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THE DEED DICTIONARY
All of the terms and concepts that relate to deeds and conveyance instruments.
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ABSTRACT OF TITLE
A summarized history of the title to a specific parcel of real property, including a statement of all liens and encumbrances affecting the property. The abstractor searches the records of the Bureau of Conveyances, the Land Court, the Probate Court, the Circuit Court and other official sources. The abstractor then prepares a summary of the various instruments affecting the property and arranges them in chronological order of recording or filing, starting with the original grant of title from the sovereign. The abstract also includes a list showing which public records the abstractor has and has not searched in preparing the report. The abstract of title does not guarantee or insure anything with respect to the title to the property. It merely discloses those items about the property that are of public record, and thus does not reveal such things as encroachments, forgeries, and the like. (See TITLE INSURANCE, TITLE SEARCH.)
A clause in a promissory note, mortgage, agreement of sale or other instrument evidencing or securing payment or performance of an obligation which gives the one to whom the obligation is due the right to demand payment or performance in advance of the stated. due date upon the occurrence of one or more stated events. The events giving rise to the right and the remedies available to the party to whom the obligation is owed must be set forth expressly and with specificity, or the right or remedies, or both, may be difficult or impossible to enforce. (See ALIENATION CLAUSE, DUE-ON-SALE CLAUSE.)
A formal declaration made before an officer authorized by law, usually a Notary Public, by a person who has signed a document. The requirements for, and contents of, the declaration will vary, depending upon the jurisdiction. Hawaii law (HRS § 50245) provides that an acknowledgment taken in another state of the United States in accordance with the laws of that state will be accepted in Hawaii. With minor exceptions a document must be acknowledged by each party executing the document to be recorded in the Bureau of Conveyances or filed with the Land Court (HRS §§ 501-102 and 502-41). General forms of acknowledgment and other requirements for acknowledgments are found in HRS §§ 502-41 through 502-74. Under Hawaii law, the officer taking the acknowledgment witnesses the signature of a person signing it. The person must be personally known to the officer or proved to be that person by adequate identification. The person declares that he or she executed the document as his or her free act and deed. The officer can be held liable for damages resulting from negligence in failing to adequately identify the person signing a document, as where a forgery occurs. Effective July 1, 2009, a Hawaii Notary Public is also required to include a certification statement with the acknowledgment (HRS § 456-21). (See APOSTILLE.)
ADDITIONAL CHARGE MORTGAGE
A mortgage that secures an advance (loan) made by a lender to a borrower in addition, and subsequent, to a loan secured by a mortgage already of record and encumbering the property covered by the earlier mortgage. The borrower and lender are the same as the borrower and lender named in the already recorded mortgage. The advance secured by the additional charge mortgage is one the lender is not obligated to make under the already recorded mortgage. A primary concern of the lender will be intervening liens between the original mortgage and the additional charge mortgage which would impair the priority of the latter mortgage. (See MORTGAGE regarding priority of advances.)
AMENDMENT OF MORTGAGE
An instrument executed by and between the holders of the mortgagor's and mortgagee's interests, respectively, under a mortgage which amends one or more of the terms, covenants or conditions of the mortgage. The amendment should be recorded in the office in which the mortgage was placed of record and should refer specifically to the mortgage, including a reference to the recording information (Liber and Page, Document Number, TCT number) needed to locate the mortgage in the record office. Special care must be taken regarding this instrument as its use may affect the priority of the mortgage.
AMERICAN LAND TITLE ASSOCIATION (ALTA)
An association of title insurance companies and agents of such companies, whose members search, review and insure land titles for buyers and mortgage lenders. An ALTA extended policy insures against title defects not normally covered in the standard title insurance policy, such as unrecorded documents and rights of parties in possession. (See TITLE INSURANCE.)
Hawaiian word for piece, slice, portion or fragment. Used with respect to land, it can mean sector, district or lot.
A certificate issued by an authority appointed for such purpose by a foreign nation which takes the place of diplomatic or consular acknowledgment of a document pursuant to the Hague "Convention Abolishing the Requirement for the Legislation for Foreign Public Documents."
Belonging to; adjunct; appended or annexed to. For example, the garage is appurtenant to the home; or the common interest in the common elements of a condominium is appurtenant to each apartment. Appurtenant items pass with the property when the property is transferred.
A clause in a contract for the sale or lease of real property or personal property which is intended to be a disclaimer by the seller of any express or implied warranties or representations concerning the condition or state of repair of the property. If the "as-is" disclaimer applies only to a portion of the property covered by the contract (e.g. appliances), that portion should be specifically identified. There are different views as to whether the "as-is" disclaimer should be included within the conveyance or lease document, but the more conservative position is to include the "as-is" language from the purchase contract in the document. Generally, the implied warranty of habitability of residential property cannot be superseded by a simple "as-is" clause. Since the trend in recent court decisions in various states has been moving away from the "caveat emptor" concept and toward increased liability and responsibility for sellers of real property and their agents, care should be exercised in the use of "as is" clauses and the disclosures which accompany their use.
ASSIGNMENT OF LEASE
A written instrument by which the holder ("assignor") of the lessee's interest under a lease transfers that interest to another party ("assignee"). Reference must be made to the lease provisions to determine whether or not the consent of the lessor is required to such a transfer.
ASSIGNMENT OF MORTGAGE
A written instrument by which the holder ("assignor") of a mortgagee's interest under a mortgage transfers to another party ("assignee") the mortgagee's interest together with the promissory note secured by the mortgage. The mortgage affected should be identified, at the minimum, by reference to the recording information (Liber and Page, Document Number, TCT Number) needed to locate the mortgage in the record office. Typically, the assignment is "without recourse" to the assignor.
ASSUMPTION OF MORTGAGE
The act of acquiring title to property encumbered by an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments, and ordinarily agreeing to indemnify and hold harmless the seller from any liability in connection with the mortgage being assumed. In effect, the buyer (grantee) becomes the principal obligor on the mortgage note and is primarily liable for the amount of any deficiency judgment resulting after a default and foreclosure on the property. Unless specifically released by the mortgage holder, the original mortgagor (grantor) is still liable as surety on the note in the event the grantee defaults. The personal liability of the buyer to pay the mortgage debt is usually created by an assumption clause placed in the deed (or assignment of lease if a leasehold mortgage is involved). Normally a deed needs only be signed by the grantor, but where there is an assumption clause, both buyer and seller sign the deed so that the buyer becomes personally bound to the assumption.
In many cases, an assumption of mortgage will give the holder of the mortgage the right to declare the balance of the loan secured by the mortgage immediately due and payable. (See DUE-ON-SALE CLAUSE.) In such cases, a modification of the loan terms (interest rate, length of loan term, etc.) may be required by the mortgage holder as consideration for not declaring the balance due. Additionally, the mortgage holder may require that the buyer "qualify" for the loan balance in much the same manner as if the buyer were an original loan applicant and that the buyer sign a separate assumption agreement running in favor of the mortgage holder. If the original mortgage was written on the FNMA/FHLMC form used since the late 1970's, the mortgagor (seller) may be released from further liability on the note after the assumption is consented to in writing by the mortgage holder.
One authorized to act as the agent of another (the "principal") by virtue of a written instrument (a "power of attorney") signed by the principal. The power of attorney may be general (conferring broad authority) or special (conferring limited authority) and must be examined to ascertain the powers of the attorney-in-fact. If an attorney-in-fact is conveying or encumbering real property on behalf of the principal, the power of attorney must be recorded in the same record office as the conveyance or lien document.
BILL OF SALE
A written agreement by which one sells, assigns or transfers one's right to, or interest in, personal property to another. A bill of sale is sometimes used by the seller of real estate to evidence the transfer of personal property, such as when the owner of a store sells the building and includes the store equipment and trade fixtures. The transfer of the personal property can be effected by mention in the deed, incorporating by reference an inventory list, or, as is more common, by a separate bill of sale document. As with other transfer instruments, the bill of sale may or may not contain warranties in favor of the buyer and may also include an "as-is" disclaimer.
BULK SALES OR TRANSFER
A sale, not in the ordinary course of the seller's business, of the whole or a large part of the merchandise, fixtures or other assets or property of a business. Bulk sales or transfer usually become relevant upon the liquidation of a business. Under Hawaii law, a bulk sale must be reported by the seller to the Director of Taxation within 10 days of the sale. The purchaser must withhold payment until the purchaser receives a tax clearance on the seller from the Director. If the purchaser does not get a tax clearance, the purchaser may become liable for the tax on the sale, for taxes which are a lien against the items sold, or for any other unpaid taxes of the seller (HRS § 237-43). Article 6 of the Uniform Commercial Code (UCC) relating to bulk sales was repealed in Hawaii effective July 17, 1998.
BUREAU OF CONVEYANCES
The state office is located in Honolulu at 1151 Punchbowl Street (mauka-Diamond Head of Honolulu Hale) and is the repository for all documents recorded since the Great Mahele of 1848 relating to title to both Land Court and Regular System property. The Bureau of Conveyances is a division of the Department of Land and Natural Resources. Unlike many mainland states having a recorder's office in-each county, Hawaii has only one and all documents to be recorded, whether affecting Oahu or Neighbor Island real property, must be recorded in this Honolulu office. (See LAND COURT, RECORDING, REGULAR SYSTEM.)
