Hawaii Real Estate Practices

Real Estate Practices in Hawaii, Maui and Oahu

Closing Costs / Payment Splits
For residential transactions, buyer and seller split the escrow fees equally. The cost of the owner’s title insurance policy is split, with the seller paying 60% and the buyer 40% and the buyer paying for extended or Eagle coverage. The buyer is responsible for payment of the lender’s policy premium. The seller pays the conveyance tax which is determined by the sales price, property type and real property tax homeowner’s exemption eligibility. An excise tax which varies by County is also charged on escrow.

Closing Customs
Real estate and title insurance practices in the state of Hawaii differ from those of continental states in many ways. Property transfers are handled through escrow. Documents to be recorded are typically prepared by attorneys.

The drafting of documents is considered a practice of law.

Conveyance Tax
Conveyance tax – see Conveyance Tax Certificate for formula.

See Form(s):
Conveyance Tax Certificate – Form P64A
Exemption from Conveyance Tax – Form P64B
Form P64A and Form P64B Instructions

Document of Conveyance
The form of conveyance document is dependent upon the type of property being transferred. For fee simple property, the general conveyance form is a warranty deed. Many properties in the state are owned by way of a lease and the general conveyance form is an assignment of lease. Condominiums are common in Hawaii and may be fee simple or leasehold. Also common are sales of either type of property by way of an agreement of sale.

Document of Encumbrance
Loans are typically secured by mortgages. A deed of trust is deemed a mortgage under HRS 506-1(a) but is infrequently used as the powers of the trustee are not recognized.

Escrow
Most real estate transactions in Hawaii are handled by escrow. No person shall act as an escrow depository unless it is a corporation licensed to do so by the commissioner of Financial Institutions of the State of Hawaii (HRS 449- 5). Limited exemptions from this requirement exist under HRS 449-3. Sub-escrows are often handled by Hawaii escrow companies in order to comply with licensing requirements when the main transaction is opened with a mainland escrow office. Hawaii is a fund and record state.

Foreclosure Procedures
Foreclosures of mortgages are generally conducted judicially and require the participation of counsel located in the State of Hawaii. Judicial foreclosure requires serving notice to all parties that have an interest in the property and, depending upon court schedules, is a lengthy process requiring 12 months or more. Please contact the local office for specific requirements and procedures.

Leasehold Tax
See conveyance tax.

Miscellaneous Information
Hawaii has a dual system of recording – the Land Court System (Torrens) and the Regular System. Property can be registered in the Land Court only, recorded in the Regular System only, or both registered and recorded (Double System).

For a detailed description of recording requirements, see Hawaii Recording Requirements.

Also see Schedule of Recording Fees and After Recordation Return Information.

Mortgage Tax
There is None. The special mortgage tax for Hawaii was eliminated Sept 2001.

Notary Requirements
Every notary public or person authorized to take acknowledgments to instruments, before taking any acknowledgment shall first carefully inspect any instrument proposed to be acknowledged before the notary public of officer, and ascertain whether there are any erasures or changes in the instrument. If there are any, the notary public or officer shall call to the attention thereto of the person offering to acknowledge the instrument. If they are approved the acknowledging officer shall place the officers initials in the margin of the instrument opposite each change. (§ 502-61 Hawaii Revised Statutes)

Real Estate Taxes
Taxes are payable in halves and the tax year runs from July 1 through June 30.. The first half is due August 20 (covering July 1 through December 31) and the second half on February 20 (covering January 1 through June 30). No discounts are given for early payment of the taxes.

Title Insurance Forms
Title insurance policy and endorsement forms must be filed with the State Insurance Department 30 days prior to use. ALTA owner’s and lender’s policies are issued, and numerous endorsements are available. Title insurance policies are issued through escrow upon the recordation of documents.

Title Insurance Rates
Title insurance rates are not filed, however, they must be posted in the place of business 5 days prior to use. Title insurance rates are established by schedule. Special rates are given for subdivisions, condominium projects and commercial transactions.

Transfer Tax
See Conveyance Tax Last Updated: 8/15/15 All underlined documents are searchable within the system.

Nothing contained in this article is to be considered as the rendering of legal and readers are responsible for obtaining such advice from local legal counsel. This article is intended for educational and informational purposes only. The views and opinions expressed herein do not necessarily reflect our views, opinions, or policies.

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