 Welcome to Inside Hawai'i Real Estate, a show dedicated to providing up-to-date information news to Hawai'i home buyers, sellers, and investors. I'm Will Tanaka with my co-host, business partner, and wife, Leone Lam, a realtor with over 20 years' experience in various leadership roles in the Hawai'i real estate industry. Thanks. Well, Will is a lawyer and the former head of a Hawai'i title in Esther Company, and we absolutely love working as a team to bring you the latest in Hawai'i real estate. And in Hawai'i's housing market, you've probably already heard of ohana dwelling units, ADU or accessory dwelling units, CPR properties, subdivided properties. Well, our special guest today, Abe Lee. We're going to get to talk story with him and learn more about all of these things. Super grateful to have Abe Lee. He's the founder and owner of Abe Lee Realty Hawai'i, broker in charge of Century 21 iProperies Hawai'i. He has developed over 175 CPR projects in Hawai'i, the CPR king. He's an expert in ADU and ohana dwelling, and he's the founder of the renowned real estate school in Hawai'i, Abe Lee seminars. Welcome, Abe. Thank you so much. I really appreciate being here with you folks. Thanks, Abe. So Abe said the best way to understand the differences when it comes down to ADU and ohana is to really understand the history and the evolution. So Abe, we're looking to your expertise today to share with us the history of ohana and ADU units, and we're hoping to start off with 1981. Thank you. Well, in 1981, some of you may not have been born then, the what they call the accessory dwelling unit law passed at the state level, and then each county had their own rules and used to be called accessory dwelling unit project or law, and then it became popular as the ohana law. So it really used to be the ADU law and then it became ohana. So 1981, they allowed every lot that was residential that had adequate switch capacity and a 16-foot wide road, etc. in front of your lot, that you could put a second home on no matter what the zoning was as long as it's residential and they had adequate infrastructure. Then in 1989, the neighborhood boards got a little upset because there are too many homes being built in neighborhoods, and then they're taking all the space on the road and the homes are being built really big with two homes on the property and CPRing them for profit. And so they went to the city council and said, hey, you got to do something about it. So they put size limits on what you could put on the ADU. So I'm sorry, ohana, so they were limited to 700, 900, and 1000 square feet depending on the zoning. Then in 1992, the neighborhood board and other people came on even stronger and said, okay, we now will make it ohana and you have to rent a relative zoning and the homes have to be attached and you cannot condominiumize or CPR the property. Well, that kind of put a kibosh on a lot of people that wanted to get a second home and be able to CPR or make it bigger. Then in 2015, ADU came along and that was under mayor Caldwell. So by the way, the first mayor in 1981 was Eileen Anderson. And she's the one that proposed the ADU or ADU unit. Then in 2015, Caldwell came along as a mayor and said, okay, we're going to do an ADU, which is very different from the original ohana rules. So from 1981 to 2015, there's quite a few changes. And when there's homes for sale, we see people use ohana units, ohana dwellings, as well as ADU. So is there any actual differences? Are they one in the same? Can we go into a dig deep a little bit into that, Abe? Sure. Actually, there's a huge difference. With what they call the ohana, you have to rent the relatives only now. But there's no size limit. And you have what they call 50% lot coverage. So if you have a 6000 square foot lot, in theory, you can have 3000 square feet on the main floor and then another 3000 on top of it. And there is no size differentiation between the ohana unit and the main house. With an ADU, they have size capacity limits. And that's where it's really different. So I think you have a chart on that thing. But the next one I think you have is, that's my property qualify for an ADU development. So you have to check with the city because the city dictates what you can and cannot put on your property. So you have to do an ADU pre-check form. And the zoning is usually residential. And I think they even allow in a country and maybe even some ag land. So ADU and ohana permits are a little bit different on which zoning lots can take the ADU units versus the ohana. But let's say it's allowed, right? They have a lot size standard. And with ohana, I think if we go to the next sewer, next line, yeah, if you go to the next one, this is on the left is your ADU, okay? 3500 to 4,999 square foot lots. Your ADU can only be 400 square feet, which is a small