Maui Real Estate Blog
What The FAQ is a Residential Condo?
If you browse through enough home or land listings on Maui, you may encounter some terms that may leave you scratching your head. Words like residential condominium, condominium home or CPR seem out of place when it comes to home and land listings. That said, these aren’t typos. Residential Condominiums are an increasingly popular form of ownership. This post attempts to define residential condos and answer some of the most frequently asked questions we receive from prospective residential condo buyers.
Frequently Asked Questions on Maui Residential Condos
What exactly is a residential condo?
I think it is safe to say that most understand how condos work in an apartment building setting. At a basic level, Residential condos takes the same principles and apply them to land that is zoned to allow multiple structures. For example, zoning rules for an agriculturally zoned lot allow the potential for a main house and a cottage. With the residential condo process, the main house and a surrounding area of land becomes one unit of the condo. The cottage and a surrounding area of land becomes the other unit of the condo.
I have seen the term CPR before in listing remarks. What does that mean?
CPR is not just an abbreviation for cardio pulmonary resuscitation. In a Hawaii real estate context, it is an abbreviation for Condominium Property Regime. The CPR process is how condominium homes are created. A CPR is the legal mechanism where a single property can be divided into two separate units of ownership. Each unit of ownership has its own deed, it may have its own mortgage and it has its own Tax Map Key.
How does a CPR process differ from a subdivision?
A CPR is not the same as a subdivision. The CPR process takes one property and divides it into two or more separate units of ownership. The process does not create additional entitlements to build more structures. For example, if you subdivided a five acre piece of agricultural land into to two lots, each lot would then have the potential for a home and a cottage. If the same five acre parcel were to go through the CPR process, one unit might have the rights to build a main house and the other unit may have the rights to the ohana unit.
Do I Own the Underlying Land with a Residential Condo?
The owners of the condominum units collectively own the underlying land. That said, limited common elements may be designated for the exclusive use of each unit. Exclusive is the key term. That means your partner in the condo can’t just meander into your yard area when they see fit.
Do Residential Condos have Common Elements?
Sometimes. The most frequent common elements relate to water and access. Two or more condos will sometimes share a single water meter. Two or more units might share a driveway or a portion of a driveway. In some cases, they may share both. Some residential condo properties on island have an area of common land shared by all of the different condo owners. There are some condo developments on island where almost all of the property is considered to be common element. In those cases, each unit may have a very small limited common element around the structure.
Do Residential Condos have Maintenance fees?
It is typical to have a nominal maintenance fee. Most frequently, the fee goes towards liability insurance for any common areas and the maintenance and maintenance reserves for those common areas. The larger and more elaborate the common area, the higher the fee. If there is nothing shared between the units of a condo, there may be no fee at all.
Are There More Rules with Residential Condos than a conventional home?
That depends on the intention of the people who created the condo. Some condo associations impose rules above and beyond county zoning. That said, most of the residential condo bylaws create no additional rules or regulations above and beyond county code.
Can any property go through the CPR process?
Some homeowners associations restrict CPR properties. For properties with existing structures, all homes need to go through miscellaneous inspections with the county. The structures need to comply with county zoning with all necessary permits in place. If the improvements on the property aren’t fully permitted, that could delay or prohibit the CPR process.
Is there a difference between a CPR property that is vacant land and a CPR property that has homes?
At a base level, they are similar. It is the same general process. I know some attorneys believe that CPRing raw land (sometimes called a spatial CPR) carries a little more risk. The risk is that one unit owner’s construction efforts could impact the construction efforts of the other unit owner. An owner who builds too much home or uses too many water fixtures could limit the plans of the other owner.
Typically, units of land sold as CPRs come with defined entitlements. Again, I will use an agricultural lot as an example. One unit of land receives entitlements to build a main house. The other unit of land receives entitlements to build an ohana of 1,000 square feet or less. If the ohana unit owner were to build first, and to build a structure larger than 1,000 square feet of living space, the owner of the main house unit may find themselves in a situation where they aren’t able to build over 1,000 square feet.