CERTIFICATE OF OCCUPANCY
A certificate, issued in Hawaii by a county building department, to indicate that a structure complies with building code requirements and may be occupied legally. Such a certificate is not issued for most residential structures.
CERTIFICATE OF TITLE
A statement of opinion on the status of the title to a parcel of real property, based upon an examination of specified public records. NOTE: A certificate of title should not be confused with a Land Court certificate of title, which is issued to the title holder when land is registered in the Land Court. (See TRANSFER CERTIFICATE OF TITLE.)
A certificate of title does not guarantee title but does certify title as of the date the certificate is issued, on the basis of an examination of the public records available at the following offices:
Clerks of the Supreme Court and Circuit Court of the Judicial Circuit in which the property is located, and the U.S. District Court for the District of Hawaii;
The Real Property Assessment or the Treasury Division of the 'county where the property is located;
The Assistant Registrar of the Land Court;
The Bureau of Conveyances.
NOTE: The certificate of title does not offer protection against "off-record" matters such as undisclosed liens, rights of parties in possession and matters of survey and location, nor does it protect against "hidden defects" in the records themselves, such as fraud, forgery, lack of competency or lack of delivery. A title insurance policy will protect against most of these off-record and hidden defects risks.
An owner's certificate of title normally will not be issued for less coverage than the sales price of the property, but given the availability of title insurance products, requests for owner's certificates of title are uncommon. A mortgagee's certificate is more common, especially for second and subordinate mortgages, and will not be issued for less coverage than the amount of the loan.
CHAIN OF TITLE
The recorded history of matters which affect the title to a specific parcel of real property, such as ownership, encumbrances and liens, usually beginning with the original recorded source of the title.
Title to property that is free from liens, defects or other encumbrances, except those which the buyer has agreed to accept, such as a mortgage to be assumed, the ground lease of record, and the like; also called, "established title" and "title without clouds".
CLOUD ON TITLE
Any document, claim, unreleased lien or encumbrance which may impair or injure the title to property or make the title doubtful because of its apparent or possible invalidity. Clouds on title are usually revealed by the title search and may be removed from the record by a quitclaim deed or a quiet title proceeding initiated.by the property owner. While the cloud remains, the owner is usually prevented from conveying a marketable title except where the cloud is a minor nuisance item. Typical examples of clouds on title are: (1) where a buyer under a recorded agreement of sale defaults, but the agreement of sale has not been removed from the record; (2) where a recorded option was not exercised, but still appears on the record; (3) where a recorded mortgage has been paid in full, but no satisfaction or release of mortgage has been recorded; (4) where a property was acquired by a married man prior to July 1, 1977 and is sold without the wife releasing her dower interest; or (5) where an heir of a prior owner has a questionable claim to the property.
A form of property ownership in which two or more persons concurrently own undivided interests in the same property, as joint tenants, tenants by the entirety or tenants in common.
An account established to collect periodic payments on a debt or obligation, to disburse the monies received as requested by the payee, and to make an accounting to both parties. For example, many agreements of sale require the buyer to make payments into a collection account at a bank, collection agency, or escrow company that, in turn, pays the real property taxes, lease rent, maintenance fees, mortgage payments, if any, and insurance payments. The collection fees are typically split equally, though the seller is in a better bargaining position to try to persuade the buyer to pay the entire fee since the collection account is generally considered to be for the buyer's protection (to insure that the seller makes timely payments relating to the property). There will be monthly fees for maintaining the collection account, plus an initial set up fee.
CONDOMINIUM COMMON ELEMENTS
See HRS §§ 514B-3 and 514B-38
CONDOMINIUM COMMON EXPENSES
See HRS §§ 514B-3 and 514B-41
CONDOMINIUM COMMON INTEREST
See HRS § 514B-3 and 514B-37
CONDOMINIUM MAP AND CONDOMINIUM FILE PLAN
The term applied to the map or plan of the condominium property regime containing the site plan, floor plans and elevations of the building or buildings of a condominium project, the layout, location, unit numbers and dimensions of the units in the project and parking plan, and is required to be recorded with the declaration by HRS § 514B-33. When a condominium map is recorded in the Regular System, it is sometimes termed a "File Plan," consistent with the Regular System method of designating maps of land subdivisions as "File Plans." When filed in the Land Court, the set of plans is termed a "Map," consistent with the Land Court method of designating maps of subdivisions of land as "Maps."
An estate in real property consisting of an individual interest in a residential unit or commercial unit, and an undivided common interest in the common areas such as the land, parking areas, elevators, stairways, and the like. Each condominium unit may be mortgaged, taxed, sold or otherwise transferred in ownership, separately and independently of all other units in the property of which it is a part. The unit can also be separately foreclosed upon in case of default in the mortgage note or- other lienable payments. The condominium concept is a versatile development tool and many office and professional buildings, industrial plants, recreational developments and combined apartment and office buildings utilize the condominium form of ownership. Each condominium owner has exclusive ownership of the owner's individual unit, but must, nevertheless, comply with the requirements of the declaration, by-laws and house rules set up for the protection and comfort of all the condominium owners. As of July 1, 2006, HRS ch. 514B regulates the establishment and governing of condominiums in Hawaii. HRS ch. 514A was the prior law for condominium property regimes. HRS §§ 514B-21 through 514B-23 set forth the applicability of HRS ch. 514B to condominiums created prior to July 1, 2006.
A provision placed in a contract that requires the completion of a certain act or the happening of a particular event before a party is bound to perform under the contract. For example, a buyer will submit an offer to purchase contingent upon obtaining financing or rezoning. In such a case, the seller should be sure the contingency is specifically detailed and unambiguous, and that there is a definite cut-off date, otherwise the buyer could tie up the seller's property indefinitely as the buyer attempts to get financing or rezoning. A party may waive any contingency clause which was inserted for that party's benefit. For example, the buyer could force the seller to sell the property even though the buyer was not able to obtain the zoning that was originally made a contingency in the contract of sale.
An update of a title search. In the typical transaction, the title company
will issue a preliminary title report soon after escrow is opened. At the closing date, the title company will continue the search down to the time of recording the final documents, by checking the daily records at the Bureau of Conveyances to be sure no intervening rights in the property have arisen. The final title report will then show title in the grantee. (See TITLE SEARCH.)
A tax imposed by the State of Hawaii on the transfer or conveyance of realty or any interest therein by means of deed, lease, sublease, assignment, agreement of sale or similar instrument. (See HRS ch. 247.) Exemptions from the tax include correction deeds, agreement of sale satisfaction instruments if the tax was paid when the underlying agreement of sale was recorded, transfers between husband and wife or parent and child, transfers where the actual consideration is $100 or less, and leases and subleases for a term of less than five years. Where the transaction is exempt, the document must be accompanied by a form certificate setting forth the grounds for the exemption. Mortgages and some transfers, such as a grant of easement, are totally exempt and no exemption certificate is required.
The amount of the Hawaii conveyance tax is based on the "actual and full consideration," which means the price or amount, whether cash or otherwise, actually paid or ultimately required to be paid for real property, including the value of any mortgages, liens or encumbrances thereon at the time of transfer. The minimum tax is $1.00. A Conveyance Tax Certificate (Form P-64A) (or an exemption certificate, Foini P-64B) must be filed and the tax paid at the Bureau of Conveyances no later than 90 days after the date of the transaction. The tax must be paid before the instrument will be accepted for recordation. The purchaser, grantee or lessee (or the authorized representative of such party) must sign the certificate; the names of all parties to the transaction must be noted. There is also a space to indicate the name and mailing address where the next real property assessment notice and tax bill for the property are to be sent.
The tax rates depend upon the value and type of property being transferred.
Cooperative ownership of an apartment unit means that the apartment owner has purchased shares in a corporation which holds title to the land and entire apartment building. The cooperative owner is, in essence, a shareholder in a corporation whose principal assets are the land and building. In addition to stock in the corporation, the owner receives a proprietary lease entitling the owner to occupancy of a specific unit in the building. The cooperative owner thus occupies but does not own that unit. The owner pays a pro rata share of the corporation's expenses, which include mortgage charges, real estate taxes, maintenance, payroll, and the like. Statutory amendments in 1980 permitted state chartered banks and savings and loan associations to regard as "real estate" loans those loans secured by mortgages of cooperative apartment stock or membership certificates and proprietary leases. HRS §§ 403-98(b) and 407-85.
A deed used to correct a prior deed erroneous in some respect, such as a misspelling of a name or a similar minor error. It can also be used to correct or change an inaccurate description of a parcel. Great care must be used in preparing such a deed to avoid compounding, rather than correcting, an error. NOTE: If a prior deed has been accepted for registration by the Land Court, a correction deed may not be used. Rather, the property should be conveyed by the grantee to the grantor and reconveyed using correct information. Should this be impossible or impractical, a Land Court Petition may be used in appropriate circumstances.