studio. That's not much. But if your lot is 5,000 or more square feet, then your ADU max is 800 square feet, which could be a decent one bedroom or a small two bedroom unit. Now you're allowed to have a full kitchen on both of them. And you have to have only one parking instead of two parking per kitchen. So they did loosen up the requirements. But still, 400 square feet is kind of small. And then 800 square feet is okay, but it's not great. So but that's the ADU rules. With ohana, as I mentioned, there's no size limit. You just have a 50% lot coverage, and you can break up the ohana unit in the main house any way you want. But both of them cannot do CPRs, which is a condominium property regime. So in this day and age, are you still able to build in ohana? Or is that only if you had had that permit issued back in before 1992? No, actually, after 1992, you had to run to relatives only. Prior to 1992, you could run to anybody. And prior to 1992, you could CPR, condominiumize. After 1992, you cannot on ohana. On the ADU, you could not condominiumize at all, right from Gekko. So there are different rules, and ohana actually evolved over the years. And so unless you've been in it like I have been for the last 50 years, then a lot of people don't know the years and when you can do certain things. But with ADU, it's pretty clear. When Calvo came along, he said ADU, no CPR, oh, but with ADU, you don't have to run to relatives. You can run to anybody, which is an advantage. So right now, like I looked at the market this morning, as always, and I saw like there's 622 active listings here on Oahu. And of that, there's just a very small number, like maybe, I don't know, I think it was like 2.3% of all of those that are advertised as ohana or ADU. But actually, it's actually ADU then, right? It's not ohana. Well, unfortunately, people switch the names, ADU and ohana willy-nilly. And they even say great for ohana. Well, okay, great for family, okay, but it's not an ohana unit then. You can't get a second kitchen. And in fact, I've seen some on the internet where it says ohana units can have a bar sink or wet bar. That's not true. Ohana permits have a full kitchen, so does ADU. But so people are mistakenly using the wrong names for these different types of properties. I see. So in terms of if a buyer buys a new home, there's no ADU or ohana. And they want to build something for rental income. So now, under the current rules, the only way you could build is what you were saying, it's ADU with the size restrictions. And or ohana if you're going to rent to relatives only. So you can still get ohana. And you can still get ADU. So it's the matter of the homeowner deciding, do I want ohana and rent to relatives only with no size limit? Or do I want an ADU and I can rent to anybody, but with size limits? Okay, so what happens if your intent is to rent to a family member and then, you know, something happens, they move out and you need rental income? What happens in that situation? Well, you're in a hard spot if you got an ohana permit. Hmm. You have to rent to relatives only. Okay. And I don't think you swap out because you got a size limit. So let's say you have a 1,500 square foot ohana unit and you want to switch it to no family, well then you're supposed to get only 800 square feet. Oh yeah. So you got to make your choice early and decide which way do I want to go. And no offense, but sometimes renting to relatives can be a little bit troublesome. You know, like they don't pay the rent and they go ask auntie, you can let me slide this month. I lost my job. Well, I got to go to go surfing or something. And then your sister calls you up, go, how come you kicked my kid out? Well, he didn't pay rent. You know, that kind of stuff. So you could get into some, I guess, issues with family members with ohana. With ADU it's a little more cut and dry. Hey, pay your rent. You're not related. So you got to do it. But there's size limits. Yeah. Yeah. So in terms of size limits, it says, you know, 5,000 square foot lot or more, you know, up to 800 square feet of ADU. So regardless, if you have one acre lot, 20,000, no matter how big it is, that's the limit for ADU. Correct. Yep. And that's kind of waste, isn't it? It is a waste. Yeah. But that's all you can do. And then, you know, in terms of when someone wants to apply for ADU, and would there be any reasons beyond the size restrictions where the city and county or the state would say, you know what, I'm sorry, but we cannot approve your ADU. The only reason the city will not approve an ADU is because there's inadequate switch. So now each homeowner that applies for Ohana or ADU, or even a second or third home on a piece of property that allows you to have multiple homes, you have to do a sewer check. We just did one for a client of ours. There's R10, residential, 