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When a prospective buyer is searching for a new single family dwelling as a personal residence, it is always a good idea to consider buying a property (a) where the size of the land is significantly greater than the minimum lot size required for the zoning area or (b) where the property already has two dwellings located on it. A good example of the foregoing would be to purchase a lot of at least 10,000 s.f. in a zoning district calling for a minimum lot size of 5,000 square feet (R-5 on Oahu). Alternatively, an existing duplex could be purchased outright allowing the buyer to live in one unit and rent out the other, or a buyer may be able to build a duplex dwelling in an R-5 zone (above) if the land size is 7,500 s.f. or greater.

Let us confine ourselves here to the first example. Assume a buyer was so fortunate as to find such a favorable situation. The buyer may have two options--either to subdivide or "condominiumize" the parcel. In either case, the idea is to retain one of the dwellings and a portion of the land for the buyer's own use and sell the other home together with the remainder of the land. The obvious advantage to the buyer is that this could reduce the buyer's net cost, since the value of the land allocable to the unit being sold, particularly on Oahu, can be quite significant.

The size or shape of the parcel of land being purchased, or the lack of sufficient width fronting a public street, frequently prevents legal subdivision. Nevertheless, if the lot is sufficiently large, it is often possible to condominiumize a property which cannot be subdivided, because the rules are different. The remainder of this article explains the process of forming a two-unit condominium project consisting of two houses and a parcel of suitable land. It also explains the costs and timing involved in such a process.

To create a condominium project involves (a) drafting a Declaration of Condominium Property Regime and By-Laws for the condominium association and (b) preparing and recording drawings certified by a Hawaii-licensed architect or engineer.

A sufficient set of condominium drawings would include (a) a site map (b) floor plans of the two dwellings and (c) four sided exterior elevation drawings. The Site Map would contain a "footprint" showing the buildings and other improvements, dotted lines showing the division of the lot into the condominium "exclusive use areas" and any designated parking or any other common driveways or facilities. To be able to sell the "apartments" (condominiumized houses) to the public, it is necessary after creating the condominium regime to obtain a Public Report from the Real Estate Commission. A public report is similar to a permit issued by the State to allow the sale of a condominium apartment. The attorney for the owner prepares and files with the Real Estate Commission a package of documents containing the following: (a) Draft of the Final Public Report (b) Specimen Apartment Deed and a Sales Contract and (c) Good faith estimate of annual maintenance costs (which ca be minimal).

Once drawings for a project have been completed and an updated title report is obtained, it normally takes about two weeks to draft the document suitable for recording at the State Of Hawaii Bureau of Conveyances. After recording and obtaining an updated title report showing recordation of the condominium documents, the public reports package of materials is filed with the Hawaii Real Estate Commission.

Our experience indicates it will take about eight weeks before the Commission will authorize issuance for a Final Public Report. Thus, the entire process should take approximately three (3) months after delivery of the plans and title report.

Costs involved in the condominium process would include legal fees in the range of $6,000 to $8,000, and excise tax and any disbursements. The main disbursements would include the Real Estate Commission filing fee ($960), an updated title report ($250), Xeroxing, recording fees, etc.

Because land is expensive in Hawaii, it makes sense for a prospective buyer to consider buying a property that can be condominiumized. If the buyer can condominiumize the property and sell part, the cost of "Paradise" could be significantly reduced.

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