There is also some risk if the two unit owners share a county water meter. If the first person to build goes a little overboard with the number of plumbing fixtures for their unit, it could leave the other owner with fewer fixtures than anticipated.
I know of just one circumstance where the ohana side of the CPR overbuilt. I haven’t heard first hand of any issues with someone hogging all of the water fixtures. That said, I want to help illuminate potential risks even if they aren’t likely to occur. Condo documents should spell out the entitlements available to each unit. They should also offer some means to mitigate against the above risks. If there are any questions about the documents, hire a Hawaii Real Estate attorney to assist with document review.
Is there anything else I should know about the process of buying a residential condo?
There are a couple of things to note. If it is the first time the condo is being sold, the buyer has a 30 day rescission period. Not all attorneys are equal when it comes to the creation of condominium documents. More specifically, some do a great job and others write confusing documents with too many loop holes and ambiguities. Repeating the advice from the question above, it is worth the investment to hire a qualified Hawaii Real Estate attorney to review the condo documents. They can answer the legal questions about the condo documents that are outside the scope of your Realtor’s services.
Why do people choose to CPR a property?
There are a number of reasons why people choose to condo.
- Statistics show that the CPR process creates equity. The sum of selling the units of a CPR minus the cost of the CPR exceeds the value of a whole property that has not been through the CPR process.
- Not everyone wants or needs all of the building entitlements that come with a property. Some don’t want or need an ohana on their property.
- The units of a CPR tend to create more affordable options for buyers.
- CPRs allow for the split of a property in a tenants in common situation or among family members.
- It does not typically require the improvements necessary for a subdivision.
- It is typically faster than the subdivision process.
Are there any downsides to CPRing a property?
- We mentioned the potential risk with a spatial CPR above.
- The CPR process requires some sort of ongoing relationship between unit owners.
- There is the potential for shared liability with building or zoning violations. The County could attribute the violation to the whole property instead of citing just the specific unit.
- Taxes could go up on the property if you retain both units. This is particularly the case if you have a homeowner tax assessment.
Hopefully, this answers some of our reader’s questions on CPRs. Special thanks to Jacob Wormser, Attorney at Law. His letter to prospective condominium clients helped clarify some of my own questions on the CPR process. Still have questions? Contact the Maui Real Estate Team and we will do our best to provide answers or direct you to the right resources if we can’t do it ourselves.
Maui Real Estate Blog
Maui County Changes Accessory Dwelling Laws
The County of Maui Recently updated its laws regarding accessory dwellings. For those that don’t speak zoning, the term accessory dwellings refers to cottages or attached apartments. Locally, we refer to these structures as ohanas. With the island feeling the pinch of a housing shortage, the county council recently voted to remove the limit on minimum lot sizes for ohanas. The new zoning laws also allow for a second ohana unit on certain size lots. The change in laws increased the size limits for ohanas, and it also allows for larger deck spaces. The last significant change is a prohibition on accessory dwellings for use as a bed and breakfast home, short-term rental home or a transient vacation rental. The intent of all of this legislation is to address the shortage of long term rentals on island.
Accesory Dwellings on Smaller Lots
Previously, a lot had to be 7,500 square feet or larger to legally have an ohana. The new rules stipulate that any property may have an accessory dwelling. That said, smaller properties would still need to have sufficient space for off street parking to get a permit for an accessory dwelling.
Two Accessory Dwellings are now Allowed on Lots that are 7,500 Square Feet or Larger.
Lots that are 7,500 square feet or above have always allowed for ohanas. They are now allowed a second ohana on the property. As with the smaller lots, the stipulation is that any additional ohana also has sufficient off street parking.
