When you think of a condominium you probably imagine a tall building with apartments on every floor. In fact, any property can be submitted to a condominium property regime. Hawaii state law was revised a few years ago to greatly expand the possibilities.
What is a condominium property regime (“CPR”)? It is a vertical or horizontal subdivision of land. When it is created each of the apartments or units is the equivalent of a subdivided piece of property which can be bought and sold separately.
You can submit vacant land to a condominium property regime (a “CPR”). The only restriction is zoning. The zoning size of a lot determines how many units can be on the lot. There are five residential zoning districts: R-3.5, R-5, R-7.5, R-10 and R-20. The number in the district indicates its minimum size: 3,500 square feet, 5,000 square feet, 7,500 square feet, 10,000 square feet and 20,000 square feet. The zoning and building codes permit only one dwelling and one kitchen for each lot (a kitchen is a stove, refrigerator and sink). What if you have an R-5 lot of 10,000 square feet? You could submit 2 units to a CPR and the buyer of the vacant land area could build a house on it.
Do you own a walk-up apartment building? You could submit it to a CPR and divide each of the apartments into its own unit which can be separately sold. I like to tell my clients that the sum of the parts is worth more than the whole! The value which can be obtained selling each of the apartments exceeds the value of the building as a whole.
A strip center can also be submitted to a CPR. Again the sum of the parts is worth more than the whole. Some very successful retail centers in Honolulu are CPRs including Lewers Street in Waikiki.
Creating a condominium lives up to the difficulties of doing business in Hawaii. But it can be done and the advantage of it over a subdivision is that it is completely in the control of the property owner. A condominium is created by recording a Declaration of Condominium Property Regime, By-Laws and a map depicting the land and improvements on the land. This requires retaining an architect as well as an attorney. In order to legally sell a condominium, you must prepare and have approved a “Public Report.” This is a form promulgated by the State which is lengthy and requires submission of a large number of forms and documents. The Public Report is reviewed by a consultant and when approved it is issued by the State. The owner must provide the Public Report to prospective buyers and they have 30 days in which to approve it. Once approved the contract for purchase becomes binding.
One of the advantages of submitting a property to a condominium property regime is that it enables the owner to withdraw equity from the property by selling a portion of it as a condominium unit.
If you own property which could be submitted and you want to take advantage of the benefits I’d love to help you! Give me a call.