What is a Residential Condo in Hawaii?

At first sight, you probably wonder, “What is a “residential” condominium in Hawaii? How does it differ from a ‘real’ condo?”

A residential condo, many times referred to as a CPR (condominium property regime) property, is essentially the identical item under the Hawaii State Law HRS 514B.

In order to create a condominium, you need to have certain elements:

1. Zoning that will allow multiple units on a parcel of land
2. Construction that conforms to all of the county zoning codes and has permits for all structures that presently exist, or that will be constructed as part of the condo process
3. Limited use of some portion of the overall parcel
4. Common ownership of some portion of the overall parcel

Not to be confused with the middle photo, a CPR in the context of Hawaii real estate can be both high rise condo complexes, or beautiful oceanfront residential condos on the shores of Makena, Maui.

All of these elements are the same, whether you want to create a 40-story condo tower, or if you want to build two houses on one lot, and submit the tower or the houses to HRS 514B to create “apartments” that may be individually conveyed as “limited common elements.” The law does not allow any increase in density of the underlying county zoning, allow any more people to live on a property, or create uses not already allowed by the underlying county zoning.

How Does it Differ From a “Real” Condo?

A residential condo differs from a “real” condo really only in respect to the fact the residential condo may look exactly like a single family detached home, complete with a fenced yard around the “limited common elements” of the home and yard.

The term “limited common elements” is defined as “those rights appurtenant to (belonging to) the specific apartment.” These rights can include the structure, a defined area of land limited specifically to the apartment, perhaps a garage, a swimming pool or other feature, all exclusively for the use of the apartment.

The residential condo may share some common elements with other structure(s) on the same parcel such as common driveways, a water meter, utility hookups, or possibly something like a pool or tennis court. HRS 514B creates all of the documents that control the process, essentially creating a private governing set of documents for the entire process.

Why Would a Person Want to Create a Condo if They Had Several Houses on One Parcel?

Zoning usually controls minimum lot sizes and in Maui County, for example, to change zoning to a higher density, you may have to change the community plan, deal with Special Management area, do an archeological site assessment, get approval from the Maui Planning Commission, get approval from the Maui County Council, and then do the actual subdivision improvements.

If you actually wanted to do all these things, it could take 10 years, cost over $100,000, and there is no guarantee you would ever finish it all.

Assuming that zoning would allow you to construct two houses, after construction and final approval of all permits and inspections, you could submit the property to the condo process. Within 6 to 9 months, you could have the process complete for less than $20,000 for most small projects and have two “apartments” that could be individually sold, or owned by two different family members.

What Benefits Does This Have?

Here are a couple:

1. If you have one parcel, two houses, and two children, you can use the process to give each child a house of their own without going through the even more rigorous process of a subdivision.
2. If you have a multi-generational family, parents could own their own house, and children could own the other without having to subdivide.
3. For people who don’t like to maintain a large yard, the condo could be created with one house apartment having a small yard and most of the land could be allocated to the other house apartment. For aging people not as capable of the yard work and expense, this could be beneficial.
4. For taxes and accounting purposes, one house could be a principle residence with a mortgage deduction benefit and a separate loan, and the other house could be rented, depreciated, mortgaged, and treated as a business.
5. You could sell one unit and pay off the mortgage on the remaining unit.
6. If a married couple got divorced, this could be a mechanism for each spouse to each end up with a house without having to sell the property.
7. In the very expensive real estate market in Hawaii, the process creates smaller, less expensive units that a lot more buyers can afford to purchase.

 
Overall, these benefits add considerable value to the property as demonstrated by the aforementioned reasons. For a relatively small investment in the process, the identical property increases in value once this condominium conversion process is completed.

Put My Experience to Work For You

Buyers: In my 32 years of real estate experience here on Maui, I have represented many buyers on these types of properties. Should you want to be further educate about the benefits and challenges that are part of owning residential condos, I am here at your service.

Sellers: If you have a property that you think may be eligible for a residential condominium regime, or you have already gone through the CPR process, I am here to consult you about how to best go about selling one or more of the units. I have successfully represented many sellers of condominiumized properties.

Whether you are interested in buying or selling – I am happy to share my honesty and expertise with you.

Tracy Stice, R(B)
Maui Broker in Charge
Tracy@HawaiiLife.com
808.281.5411