New Size Limits for Accessory Dwellings
The county has increased the size of the ohana units allowed on a property. The table below shows the new size limits based on lot size.
|Lot Area in Square Feet||Maximum Gross Covered Floor Area (sq. ft)|
|Up to 7,499||500|
|7,500 to 9,999||600|
|10,000 to 21,799||720|
|21,780 to 43,599||840|
|43,560 to 87,119||960|
|87,120 or more||1,200|
It is notable that these numbers are per “ohana” and not the total for the two structures. Covered floor area includes “any covered storage; excludes carports, parking spaces, and garages (including areas therein that contain laundry facilities and utility equipment such as water heaters); and covered walkways or landings up-to four feet wide under eaves or overhangs that are not part of an uncovered open deck, patio, lanai or similar structure.”
Who Doesn’t Want to Have a Bigger Deck?
The changes in accessory dwelling rules also allows for bigger covered and uncovered lanai spaces. The new covered lanai spaces are shown via the table below.
|Lot Area in Square Feet||Maximum Gross Covered Floor Area (sq. ft)|
|Up to 7,499||200|
|7,500 to 9,999||240|
|10,000 to 21,799||280|
|21,780 to 43,599||320|
|43,560 to 87,119||360|
|87,120 or more||400|
The table above includes the square footage for covered decks, walkways, patios, lanai or similar structures.
There are similar allowances for uncovered decks, lanais and patios.
|Lot Area in Square Feet||Maximum Cumulative Floor Area (sq. ft)|
|Up to 7,499||200|
|7,500 to 9,999||240|
|10,000 to 21,779||280|
|21,780 to 43,559||320|
|43,550 to 87,119||360|
|87,120 or more||400|
For both of the above tables, “cumulative floor area” excludes walkways or landings up to four feet wide under eaves or overhangs that are not part of a deck, patio, lanai or similar structure.
No More Vacation Renting Accessory Dwellings
The underlying goal of the changes to accessory dwelling laws was to create more housing inventory for local residents. With that in mind, the county established a prohibition on using accessory dwellings as short terms rentals, vacation rentals or as part of a Bed and Breakfast. This is to ensure that the new accessory dwellings don’t become Airbnb rentals.
What’s Not Covered by the Bill
The changes to accessory dwelling laws are limited to properties with the appropriate zoning. One place where there might be some confusion is with properties that are zoned agricultural. While ag zoning allows for “ohanas,” the cottage structures on agricultural lots are considered to be “accessory farm dwellings.” The rules for “Accessory farm dwellings” have not been changed by this bill.
While this bill allows for an increase in density, home owners will find that that parking and water could be a constraint to building out a property to its full capacity. I had already mentioned the need for sufficient off street parking for any accessory dwelling. Fixture count will also be a factor for that property owners will need to consider if they want to take advantage of the new law.
Maui County limits the number of plumbing fixtures that can be installed with a standard 5/8ths inch water meter. It is pretty easy to hit fixture limits with a main house and an ohana. Within the last few years, the county started to allow home owners to buy additional fixture points. If someone wants to build a second accessory dwelling, they may need to buy the additional fixture points or even a second water meter. In places like the North Shore and Upcountry, a second water meter is not an option. Let’s hope that water constraints do not undercut the potential of the bill. With Maui in desperate need of more long term rentals, this bill seems like a positive step to generate some much needed rental housing.
Maui Real Estate Blog
Maui County Property Tax Rates for the 2017/2018 Fiscal Year
July 1 marked the start of the new fiscal year for Maui County. A new year brought a new budget and new property tax rates for the county. While recent history has seen tax rates decrease when property values have increased, this year was different. Rates went up for all classifications despite generally increased assessed values throughout the county. You will find the new rates below with last year’s rates provided for frame of reference.
- The new residential rate is $5.54 per $1,000 of assessed value. That is a 14 cent increase from last year’s rate of $5.40 per $1,000 of assessed value.
- The new apartment rate is $6.32 per $1,000 of assessed value. That is up 32 cents from last year’s rate of $6.000 per $1,000.
