§206-10 Restrictions on sale and use of residential lots by purchaser. (a) For a period of five years after the date of purchase of any lot under this chapter (which date shall be deemed to be the date of the agreement of sale or deed under which the lot was originally purchased or agreed to be purchased) the lot shall not be sold by the original purchaser thereof unless the same, together with the improvements thereon has first been offered in writing to the board of land and natural resources under the option reserved by this chapter and the board has either refused or failed within the time required by this section to exercise the option.

(b) Any original purchaser intending to sell any lot and improvements within the five-year period shall first notify the board in writing of the original purchaser's intention. The notice shall specify the original purchaser's address and shall expressly offer to sell the property to the board at a price that shall not exceed the sum of the:

(1) Original cost of the land; and

(2) Replacement value, less depreciation at the rates used for real property tax purposes, of all buildings and improvements thereon, to be determined by three appraisers; one appointed by the board, one appointed by the owner, and the third by the two appraisers so appointed, the cost to be borne equally by the parties.

Within thirty days after the receipt of the notice, the board in writing shall notify the original purchaser at the specified address whether it elects to exercise the option. If the board refuses, or fails within the thirty-day period, to reply to the offer, the original purchaser may sell the property to any other person free from any price restrictions; provided that if the board elects to purchase, the board shall use its best efforts to redispose of the property as soon as practicable subject to the lien of any mortgage, to a qualified and responsible person who will assume the obligation of mortgage and debt secured thereby.

(c) The board may resell any lot and improvements so purchased at a price not to exceed the actual cost thereof to the board, with the addition of a reasonable amount to cover overhead and estimated and actual expenses.

(d) Any original deed or original agreement of sale from the board to any original purchaser of a residence lot shall contain a covenant running with the land (and shall, whether or not the condition is contained in the instrument, be subject to the requirement) that the original purchaser shall erect on the lot, within two years following the date of purchase, a suitable residence building to conform to the terms set forth in the instrument, with a proviso that the board may, on application of the original purchaser, extend the period from time to time for good cause shown. Other reasonable restrictions designed to prevent the lots from becoming slum areas may be established by the board for any development project and included in the agreement of sale or deeds as covenants running with the land for a term of twenty-one years.

(e) No residence lot shall be used for any purpose other than residence purposes for a period of twenty-one years following the date of the first sale of such lot by the board; provided that in the event the lot is zoned or rezoned by governmental authority for nonresidence purposes, the restriction shall be relaxed to the extent permitted by the zoning laws or regulations.

(f) Subsections (a) and (b) of this section shall not be applicable to a sale under foreclosure by a mortgagee of any lot, or to the transfer of title by a mortgagee after foreclosure or otherwise to any agency of the United States government pursuant to the terms of any insurance or guarantee of mortgage loan by such agency, or to any subsequent purchaser. [L 1961, c 6, pt of §10; am L 1965, c 157, pt of §4; Supp, pt of §98J-10; HRS §206-10; gen ch 1985; am L 2017, c 12, §20]