What's a CPR
What's a CPR?
CPR Stands for:
You’re probably familiar with Condominiums. The most common Condos are when someone takes a Building and divides it up into apartments or "Units", which can then each be sold and owned individually. A CPR is the same thing, but applied to Land in Hawaii.
So just like with Condos, CPRs have Documents that tell you what you can and cannot do with your individual Unit/apartment. They might say that you can or can’t have certain types of pets, how Decisions are made, and what your monthly maintenance fees are. They might specify "limited common elements" that everybody shares (like roads or open spaces) and they are likely to say what each Unit's percent ownership is in the underlying property. They are highly variable and range from very restrictive (even to the point of specifying what type and color of house you are allowed to build) or very relaxed (just saying which unit is allowed to build what and how roads and utilities will be shared).
The point is, they are NOT subdivisions. You do not own your property: you and the other members of the CPR collectively own a piece of property which you share under the rules and guidelines of the CPR Documents. And if you or your neighbors don't follow those rules, then the main recourse is usually to go to Court or mediation and try to get the rules enforced.
Where this gets really interesting is that the Kaua’i County Planning Department does not care what your CPR Docs say. They refuse to get involved. All they care about is the Development Rights of the Underlying Parcel.
So for example: Imagine there's a Parcel of land with County Development rights for 4 houses. And imagine that this Parcel has been CPR'd into 4 units, where the CPR Docs say each Unit gets one house right. So if you Buy one of these Units where the house has not been built yet, and have read the CPR Docs, you would probably think "Great! I can build my house here!"
But when you go to the County and apply for your Building Permit, they're not going to look at just your Unit, they're going to look at the underlying Parcel (all 4 Units). And if one of them (your neighbors/CPR-mates) has overbuilt on their unit (with or without a permit), your permit is likely to be denied. Which can be a shock! And the County won't care what the CPR Docs say or that your Unit doesn't have it's promised house. At this point, your main recourse usually becomes civil action such as court or mediation with that neighbor.
Another situation might be: not all CPRs are created properly by experienced Developers. Sometimes inexperienced homeowners try to create their own. And sometimes they get their Development Rights wrong. Or the laws governing how many Development Rights a Property has change. So what you really need to know when buying into a CPR is:
- Always, always, always read the CPR Docs to understand what you are really buying into
- Just because the CPR Docs say you have certain Development Rights does NOT mean that the Kaua’i County Planning Department will agree (or care). So ALWAYS check with the Kaua’i County Planning Department what the actual development rights of the Underlying Parcel are during Escrow, how many of those rights remain (you know, to make sure you can still exercise yours), and compare it to how many structures appear to have actually been built. Some CPRs go completely rogue and start building without permits willy-nilly. If you want to stay within the law, those may not be a good fit for you.
Alright, one more thing for anyone who wants to go deep & advanced: Remember how I said that Development Rights are determined by the Underlying Parcel, not the size of your particular Unit? And sometimes Developers miss things or the law changes? This is very, very important when figuring out your CPR's current Development Rights vs. whatever your CPR Docs may say.
For example, I once had a Client who had CPR'd her 18 acres into 5 Units, of roughly equal size. In her particular Zoning, parcels smaller than 10 acres qualify for one Dwelling and one Guest House. So did each of those 5 Units qualify for one Dwelling and one Guest House? NOPE! Because Planning doesn’t care about the CPR Units, just the Underlying Parcel. Those 18 acres qualified for 3 Dwellings and one Guest House. So the CPR Docs had to divvy up which Parcel got which building right and Parcel #5 got left out in the cold with no development rights because there weren't enough to go around. Needless to say, that substantially affected its Market Value.
So the moral is: CPRs are NOT the same as regular ownership. They are very, very common in Kaua’i and if you want to buy into one, take the time to understand it thoroughly. Read the CPR Docs, and research your actual Development Rights.
Also, please note that since CPRs are a uniquely Hawaiian phenomenon, Mainland Lenders often fail to finance them: everything looks good on the surface, but they frequently fall through when the Underwriters start reading the CPR Docs. Therefore, if you are buying into a CPR and thinking about Financing your purchase, we strongly recommending using a Hawaii-based Mortgage Broker or Bank, whether or not there is already a house on your Unit. There is nothing more frustrating than Escrow falling through just a few days or weeks before Closing simply because the CPR Docs finally made it to Underwriting and got kicked back out in shock.
- Melveen Fredeluces