Hawaii Real Estate Broker Exam — All Questions

A deed to a Hawaii parcel registered in the Land Court is signed, notarized and delivered to the buyer, but it is never filed with the assistant registrar. Under HRS section 501-101 that deed:

• a.conveys the land, because a signed deed was delivered
• b.operates only as a contract between the parties and conveys no land✓
• c.conveys the land as soon as the buyer goes into possession of the parcel
• d.conveys the land once a copy is recorded in the Regular System instead

Hawaii keeps two separate systems of land records, and they work differently. For Land Court property, HRS section 501-101 says that no deed, mortgage or other voluntary instrument "shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties, and as evidence of authority to the registrar or assistant registrar to make registration," and that "the act of registration shall be the operative act to convey or affect the land." Ownership is then evidenced by the transfer certificate of title, and HRS section 501-82 holds a purchaser for value in good faith free of everything except the encumbrances noted on that certificate. Delivery of a signed deed is what passes title in the Regular System, not in Land Court. Possession is not a conveyance in either system. And recording the instrument in the Regular System files it in the wrong register altogether, which leaves the certificate of title unchanged.

Hawaii's conveyance tax carries two rate schedules. Where the property is a condominium or a single-family residence and the purchaser is ineligible for a county homeowner's exemption, the tax on that conveyance is:

• a.waived, because that purchaser has no county exemption to protect
• b.doubled from the schedule that applies to every other buyer
• c.computed on the same schedule that applies to every other buyer
• d.computed on the higher of the two schedules in HRS section 247-2✓

HRS section 247-2 sets two ladders. The general one runs from ten cents per $100 for property worth less than $600,000 up to one dollar per $100 at $10,000,000 or more. The second, in section 247-2(2), applies "for the sale of a condominium or single family residence for which the purchaser is ineligible for a county homeowner's exemption on property tax" and runs from fifteen cents per $100 to one dollar and twenty-five cents per $100 across the same value bands. The higher schedule is therefore a genuinely different table, not the same table doubled, and the difference at the top is twenty-five per cent rather than one hundred. HRS section 247-3 lists the exemptions, and a purchaser's ineligibility for a homeowner exemption is not among them; it is the trigger for more tax, not for none. Note also who pays: HRS section 247-4 charges the tax to the seller or other conveyor, so the purchaser's exemption status sets the rate on a bill the seller settles.

A California resident sells a Kailua condominium to a Hawaii buyer. Under HRS section 235-68, the Hawaii withholding obligation falls on:

• a.the escrow depository, which must withhold 5 per cent of the sale price
• b.the seller, who must remit 7.25 per cent of the gain within twenty days
• c.the buyer, who must withhold 15 per cent of the amount realized
• d.the buyer, who must withhold 7.25 per cent of the amount realized✓

HARPTA puts the duty on the party who is paying, not the party who is leaving. HRS section 235-68(b) provides that "every transferee shall deduct and withhold a tax equal to 7.25 per cent of the amount realized on the disposition of Hawaii real property," and makes the withholder personally liable for the tax. Section 235-68(c) requires the transferee to file a return of the amount withheld with the Department of Taxation "not more than twenty days following the transfer date." Two features of the wording matter on the exam: the base is the amount realized, not the seller's gain, and the obligation runs to the transferee even though escrow usually performs the mechanics. Fifteen per cent is the federal FIRPTA rate, which can apply on top for a foreign seller; five per cent was Hawaii's rate before it rose. Section 235-68(d) excuses withholding if the transferor furnishes an affidavit of resident status, and section 235-68(e) allows the seller to apply for a withholding certificate reducing the amount.

A Hawaii seller must deliver the residential disclosure statement no later than ten calendar days from acceptance of the purchase contract. On receiving it, HRS section 508D-5 gives the buyer:

• a.three business days to rescind, after which the deposit is forfeited
• b.fifteen calendar days to examine it and decide whether to rescind✓
• c.thirty calendar days to examine it and decide whether to rescind
• d.no right to rescind, but a right to demand repairs from the seller

HRS section 508D-5(a) sets the delivery deadline and section 508D-5(b) sets the buyer's window: "Upon receipt of the disclosure statement, the buyer shall have fifteen calendar days to: (1) Examine the disclosure statement; and (2) Decide whether to rescind the real estate purchase contract." Written notification must reach the seller inside those fifteen days, and failing to deliver it "shall be deemed an acceptance of the disclosure statement." The statute also settles the money: "Any rescission made pursuant to this subsection shall be without loss of deposits to the buyer which deposits shall be immediately returned to the buyer," so a rule that forfeits the deposit gets Hawaii exactly backwards. Thirty days is the condominium developer cancellation period under HRS section 514B-86, not the disclosure period. And a right to rescind plainly exists, which is what makes timely delivery a transaction-critical duty. Section 508D-5(c) lets the parties agree in writing to shorten or extend either period.

