Civil Beat’s recent coverage of horrendous living conditions in illegal residential rentals in a derelict commercial building in downton Honolulu caught my attention, so I decided to look at the situation. Maybe something useful will result, maybe not. You never know at this point. So come along for the ride.

The CB stories focus on the situation in Union Plaza, a 59-year old building at 1136 Union Mall.

Reporter Stewart Yerton first reported on conditions in the building last month (“They Signed Up For Co-Living In Honolulu And Got A ‘Hell Hole’“), and followed with a second story just last week (“‘Hell-Hole’ Building Tenants Gain Traction In Court As Conditions Deteriorate“).

In his first story, Yerton summarized the situation.

For the last year, dozens of people have been living in the office building without kitchens, air conditioning and proper ventilation — and limited access to showers, multiple current and former residents told Civil Beat. Despite complaints to city and state agencies, conditions for residents have deteriorated. A police officer noted the building was totally unsecured in April, the same month a tenant reported a teenager had been sexually assaulted in the family’s unit.

Then, as pressure mounted, the building’s owners shut down power and air conditioning, and issued eviction notices to everyone.

It seems those who have been paying to live in these squalid conditions are caught in a legal battle in which the building’s former owner and mortgage holder is seeking to foreclose and retake control of the building from a limited liability company that bought it last year.

The former and current owners are both real estate investers and developers.

Real estate records show the building was purchased for $6.5 million on April 8, 2024 by Union Mall Development Group LLC, which financed the purchase largely via a $5.2 million purchase money mortgage from the seller, real estate developer Tomoya Tsuruhara. That simply means that the seller accepted a down payment, and took back a mortgage in which the buyer promised to pay off the mortgage loan by a set date. The principals in Union Mall Development Group, Chad Waters and his partner, Scott Bingo, aslo provided personal guarantees that the loan would be repaid.

The mortgage required UMDG to make three payments–$200,000 due on October 8, 2024 an additional $450,000 that was due April 8, 2025, and a final payment of the outstanding balance due at maturity on April 8, 2026.

After the first payment was missed, UMDG was given written notice that it was in default on the mortgage, and that the plaintiff “reserved its rights and remedies against the Borrower under the Loan Documents, including, but not limited to, foreclosure of the Mortgage.”

The April deadline also passed without any payment, and a foreclosure lawsuit was then filed in First Circuit Court on June 9, asking that the court certify the amounts due and authorize sale of the building at a foreclosure sale, with Tsuruhara able to use the unpaid amount as credit to be bid in the foreclosure sale. The complaint put the total amount then due at $5,712,067.61, with interest and other costs, including legal fees, continuing to rise.

Waters, Bingo, and Union Mall Development Group responded that an allegedly undisclosed “subterranean encroachment that materially affects the property’s boundaries, use, and value,” created a cloud on the building’s title which blocked their attempts to refinance the mortgage loan.

Waters and Bingo allege that following their purchase, they were informed by a maintenance employee that portions of the driveway into the parking garage of the neighboring building at 1132 Bishop Street, including walkways and a utilities room, extended under a portion of their building at 1136 Union Mall. They claim they had been unaware of the encroachment, and allege Tsuruhara had been informed of the encroachment but did not disclose it prior to the sale.

For his part, Tsuhara has denied the allegations and said he “acted in good faith and in compliance with all applicable laws, regulations, and contractual obligations,” and raised a nunber of other defenses, including that the sales contract contained an “as is” clause, meaning that the property was being sold in its present condition.

On November 10, the same day Civil Beat published a follow-up on the plight of residents, Tsuhara’s attorneys filed a motion asking the court to appoint a receiver, attaching Civil Beat’s initial description of rapidly deteriorating conditions in the building to demonstrate “a legitimate concern exists as to the worsening condition of the Property.” And within days, a motion was filed to expedite a hearing on the request for appointment of a receiver due to the building’s continuing deterioration. That motion is pending.

A copy of the Civil Beat story was attached to the motion. Also attached is an email from Dawn Apuna, director of the city’s Department of Planning and Permitting, identifying multiple notices of violation and notices of orders issued to Chad Waters “for unpermitted construction, change of occupancy, and illegal short-term rentals (STRs).”

She says the city has not been able to serve Waters despite repeated attempts, perhaps indicating he is actively avoiding legal service.

A notice of violation (NOV) officially informs a property owner of a violation and provides a deadline to fix it. A notice of order (NOO) is issued when no corrective action is taken, including potential fines and the appeal process.

It appears that each of these violations could violate another provision of the mortage requiring Union Mall Development to comply with “all existing and future laws, ordinances, rules, regulations, orders, building restrictions and requirements of, and
all permits and approvals from, and agreements with and commitments to,” any government or legal authority.

Apuna’s email with the list of violations is included below.