The Fundamentals of Land Court, Hawai‘i’s Legal “Enigma”
Here, a longtime real estate attorney explains the advantages – protecting against squatters rights is one – and challenges of Land Court.
Many people in Hawai‘i have heard of land court, but only a few truly understand it.
Even experienced attorneys can struggle to comprehend its intricacies. Gary W. B. Chang, current judge of the Hawai‘i Land Court, included a warning in his article about it in the September 2017 issue of the Hawaii Bar Journal.
“The greatest challenge for professionals who dabble in the area of Land Court, is that such dabblers are typically not inclined to invest the time to acquire expertise in land court matters. As a consequence, they struggle to navigate their way through what they view as a morass of confusion and frustration,” Chang wrote.
The Hawai‘i Land Court was established by the territorial Legislature in 1903, and is mainly a recordation system based on the Australian Torrens title system, according to a 1983 Hawai‘i Supreme Court ruling involving the estate of James Campbell. (tinyurl.com/HILandCourt)
In the same case, the Supreme Court said Land Court remains a “system for registration of land under which, upon the landowner’s application, the court may, after appropriate proceedings, direct the issuance of a certificate of title.”
Only a few American states have tailored their recordation systems to the Torrens structure, but all or parts of more than a dozen countries including Canada, Ireland and New Zealand have adopted similar systems.To this day, any document or conveyance instrument that relates to Hawai‘i Land Court real estate says “Torrens” on the fees receipt paid at the Bureau of Conveyances.
Two Types of Property
In Hawai‘i, there are two types of real property for recordation purposes: One is designated Land Court property, and the second is designated Regular System property.
The fair market value of the property is not dependent on the category, although there are substantial benefits to being designated as Land Court property.
In a 1997 Hawai‘i Supreme Court decision concerning two properties on Ala Wai Boulevard, the court stated: “The fundamental difference between certificate of title issued by the land court for registered property and recordation of title at bureau of conveyances is that Land Court certificate of title is conclusive and unimpeachable with regard to all matters contained therein.” (tinyurl.com/AlaWaiCase)
The Supreme Court said the Land Court was expressly established to have “exclusive original jurisdiction of all applications for the registration of title to land and easements or rights in land and possessed in fee simple within the State, and power to hear and determine all questions arising upon such applications.”
Judge Chang’s informative and comprehensive article in the September 2017 issue of the Hawaii Bar Journal is titled: “Land Court: Demystifying An Enigma.”
In it, he explained, “The Hawai‘i land court system consists of two components: (1) an adjudicatory arm (that decides all contested and uncontested issues pertaining to Land Court title) and (2) a recording arm (that records Land Court title documents and registers title). The adjudicatory arm is headed by the land court judge (adjudication) and the registrar of the Land Court (administration), while the recording arm is headed by the assistant registrar.”
In the Hawai‘i judicial system, there is a judicial circuit for each of the major islands, but not for Land Court. “There is only one registrar and one Land Court judge for the entire state and they are both located in Honolulu,” Chang wrote.
Another interesting twist is who appoints these people. “Organizationally, the registrar and the assistant registrar of the Land Court are created under two separate branches of government. The assistant registrar, where land court title documents are recorded, is under the executive branch (governor) and the registrar of the Land Court and the Land Court judge are under the judicial branch (chief justice).
Protects Against Trespassers
Another legal benefit of land court property is that it cannot be claimed by adverse possession or prescription. But under Hawai‘i law, trespassers are statutorily allowed to gain legal title to non-Land Court property if:
1. There is actual possession, that is, the trespasser is physically present on the land, treating it as his or her own.
2. The possession is exclusive and continuous for 20 uninterrupted years.
3. The claim must be “hostile,” (that is, the trespasser must either make an honest mistake, occupy the land with or without knowledge that it is private property) or be aware of his or her trespassing.
4. The possession of property is open (it cannot be secret).
Another fascinating twist: The trespasser is not required to pay real property tax on the property.
Complex, Expensive and Rare
In essence, Land Court property is registered real estate, and to register real estate is complex and expensive. In modern times, it is rare for a property to be registered.
Here are the 11 statutory requirements to register real property, based on Hawai‘i Revised Statutes, Section 501-23:
1. The application to register the land in Land Court must be in writing, signed, and sworn to by the applicant or a person duly authorized to act on the applicant’s behalf.
2. The application must contain a legal description of the land, which is a metes and bounds legal description certified by a licensed surveyor.
3. The application shall contain a statement of the estate or explain the interest of the applicant in the land.
4. It is further required that the application indicates whether the applicant is married, and if married, the full name of the spouse, the time and place of the, and the name of the official performing the marriage.
5. If unmarried, whether the applicant was married, and when, where, and by what court the divorce was granted.
6. The application is required to indicate the names and addresses of the adjoining owners and occupants, if known.
7. If unknown, the application must indicate the search that was made to find the adjoining owners and occupants.
8. Together with the application, the applicant is required to file a plan of the land, and all original muniments of title within the applicant’s control.
