Isle pre-fab home builder
seeks to stop state regulation

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By Lyn Danninger
ldanninger@starbulletin.com

Hawaii's only manufacturer of pre-fabricated homes has asked the U.S. District Court for an injunction to prevent the state Department of Commerce and Consumer Affairs from trying to regulate it.

DCCA began investigating the company last year and issued a $25,000 fine because Hawaiian Palisades did not obtain a state contractor's license.

At its Kapolei factory, Hawaiian Palisade Homes LLC manufactures U.S. Department of Housing and Urban Development certified homes ranging in size from 500 square feet to 2,900 square feet. The average selling price of the homes is $80,000.

The company maintains it is not required by federal law to obtain the state license and does not deserve the DCCA citation.

"It's a federal scheme and the state's got no business trying to regulate it," said attorney David Gierlach, who will represent Hawaiian Palisade Homes next week in federal court.

Gierlach believes the state officials don't understand the federal regulations for pre- fabricated homes.

"The state is overreaching their authority. They are demanding quality assurance information and design information. All this stuff is squarely in the federal area," he said.

But Steve Levins with DCCA's Office of Consumer Protection disagrees and believes his department is justified in its actions.

"We believe we have the ability to conduct an investigation and that our investigation would be conducted pursuant to state law," he said.

Levins said his office will be filing a memorandum in opposition to Hawaiian Palisades complaint by next Thursday.

The court hearing on the matter will take place the following Tuesday, he said.

For a pre-fabricated home to be certified be HUD, it must follow certain federal, not state guidelines. The home must be designed and manufactured according to HUD specifications, said local HUD official Michael Flores.

Plans must be approved and the home is inspected at the factory by a HUD-approved third party, he said.

Once inspections are completed, homes are given a HUD certification label.

Hawaiian Palisades has been battling on a number of fronts since it began manufacturing homes last year.

It is suing its former third-party inspector, California-based Radco Inc., alleging breach of contract. Around half a dozen houses the company manufactured are part of the dispute, Gierlach said.

Gierlach said Hawaiian Palisade now contracts with a new inspection company and is working with HUD to force Radco to complete certifications on the previously manufactured houses. In addition, product suppliers for the company have filed a number of lawsuits alleging overdue payments. Gierlach said those disputes are in the process of being settled.