Hawaii has unique real estate rules and regulations that surprise most mainland buyers and sellers. These plain-language guides explain the concepts — always consult licensed professionals for advice specific to your situation.
Leasehold vs. Fee Simple
Hawaii has more leasehold properties than any other U.S. state — a legacy of the Great Mahele of 1848, which concentrated land ownership in large trusts like Bishop Estate, Queen Emma Foundation, and others.
Fee Simple — You own the land and everything on it outright, in perpetuity. This is the most common and most desirable form of ownership. Financing is straightforward, value builds over time, and you can pass it to heirs.
Leasehold — You own the structure (or condo unit) but lease the land beneath it for a fixed term — typically 30–65 years. Monthly lease rent is paid to the landowner and renegotiated periodically.
About 7.8% of Maui condos are leasehold — concentrated in Ka'anapali, Lahaina, Napili, Kahana, and Ma'alaea.
HARPTA & FIRPTA
These are not taxes themselves — they are withholding mechanisms to ensure the state and federal government collect applicable capital gains taxes from non-resident sellers before they leave Hawaii.
HARPTA (Hawaii Real Property Tax Act) — Requires the buyer to withhold 7.25% of the sales price at closing when the seller is NOT a Hawaii resident. Applies to all U.S. citizens living outside Hawaii.
FIRPTA (Foreign Investment in Real Property Tax Act) — Federal law requiring 15% withholding when the seller is a foreign national (non-U.S. citizen). Applied on top of HARPTA for foreign sellers.
Land Court vs. Regular Title
Hawaii is one of the only U.S. states with two parallel systems for recording property title — a legal quirk that dates to the 1800s and matters more than most buyers realize.
Land Court System (Torrens System) — State-guaranteed title. Ownership is registered with and guaranteed by the State of Hawaii. Title is definitive and government-backed. Generally the stronger form of title.
Regular System (Bureau of Conveyances) — Title is recorded but not guaranteed by the state. More common and more flexible. Title insurance plays a larger role in protecting owners.
1031 Exchange in Hawaii
Section 1031 of the Internal Revenue Code allows real estate investors to defer federal capital gains taxes when they sell an investment property and reinvest the proceeds into another "like-kind" investment property.
Hawaii honors 1031 exchanges for both HARPTA and federal tax purposes — making this one of the most powerful tools available to Maui property investors.
The NAR Settlement & Buyer Representation Agreement
On March 15, 2024, the National Association of Realtors® (NAR) reached a landmark $418 million settlement ending class-action lawsuits over buyer's agent compensation. New rules took effect August 17, 2024 — permanently changing how buyers work with agents across America, including here in Maui.
What Changed
Our approach: Transparency first, always. Before viewing a single property, compensation is discussed clearly and every term of the agreement is reviewed together — so you know exactly who is working for you and how.
Hawaii Property Insurance: What Every Buyer Must Verify Before Closing
The August 2023 Lahaina wildfires — with over $7 billion in estimated losses — fundamentally changed Hawaii's property insurance landscape. This is now one of the most critical due diligence items in any Maui real estate transaction.
What Happened to Insurance in Hawaii
What Buyers Must Do: Before making an offer on any condo, request the HOA financials, current insurance certificates, reserve fund status, and any pending special assessments. Always request HOA financials and insurance certificates as part of standard due diligence. Coverage should reflect at least $500/sqft rebuild cost.
Types of coverage to understand: Master policy (building exterior/common areas — carried by HOA) · HO-6 unit owner policy (interior, personal property, liability) · Hurricane insurance · Flood insurance if in flood zone.
Why You Must Use a Hawaii-Licensed Lender — The Condotel & Non-Warrantable Condo Problem
This is one of the most common — and most expensive — mistakes mainland buyers make on Maui. Getting pre-approved by your bank back home feels safe and familiar. But Hawaii properties are unlike anything most mainland lenders have ever financed.
The Three Condo Classifications in Hawaii
The Real Risk: Buyers have been formally pre-approved by mainland banks, gone under contract, spent money on inspections and attorneys — then discovered days before closing that their lender cannot close the loan. This destroys deals, costs money, and causes enormous stress. It is entirely preventable.
How Real Property Taxes Work in Maui
Maui County assesses and taxes real property annually. The tax year runs July 1 through June 30. Your bill arrives in two installments — first half due August 20, second half due February 20. The amount you pay depends on two things: your property's assessed value and its tax classification.
How the Rate System Works
All rates are per $1,000 of net taxable assessed value. Most classifications use a tiered system — meaning different portions of your property's value are taxed at different rates. A $200,000 homeowner exemption reduces taxable value for qualifying primary residences.
2025/2026 Rates by Classification
A Real-World Example
A Wailea condo assessed at $1,500,000 used as a non-owner-occupied second home pays: $1,000,000 × $5.87 + $500,000 × $8.60 = $5,870 + $4,300 = $10,170 per year. The same condo as a primary residence with homeowner exemption: taxable value $1,300,000 ($1,500,000 − $200,000 exemption), taxed at $1.80 = $2,340 per year. Classification matters enormously.
Key Deadlines
July 1 — New tax year begins · July 20 — First half bills mailed · August 20 — First half payment due · December 31 — Deadline to file exemption claims for following year · February 20 — Second half payment due · March 15 — Assessment notices mailed · April 9 — Deadline to file assessment appeals
Important Note for 2025/2026
Many Maui property owners saw assessed values increase significantly in 2025 — in some cases 40–50%. Even with rate reductions for owner-occupants, higher assessments can mean a higher bill. Always verify your assessment notice and consult a professional if the increase appears unreasonable. You have until April 9 to file an appeal.
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