9. The applicant must also file with the application a complete abstract of title of the land on forms furnished by the Land Court and in accordance with Land Court rules.
10. Immediately after the filing of the application, the Land Court will enter an order referring it to one of the examiners of title, who will search the records and investigate all facts mentioned in the application, or brought to the examiner’s notice and file a report on the result of the search and investigation, and the examiner’s opinion on the title.
11. Before granting a final decree of registration, the judge of the Land Court will require a map of the land to be registered to be filed. The map may be required to show all data necessary to enable the survey lines to be reproduced on the ground. The map must contain such data (as survey lines or field notes) from enduring monuments, and that the destruction of temporary monuments will not be impracticable to enforce a Land Court decree on the map. The names, as far as known, of the owners and occupants of the adjoining lands shall be indicated on the map, and all parcels of land owned by the adjoining properties’ owners shall be marked on the ground and their boundaries defined by metes and bounds with such easements or rights of way existing on the ground. The distances and functions of necessary angles must be shown definitely, not approximately.
You may wonder: If real property is registered as Land Court property in Hawai‘i under strict and comprehensive statutory requirements, do you still need title insurance for such property? Yes, and here’s why.
A reliable local company, which is part of a national title insurance company (it provides this information on condition it not be named), explains that title insurance is protection that assures that the rights and interests to the property are as expected, that the transfer of ownership is smoothly completed and that the new owner receives protection from future claims against the property.
“It is the most effective, most accepted and least expensive way to protect property ownership. … The title to the property could be seriously threatened or lost completely by hazards which are considered hidden risks, which include omissions in public records, forgery, fraud and other errors.”
The local title company explains the necessity for a title search before a policy of title insurance is issued: “The title company must review the numerous public records concerning the property being sold or financed. … The search determines if there are rights or claims that may have an impact upon the title such as unpaid taxes, unsatisfied mortgages, judgments, tax liens against the current or past owners, easements, restrictions and court actions. These recorded defects, liens, and encumbrances are included in a ‘preliminary report’ to applicable parties. Once reported, these matters can be accepted, resolved or extinguished prior to the closing of the transaction.”
There are two types of title insurance, as explained by the same local title company: an “owners policy,” which covers the homebuyer for the full amount paid for the property, and a “lenders policy,” which covers the lending institution over the life of the loan. When purchased at the same time, a substantial discount is given in the combined cost of the two policies. Unlike other forms of insurance, the title insurance policy requires only one moderate premium for a policy to protect you or your heirs for as long as you own the property. There are no renewal premiums and no expiration date. Title insurance is a unique form of insurance that provides coverage for future claims or losses due to title defects created by some past event (i.e., events prior to the acquisition of the property). Title insurance policies are issued by two mainland title companies. One is by the American Land Title Association, an ALTA policy, and the other is by the California Land Title Association, a CLTA policy. The fees for both insurance policies are the same.
Legal documents and instruments filed with the Land Court section of the Hawai‘i Bureau of Conveyances will be delayed for years before they are reviewed by the Land Court section of the Bureau of Conveyances.
After the legal document or instrument is filed, a “second look” of the filed legal document and instru-ment is conducted by the staff of the Land Court section of the Bureau of Conveyances to be sure that it is in accordance with Land Court records. Although Land Court records are now kept and maintained electronically, the work requires exact and stringent review. The backlog now for the “second look” is about six to seven years.
However, the title insurance for the Land Court property commences at the filing of the legal document or instrument. That’s why title insurance is essential.
A crucial document issued by the Land Court is the Transfer Certificate of Title, or TCT, which includes all prior information related to the property. The TCT is the heart and soul of the Land Court system and like an Asian family register, the TCT includes and covers all information, past and present.
Advice from an Expert
In an interview, Jeffrey S. Grad, one of Hawai‘i’s foremost real estate and conveyancing experts, was asked how to maneuver through the maze and complexity of the Land Court system. Grad says that as a guide to Land Court issues, he reviews and researches the Hawaii Conveyance Manual, which was written and compiled by several local real estate law experts. (Reference copies are available at the UH Mānoa law library, and at the main and Hilo branches of the State Library.) He also relies on the Hawaii Real Estate Manual, which consists of three volumes, also written and compiled by local real estate law experts. (Reference copies are available at several branches of the State Library.)
When faced with a Land Court issue, Grad says, “As a practical matter I rely on the opinion of Hawai‘i title companies, which in most instances are connected to or are subsidiaries of national title companies, which act as the insurer of real estate titles.
“Their opinions and recommendations are critical to obtain title insurance in Hawai‘i. The document or the court pleading must conform to and comply with the standard policies and practices required by the terms and conditions of a title insurance policy.”