Lands retained by the King for his own use after the Great Mahele of 1848, when King Kamehameha III and his chiefs effected a division of the lands in the Kingdom of Hawaii between the King on the one hand and the chiefs on the other hand. A second category of lands retained by the King was called "government lands," and the remainder of the land was passed to private ownership. (See GREAT MAHELE.)
The interest of a husband in property owned by his wife at the time of her death. Effective July 1, 1977, with the adoption of the Hawaii Uniform Probate Code, curtesy no longer exists in Hawaii.
CUSTOMER TRUST FUND (CTF)
An account maintained to provide a source of money to pay periodic obligations with respect to real property, such as real property taxes, lease rent and property insurance premiums. Such accounts are required by regulation with respect to FHA and VA loans, and lenders routinely require such funds to be maintained with respect to other loans.
DECLARATION OF RESTRICTIONS
A statement of covenants, conditions and restrictions ("CC&Rs") that affect a parcel of land. Typically, a subdivider records this declaration in the Bureau of Conveyances. The restrictions usually relate to a general plan of development and require all lot owners to comply with certain building standards. For example, the CC&Rs may require lot owners to construct homes valued at more than a minimum dollar amount or to obtain prior design approval from a designated architectural review committee. Some CC&Rs establish the framework for the creation of a homeowners' association and designation of association common areas. Once recorded, these restrictions in the declaration run with the land and bind all future lot owners. Generally, an owner subject to the restrictions can enforce the restrictions against any owner who violates any of the restrictions.
A written instrument by which title to real estate is conveyed by the owner ("grantor") to another party ("grantee").
A clause in leases and mortgages which defeats or cancels a certain right upon the happening of a specified- event. A defeasance clause typically found in mortgages provides that if the borrower repays the debt on or before the day it is due (called the "law day" at common law), then the words of grant are void and the mortgage is thereby canceled, divesting the mortgagee of title and reverting title in the mortgagor. Automatic defeasance was important under the common law and in "title theory" states, where title is transferred under a mortgage. While Hawaii is a "lien theory" state, meaning that title remains with the mortgagor and the mortgagee takes a security interest in the property, Hawaii mortgages typically contain defeasance language even though it is not necessary.
A conveyance of an estate or interest in real property to another for years, for life, or at will -- most commonly for years, as in a lease. A lease often refers to the "demised premises." The use of the word "demise" often implies a covenant of quiet enjoyment by which the lessor undertakes to guarantee that the lessee will not be disturbed in the use of the premises by superior claims of others.
DEPOSIT RECEIPT, OFFER & ACCEPTANCE
Commonly referred to as a "DROA," this was a printed form Contract prepared by the Hawaii Association of Realtors and the most frequently used contract of sale or purchase agreement for residential real property in Hawaii. The DROA form has been replaced by a Purchase Contract form for residential real property and Commercial Real Property Purchase and Sale Agreement (PSA) form for commercial transactions. A number of standard disclosures (e.g., "as is" condition, oceanfront property, cooperating broker) and additional provisions (e.g., purchase money mortgage) have also been prepared for use by the parties as addenda to the contract forms. (See Chapters 7 and 8 for forms and comments.)
The interest acquired by a wife in the property her husband held or acquired at any time during marriage: During the husband's life, the wife's dower interest is expectant or inchoate. Dower becomes a legal estate (consummate dower) upon the husband's death. The wife is then entitled to a life estate interest in all real property owned by her husband at any time during the marriage, except property held by the husband in joint tenancy with another party. The wife's interest is a one-third interest. Hawaii recognizes dower in leaseholds. The wife's dower interest in personal property is an absolute one-third of all personal property owned by her husband at his death which remains after payment of just debts. Dower was abolished in Hawaii concurrent with the adoption of the Hawaii Uniform Probate Code, effective July 1, 1977. NOTE, however, that dower rights existing prior to July 1, 1977 were NOT impaired and continue in existence.
A form of acceleration clause found in mortgages, requiring the mortgagor to pay off the mortgage debt when the property is sold without consent of the lender, thus resulting in automatic maturity of the note at the lender's option. This clause effectively eliminates the possibility of the new buyer assuming the mortgage unless the lender permits the assumption, in which case the lender might increase the interest rate or charge an assumption fee.
The Garn-St. Germain Depository Institutions Act of 1982 ("Garn-St. Germain") expressly authorizes (with exceptions not applicable in Hawaii) the inclusion of due-on-sale clauses in mortgages by virtually all institutional mortgage lenders and the enforcement of those clauses. Pursuant to the regulations promulgated under Garn-St. Germain at 12 C.F.R. Part 591, with respect to any loan secured by a mortgage on a home occupied or to be occupied by the borrower, a lender may not exercise its option under a due-on-sale clause upon:
the creation of a lien or other encumbrance subordinate to the lender's security instrument which does not relate to a transfer of rights of occupancy in the property; provided, that such lien or encumbrance is not created pursuant to a contract for deed;
the creation of a purchase-money security interest for household appliances; a transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
the granting of a leasehold interest which has a term of three years or less and which does not contain an option to purchase (that is, either a lease of more than three years or a lease with an option to purchase will allow the exercise of a due-on-sale clause);
a transfer, in which the transferee is a person who occupies or will occupy the property, which is: (A) a transfer to a relative resulting from the death of the borrower; (B) a transfer where the spouse or child(ren) becomes an owner of theroperty; or (C) a transfer resulting from a decree of dissolution of marriage, legal separation agreement, or from an incidental property settlement agreement by which the spouse becomes an owner of the property; or
a transfer into an inter vivos trust in which the borrower is and remains the beneficiary and occupant of the property, unless, as a condition precedent to such transfer, the borrower refuses to provide the lender with reasonable means acceptable to the lender by which the lender will be assured of timely notice of any subsequent transfer of the beneficial interest or change in occupancy.
A property interest which one person has in land owned by another, entitling the holder of the interest to limited use or enjoyment of the other's land. An easement may be appurtenant to certain land or may be "in gross," that is, an easement for the personal benefit of an individual or entity. The land receiving the benefit of an appurtenant easement is sometimes called the "dominant estate", and the land on which the easement is located is sometimes called the "servient estate". BecauSe an easement is an actual interest in land, an express grant of easement must be in writing, usually taking the form of a separate deed or a reservation in a deed. Easements may also be created by necessity, as in "landlocked" situations, by implication, or by prescription. Depending upon the subdivision ordinances of the county, the creation of an easement may be classified as a "subdivision" of land, requiring approval of county authorities. Before an easement may be granted over property registered with the Land Court of the State of Hawaii, the easement must first be designated by the Land Court in accordance with the Rules of the Land Court.
An unauthorized invasion or intrusion ("trespass") of a fixture or other real property wholly or partly upon another's property, thus reducing the size and, perhaps, value of the invaded property. Common examples of encroachments are the roof of a building which extends over the property line, or the front of a building extending over the building setback line or extending into a neighbor's property. Under Hawaii law, certain "de minimis" structure position discrepancies are permitted on private property and shall not be considered an encroachment or a basis for a zoning violation. (See HRS §§ 669-11 to 669-13.)
Any claim, lien, charge or liability attached to and binding real property which may lessen the value of the property but will not necessarily prevent the transfer of title.
EQUAL DIGNITIES RULE
A rule of agency law provides that when a contract is required by law to be in writing, the authority of an agent to enter into such a contract on behalf of the principal must also be in writing. Therefore, a power of attorney for real estate contracts must be in writing, because the Statute of Frauds (HRS ch. 656) requires that all real estate contracts be in writing and that the agent's authority likewise be in writing. The power of attorney must also be recorded if the real estate contract is expected to be recorded. (See HRS §§ 501-174 and 502-84.)
The process by which money and/or documents are held by a disinterested third person (a "stakeholder") until the satisfaction of the terms and conditions of the escrow instructions (as prepared by the parties to the escrow). When these terms have been satisfied, there is a delivery and transfer of the escrowed funds and documents.
Under Hawaii law applicable to "Escrow Depositories" (HRS ch. 449), escrow is defined as "any transaction affecting the title to real property, including leaseholds, proprietary leaseholds, and condominiums, in which a person not a party to the transaction and neither having nor acquiring any interest in the title receives from one party to the transaction, holds until the happening of an event or performance of a condition and then delivers to another party to the transaction, any money or other consideration or any instrument affecting the title to that real property, all in accordance with the terms of the agreement between the parties to the transaction." HRS § 449-1.
EVIDENCE OF TITLE
Proof of ownership of property. Common examples are a certificate of title, a title insurance policy, or, with Land Court registered property, a Land Court Certificate of Title or lien letter. When a person contracts to sell real property, he or she generally must furnish the buyer with a marketable title. This, however, is a matter of contract and unless the contract provides otherwise, the seller is not obliged to furnish the buyer with any evidence that the title is good and marketable. Unless the parties agree otherwise, if the buyer wants a title insurance policy to insure that the buyer has marketable title, the buyer must pay the cost for the policy that exceeds the cost of the certificate of title or lien letter provided by the seller. (See CERTIFICATE OF TITLE, LAND COURT, LIEN LETTER, TITLE INSURANCE.)
