Expanding on the Kauai Land ADU Sunset Law

In my recent blog post “Buying Farm Land on Kauai” I mentioned the upcoming “ADU Sunset“, and that it was offering the potential for some excellent land deals in the coming months. In my blog post, I wrote:

“Agriculturally-zoned parcels on Kauai… come with the right to build a guest house. The County has allowed owners to “convert” that right into the right to build another home, or additional dwelling unit—ADU. But a couple of years ago, the County decreed that anyone on Ag-zoned land who received permission to build an ADU would lose that right if they did not have a building permit in place by the end of 2009. So what we have are a number of Ag-zoned CPR lots (a type of land subdivision based on Hawaii’s condominium laws) on the market right now that will lose the ability to have a home built on them, unless: a) they sell fairly quickly and the new owner starts the permitting process; or b) the current owner goes ahead and pulls a permit for a house they would rather not have to build.”

To expand on that…

So we’d expect to see some drastic price reductions on Kauai Ag land right about now, right? Interestingly though, that hasn’t been the case; so far, it’s been more like a game of high-stakes poker – who’s going to be the first to blink? However, with very few sales on Kauai of vacant land over half an acre in the past 60 days, there had better be some blinking soon!

For Buyers, searching specifically for land listings that will be affected by the ADU Sunset is a bit of a puzzle. Since the ‘ADU Sunset’ applies to Agriculturally-zoned land where the master lot (prior to a subdivision or ‘CPR’) is less than 4 acres and/or Open-zoned land, as Buyers’ agents we have to a bit of research to make sure this ‘Sunset’ applies. Unfortunately, there are often no comments to that effect in listing remarks, so we’re left to our researh, often prompted by clues such as (the heretofore scarce) enthusiastic price reductions.

Here are a few land listings that will be affected by the ADU Sunset:

• Two pieces, of 1 acre and 1.36 acres, off Waipouli Rd. on the East side. These were originally listed for $395K & $435K, respectively, and after several price reductions have arrived at $250K & $260K.
• 3/4 of an acre off Puuopae Rd, also on the East side, listed for $269K.
• 1.43 acres, also off Waipouli Rd, listed at $389K.
• Four pieces of 1.5 acres, on upper Olohena Rd. on the East side, each listed at $300K (after several price reductions following initial listing prices of 399K.)
• Half an acre of big ocean view land above Kalaheo, currently listed at $495K.

Many of the sellers of affected listings have already initiated the permitting process with the County—it’s definitely something for a Buyer to consider, as it is not a quick process, and needs to be started several months prior in order to beat the deadline.

And as always, but especially right now (due to the difficulty of getting a land loan), cash is king—cash buyers should expect significantly better deals. There are still some lenders out there doing land & construction loans, but the lending climate in general has gotten VERY conservative recently, and land loans are considered risky.

In fact, if I could give one other bit of advice to an interested Buyer, especially a non-cash buyer, it would be to consider putting in offers sooner rather than later, and allow extra time for procuring the loan (not to mention dealing with the building permit if that process is still un-finished.) Most sellers, I think, are aware enough of their situation to consider that it’s already the 11th hour, and to concede to Buyers the bargaining power they seek.

If you’ve ever considered buying and building on Kauai…this ‘ADU Sunset’ has created an unprecedented opportunity. Not to mention, you’d probably have your pick of Kauai’s best building contractors (since most of them aren’t particularly busy!).