10,000 square foot minimum lot size in Nuanu. He had 20,000 sewer feet. So we applied for sewer adequacy. And lo and behold, within a week or two, inadequate sewage denied. Oh, wow. So you have plenty of land, but the sewage was inadequate. So you go, how do they determine sewage inadequacy? Well, they have this, I guess, logarithm or some sort of calculation that says if everybody flushed the toilet at the same time, is it going to be a backflow? And if it's going to be a backflow, then you can't have an ADU or Ohana or a second unit. In our case, we could have two homes on the property, but we could not get the second home permitted because there was inadequate sewage. And there's no way for the person that's applying for this permit that got denied, they can't appeal it because that's just infrastructure. There's nothing they can really do then. No, and what we've done in the past years ago, we would ask the sewer department or the wastewater management department, hey, do you have any capital influence budget in this neighborhood to expand the sewer capacity? And in certain cases, they'll say, oh, yeah, in three years, they're going to widen the sewer pipes down the road, which would then allow more sewage to flow freely and then they'd allow it. So sometimes people would wait for the two or three years moratorium to pass, then they do the improvements on the sewer lines, and then you can get a permit for the second unit. And people have waited, but that's all they can do. That was the issue because there's so many, I mean, all of our neighborhoods are, a lot of our neighborhoods are older, right? So I guess that would be, so that's like the biggest thing I guess a homeowner would need to consider if they're considering applying for an ADU. That's going to be one of the biggest hurdles, I guess. It is the biggest hurdle. Yeah. You have to get sewer adequacy, right? Right. The time to get the actual permit might be a little great. Well, the permit process is a little different. That's going to take a long time anyway. But the sewer adequacy usually get an answer within a couple of weeks from the wastewater department engineer. You submit it by email and say, I plan to put an ADU, an Ohana, or extra house, a big second home. Is there adequate sewage for what I want to build? And within two weeks, usually they'll send you a letter saying approved or denied. Okay. Last, at least you know upfront. Yes. The early stages of the application. Wow. Okay. And then how about parking? Is parking an issue? Like, do you, if there's street parking for the additional ADU? Nope. It has to be on the, it has to be on the property. So you have to have at least one parking for an ADU, 400 square feet or 800 square feet. But if you're going to do an Ohana, I believe you have to have two parking stalls. Okay. It has to be on the ground, on the property. Street parking doesn't count. Now you can do what they call tandem front and back. You can do side by side. And you can park in a sitback as long as you pave it. Because it says it's supposed to be a weather, all weather parking. So you do have to have some sort of pavement concrete asphalt or what they call grass blocks or something like that. So you do have to have one parking for ADU, two parking for Ohana. And if you're near the TOD, like the real, yeah, then you don't have to have any parking, extra parking. If you're near, interesting. I think it's within half a mile or something. Yeah. I forgot the distance. Oh, learning so much already. And just rolling back to what you were saying, you know how you mentioned like your, your client or friend had a zoning, you know, where he had a 20,000 square foot lot. And he was, I think you said was it R10? Yes. So, but like there's R3.5, there's R5 for 5000 square foot lot. So if you have like R3.5, are you able to still apply for an ADU permit or does it have to, does that matter? The minimum lot size has to be 3,500 square feet ADU. Okay. As long as you have minimum 3,500, then you get an ADU. Okay. Question is where do you put all this house and parking? You know, it's going to be really tiny. Right? Yeah. Then you got to go two stories. Great. Abe, you know, earlier we talked about CPRs. You developed over 175 CPR projects. We've all heard of CPRs, you know, condominium property regime. And oftentimes when we think about condominiums, we think about those high-rise buildings in Takako. Right. But can you talk a little bit about CPR projects that you've dealt with? Sure. I've done no high-rises because I'm a real small developer. But I have converted apartment buildings, walk-ups into condominiums and created what I call affordable housing. So we created condominiums so we could sell individual units to the owners, or to the tenants actually. They have first right. But what I found out early in my