As used in a conveyance of an interest in real property, an exception is an exclusion from the conveyance so that some part of the property that would otherwise be conveyed by the description is not conveyed. An exception in favor of the person making the conveyance is, in effect, a reservation. (See RESERVATION.)
Liens, encumbrances or other matters specifically excluded from coverage under a title insurance policy.
Those matters noted in that portion of a contract of sale, in which the seller agrees to convey marketable title to the buyer "free and clear of all liens and encumbrances except . . . ."
A written instrument by which title to real estate is conveyed from one party to another. The difference between an exchange deed and other forms of deed is that the consideration (in whole or in part) for the conveyance is the conveyance of other real property (or interest therein). Tax considerations motivate one or both parties to an exchange and proper documentation and timing are critical to an exchange transaction, as is the advice of a practitioner knowledgeable in the requirements of the Internal Revenue Service, to assure the parties' tax objectives are achieved. See Internal Revenue Code, Section 1031.
A term used to indicate an endorsement to a property insurance policy that provides additional coverage for risks other than those in a basic policy, such as loss caused by windstorm, hail, explosion, civil commotion, and aircraft, or vehicle damage. A title insurance policy that covers risks normally excluded by most standard coverage policies. The standard policy normally only insures against defects in the title as shown by the public records. It does not cover such off-record matters as might be discovered by an inspection of the premises. Most institutional lenders will require this added coverage, usually in the form of an American Land Title Association (ALTA) Loan Policy. Extended coverage indemnifies the insured against such things as defects, liens, encumbrances, easements, rights of parties in possession, tax liens and encroachments which are not disclosed by the public records. (See ALTA, TITLE INSURANCE.)
A taw used to refer to a succession of events by which the holder of a leasehold interest in real property becomes the owner of the fee simple interest in that property. The term applies to the events resulting from a voluntary negotiation process between the leased fee owner (lessor) and the lessee(s) or the proceedings set forth in HRS ch. 516.
To place an original document or a duplicate original on public record. Most legal documents are "recorded," i.e. kept in the form of a literal copy produced by electrostatic process, microfilm or in an electronic record. (See RECORDING.)
A metes and bounds survey of property prepared by a registered professional surveyor, verified by the State Surveyor, and assigned a file plan number in the Bureau of Conveyances. See HRS § 502-17. Lots located within a file plan can be legally described by reference to the file plan number, such as:
Lot 173, area 7,500 sq. ft., of the Kahala subdivision, as shown on the map filed in the Bureau of Conveyances of the State of Hawaii as File Plan No. 12.
A standard form document that, when completed and recorded at the debtor's "location", perfects or establishes a creditor's security interest in most personal property collateral. If the debtor's "location" is Hawaii, the proper place for filing is the Bureau of Conveyances. See HRS §§ 490: 9-310, 9-501; 9-502. A financing statement is also required to protect a creditor's security interest in personal property which becomes a fixture when attached to realty.
Hawaii law concerning security interests in personal property and fixtures changed significantly as of July 1, 2001, in Revised Article 9 of the Uniform Commercial Code. Particular provisions to note concern the types of collateral subject to filing, the identification of the collateral, the location of the debtor, the debtor's correct name, and the deletion of the requirement that financing statements must include the debtor's signature. The applicable provisions include HRS §§ 490: 9-108, 9-307, 9-310, 9-502, 9-503, 9-504, and 9-506.
When filed, the financing statement is effective for five years from the date of filing and lapses upon expiration of that period unless extended by filing a continuation statement filed anytime within the six-month period preceding the expiration of the five-year period. See HRS § 490: 9-515.
Creditors should also note that a financing statement cannot be filed with the Land Court, since the Land Court accepts documents that affect real property only. However, if fixtures located on Land Court property are secured by a mortgage document, the mortgage can be the financing statement for a fixture filing under the conditions of HRS § 490:9-502(c).
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT OF 1980 (FIRPTA)
This Act subjects most dispositions by foreign persons of real property interests in the United States to capital gains tax under the Internal Revenue Code. FIRPTA taxes not only sales of directly held U.S. real property, but also taxes sales of interests in any "United States real property holding corporation." The buyer of a U.S. real property interest from a foreign person is required to withhold 10% of the total purchase price. The buyer is not required to withhold if the seller provides a certificate of "non-foreign status." There are a number of exemptions, such as the purchase of a residence (for use as such by the buyer) costing less than $300,000 and the purchase of stock traded on an established securities market. See Internal Revenue Code, Section 1445. A detailed discussion of FIRPTA is beyond the scope of this Manual, but the requirements of FIRPTA can be a trap for the unwary and, in a transaction of any substance, consultation should be had with a professional advisor conversant with FIRPTA.
Those lands, other than Crown Lands and Konohiki Lands, were set apart for the Government by King Kamehameha III on March 8, 1848, as confirmed by the Legislature on June 7. 1848.
The person who receives from the grantor a title to or an interest in real property. The grantee must be a person, either an individual or a legal entity, who exists at the time of the conveyance and who is capable of taking title. As a general rule, a grantor cannot convey title to oneself alone. The grantor may, however, convey to the grantor and others; e.g., "Sleeping Beauty conveys title to Sleeping Beauty and Prince Charming as joint tenants."
The person transferring title to, or an interest in, real property. A grantor must be competent to convey; thus, an insane person cannot convey title to real property. In Hawaii, a deed from a minor is voidable (not void) and may be disaffiliated by the minor before or within a reasonable time of the minor's reaching majority (the age of 18 years). A corporate grantor must have legal existence, be authorized to hold and convey title to real property and be represented by a duly authorized officer of the corporation. The grantor must be clearly identified in the deed. Misspellings do not render the deed inoperative unless the discrepancy is so extensive that the grantor cannot reasonably be identified. The grantor should convey the title under the same name in which the grantor acquired the title. If the grantor's name has changed, the designation of the grantor in the document should reflect such change; e.g., "XYZ Corp., a Hawaii corporation, formerly known as ABC Corp."
When title to real property is vested in two or more persons, each must convey its interest if complete title to the property is to be conveyed. Usually all co-owners will join in one deed, although separate deeds are valid to transfer complete title to the grantee unless the owners hold title as tenants by the entirety, in which event both must join in the same deed.
The division of lands which occurred in 1848, when King Kamehameha III and more than 240 of the highest chiefs of the kingdom met and reached agreement determining their respective individual interests in the different lands within the Hawaiian Islands. The division was made into three major parts: one for the chiefs, one for the support of the government, and a third for the King's personal use. These came to be known respectively by the names of "Konohiki lands," "Government lands," and "Crown lands." This mahele, or division, did not automatically convey title to any Konohiki land; rather it gave each chief the right to present his claim to the Land Commission and receive an award confirming the chief's title to the land. Following payment to the government of a commutation, the chief would receive a patent which conferred fee simple title to the awarded land. In 1850, the Legislature authorized the Land Commission to award to native tenants fee simple title covering the lands lying within any Konohiki, Government or Crown lands which they actually occupied and which they had improved with the exception of house lots or lands in Honolulu, Lahaina, or Hilo. These awards were called "kuleana awards."
A lease of the land alone. The ground lease is a means to separate ownership interests in the land from the ownership of the buildings and other improvements constructed on the land. In Hawaii, a residential ground lease creates a tenancy for years on the land, typically for a term of 55 years.
That part of the deed beginning with the words "to have and to hold," following the granting clause and reaffirming the extent of ownership that the grantor is transferring, such as "To have and to hold unto the said Jane Lathrop, grantee, a life estate in. . . ." The habendum clause defines or limits the extent of ownership in the estate granted, e.g., fee simple, life estate or easement. If there is a discrepancy between the extent of ownership as specified in the granting clause and that specified in the habendum clause, the granting clause prevails. Consequently, the habendum clause is not an essential part of the deed.
HAWAII REAL PROPERTY TAX ACT (HARPTA)
HRS § 235-68 is Hawaii's counterpart to FIRPTA. HARPTA provides for the withholding of income tax equal to 5% of the amount realized on the disposition of Hawaii real property by a nonresident person (whether mainland U.S. persons or foreigners). The party acquiring the real property (the "transferee") is required to withhold and pay over to the State Department of Taxation the required amount of tax by the 20th day after the date of the transfer of the property, unless the person disposing of the real property (the "transferor") furnishes the transferee with a Certificate for Exemption from the Withholding of Tax on the Disposition of Hawaii Real Property (Form N-289). If the transferee is required, but fails, to withhold and pay over the tax, the transferee is liable for the tax and may be guilty of a misdemeanor.
A title risk that cannot be ascertained from an examination of the public records. The most common hidden risks include forgery or lack of delivery of an instrument in the chain of title; corporate forgery (the execution by the appropriate officers of an unauthorized instrument, or the execution of an instrument by one lacking authority); minority of a party to an instrument; death of a principal prior to execution of an instrument by the principal's attorney-in-fact; conveyance in fraud of creditors; dower right of the wife of a grantor who falsely represented himself to be single; and potential vulnerability of the subject property to mechanics' liens. All such hidden risks (except for mechanics' liens and creditor's rights claims) are covered under standard policies of title insurance, but not under a standard certificate of title.
