What is a Residential Condo in Hawaii? Part 2

What is a residential condo on Maui and how does it work? This blog is specific to Maui, but the general rules apply to all islands, but each island has zoning and rules that are different.

What is a Residential Condo in Hawaii? Part 2

What is a residential condo on Maui and how does it work? This blog is specific to Maui, but the general rules apply to all islands, but each island has zoning and rules that are different. This blog is a continuation of a blog I published in 2011, "What is a Residential Condo in Hawaii?" and adds some more details.

Working as a real estate professional, you need to be able to understand and explain what a residential condo is and how it differs from a similar property that is not a residential condo.

Simply put, a residential condo is a splitting of property ownership, using Hawaii Revised Statutes section 514 B, to allow separate ownership and mortgaging of property of a parcel (single tax key ), under Maui county zoning. It is possible to create separate “ apartments “ from legally permitted structures, or vacant land parcel "apartments" under HRS 514B.

A residential condo is not a subdivision. Maui county still regards the original lot to have the controlling, underlying zoning. No extra lot density or other improvements are allowed on the original lot. New tax keys are assigned once the process is complete, but they only add "apartment" keys to the original tax key. All residential condos have six numbers in their tax keys, while non-condo parcels have five. This is the fastest way to find out if a parcel is a condo or not.

Hoomalolo condo

Maui county requires that any parcel, to be considered eligible to considered, has to have all structures totally permitted. Everything has to match county permit records.

A checklist would look something like this for starters to evaluate a property:

  1. What is the underlying zoning (i.e. R-2, R-3. rural, ag.). Get a county zoning verification signed by Maui planning department.
  2. Does the zoning allow multiple living structures?
  3. Do the covenants on the title report restrict residential condos? (many do)
  4. What is the water meter size?
  5. What is the current water meter sizing fixture count for the current homes? (You need to do the county water department worksheet.)
  6. Do the setbacks for all of the structures conform to zoning? (Hard to tell without a survey locating all structures.)
  7. Can all permits be verified for every improvement on the property? This includes "add-ons" such as covering a permitted lanai, enclosing carports, and other items that owners do without permits.
  8. Were notices of completion filed for owner builder construction and has it been more than one year since the filing of these notices?
  9. If improvements were built by a contractor, have all lien notices been filed and final inspection signed off by county on all permits?

This is just a starting point in the process. If you are able to verify all of the information above, you have just saved about $5,000 in the process, as researching all of these issues, especially permits , is very difficult because Maui County has very poor records for anything built prior to 1990 and the county does not retain building plans for more than a year.

Now, you need to put together a team.

You are going to need the following:

  1. A local Maui attorney who does this process often, or even full-time, who will produce the declaration, public report and other necessary documents under HRS 514B
  2. A local Maui survey/engineering firm to produce the survey and condo map, as well as to certify all of the building improvements.
  3. A Hawaii licensed real estate broker to sign on the condo documents
  4. somebody who knows their way around the county to research permits, title reports, covenants ( maybe a Realtor or professional planner)
  5. A Hawaii title and escrow company to do the title search and produce all of the covenants and restrictions on title for the property.
  6. A home inspector to provide an inspection report

Most of these processes can be done by the engineer/survey team for a fee. Most attorneys will not process the CPR without a team to take care of all verification and inspections that are required.

If you have completed the first part of the process and can hand it over to your attorney and engineer, you can hope to have the process completed within a year or a little more. Little things can cause big delays. Missing one permit can send the whole process back through the loop again and that will take a lot of time.

Over the past 6 years, I have had many inquires on my 2011 blog, and I wrote this to clarify some issues and provide some links to help. Please contact me for additional resources and recommendations for professionals who can help you along with this process.

Tracy S. Stice  Realtor-Broker   808-281-5411

Purchasing CPR'd Hawaii Real Estate

Condominium Property Regimes, more commonly known as a CPR, have become a common term when it comes to Hawaii real estate. The first step is to understand what a CPR actually is. Secondly, you need to ask yourself what you value in terms of owning real estate.

CPR unit we listed

Do You Plan on Expanding the House?

If you plan on expanding the house, you need to make sure you will be purchasing the A unit. The A unit is the parent or less hindered home or lot, not the cottage portion of the CPR. The A unit is only restricted to whatever laws or CC&R's state as far as size, height, and so forth. The B unit (depending on lot size and zoning) can only be 1,000 sqft of living space at the largest. You will need to consider lot size, setbacks, water fixtures, sewer systems, etc, but overall the A portion is less restricted.

Are CPR's Hard to Resell?

One way to measure the resell of a property is absorption. On average only .5 CPR's sell a month vs 4.5 on a non CPR unit in Haiku. The average days on market for a CPR'd parcel in Haiku is 113 vs a non CPR at 151 days. This could be due to the lower price point and more competition.

Additionally, CPR's are technically encumbered. This also decreases the amount of interested buyers, which decreases value. If a non CPR'd and CPR'd lot of the same size and quality are available for the same price, which one would you choose? Depending on the zoning restrictions, you have many more options with the non CPR'd lot. If you own the B unit, you can only build out to 1,000 sqft, which limits the buyer pool once more.

Another factor to consider is the permitting process. If your partner in the CPR (owner of A unit if you own B, or vice versa) does not pull a permit for an improvement and you go to get a permit, you will not be granted that permit until theirs is closed.

Benefits of a CPR

There are benefits to a CPR. Are you wanting your property to pass to multiple children? Go for it, create a CPR from your house and cottage to pass along. A large concern for home buyers is that their neighbor might block their view with future buildings. If you buy a CPR that is already built out, the density and locations are set. Knowing that there are restrictions with a CPR is most often considered in the listing price. With that said, if a buyer is less concerned about restrictions on building and more concerned about finishes and quality, a CPR could get them a better finish for less money. The first key is to see what the subject lot is zoned, then you can go through all of your options for the highest and best use. Give me a call and we can find what fits your needs.

Tim Stice 808.268.8511

Earn Maximum Cash Flow in Hawaii By Owning a Honua Kai Resort Studio Residence

Looking for an investment property in Maui? Studio residences at Honua Kai are some of the best cash on cash performers that I have seen in the entire marketplace on Maui and I would prognosticate are some of the very best in the state.