HRS section 508D-15 makes a Hawaii seller put into the disclosure statement the fact that the property sits inside certain mapped areas. Along with flood, airport noise, military air installation and tsunami inundation areas, the list includes:

• a.the state land use conservation district as mapped by the Land Use Commission
• b.any parcel a newspaper has ever described as being at risk of erosion
• c.the sea level rise exposure area designated by the State's climate commission✓
• d.any area a county planning department has studied for future development

Section 508D-15(a) lists five mapped areas, and the fifth, added by Act 179 in 2021 and amended in 2023, is "the sea level rise exposure area as designated by the Hawaii climate change mitigation and adaptation commission or its successor." The duty is conditional on the maps existing: it applies "subject to the availability of maps that designate the five areas by tax map key (zone, section, parcel)," and each county must supply legible copies identifying properties by TMK number. Section 508D-15(b) adds a shoreline duty, requiring disclosure of permitted and unpermitted erosion control structures, permit expiration dates, notices of alleged violation and fines. Section 508D-15(c) construes genuine map ambiguity in the seller's favor where a good faith effort was made, and section 508D-15(d) confirms that outside these items the seller has no duty to examine any public record. The conservation district is a land use classification under HRS section 205-2, not one of the five; press coverage and county studies are not designations at all.

A Hawaii home for sale is subject to a recorded declaration enforced by a planned community association. HRS section 508D-3.5 requires the seller to provide the buyer with:

• a.an appraisal of the common areas prepared by a licensed appraiser
• b.a title report certified by the registrar of the Land Court
• c.the association's articles, bylaws, declaration and use rules✓
• d.a written waiver of the association's enforcement rights

Section 508D-3.5(a) lists the documents: the articles of incorporation or other document creating the corporation or association, the bylaws, the declaration or similar organizational documents with exhibits, and any rules on use of common areas, architectural control, maintenance of units, or assessments. Section 508D-3.5(b) extends the duty to restrictions imposed by deed covenants or another recorded document, including unrecorded rules or guidelines issued by whoever enforces them. Timing is generous but finite: under section 508D-3.5(c) the seller need not produce the documents until ten calendar days after both parties have received a current title report, and the buyer then has fifteen calendar days to examine them and rescind, a right that stacks on top of the rescission rights in sections 508D-5, 508D-6 and 508D-13. Section 508D-3.5(d) allows the seller, with the buyer's consent, to point the buyer to an internet address instead of printing copies, and section 508D-3.5(e) provides that complying "shall fulfill the seller's duty of disclosure of material facts relating to a recorded declaration." Nothing in the section calls for an appraisal, a certified title report, or a waiver the association would have no reason to give.

HRS section 7-1, a survivor of Hawaii's nineteenth-century land division, provides that on all lands granted in fee simple:

• a.the springs of water, running water and roads shall be free to all✓
• b.no structure may be built without the consent of adjoining owners
• c.the State keeps a one-half interest in all mineral and water rights
• d.title reverts to the State if the land is unimproved for ten years

This is the statute that keeps Hawaii land history on a licensing exam. Section 7-1 is titled "Building materials, water, etc.; landlords' titles subject to tenants' use," and it provides that where landlords obtained allodial titles, "the people on each of their lands shall not be deprived of the right to take firewood, house-timber, aho cord, thatch, or ki leaf, from the land on which they live, for their own private use, but they shall not have a right to take such articles to sell for profit." It continues: "The springs of water, running water, and roads shall be free to all, on all lands granted in fee simple; provided that this shall not be applicable to wells and watercourses, which individuals have made for their own use." Article XII section 7 of the state constitution protects traditional and customary rights on the same footing. A buyer can therefore acquire fee simple land that carries access and gathering rights no deed ever granted, which is a material fact a broker should raise rather than discover at closing. The State takes no automatic half interest, forfeits nothing for non-use, and the section says nothing about neighbors consenting to construction.