- The commercial rate for this year is $7.28 per $1,000 of assessed value. That is an increase of 68 cents from the 2016/2017 rate of $6.60 per $1,000 of assessed value.
- The industrial rate for this fiscal year is $7.49. That is an increase of 80 cents over last year’s rate of $6.69.
- The agricultural rate increased to $6.01 per $1,000 of assessed value. That is a change of 25 cents over last year’s rate of $5.66.
- The conservation rate for the year is $6.37 per $1,000 of assessed value. That increased from 57 cents over the last year’s rate of $5.80.
- The hotel/resort rate for this fiscal year is $9.37 per $1,000 of assessed value. That is a 66 cent increase over last year’s rate of $8.71 per $1,000 of assessed value.
- The timeshare rate went up to $15.43 per $1,000 of assessed value. That is an increase of $1.12 from the rate of $14.31 per $1,000 for the previous fiscal year.
- The homeowner rate increased to $2.86 per $1,000 of assessed value. That is an increase of 16 cents over last year’s rate of $2.70 per $1,000 of assessed value.
- The commercialized residential rate is $4.56 per $1,000 of assessed value. That is a 21 cent increase over last year’s rate of $4.35.
Property taxes are paid biannually in Maui County. The first bill comes up in August with the second bill following in February. Property owners are notified of changes in assessed values in March with the rates themselves deliberated and updated sometime between April and June during the year. If you have additional questions on Maui Property taxes check out the Maui county property tax FAQ.
Maui Real Estate Blog
Keonekai Villages 14-103, A Case Study for Buying vs Renting
Rents are rising on Maui. Borrowing costs remain low. In this type of market, a place like Keonekai Villages 14-103 is a compelling buy if you have money set aside for a down payment.
Keonekai Villages 14-103 is listed for $257,000. With 5% down at an interest rate of 3.92%, monthly mortgage payments are $1,154 a month. The current maintenance fee is $274 a month. That includes, water, trash, refuse and basic cable. Insurance would run roughly $300-$350 a year or $25 to $29.17 per month. That comes to $1,457.17 per month. Other expenses would include electricity, Internet and property taxes. The current owner is paying a $1,694 in property taxes annually. If you are a Maui Resident who paid local taxes in 2015, you could be eligible for a lower homeowner tax rate as long as you file for the new rate before the end of the year. With exemptions, your taxes would be $500 or less. I searched Craigslist to see if I could find any rentals in Keonekai Villages that might be comparable. The only recent listing I could find was asking $1,600 a month plus electricity. A Maui resident paying homeowner tax rates would be paying less to own the condo than the cost to rent.
Keonekai Villages 14-103 isn’t just a case study for buying, it also offers a great location. It is situated within a few blocks of the Kamaole II and III Beach Parks. These are some of the best swimming and snorkeling spots in South Kihei. Shops and restaurants are also within walking distance of Keonekai. The beaches and amenities of Wailea and Makena are anywhere from two to ten minutes drive.
Maui Real Estate Blog
Maui County Approves Expanded Water Fixture Counts
Maui County has opened the spigot a little more when it comes to water fixtures. It is now allowing property owners to purchase a limited number of additional fixtures units for their water meter. I realize this post may sound like Greek to those who haven’t ever looked into adding bathrooms on to an existing home or adding a new accessory dwelling. with that in mind, I wanted to give a little background on fixture count, why it is an important issue and what the new rules are about.
