Hawaii is the only state in the Union that keeps one central location for all real estate needs. All other states delegate this responsibility to the county level. Hawaii’s unique form of recording can be traced back to the original land tenure system of the Hawaiian Kingdom. The King owned all land and made it available to everyone else. The concept of private property did not exist.
That changed with the Great Mahele. Westerners pressured the Hawaiian government to adopt a private system of land ownership. Bowing to that pressure, between 1845 and 1848, King Kamehameha III divided the land among the Kingdom, high-ranking chiefs, and the territorial government. This was called the Ka Mahele, now known as the Great Mahele. Ka Mahele translated as “the division.”
There are compelling arguments the native Hawaiians did not receive their fair share of the Great Mahele. Periodically, groups or individuals advocating native Hawaiian rights challenge the established land ownership system. These challenges create rumors and innuendo, resulting in confusion and uncertainty.
Because of confusion determining land ownership and similar names, the Land Court was established in 1903. Original registration in Land Court is done through a lengthy judicial review process. The availability of title insurance has dramatically reduced the need for judicial determination and roll in the Land Court.
Hawaii’s Recording System
Hawaii has three methods to change the title on real estate. The Regular System gives “notice” of a title change. The State of Hawaii guarantees deeds recorded in the Land Court system. Documents recorded in both systems are referred to as a Double System Recording.
Types of ownership
Hawaiian Real Estate is owned in fee simple, as a leasehold interest, or as a timeshare.
Timeshares are fractional vacation ownership interests in a resort. The fractional interest is usually the right to occupy a one or two-bedroom unit for one week every year. One team could have 52 owners. Purchasers are granted ownership as either a “Time-share Estate” or a “Time-share Use.” Time-share Estate ownerships are granted by deed and are real estate ownerships. Time-share Use ownerships are granted by contract, and the owner has a license or membership interest in the timeshare resort. Time-share Use is not owned in real estate.
A leasehold interest is the right to use the land for a specific number of years, typically 55 to 75. The person who owns the leasehold must turn the land back to the actual land owner at the end of the lease. The leaseholder owns the improvements on the ground but not the land itself.
Ownership in a cooperative or multi-family unit is often acquired by leasehold interest. An apartment lease conveys leasehold interests. The apartment lease has many names: Apartment Lease, Apartment Lease and Ground Lease, Condominium Conveyance Document, Apartment Deed and Ground Lease, or Dwelling Lease.
Real property held in fee simple is the most common form of ownership and what a person typically thinks it means to own real estate. The person owns all the land and all of the buildings. In the past, transfers in ownership had the words “fee simple.” Fee simple meant the new owner’s use of the land and buildings had no restrictions whatsoever. Today transfers are granted subject to conditions of an integrated society, such as zoning restrictions and access by utilities, local governments, and holders of mineral rights below the surface.
Typical ownership in fee simple is single-family homes and condominiums. Single-family homes are what you expect, land and house owned by one owner. Condominiums are homes owned by multiple owners with a “common area” owned and shared by all. Common areas include walkways, parking lots, pools, BBQ areas, laundry facilities, and recreational areas.
Today, grants in fee simple are conveyed with either a warranty deed or a quitclaim deed. A person transferring ownership with a warranty deed at minimum guarantees they are the actual owner and they are conveying clean title. Warranty deeds are accompanied by title insurance. Warranty deeds are used in bona fide sales.
Quitclaim deeds are transfers of ownership with no guarantees. The grantor conveys whatever request they may have. Quit claims are essentially the owner walking away from the property. The new owner takes the property “as is.” Transfers from one spouse to another are often quite claimed.
Timeshares are often conveyed with a quitclaim deed. There is limited marketability for timeshares, so there is no real opportunity to sell. To avoid paying annual maintenance fees, an owner gives away the property.
A final type of property is the Ohana Dwelling or Grandma’s Cottage. This is a separate building on the property of the main home. It is usually much smaller and self-contained. It can be rented out or occupied by a relative like a grandma.
by Mark Bidwell