Capital Improvement Policy

Nā Hale O Maui Community Land Trust(CLT)

The Nā Hale O Maui (CLT) program was founded to develop and preserve long-term affordable home ownership for people of low and moderate income, and to serve the needs of current CLT Homeowners. These two concepts of preserving long-term affordability and serving current owners present a challenge of balancing return to current owners versus maintaining affordable price for future buyers.

In order to help maintain a fair and equitable CLT program, all applicants for an Eligible Capital Improvement (ECI) should have a primary goal to improve or expand livable space, rather than one solely to make an investment for monetary gain on their CLT property.

ECI's, as defined by the Nā Hale Ground Lease are as follows: the addition of bedrooms and/or bathrooms, improvement of accessibility or usability for handicapped persons, and improvement of home energy efficiency. Eligible improvements must have an appraised value greater than $2,500, with minimum expenditures of $2,500. All improvements must be approved prior to construction.

The policy for determining the value of Eligible Capital Improvements made, as outlined in the Ground Lease, has been divided into two procedures: the value of improvements that increase finished square footage that include a bedroom and/or a bathroom will be determined by an appraisal, and the value of improvements for accessibility and energy efficiency will be valued using a contractor method. The reason for this difference is that accessibility and energy efficiency improvements do not typically value in an appraisal.

  1. Increased Finished Square Footage: The CLT homeowner must complete ECI Application and approval process before work is started. This includes getting the homeowners association's approval prior to receiving full CLT approval. A pre-construction walk-through by a NHOM staff person is required prior to the start date of any construction. Any approved ECI that results in increasing finished square footage (adding a bedroom and/or adding a bathroom) requires a single post-construction fee simple appraisal (market-rate appraisal of home and land) after the work is complete. This appraisal is to be done by a mutually agreed upon appraiser is hired by the homeowner. In this appraisal, the ECI is called out as a separate line item to determine the value of the ECI. At the time of refinancing or resale, this approved improvement will become part of their financing or resale formula in the Ground lease. If the scope or timeline for the project changes. NHOM must be notified immediately, In such cases, re-processing of the ECI application maybe necessary.
    Improvements must be done in full compliance with all governmental requirements.

    Summary of Steps to receive the ECI Credit

    1. Contact NHOM CLT staff for the most up-to-date version of the NHOM ECI Application (homeowner's responsibility).
    2. Complete ECI Application (homeowner's responsibility).
    3. Turn ECI Application in to NHOM wit all supporting documentation, including a project schedule. (homeowner's responsibility).
    4. Once Application and ALL documents are turned in, NHOM reviews and determines eligibility within 10 days of submission to NHOM (NHOM responsibility).
    5. If eligible, NHOM issues start letter to owner confirming timing and valuation method (homeowner/NHOM responsibility).
    6. If eligible, NHOM issues start letter to owner confirming timing and valuation method (NHOM responsibility).
    7. Construction must be started and completed within 6 months. If the scope or timing of the work changes, the homeowner must contact NHOM immediately. Re-processing of the EC I application may be necessary (homeowner responsibility).
    8. Notify NHOM immediately when work is complete (homeowner responsibility).
    9. A mutually agreed upon appraiser may be selected during or immediately after construction. The homeowner pays for this appraisal. After the work is complete, this appraiser does a fee simple appraisal (market value of home and land), with the improvement as a separate line item (homeowner responsibility).
    10. obtain completed appraisal and deliver it to NHOM (homeowner's responsibility).
    11. Complete post construction walk-through (homeowner/NHOM responsibility).
    12. Review appraisal and write Final Valuation letter to homeowner (NHOM responsibility).
    13. Upon refinance or sale, add the improvement's appraised value to the homeowner's Limited Resale Formula (NHOM responsibility).
  2. Improved Energy Efficiency and/or Accessibility: The CLT homeowner must complete the ECI Application and approval process before work is started.  This includes getting the homeowners association’s approval prior to receiving full CLT approval.  A pre-construction walk-through by a NHOM staff person is required prior to the start date of any construction.  All other approved ECIs (per the definition in the Ground Lease, improved energy efficiency and/or accessibility) will require bids from two contractors to estimate the cost of the ECI.  The homeowner must select a contractor from those bids and submit this contract to NHOM.  In order to assure that a test of reasonableness is met, NHOM staff will review the project and projected cost, evaluating the reasonableness of cost given the scope of work.  The dollar amount used to calculate the value of the ECI will be the lesser of the chosen contractor’s estimate or actual costs, adjusted for reasonableness.  If the scope or timeline for the project changes, NHOM must be notified immediately.

    The homeowner will receive an initial credit of up to 50% of the selected contractor’s bid, subject to any reduction for reasonableness in year 1.  The credit will be reduced over a period of 15 years, in equal annual amounts, from a maximum of 50% in year 1 to 0% by the start of year 16.  The ECI credit will be added to the Limited Resale Price or Limited Refinancing Price calculation.

    Summary of Steps to receive the ECI Credit

    1. Contact NHOM CLT staff for the most up-to-date version of the NHOM ECI Application (homeowner's responsibility).
    2. Get bids from two contractors (homeowner's responsibility). to estimate the cost of the ECI. The homeowner must select a contractor from these bids and submit to NHOM a copy of the contract (homeowner's responsibility).
    3. Complete ECI Application (homeowner's responsibility).
    4. Turn the application in to NHOM with all supporting documentation, including the contract (homeowner's responsibility).
    5. Once Application and ALL documents are turned in, NHOM reviews and determines eligibility within 10 days of submission to NHOM (NHOM responsibility).
    6. If eligible for ECI credit, pre-construction walk-through is completed make final determination of eligibility (homeowner/NHOM responsibility).
    7. If eligible, NHOM issues start letter to owner confirming timing and valuation method (NHOM responsibility).
    8. Work must be started and completed within 6 months. If the scope or timing of the work changes, the homeowner must contact NHOM immediately. Re-processing of the ECI application may be necessary (homeowner's responsibility).
    9. Post-construction walk-through is completed (homeowner/NHOM responsibility).
    10. Turn in copies of all invoices to NHOM (homeowner/NHOM responsibility).
    11. NHOM reviews invoices and writes Final Valuation letter to homeowner. The dollar amount used to calculate the value of the ECI will be the lesser of the chosen contractor's estimate or actual costs (invoices) (NHOM responsibility).
    12. Upon refinance or sale, NHOM adds this value to the homeowner's Limited Resale Formula (NHOM responsibility).

    General Information:
    Improvements must be done in full compliance with all governmental requirements.

     Any ECI that involves work that includes a combination of both Sections A and B above, the default is to Section A process (e.g. adding insulation to a new bedroom, it will fall under increasing square footage, not increasing energy efficiency). 

    If a homeowner is not satisfied with the process or valuation of their improvement, they may petition staff to bring it forward to the NHOM Board of Directors to address their concern. This policy statement is intended to cover the majority of situations that would constitute an Eligible Capital Improvement (ECI); however it is not all inclusive and homeowners may request the Board of Directors review other proposed capital improvements for credit eligibility. However, repairs to the existing structure are not capital improvements and are the obligation of the homeowner.

ECI Application Form