In the county of Maui, different water fixture counts are applied to different sized water meters. The process can be a little bit confusing. The limitation on water fixtures is not applicable to when a home is first built on a property. However, if you want to expand on that home or build a cottage, you are capped at a certain number of water fixtures based on meter sizes. The most common water meter is a 5/8ths inch meter. The base configuration allows for 31 points worth of water fixtures. Different water fixtures are assigned different points. For example, a water spigot is assigned 3 points, a low flow toilet is assigned 1.7 points while a conventional toilet is assigned 3 points. If an existing structure has fixture totals that are equal to, greater than or even close to 31 points; the county would be unlikely to approve any additions or accessory dwellings that have additional plumbing. For parts of the island where additional water meters are available, the owner of the property would need to have a new water meter installed. That in itself is an expensive and not necessarily a quick process. For areas like Upcountry Maui and parts of the North Shore, that may not be an option. Those parts of the island have a closed waiting list for water meters. It will be many years before the county makes its way through that list.
These policies have been grumbled about by property owners for some time. That said, it first entered the public discourse in the fall of 2015 when the issue was raised in a county council meeting. The county has been looking at addressing some of the island’s housing shortage via infill development. In other words, they were looking at where they could add density by allowing people to build more accessory dwellings. They are even considering lowering the lot size requirements for accessory dwellings. The current fixture count limits were a potential impediment to property owners building more accessory dwellings.
As of July 1, the county has given homeowners a path to raise their fixture counts. Owners can increase their total number of fixture units by paying a fee per each additional fixture unit. There are limits to the number of units each home can purchase. This is the run down on the new fixture count rules by meter size.
Fixture unit costs and allocations are as follows:
- The standard 5/8 inch water meter currently has 31 fixture units. At a cost of $389 per fixture unit, an additional 8 fixture units may be purchased.
- A 3/4 inch water meter currently allows for 53 fixture units. You can now by as many as 14 additional fixture units at cost of $356 per fixture unit.
- A 1 inch water meter allows for up to 128 fixture units. Property owners can now pay to raise their capacity by an additional 32 fixture units at a cost of an additional $261 per fixture units.
These new rules are a positive step in creating some infill development on Maui and at least addressing a portion of the limitations on housing inventory. They also make it easier for people to add a new bathroom if they had previously tapped out their fixtures. Here is a link to a Maui County Plumbing Worksheet to show the full list of values of different plumbing fixtures. Check out the Maui County Department of Water Supply for more information on the county water system. The Engineering department is the group that handles water meters.
Maui Real Estate Blog
2016-2017 Maui Property Tax Rates
The new fiscal year for Maui County starts on July 1 and that means new property tax rates. The Maui County Council approved a new budget that saw a reduction in property tax rates for almost every property tax classification. Some of the reduction in rates may be offset by increased assessed values for properties. This is following a general pattern with Maui County Property tax rates. When the market is going up rates are decreased. When market values go down, property tax rates go up. You can see the new rates compared to the old rates below.
- The Residential tax rate will be $5.30 per $1,000 of assessed value. That is a decrease of 10 cents from the 2015/2016 tax rate of $5.40.
- The Apartment tax rate will be $6.00 per $1,000 of assessed value. That is unchanged from last year’s tax rate.
- The Commercial tax rate will be $6.60 per $1,000 of assessed value. That is also unchanged from last year.
- The Industrial tax rate is $6.69 per $1,000 of assessed value. That is a decrease from $6.85 last year.
- The Agricultural tax rate is $5.66 per $1,000 of assessed value. That is down from $5.75 in 2015/2016.
- The Conservation tax rate is $5.80 per $1,000 of assessed value. That is a decrease from last year’s rate of $5.90.
- The Hotel and Resort tax rate is $8.71 per $1,000 of assessed value. That is a decrease from the previous rate of $8.85.
- The Time Share rate is $14.31 per $1,000 of assessed value. That is a healthy decrease from the old rate of $14.55.
- The Homeowner rate is $2.70 per $1,000 of assessed value. That is a down from last year’s rate of $2.75.
- The Commercialized Residential rate is $4.35 per $1,000 of assessed value. That rate remains unchanged.
Property tax rates are paid biannually in Maui County. The first bill comes due in August with the next payment made in February. Tax rates for the next fiscal year will be debated again in the Spring with the County Council approving new rates sometime in late May or June.