5 Things You Need to Know About Small Condo Projects

5 Things You Need to Know About Small Condo Projects

Owners of a residential property that has an existing dwelling or multiple dwellings on it may at some point consider subdividing the property or in some way creating separate legal "lots" that can be conveyed, used, mortgaged separately. In many cases, parents or siblings are looking for a way to divide the property between their children or grandchildren. Subdivision is one way to create a separate lot, but may take more time, effort and expense to achieve. An alternative to subdivision is to create a small condo. A condo unit is recognized in Hawaii as a separate parcel of real estate. See HRS Section 514B-4(a). Accordingly, many have sought to create separate parcels by submitting their land and improvements to a condo regime.

When pursuing this alternative to subdivision, there are many things to consider, including these 5 things:

  1. If there is an existing dwelling or dwellings on the property, the Real Estate Commission will view the project as a conversion, which triggers specific requirements, including a report from the City or County (depending on which island the property is located) as to variances and non-conformities. Get your letter requesting this information in early to the City or County in order to avoid delays in the process, as it takes time to process.

  2. Engage a good architect or engineer that is familiar with drawing a condo map. There are specific statutory requirements for this map. Unless you are doing a spatial condo, it requires, among other things, a site plan depicting the location, layout and access to a public road of all buildings in the project, elevations and floor plans of all buildings in the project, the layout, location, boundaries, unit numbers and dimensions of the units, the parking plan if there is parking, and any limited common elements. HRS Section 514B-33.

  3. Make sure that your constituent documents specify that any improvements to be built must comply with applicable local ordinances, and what floor area is allocated to each condo unit so as to avoid disputes on the size of any future improvement proposed by an owner.

  4. If it is a spatial unit that will be created with improvements within the spatial unit envelope, make sure that there are setbacks that are clearly defined for improvements to avoid issues between different owners in the future.

  5. If there are non-conformities, make sure that you or the owner obtains an existing use permit or equivalent so that any improvement can be rebuilt if it is destroyed. See Revised Ordinances of Honolulu Section 21-2.100. Also, make sure that there is a requirement that each owner maintain insurance. There is nothing more disheartening than returning each evening to your home only to see the remnants of your neighbor's home that has been destroyed and not rebuilt due to the lack of financial resources to do so.

There are many considerations when doing a project of this nature. Owners should make sure that they retain good consultants and professionals to avoid problems after-the-fact.

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