career was you can do single-family home condominiums, which I never heard of. I thought condominiums had to be only high-rises or mid-rises. But then I found out that attorneys were doing this and they're having an enclave of, say, five or six homes in Palo Alto, Manoa, and elsewhere. And in order to split ownership, they'd condominiumize it. So CPR stands for condominium property regime. And all that is is an ownership issue. It's how you hold title to property. That's it. Now, the zoning at the city will dictate to you how many homes you can put on the property, depending on your zoning, like R5 and 10,000 square feet. But the CPR allows you to transfer title to that property. And so people have no idea what a CPR actually does. Now, well, you're an attorney and you've been in escrow. So you know this stuff. But how many people really don't understand that a condo is just a way to transfer title to property. And that's it. You follow what they call the 514B law, Hawaii Revised Statues 514B, then as long as you follow those rules, you have a condominium and it can be a single family home. It can be a duplex. It can be a fourplex. It can be a walkup. It can be a mid-rise high-rise. So condominiums are very flexible. And they've even done ad condos, which a lot of people don't like. They've even done condominiums of boats with cabins. And they make a ship condominium with one room or 100 rooms or whatever. So condos are really interesting and a very different way to transfer title to property. Great point, Abe. And you know, in terms of, let's say, you know, we live in Kaimuki. I know you've done a lot of projects in Kaimuki, Manoa, and the surrounding neighborhoods. So let's say that, you know, someone buys a 10,000 square foot lot with one house on it. It's R5 zoning. So can you kind of walk us through the process on how a CPR would work in that situation? Sure. So R means residential and 5 means 5,000 minimum lot size. So let's take an R5 zoning property anywhere on the island. If you have 5,000 square feet, you can do an ADU of 800 square feet. If your lot is 3,500 to 4,999 square feet, you can do a 400 square foot ADU or you can do an Ohana. Now where the magic comes in is when you have 7,500 square feet. At 7,500 square feet, the zoning code says you can put a two family dwelling detached lot house. You go, what the heck is that? All it is is a duplex. So you put two units, attach them together, either side by side, up and down, car put in the middle, laundry room or storage room in the middle. As long as the two units are attached, then you can have two units with two full kitchens. You need four parking, two parking staff for each. Now you can kind of minimize and sell them separately. And it works really well for families because the parents would say hit to the son or the daughter. Hey look, you can get this unit built, but I want to kind of minimize so that if you go belly up, my property is frame clear. Or you get divorced or sued, then you might lose your house, but I'm not losing mine. So if you don't see PR, then the two units under one ownership and then both units will go down in flames, unfortunately. So if you split it, then you have separate ownership and separate mortgages. Now that's a duplex. When you have 10,000 square feet in R5's own, then the city says you can either attach them or detach the homes. So you have the option at 7,500 to do a duplex. That's all you can do, but at 10,000 square feet, you can attach them or detach them depending on your lot size, your terrain, topography and all this stuff. So in that situation, like 7,500 square foot lot, do you need to get some type of permission beyond the usual permit process to build the second dwelling that's attached? No, just the city. All is a city permit. Now you get the permits on the city and they allow you to put a two-family dwelling detached, which is a crazy way of saying duplex, okay? So now you're going to do a duplex. The city doesn't recognize CPRs, which is really interesting. City says we recognize two units on one lot. The state says it will allow you to split the ownership out by virtue of the horizontal, now called a condominium property regime act, and now they let you split up the ownership so now you can have two separate owners, which is really interesting. Condominium is very unusual, and people don't understand quite how to deal with this stuff. It's at the state level where you register the condominiums, and it's a county level where you get the permits for the two units. Totally different, and the city doesn't recognize condominiums. Okay, except the tax office. Oh, the tax office recognizes it. Yeah, because they want the tax. Of course, of course. So there's CPRs, and then there's also you can subdivide, right? Yes. So you have a large lot you can subdivide. I think the