The CPR: Condominium Property Regimes on Kauai Explained

 

Few real estate concepts on Kauai confuse real estate buyers and sellers more than that of the Condominium Property Regime, or CPR. In most parts of the United States, if you decided you wanted to own or build your own detached, single-family home, you most likely imagine a situation of full ownership of the land and building improvements, without having your ownership interests tied to anyone else’s. Here on Kauai, that may still be the case, but not always. A significant percentage of single-family homes here on Kauai are what we call CPR units, which means they are legally registered condominium units that share some amount of common interest with others.

 

According to the Hawaii Department of Commerce and Consumer Affairs (DCCA), a Condominium Property Regime (CPR) refers to a specific form of ownership and governing process when real property becomes a condominium, where a “condominium” is recognized as ownership of an apartment (unit) and a percentage of undivided interest in the common elements. A CPR unit owner is entitled to exclusive ownership of their unit, but the land is a common element, owned jointly in common with other unit owners in the condominium project. A CPR can be created for high-rises, townhouses, or detached units (single-family homes), and can be approved for properties with many different types of permitted uses, including residential, commercial, industrial and agricultural.

 

On Kauai, CPR law provides a way for individual property owners and developers to subdivide larger parcels of land into smaller sellable units, where the owner would otherwise be restricted from doing so. Historically, Kauai has worked to preserve a rural atmosphere and encourage agriculture by restricting how small individual parcels of land may be divided. The result of this was that there were relatively few property owners, each of which owned large tracts of land that allowed for the building of multiple dwellings. As the story goes, the first application of the CPR law to land ownership was intended to provide families with the newfound ability to legally gift or devise additional homes on their property to their children or relatives. Before too long, the law found additional support from buyers who were formerly forced to form “Hui’s”, or groups, in order to raise enough funds to purchase the large parcels. By purchasing smaller, fee-simple CPR unit interests, buyers learned they could still purchase the real estate they wanted and avoid many of the complications that stem from owning property jointly with others.

 

As is true with all fee-simple condos, CPR ownership insulates you from your neighbors as a separate property owner with your own private set of ownership rights. You will receive separate property tax assessments and have your own individual mortgage and insurance requirements. However, depending on the circumstance, you may still share certain common elements such as a septic system, utilities, access roads, driveways, walls, etc., and you would have to work with your neighbors to maintain and repair those items. Additionally, in the eyes of the County of Kauai Planning Department, your CPR unit is still just one part of the cumulative CPR development, so decisions regarding what physical structures you may build, the size of what structures may be built, or what uses you may be approved for on your CPR unit are made in consideration of what already exists in the development as a whole.

 

One example of where this situation with the Planning Department comes into effect is when a CPR unit owner applies for a building permit to build a dwelling unit with guest house rights, where only a limited number of dwelling units and units with guest house rights are approved for the entire CPR development. The Planning Department will examine all CPR units in the development to determine what structures already exist, what uses have already been approved, and whether there are any properties with recorded violations against them within the CPR development. If allotments for dwelling units or guesthouse rights are full, or if there is a violation recorded against any of the other CPR units within the development, you may not obtain the approvals you are seeking until the situation with one or more of your neighboring CPR units is somehow modified or rectified.

 

For this reason, in particular, it is important for all prospective purchasers of CPR properties (and their attorneys) to familiarize themselves with the neighboring CPR unit properties, and, to the extent the documents are available, closely examine the records of the governing CPR association and all other public records to make sure that everything is in order, and to protect against any surprises down the road.

 

Although single-family CPR units are just another variation of condominium ownership, they may not always be governed in the same way as more typical condominium projects, and mainland lenders can sometimes have a difficult time getting comfortable enough to issue a loan if this is the case. A well-run CPR should have some form of an Association of Apartment Owners (AOAO), along with a set of CC&R’s, Rules & Regulations and other documentation that set certain standards for the development, though not all do. Fortunately, Hawaii-based lenders are much more comfortable with the existence of CPR’s and understand their uniqueness compared to more standard condominium developments, so you should still have a wide variety of local options that can help you finance your purchase.

For detailed information about what properties can be “CPR’ed”, the process of creating a CPR, timelines affecting CPR creation and registration, and the requisite documents to create a CPR, read the article on the DCCA website titled, “So You Want to Go Condo?”