Condominiums are a different type of ownership created in the 1960s of real property unlike subdivisions, which have been in existence for centuries. Hawaii is a leader in the development of condominium laws and has been used as a model by other states. The Condominium Property Regime (CPR) was known as the Horizontal Property Regime (HPR) in the early 1960s. Condominiums projects were high-rise buildings or town houses or apartment buildings that were converted to condos and sold to individual buyers. Within the last 15 years, single-family homes on one lot were condominiumized because the property could not be subdivided or the owner chose to do a condo project rather than subdivide.

What makes a condominium form of ownership different from all others forms of ownership in real property? A condo project is a special form of ownership of real property. To create a condo project in Hawaii, the requirements of the Condominium Property Act, Chapter 514A, Hawaii Revised Statutes (HRS) must be complied with. The condo project must also comply with all of the county requirements for zoning and building code.

Condo Creation

The Real Estate Commission (REC) does not create the condominiums. A condominium project is created by recording the master deed or lease, declaration of the condo project, by-laws of the project and the condo maps at the Bureau of Conveyances or at Land Court. The role of the REC is to make sure that all of the condo documents have complied with the law and all pertinent disclosures have been made for the consumer’s protection. The law states that you cannot sell the condo units to the public unless you have a public report. The CPR documents can create the condominium and be recognized by the government as a condo project but in order to sell the units to the public, a public report has to be issued by the REC.

A landowner may choose to do a condo project because although he has enough land to build the number of units, the lot configuration may not be conducive or preclude a subdivision from being approved. The lot may be too narrow, or the access to the lot may be a flag driveway, or the lot may be too steep and the grade is unacceptable for a subdivision. The owner may have a lot large enough to subdivide and has the required frontage but he may want to convey title to a smaller land area than the minimum lot size for a subdivision. There is no minimum land area required for a condo unit whereas the minimum lot size for a subdivision could be 5,000, 7,500, 10,000 or 20,000 square feet.

A landowner is strongly urged to condominiumize if a second house is built on the lot and a child has borrowed money to build the second house and the mortgage is on the whole property. The parents may be jeopardizing their financial security if the child defaults on the mortgage and the bank is forced to foreclose on the property. The parents will need to satisfy the bank loan or they may have a new partner on the lot under a Tenants in Common ownership and the new partner can force the sale of the property. If the child goes bankrupt the creditors could attach a lien on the property. If the child gets a divorce, the in-law could ask to be paid off his or her share of the equity. Many problems arise when the property is held in joint ownership. It is highly recommended that landowners condo the property to protect it against lawsuits, divorce and non-payment of mortgage notes.

Development Timeline

How long does it take to subdivide one lot into two? Does the streamlined building permit process affect other applications at the DPP? If all goes well, a subdivision could be approved in 2 to 3 months but realistically, the whole process could take 4 to 5 months or longer. The key is to have a good professional that knows what he is doing and follows up with all of the agencies reviewing the subdivision plans. The streamlined building permit process is limited to duplex and single-family homes only.

In a subdivision, there is a tentative approval and a final approval and the time it takes between the two approvals is dependent on the difficulty of the project, accuracy of the plans, the proficiency of the surveyor and engineer, the number of projects being submitted, vacation time of the reviewers, and many other factors. A tentative approval could be received as quickly as 30 days if there are no hitches. Final approval will not be given until construction plans are approved, each agency signs off on the plans (about 12 agencies are involved including the utility companies), DPP signs off on the plans, bonding approval if the site work is not finished and the file plan is given to the state surveyor for his review. You can sell the land with a final map being approved but cannot convey title without a recorded map.

In a simple 2 lot subdivision, the surveyor is the key person that will route the plans through the DPP. In a larger project, a consulting engineer or civil engineer will be the key person(s) to design the improvements, sewer lines, utilities, lot layouts, check for sewer and water availability, do preliminary consultations with the various city and state agencies, etc.

DPP has a lot of printed materials on the subdivision process and the guidelines are well defined. There is a subdivision guideline summary booklet that is available. Clusters and PDHs are more subjective and the final decision lies with the DPP Director rather than printed guidelines. In the future, private roads that are 24 feet wide may not be ADA approved and design requirements may be different. Kalanianaole Highway is a classic example of changing rules and the work taking years to finish. The bus stops and fire hydrants are in the way of the wheelchairs traveling on the sidewalks and need to be relocated at tremendous cost and time. State office for persons with disabilities will need to review the plans for compliance with the laws.

Leasehold means you do not own the land.

Someone else owns the land and you pay a fee/rent each month to that owner to be on their land.

