation, he said. The inn’s vacation rental permits are now current, he said.

The irony, Baskin said, is that the inn won an award for exterior and interior renovations from the Paia Main Street Association in 2010.

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