first house I bought in Polo Valley was originally like one large lot. We subdivided it, built another structure, and you know, but we shared a driveway. So in that situation, I think we're both owners were responsible for that shared driveway. We had an easement over that. But anyway, what is the difference, I guess, between CPRing and subdividing? If you could kind of... Sure. If you have a subdivision, the two lots are totally separate, and they're not together. Actually, you should have had a separate driveway. I don't know how come you had a flag lot that shared the driveway. But typically, you'd have a separate driveway with a driveway to the back lot, and a separate property in the front where they come straight off the street. So basically, you'd have a flag driveway in the back and a regular driveway in the front. Okay. And that's a subdivision. So there's lot one and lot two. And the two owners are not related to each other at all. In a CPR, what you've done is you built two homes on one lot. You condominiumized it. The two homes belong to an association, just like the high-rise. And so you have to be part of the association. So the difference is in a condominium, the two units belong to one lot. And then they have units one and two on the condominium. In a subdivision, you have lot one, you have lot two, and the two are totally separate, and they don't talk to each other. And they're not related to each other. That makes sense. So if a buyer was looking at a property that was a CPR property, then they should be aware that will they be sharing, I guess, common expenses with the other CPR owners? Is that different? Sometimes what we've done is when we do a single-family home condo, like I live in a four-year condo in Manoa that I developed, our maintenance fee is $250 a year. Oh no, $500 a year, sorry. And that's it. So that's like $40 a month. And we have no other association fees. We maintain our own home. The only thing we maintain together is a driveway, because that's a common driveway. So in an association, in a condo, you belong to an association, and you should get along with your neighbor. In a subdivision, you don't have to talk to your neighbor. So you don't really have any relationship with them. So condominiums are a little different. Well, actually a lot different than a subdivision. Got it. So if a buyer is looking at purchasing a CPR property, then they should be aware that they would need to probably be collaborative with their neighbors at least, because there's going to be some shared things. Yeah, they could be no maintenance fee either. Or they could be a maintenance fee. Just depends on how it's set up. Okay. Yeah. Thank you. Because I've seen CPR properties where on paper, there's an association, but because it's so small, whether it's two units or units, it's not active. Okay, by law, they're supposed to be active. So at the minimum, they're supposed to have an annual meeting, get together at one of the owner's homes, have coffee, have some cookies and say, Hey, how's your family? Good. Anybody have any complaints? No. Can you pay your maintenance fee? Yes. And then you're done with the meeting for the year. Yeah. There you go. Yeah. But so some association like we have one once a year. And we just pay our 500 bucks maintenance fee. And we have a fund of about 10,000 to repay the road. And that's all. And we have a good relationship with all our neighbors. We have wonderful neighbors. But there may be some times where it could be contentious and they might not get along. So it's a luck of the draw as to what kind of neighbors you have. Well, in terms of, yeah, when we have buyers, they look at a CPR property and they're like, well, I'm not really sure because the CPR will say, well, Abe Lee, he lives in a CPR. You know, all the years I've done CPRs, I don't think we've ever had a lawsuit in 175 groups that I've put together. Now, sometimes they don't get along as well as others. In fact, there was a one deal where there was a cop and a drug dealer. It's a CPR project. So I heard that they had a few beefs, but you know, other than that, no problems. Well, I mean, we learned so much. Ohana dwellings, ADU, CPR, subdivisions, and we unpacked so much and we're very grateful, Abe. Thank you. Yeah. No, this was a great show. I mean, learned so much. And is there any last message that you want for the viewers? If they're going to do a CPR, look at the documents. Look at the declaration and the bylaws and look at the condo map and see what kind of rules and regulations govern that association. So that's really important. In a subdivision, not so much, but in a CPR, you're definitely in partnership with your neighbors. Thank you. Thank you. Thank you. Thank you. All right. My pleasure. Thanks for having me. You're amazing. Thanks. Thank you. Aloha. Aloha.