An arrangement whereby an escrow agent holds the documents necessary to convey title pursuant to an agreement of sale. Holding escrows are often suggested as the solution for the nagging agreement of sale problems that arise where the buyer is ready to pay off the balance owing on the agreement of sale but the seller either cannot be found or is not cooperative about executing the conveyance. Under the holding escrow, the seller, at the time the agreement of sale is signed, leaves with escrow executed copies of the deed or assignment of lease and instructs escrow to deliver the same to the buyer when full payment is made under the agreement of sale. Many escrow companies are reluctant to handle holding escrows even when they are indemnified against loss. They raise these objections:
It is difficult for escrow to ascertain whether there has been a full payoff, or whether the amount deposited in escrow is the correct amount, or whether the buyer is in default under any other terms of the agreement of sale.
What happens if the seller has died? Who determines the rights of the heirs?
What if the buyer has resold the property and used a different escrow agent and the seller is requested to draft new documents conveying title directly to the new buyer. (Thus, there sometimes are added costs.)
While the holding escrow may be good in theory, these practical problems often prevent its effective use, except in special situations. An alternative is to set up a collection account with the lending institution where the seller has an existing mortgage. At least then the collecting agent will know the whereabouts of the seller. Also, the buyer will be protected since the seller's mortgage payment will be made as long as the agreement of sale payment is made, and, vice versa, the seller will be notified if the buyer is in default in making an agreement of sale payment,
The Hawaiian term for a unit of land under the ancient Hawaii land system which is next below the "ahupuaa." There were two types of ili: a subdivision of the ahupuaa made by the konohiki himself ("ili of the ahupuaa") and a tract reserved out of an ahupua'a and not under the control of the konohiki of the ahupuaa ("ili kupono").
A form of property ownership by two or more persons in which the joint tenants have one and the same interest, arising by one and the same conveyance, commencing at one and the same time and held by one and the same possession (sometimes referred to as, the "four unities"). Under a joint tenancy, the surviving joint tenant(s) succeeds to the interest of the deceased joint tenant under a right of survivorship. No probate proceedings are necessary.
Hawaiian term which originally referred to an agent or a person in charge of a tract of land on behalf of the king or a chief; later it came to refer directly to the chief. "Konohiki lands" were those lands held by the chiefs after the Great Mahele.
Hawaiian term which originally referred to a right of property or business interest pertaining to an individual. It later was applied to the landholding of a native tenant residing or working within a larger parcel of land (such as an ahupua'a). "Kuleana" now refers to a small tract of land located within a larger tract of land. The lawful occupant of a kuleana has a right-of-way of necessity through the adjoining lands of the ahupuaa to the nearest public road.
See GREAT MAHELE.
LAND COMMISSION AWARD
An award made by the Board of Commissioners to quiet land titles. The Board was established at the time of the Great Mahele to pass upon the claims of private individuals to "landed property." The Commission's awards gave complete title, subject only (in some cases) to the government's right of commutation. The awards alone did not confer a fee simple title; that title was derived from the patent issued by the minister of the interior upon payment of necessary charges. (See ROYAL PATENT.)
A special court established in Honolulu in 1903 to administer the Torrens System of land registration. The Land Court registers all documents affecting title to registered land in Hawaii, including easements or other rights in the land. Every decree of registration of absolute title insures the land . owner a quiet title to the registered land. Title to land once registered cannot be subsequently acquired through adverse possession or through prescription since the possession of a Land Court certificate of title is deemed to be a continuing possession of the land itself. The judge of the Land Court is designated by the Chief Justice of the Hawaii Supreme Court from among the judges of the first Circuit Court. The judge appoints a Registrar for the Land Court. In addition, the Registrar of Conveyances in the Bureau of Conveyances and his or her deputy act as Assistant Registrars of the Land Court to carry out the recording and registration of documents 'affecting title to registered property.
Under the registration procedure: (1) the applicant files an application and a survey of the property with the Land Court, and records a memorandum to that effect in the Bureau of Conveyances; (2) the Land Court orders an examiner of title. to report on the condition of title; (3) the Registrar publishes a notice of the application in the newspaper and sends notices to all affected parties. If the examiner's report is favorable to the applicant and no parties dispute the applicant's claim of title, the Court then enters its decree registering title in the applicant's name. In the event that there is a dispute of the title, a hearing will be held to determine whether title should be decreed in favor of the applicant, thus insuring the land owner a quiet title to the real property covered by the application. The Registrar then enters the original certificate of title in the indexed registration book located in the Bureau of Conveyances. The registration runs with the land and is binding on successors in title. Once registered, the land may not be withdrawn from the Land Court jurisdiction except by order of the Land Court. HRS § 501-86.
The distinctive feature of Land Court registered property is that title does not pass, and encumbrances are not effective against the property, until such encumbrances or conveyances are noted on the original certificate of title. Thus the certificate of title reflects the current status of the title to the property. There are a few exceptions to this rule, such as financing statements affecting fixtures on Land Court property, federal tax liens and bankruptcies, which need only be recorded in the Bureau of Conveyances. Unlike the Regular System of recording, delivery of a deed covering property registered in Land Court does not pass title until the transfer is noted on the certificate of title. The act of registration, rather than delivery, is the operative act to effect the transfer of title to Land Court property. HRS § 501-101.
The proper procedure upon transfer of the fee simple is for the grantor or grantee to present the deed of conveyance to the Assistant Registrar, who notes the transfer on the original certificate of title and then cancels it. A new certificate of title, called a "Transfer Certificate of Title" (TCT), is then issued. The deed must contain the full names of all parties; that is, all names must be completely spelled out and initials may not be used unless the initial itself constitutes a complete part of the person's true name. A TCT is not issued for any transfer of less than a fee simple; only a memorandum is noted on the certificate of title in the case of a lease, an assignment of lease, mortgage, or other encumbrance.
The Assistant Registrar previously issued duplicate certificates of title and TCTs to owners. However, no owners' duplicate certificates of title have been issued since June 14, 1988 (HRS § 501-83.5), and all outstanding owners' duplicate certificates of title have been deemed surrendered.
Although the State of Hawaii guarantees title to registered land, the process of recovering on that guarantee is neither simple nor expeditious. There is no recorded instance of any person recovering on the guarantee. As a result, lenders routinely require title insurance for mortgages of Land Court property. Additionally, the title insurance company would defend any lawsuit challenging title, while the State would not. (HRS §§ 501-211 to 501-217, inclusive, set forth the procedures for claiming against the State of Hawaii based on a loss of title due to an error in the certificate of title made by the Registrar's office.)
Land Court property is never described by metes and bounds. A typical description of property registered in Land Court would read as follows:
All of that certain parcel of land situated at Moana, District of Ewa, County of Maui, State of Hawaii described as follows:
Lot 1632, area 15,932.2 square feet, as shown on Map 211, filed in the Office of the Assistant Registrar of the Land Court of the State of Hawaii with Land Court Application No. 410 of Development Corporation; being a portion of the land described in Transfer Certificate of Title No. 156452 issued to Charles Primo.
SUBJECT, HOWEVER, to any and all encumbrances noted in said Transfer Certificate of Title No. 156452.
NOTE: It is not uncommon for a title report to include with a description of Land Court property an easement across Regular System (non-Land Court) property that is described by metes and bounds.
With respect to condominiums located on Land Court registered property, upon the conveyance of a fee simple unit, a Land Court 'certificate of title is issued to the owner of the fee simple unit, covering the unit owner's undivided common interest in the land, with a notation of the unit number.
LAND COURT ORDER
A notice of change in title or description of Land Court property issued by the Land Court. Any change in land description, i.e., subdivision, accretion, consolidation, restriction of access, designation of easement or setback lines, must be accompanied by a map showing the change.
LAND COURT PETITION
A document by which a change in the facts which appear in the records of the Land Court is presented to the Court for notation on the Transfer Certificate of Title. The petition must be accompanied by evidence competent to prove the change in facts. For example, if title is vested in the Transfer Certificate of Title in "John Smith and Mary Smith, husband and wife, as tenants by the entirety," and Mary Smith dies, the only way to remove her name from the Transfer Certificate of Title is to present the Land Court with a petition reciting the fact of her death, accompanied by an officially certified copy of her death certificate. A petition would also be required for any change in title that does not involve a deed, assignment of lease, or other transfer instrument such as (a) a change in name of a person or entity holding title (fee simple owner, lessee, mortgagee, etc.), (b) merger of entities holding title, such as corporations, that results in a surviving entity, and (c) conversion of a corporation to a limited liability company.
In Hawaii, a government (State of Hawaii) grant of real estate in fee simple. HRS § 171-1. (See ROYAL PATENT.)
A trust established pursuant to HRS ch. 558, in which title to real estate is conveyed to a trustee under an arrangement reserving to the beneficiaries of the trust full management and control of the property, including the power to direct the actions of the trustee involving the sale, mortgaging or other dealings with respect to the property. Generally, two instruments are required to create the arrangement. One is a deed (or other conveyance) of the real estate in trust to the trustee, and the other is the trust agreement. If the recorded conveyance declares the interests of the beneficiaries to be personal property, such declaration is controlling. Lenders may impose special requirements for loans secured by property in a land trust.