The problem with leasehold is at the end of the lease you no longer have the right to be on that land, so the value in your leasehold unit would be zero.

Sometimes you can change a leasehold property to fee simple, and it in that case it becomes a normal property where you own the land and the value will continue to increase.

If you can’t change it to fee simple the leasehold property value will decrease each year as it heads towards a zero value.

So, for leasehold you must pay rent to the land owner each month plus Home Owner’s Association fees plus taxes. It can add up to a big expense each month.

So, for most situations, we do not recommend leasehold because you lose not only the rent you pay but each year you are there you lose the value in the unit. You are better off renting because at least you know exactly how much money you will spend each month and at the end of the rental period you simply walk away, you do not have to sell a property and take a loss on it.

One situation where leasehold could work is for seniors who will most likely die before the lease is up and are not worried about leaving more money in their estate.

Another option could be for an investor, but you must make sure you are not expecting to get your money back if you must sell the unit.

The rule for the Honolulu Board of Realtors MLS, otherwise known as HiCentral.com, is there can be no contact information in the public section of the MLS.

This is important because the MLS goes out to over 1,000 other websites, and those websites do not want to be promoting competitors. If contact information was allowed every Broker would be promoting themselves as much as promoting the property they are selling.

Regarding not adding contact information it sounds straight forward but might surprise you with a violation anyway. The obvious thing is no contact information in the photos or public description. However, it gets a bit more tricky when you link to 3rd party websites such as YouTube, Zillow, etc.

For example, we had one seller who had us link to a 3D tour on Zillow. On the tour itself there was no contact information, but for someone really looking at it closely, the Zillow tour had a way to see who the listing agent was, and this counts as contact information. It was hard to find that link, but some agent found it and reported us.

If you do link to YouTube you have to make sure there is no way to get contact information from the YouTube account you have uploaded the video too. A Broker can’t simply upload a video to their YouTube channel and display it that way.

One thing they are OK with so far is they do not analyze the URL you are linking to. For example, we can link to a generic page with no contact information on OahuRE.com. The URL contains the words OahuRE.com, but nowhere on the page does anything mention us, so they are OK with it. Here is a sample unbranded page on OahuRE.com.

This no contact information policy has been improved throughout the years. At one time they used to allow branding in the photos, so for example we could put OahuRE.com on every photo showing that it was our listing and our photo. As complaints mounted about this they updated the rule to say no company logo or branding on any photos. That branding in the photos was one of the reasons I started OahuRE.com as a separate company. At the time we worked for Realty Executives, and we could only put Realty Executives on our photos, as that was our Broker’s name. I figured if I start OahuRE.com as my own brokerage, then I can use OahuRE.com on the photos. This worked for a few years until they eliminated it.

When a home is not selling, some sellers feel the need to reset the Days on Market shown in the MLS.

Let’s take a closer look at how a buyer might see this.

Buyers care most about the price of the home, what it looks like, and where it is located. They don’t say to themselves I won’t buy a home that has been on the market for over 60 days. If the price was lowered and is now priced right, that home that was sitting on the market for a while could now get multiple offers.

Buyers do look at Days on Market to get an idea of how flexible the seller is. So there is a possibility if you reset the Days on Market and the buyer does not notice the past listing they will feel you are less flexible with your price, as sellers tend to be less flexible when they first list and more flexible after they have been on the market for a period of time. This means resetting the Days on Market could prevent a buyer from making a lower offer as they might assume you will not be interested in it. So in this scenario resetting the Days on Market might cause you to lose an offer.

Another issue with resetting the Days on Market is if they notice you withdrew and then relisted again, buyers might wonder why. Is it just you are trying to hide the Days on Market or is there some other reason you had to withdraw? Perhaps there was an issue with the home you had to fix. Even if it was just to hide the Days on Market, buyers could get concerned with sellers who attempt to hide something. It brings up the question, would there be other things a seller might hide.

With the Oahu MLS, 15 days is required after withdrawing a listing to relist it again. During these 15 days while you are not listed you could lose a potential buyer. We figured out a way around this 15-day rule, but most agents will have you wait 15 days before it can be relisted and you can’t get an offer when you are not listed.

So resetting the Days on Market is not something we recommend, but we will do it if the seller requests it. We believe if a home is sitting too long the best thing you can do is drop the price. This shows you are interested in selling and gets you closer to the market price where your home will sell. All homes are easy to sell and sell fast at the right price, and all homes are impossible to sell when priced too high. The market might be telling you that your price is too high if you have been listed over 30 days with no offers.