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.
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.
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.