A written instrument by which a property owner ("lessor" or "landlord") grants to another ("lessee" or "tenant") the right to exclusive use of specified property for a specified term or at will. The terms, covenants and conditions of leases vary substantially and must be reviewed individually to determine the rights, duties and obligations of the parties to the lease in question.
A description that is sufficiently complete so as to enable an independent surveyor to locate and identify a specific piece of real property. Oral testimony is not admissible to describe the property, except in certain cases involving fraud or mistake. Methods of description include Lot, Block and Subdivision; File Plan Number; Government Survey; Land Court Map number, Lot number and Certificate of Title number; and metes and bounds.
A legal description is required in all recorded documents affecting title to real property including deeds, assignments of lease, mortgages and agreements of sale. Tax map key numbers will be accepted as the legal description of property for documents to be recorded in the Regular System, but a copy of the tax map should be attached since the numbers are subject to change.
See LAND COURT regarding the legal description for Land Court property.) Under Hawaii's condominium law (HRS § 514B-44), a unit number is sufficient in a deed or lease of the unit if there is an appropriate reference to the recorded declaration of condominium property regime, since the legal description has been included in the recorded declaration. Street addresses are generally inadequate and unacceptable as legal descriptions. (See Chapter 5 for detailed discussion.)
Latin for ‘book’. Usually refers to the record books at the Bureau of Conveyances which contain copies of all recorded documents relating to real estate in Hawaii (except property registered with the Land Court). Prior to January 1, 1990, when a document was recorded, it was given a Tiber and page number. Documents recorded in the Bureau of Conveyances are now assigned a document number beginning with "1" each year and preceded by a number indicating the year of recordation; e.g., 91-000456 was the document number assigned to the 456th document recorded in 1991. (See RECORDING.)
A charge or claim which one person (lienor) has upon the property of another (Renee) as- security for a debt or obligation. Liens can be created by agreement of the parties (mortgage) or by operation of law (tax liens). They may be general (thus affecting all the debtor's property, as in a judgment lien) or specific (thus affecting only a particular property, as in a mortgage given on a parcel of real property). Liens can be statutory or equitable, voluntary or involuntary. For example, a mechanic's lien is an involuntary, statutory, specific lien, whereas a mortgage is a voluntary, equitable, specific lien. However, if the mortgage lien were foreclosed upon and there was a deficiency, the resulting deficiency judgment, when recorded, would be a general lien upon all of the debtor's property. Certain statutory liens become unenforceable after a lapse of time, e.g., judgment liens after 10 years, mechanics' lien after three months from date the court orders the lien to attach unless suit is filed (HRS §507-43(e)). Liens do not transfer title to the property; until foreclosure, title remains in the debtor.
The priority of a lien is often determined by the date of recordation, thus it is important to record the appropriate document as soon as the lien has been created, Real property tax liens and assessments, however, take priority over all other liens, even those previously recorded. Since the lien is an encumbrance on the title, the lienor should (at the lienee's expense) execute and record a satisfaction of the lien as soon as the lien has been paid, in order to remove this cloud on the title.
Generally, a title search issued to cover Land Court property. Since the Land Court certificate of title does not directly reflect certain encumbrances such as real property taxes, county assessments, and federal tax liens or bankruptcies, the lien letter is used to provide this information as a limited- supplement to the matters covered in the Land Court certificate of title. The liability of the issuer of the lien letter is limited to those matters shown on the public records only. Lien letters are now mostly obsolete and have been replaced by certificates of title or status title reports.
The lien letter does not cover matters which would be revealed by an inspection of the premises nor does it cover questions of zoning. Title is certified solely on the basis of an examination of the public records available in the following offices:
Assistant Registrar of the Land Court;
Bureau of Conveyances;
Clerk of the U.S. District Court;
Tax Office; and
Treasurer of the county where the property is located.
The records of the Hawaii Supreme Court and Circuit Courts are not examined because, until they are recorded at the Bureau of Conveyances, those judgments are not encumbrances on the record title and are only effective as between the immediate parties to the action.
An estate in real property which is a freehold and gives the life tenant the right to possession of the estate and to its income for the duration of the life tenant's life or the duration of the life or lives of another person or persons. Upon the death of the life tenant (or the other person or persons whose life or lives provide the measure of the duration of the estate), the property and income pass in the manner determined by the original grant of the estate: either reverting to the grantor or the grantor's estate or passing to the holder of the remainder interest. A life estate, like any other estate in real property, can be conveyed or mortgaged. However, the grantee or mortgagee can receive no more than the life tenant can give, i.e., an interest which terminates upon the death of the person whose life measures the duration of the estate.
LIMITED COMMON ELEMENTS
A special class of common elements in a condominium reserved for the Use of certain unit(s) to the exclusion of other units, such as assigned parking stalls or storage units.
A legal document recorded in the Bureau of Conveyances, which gives notice that an action has been filed in either a state or federal court affecting a particular piece of property. "Lis Pendens" is a latin term which means "action pending" and is in the nature of a quasi-lien. A person subsequently acquiring an interest in that property takes it subject to any judgment that may be entered; that is, a purchaser pendente lite is bound by the result of the lawsuit.
A notice of lis pendens does not have the same effect as placing a lien on or attaching real property. It is only notice of a pending action involving title to or possession of real property. A lien, however, is a charge against or security interest in the property, and an attachment is a procedure to preserve the property for collection purposes. The end result of filing a Hs pendens, however, is the same; that is, the property may not be freely sold or encumbered and the title is thereby effectively rendered unmarketable during the litigation.
If the property is registered in the Land Court system, the lis pendens must be filed with the Assistant Registrar of the Land Court. Thereafter, it is sufficient to register the judgment or decree within sixty days after its rendition.
Authority for filing a lis pendens is contained in HRS § 634-51.
Good or clear title reasonably free from risk of litigation over
possible defects; also referred to as merchantable title. Marketable title need not, however, be perfect title. Rather, it is a title not subject to such reasonable doubt as would create a just apprehension of invalidity in the mind of a person of reasonable prudence and intelligence.
A statutory lien created in favor of any person or association of persons who furnish labor or materials in the improvement, repair or maintenance of real property to secure payment for the materials supplied or labor and services rendered. (See HRS § 507-42.) This right did not exist in common law.
An intermediate or middle conveyance; any conveyance between the first or initial conveyance and the most recent conveyance in the chain of title.
METES AND BOUNDS
A common method of land description that identifies a property by specifying the shape and boundary dimensions of the parcel, using terminal points and angles. A metes and bounds description starts at a well-marked point of beginning and follows the boundaries of the land by courses and metes (measures, distances and compass direction) and bounds (landmarks, monuments) and returns to the true point of beginning. A description which fails to enclose an area by returning to the point of beginning is defective. The general rule is that in case of variations between courses and distances and monuments, the monuments prevail. This is because errors are more likely to be made with respect to measurements than visible objects. However, the rule is not absolute and is less likely to be applied where the monument is an artificial one, such as a pin placed by, a surveyor, than where the monument is a natural or permanent one.
NOTE: In Hawaii, attorneys do not ordinarily check a metes and bounds description to see if the lot "closes," but if an attorney notices that a description does not close, e.g., only three sides of a square are described, steps should be taken to correct the problem.
A written instrument under the terms of which a property owner ("mortgagor") pledges real property to secure payment of a debt owed to another ("mortgagee"). Hawaii is a "lien theory" state, viewing the mortgage as merely granting a lien on the property to the mortgagee, whereas "title theory" states view the mortgage as an actual conveyance of the property to the mortgagee, subject to defeasance. HRS ch. 506 concerns mortgages of real property. Particular attention should be devoted to HRS § 506-1(b) concerning the priority of advances secured by a mortgage.
A public officer whose function is to administer oaths, to attest and certify documents by the officer's signature and official seal, giving them credit and authenticity, to take acknowledgments of deeds and other conveyances, and to perform certain official acts, such as protesting rates and bills. In the absence of a seal, the notarization is void. One who has a beneficial interest (e.g., a grantee or mortgagee) in the subject matter of the instrument being notarized cannot act as a notary public to the document.
NOTICE OF PENDENCY OF ACTION
See LIS PENDENS
The Hawaii Supreme Court decision in Public Access Shoreline Hawaii v. Hawaii County Planning Commission, 79 Hawaii 425, 903 P.2d 1246 (1995). In the case, the Court concluded that "the issuance of the Hawaiian land patent confirmed a limited property interest as compared with typical land patents governed by western concepts of property" since "Native Hawaiians retain rights with regard to undeveloped land to pursue traditional activities" (emphasis added). The decision has raised many unanswered questions relating to how traditional western private property rights, including the right to exclude others from one's property, can co-exist with the exercise of traditional and customary rights of Native Hawaiians. Such rights include practices related to subsistence, cultural and religious purposes, access, water and gathering rights.
