What is a Residential-Condominium? What is a Land Condominium?

If there is one thing about Hawaiian Real Estate has confused mainlanders more than any other it’s the concept of the Land Condominium.  Likewise, the Residential Condominium.

Res-condos don’t look the way most people envision a condo. Most people consider a condominium to be more than one unit in a two story or higher apartment building.  Once the units become condominiums they have their own TaxKey numbers (property identification numbers) for ownership and property tax purposes. A condominium unit can also be bought and sold separately from the property as a whole. Each condominium owner has a proportionate share in the underlying land and appurtenances (called “common area”).  However, in Hawaii there are several different ways to get more than one single family residence on a single piece of property.  It depends on the lot size and zoning of the property.  Once there is more than one single family residence on one lot, the owner can turn two or more of the homes into condos and sell each separately.  To fully explain I’ll have to start at the beginning.

Back about 25 years ago residents who were born and raised here were complaining that their kids were leaving Hawaii because mainland buyers had inflated home prices beyond what local people could afford.  So the legislature devised a bill and the Ohana Law was passed.  Ohana means “family” in Hawaiian.  The idea was that a person could build a second home on their land for a family member if they got a special building permit called an Ohana Permit.  But it didn’t take long for developers to realize that they could buy a house, build another house behind it, go through the State Condominium Property Regime process, and turn both houses into condos.  Condominium Property Regime, or CPR, is the process normally used by a developer to build apartment buildings and sell the units as condominiums; each with their own Taxkey number (property identification number).  However, there is nothing in the CPR law that says you can’t apply for condominium status for two single family residences on one lot.  So the Ohana Law allows people to build two houses on one lot and the CPR law allows those houses to be turned into condos.  Each condo/house has its own individual Taxkey (or TMK) number, so each house can be sold separately.  Each house sold as a condo totals more profit than the two houses would generate if sold together on the one lot.  Hence, there is a profit motive for builders, or anyone for that matter, to do this.  I did it myself, actually.  I CPR’ed two houses on my property, sold one and paid off my mortgage.  I am in a condominium association with my neighbor and we share a water line as common area.  The condominium association by-laws state which condo owner gets to use which portion of land based on a survey I had done.  The lots are not subdivided and the State, County, Federal Government and the courts consider all the land encompassed by the original lot as common area.  So the common area I can use, and the common area my neighbor can use (based on the survey) is called “Exclusive Use Common Area”.

It didn’t take long for some enterprising developer to find another interesting loophole when combining CPR with Ohana laws.  The CPR law doesn’t specify what a “structure” is.  So enterprising folks put up storage sheds or 10X10 shade houses, called them “units”, and CPRed (condominiumized) them.  Hence was born the “land condo”.  When a person purchased one of these land condos they would apply for a remodel permit for the “unit” and build a house.  Since January 1 of 2003 the concept of the land condo on agriculturally zoned land was outlawed.  Except that all legally built homes, built prior to the new law are grandfather in and a CPR of no more than 2 units is still allowed for these grandfathered homes.  On residentially zoned lots over 10,000sq.ft. a person can still get an ohana permit for a second dwelling on one lot and they can still be CPRed.  Also, land condos created prior to the new law are grandfathered in as well.