The Court has provided some clarification of the PASH decision in a subsequent case, State of Hawaii v. Hanapi, 89 Hawaii 177, 970 P.2d 485 (1998), by holding that "if property is deemed 'fully developed,' i.e., lands zoned and used for residential purposes with existing dwellings, improvements and infrastructure, it is always 'inconsistent' to permit the practice of traditional and customary native Hawaiian rights on such property."
POINT OF BEGINNING
The starting point in a metes and bounds description of property, which is usually a street intersection or a specific monument. To effectively complete a legal description of a property, the description must always return to the point of beginning, in order to enclose the described area.
POWER OF ATTORNEY
A written instrument which authorizes the person named therein (the attorney-in-fact) to act in the place of the person executing the instrument. A power of attorney may be general or special. A special power of attorney limits the authority of the attorney-in-fact to performing only the acts listed in the power. If a special power of attorney is to authorize the attorney-in-fact to conduct transactions with respect to real property, a full legal description of the property must be attached to the power. A general power of attorney authorizes the attorney-in-fact to perform any and all acts that the principal might perform, including conducting real property transactions. If the attorney-in-fact is to conduct real property transactions, the power of attorney must be recorded as appropriate. HRS §§ 501-174 and 502-84. Death, disability or incompetence of the principal executing a power of attorney revokes or terminates the power whether or not the attorney-in-fact has actual knowledge of the death, disability or incompetence. A so-called "durable" power of attorney can be prepared to avoid revocation or termination of the power by disability or incompetence by inserting in the power words such as, "This power of attorney shall not be affected by disability of the principal." HRS ch. 551p. (See Chapter 4J for forms and comments.)
A report issued by a title insurance company that reflects the state of title to a particular piece of real property at a particular moment in time. The report reflects (a) date of the title search, (b) estate or interest covered, (c) vesting of the estate or interest, (d) description of the property reported upon, and (e) exceptions affecting the title as determined by an examination of public records. A preliminary report is commonly furnished to the escrow in a sale or loan transaction for use by the parties as a prelude to consummating the escrow and "preliminarily" to the issuance of a title insurance policy. (See Chapter 5 for forms and comments.)
A written lease of an apartment in a cooperative apartment building between the owner-corporation and the tenant-stockholder, in which the tenant is given the right to occupy a particular apartment unit. (See COOPERATIVE OWNERSHIP.)
PURCHASE MONEY MORTGAGE
Technically, any mortgage executed by a purchaser of specific real property, contemporaneously with the acquisition of such property, which secures the repayment of money used to purchase the property. However, the term is more usually applied to a mortgage taken by a seller from a purchaser in lieu of purchase money. It may or may not be a first mortgage, but it will have priority over all liens with which the purchaser may have attempted to encumber the property prior to taking title (such as an "after acquired property" clause in an existing mortgage which extends the lien of that mortgage to future property acquired by the borrower), or general liens (such as judgments) which would attach to the property upon delivery of the conveyance to the purchaser. Some states (e.g., California) prohibit deficiency judgments upon foreclosure of purchase money mortgages, but Hawaii does not. (See Chapter 7 for detailed discussion.)
A deed that operates, in effect, as a release of whatever interest the grantor has in the property; sometimes called a release deed. The grantee takes title to the property "as is." The quitclaim deed contains language similar to that found in a "normal" deed, with the important exception that rather than using words of "grant and convey," it contains language such as "remise, release, and quitclaim." Also, a quitclaim deed does not contain any warranties. The grantor therefore does not warrant title or possession and only passes whatever interest the grantor may have, "if any." In effect, the grantor forever quits whatever claim the grantor has in the property and the deed effectively forecloses the claim, if in fact any existed.
The quitclaim deed transfers only whatever right, title and interest the grantor had in the land at the time of the execution of the deed and does not pass to the grantee any title or interest subsequently acquired by the grantor. Thus, the grantee cannot claim a right to any after-acquired title.
The act of entering into the public records the written instruments affecting the title to real property, such as deeds, mortgages, contracts of sale, options, assignments, and the like.
Under Hawaii's recording statute (HRS § 502-83), all deeds, leases for a term of more than one year, mortgages of any interest in real estate, or other conveyances of real estate within the state "shall be" recorded in the Bureau of Conveyances. This statute was designed to encourage all persons having an interest in real property to disclose that interest in the public records, thereby protecting others dealing with the property from secret, unrecorded deeds and mortgages. (Prior to the enactment of Recording Acts, the common law rule gave priority to the transferee prior in time.)
Proper recordation imparts constructive notice to all the world of the existence of the recorded document and its contents, and it protects the grantee in the event that the deed is altered or lost. Further, the act of recordation raises a presumption (rebuttable) that the instrument has been validly delivered, and that it is authentic.
Any conveyance not properly recorded is void as against any subsequent purchaser, lessee, or mortgagee who, in good faith and for a valuable consideration, without having actual notice of the unrecorded conveyance, records a subsequent interest in the property first. HRS § 502-83. Hawaii's recording statute is, thus, a so-called "race-notice" statute. By way of contrast, the Land Court System is "pure race," where even actual notice of a prior conveyance will not defeat the grantee who records first. HRS § 501-101. The act of recordation only protects subsequent purchasers for value and not donees or beneficiaries under a will, nor does recording protect against interests which arise by operation of law rather than by recordable document, such as dower rights, prescriptive and implied easements and title by adverse possession. (In the case of adverse possession, however, the adverse possessor's physical possession of the property would have provided constructive notice to the subsequent purchaser of the possessor's interest in the property and thus the subsequent purchaser would not be in "good faith.") Failure to record a document, however, does not impair its validity as between the parties thereto and all other parties having notice of its existence.
Real property tax liens and special assessment liens need not be recorded, since they are considered to be matters of public record. Other tax liens, such as for income tax and payroll tax, must be recorded in the Bureau of Conveyances in order to take priority over subsequently recorded interests. (See HRS § 231-33(c)(1).) Thus, the system of recording creates a hierarchy of claims against a property with priority to be determined by the order in which the claims are recorded. Except for certain governmental liens which automatically take first priority, the order of recorded priority will not be disturbed absent a subordination or recordation of a release.
When the document affects registered property, it must be registered in the Land Court System; all other documents should be recorded in the "Regular System" at the Bureau of Conveyances. There is no county recording system and therefore documents affecting property on any of the islands must be recorded in the Bureau of Conveyances located in Honolulu. The requirements for recording documents in the Regular System are generally less stringent than under the Land Court System (e.g., parties usually must use their full first and middle names and cannot use their initials on Land Court documents).
Under both systems, the documents must be signed and properly acknowledged before being recorded. Strict rules apply to the form of the documents; e.g., all changes must be initialed by the notary (or if the document is not executed in Hawaii, initialed by the notary public or the parties to the document) and all insertions and signatures must be in ink that will reproduce legibly under photographic or electrostatic methods. (The requirement that the ink reproduce led to the local practice that documents be signed in black ink.) The grantee's marital status and address must appear on all deeds (HRS § 502-34). The top left-hand portion of the first page of the document must contain the name and address of the person to whom the document should be sent after recording. Only documents in English or Hawaiian are acceptable for recordation; i.e., a deed in Japanese would have to be translated before it would be acceptable for recording. Documents such as assignments or satisfactions of mortgage must contain the book and page number or document number of the mortgage (HRS § 502-33).
A conveyance document will not be accepted for recordation unless it is accompanied by a conveyance tax certificate and the tax, if any, has been paid. After the document has been recorded, it is copied and the original is then returned to the person indicated on the document.
The reproduced document formerly was placed in the appropriate record book that corresponds to the liber number. The Bureau now maintains microfiche and, more recently, digitally scanned copies of documents. Anyone can examine any recorded document; all he or she needs to know is the book and page number or document number, which can be easily ascertained by use of the grantor-grantee indexes available at the Bureau of Conveyances.
In 2009, Hawaii enacted the-Uniform Real Property Electronic Recording Act (HRS §§ 502-121 to 502-125), which allows the Bureau. to accept electronic documents with electronic signatures for recordation. Procedures are currently being developed to determine the requirements for the delivery of electronic documents for recording.
A system for recording documents affecting land not registered in the Land Court System; also known as the "unregistered system" or the "grantor-grantee system". Regular System documents are recorded at the Bureau of Conveyances. Requirements for recordation in the Regular System are less stringent than in the Land Court System.
Used with respect to a conveyance of an interest in real property, a reservation is a provision in the conveyance by which the grantor creates, for the benefit of the grantor, an interest or right in the property conveyed which did not previously exist. Examples would be the reservation by the grantor of an easement over the property conveyed or the reservation of a life estate in the property. (See EXCEPTION.)
A private agreement, usually contained in a deed or declaration of restrictive covenants, which restricts the use and occupancy of real property, often relating to lot size, building lines, type of architecture and view planes. The covenant binds subsequent owners of the property.
RIGHT OF SURVIVORSHIP
The distinctive characteristic of a joint tenancy (also tenancy by entirety) by which the surviving joint tenant(s) succeeds to all right, title and interest of the deceased joint tenant by operation of law without the need for probate proceedings or another conveyance document.
The right or privilege, acquired through accepted usage or by contract, to pass over a designated portion of the property of another. A right-of-way may be either private, as in an access easement given a neighbor, or public, as in the right of the public to use the highways or streets, or to have safe access to public beaches.
The instrument issued by the Minister of the Interior of the Kingdom of Hawaii which evidenced the payment of the government commutation due upon lands awarded by the Board of Commissioners to quiet land titles at the time of the Great Mahele and gave fee simple title to such lands to the awardee. (See GREAT MAHELE, LAND PATENT.)
A term used in real estate practice to generally describe specific conditions inserted into a contract of sale which must be satisfied before the contract is binding upon the party for whose benefit they were inserted. (See CONTINGENCY.)
SPECIAL MORTGAGE RECORDING FEE (SMRF)
A fee imposed by the State of Hawaii on each mortgage and each amendment to a mortgage that increased the principal amount of the secured debt, which fee was suspended as of July I, 2001. SMRF, which was collected when the mortgage or amendment was recorded, amounted to $.10 per $100 of the principal amount of the debt secured by the mortgage or, in the case of an amendment of the mortgage, $.10 per $100 of the increase in the principal amount of the debt, if any. SMRF funded the hurricane reserve trust fund established by HRS ch. 431P.
SUB-AGREEMENT OF SALE
An agreement of sale between the original vendee of an agreement of sale and a new purchaser. There is thus no contractual relationship between the new buyer (subvendee) and the owner of the property (original vendor).
An assignment of agreement of sale is a transfer to the new buyer of the original vendee's right, title and interest in the agreement of sale. A sub-agreement of sale, however, is an entirely new contract, strictly between the original vendee and the new buyer. Since the original vendor usually reserves the right to consent to all transfers by the vendee, the sub-agreement of sale should not contain any provisions prejudicial to the original vendor, otherwise, the vendor can withhold consent and delay the closing of the transaction.
Generally, a subdivision is the division of a parcel of land into two or more smaller parcels. Subdivision of land in Hawaii is regulated at both the county and state levels. For example, on Oahu a subdivision is "[d]ivision of land into two or more lots, parcels, sites or other divisions of land, including designation of easements, for the purpose, whether immediate or future, of sale, lease, rental, transfer of title to or interest in, any or all of such lots, parcels, sites, easements or other divisions." Section 22-3.2, Revised Ordinances of the City and County of Honolulu 1990. It is a violation of law to sell land without complying with applicable subdivision laws, ordinances and regulations. The penalties for such violations can be quite severe; e.g., violation of the Uniform Land Sales Practices Act, HRS ch. 484, is a felony.
SUBDIVISION FILE PLAN
See FILE PLAN.
A map that shows the division of a parcel of land into two or more smaller parcels. Upon compliance with the requirements of the governmental authorities having jurisdiction, and being appropriately filed or recorded, the map becomes a Land Court Map (HRS § 501-85) or a File Plan, if the property is in the Regular System (HRS §§ 502-17 to 502- 22).
SUBJECT TO MORTGAGE
A grantee taking title to real property "subject to mortgage," but without assuming the mortgage obligation, is not personally liable to the mortgagee for payment of the mortgage note. In the event the grantor-mortgagor defaults in paying the note, the grantee could, however, lose the property, and thus the grantee's equity, in a foreclosure sale. The purchaser should request an estoppel certificate from the lender so that the purchaser is aware that no defaults have occurred, all installments of the loan and interest have been paid, and that the interest rates, terms and unpaid balance of the loan are as represented by the seller. Of course, the certificate affords no protection against future defaults by the seller.
TENANCY BY THE ENTIRETY
A joint tenancy only permitted between a lawfully married husband and wife or reciprocal beneficiaries, under which both tenants having an equal, undivided interest in the whole property. Upon the death of one tenant, the survivor succeeds to the entire property to the exclusion of heirs and creditors of the deceased tenant and without the need for probate. A tenancy by the entirety differs from a joint tenancy in that neither tenant can convey his or her interest or force a partition during the lifetime of the other, without the consent of the other tenant. It can only be severed by mutual agreement, divorce, severing the reciprocal beneficiary relationship or joint conveyance.
TENANCY IN COMMON
A form of concurrent ownership of property between two or more persons, in which each has an undivided interest in the whole property. Each co-tenant is entitled to the undivided possession of the property, according to the tenant's proportionate share and subject to the rights of possession of the other tenants. The interests of the co-tenants may be equal or unequal. Where the conveyance document does not specify the extent of interest of each co-tenant, there is a presumption that the shares are equal. There is no right of survivorship. Any tenant in common can sell the tenant's interest in the property without the consent of the co-tenants.
A comprehensive contract of indemnity under which the title company agrees to reimburse the insured for any loss the insured sustains, up to the face amount of the policy, if title is not as represented in the policy. The title insurance policy generally consists of three parts: (1) the agreement to insure the title and indemnity against loss, (2) description of the estate and property being insured, and (3) the exceptions to and conditions of the insurance.
Title indemnity is provided as of a specified date. The premium is paid only once and the policy continues in effect until the property is conveyed to a new owner. The title policy is generally nontransferable, and each subsequent owner normally obtains its own title insurance. In addition to insuring the title, the title company also agrees to defend the title against any lawsuits. This protection against unwarranted litigation is one of the main benefits of title insurance.
A standard title policy insures against defects in the title, including hidden or off-record risks, such as forgery in the chain of title, unless excepted in the policy. Some typical exclusions are:
Rights of parties in possession not shown by public records, including unrecorded easements;
Any state of facts which an accurate survey would reveal; Creditor's rights including fraudulent or preferential transfers; Taxes and assessments not yet due or payable; and
Zoning and governmental regulations.
The title company may agree to insure against some of the excluded risks (e,g„ survey or zoning) under the standard title policy by issuing endorsements, at an additional premium.
Even the largest title companies in Hawaii are only agents and thus are not licensed title insurance companies. All policies of title insurance originating in Hawaii are issued by local companies that countersign the policies as agents of mainland title insurance companies.
There are basically two types of title insurance policies: the owner's policy and the lender's or loan policy. The owner's policy normally insures title for the full sales price, not the loan value. It is issued for the benefit of the owner, the owner's heirs or devisees, or in the case of a corporation or other entity, to its successors by dissolution, merger or consolidation. The protection afforded to the insured in an owner's policy continues even after the interest of the insured is transferred or conveyed, so the insured is covered if a claim is made against the insured's grantee, who, in turn, claims against the insured. It does not run with the land, however, thus the new buyer should obtain its own title insurance coverage. The lender's policy is for the benefit of the insured lender (not the owner) and for any subsequent assignee of the lender. It is usual practice to obtain an owner's policy in those cases where the mortgagee is requiring a lender's policy since there is usually a relatively small additional charge for the title company to issue both policies.
The forms of title policies used in Hawaii are the Hawaii Standard Coverage policy and the ALTA Extended Coverage policy. The standard coverage policy excludes claims arising out of the interests of possessors and other claimants that would be ascertainable by an inspection of the property even though these interests are not recorded. An ALTA extended owner's policy for an owner or lessee (there are also leasehold policies) generally does not exclude such matters from coverage, and the premium cost is about one and one-half times the cost of the standard policy. In most instances, especially for transactions involving commercial property, a current ALTA/ACSM survey of the property must be provided to the title company.
An examination of the public records to determine what, if any, defects there are in the chain of title. In Hawaii, the title search is usually performed by a licensed title company. Escrow does not normally order a title search until major contingencies in the sales contract have been cleared, such as financing (i.e., securing a loan commitment) and the like.
The title searcher checks back to the original source of title, which often dates from a land patent or award of title at the time of the Great Mahele. These original documents are located either in the State Archives under the Department of Accounting and General Services or at the Bureau of Conveyances.
After conducting this exhaustive search, the title company will issue, as requested, either a preliminary report, a certificate of title, a continuation certificate of title, a lien letter or a title insurance policy.
TRANSFER CERTIFICATE OF TITLE (TCT)
Under the Land Court System of registration of title to property, the court issues an original certificate of title to the owner once the owner has established rightful title to the property. The certificate shows the owner's name, date of registration, the Land Court documentation number, and all encumbrances on the title. The original certificate is then recorded. When the original owner sells the property, the original certificate is canceled upon the recordation of the deed, and the registrar issues a new certificate, called a Transfer Certificate of Title ("TCT"), to the grantee. All subsequent conveyances result in the issuance of a TCT.
Prior to June 14, 1988, certificates of title and TCTs were issued in duplicate with the duplicates being given to the owners. As of August 17, 1992, all outstanding owners' duplicate certificates of title and TCTs have been deemed surrendered. HRS § 501-83.5.
The charging of interest or consideration in excess of that permitted by applicable law for the use or detention of money. HRS ch. 478 is Hawaii's usury law. Federal law does not preempt Hawaii's usury law.
The purchaser of realty, the buyer, or the buyer under an agreement of sale.
The seller of realty, or the seller under an agreement of sale.
The party or parties shown by a preliminary title report, title insurance policy, etc. to be the holder of the interest in real property with which the report or insurance policy is concerned.
T/E & T/C
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