Aloha! Today we’re going to talk about the difference between fee simple and leasehold ownership in Hawaii.
Fee Simple Ownership
Fee simple ownership is the most traditional kind of ownership that people are used to. Otherwise known as “freehold” in that you own the land beneath the property. For instance, with a single family home, you own the improvements and the land thereon. Likewise, with a condo, you’re going to own the improvements and the collective home owners are gong to own the land beneath the building.
Leasehold Ownership
Now, leasehold on the other hand is where someone owns the land interest or a fee owner that owns the land interest underneath the improved property. An example would be a condominium or a single family home or even a commercial property.
Kahala Examples
Here we are in Kahala and a lot of the land here is leasehold owned by Kamehameha Schools. We’ve got the Kahala Hotel as well as The Kahala Beach Apartments, then Waialae Country Club, all of which are leasehold. Those are several examples. In general, what we come across most often in residential real estate are leasehold condos. Here we are at the Kahala Beach Apartments, where the land lease is actually going to expire in the year 2027.
Waikiki Examples
Currently, today we are in the year 2024 and in Waikiki alone there are 14 buildings with the land lease expiring this year in 2024 and the year 2054. The majority of these are going to be expiring in the 2030’s to 2040’s. Even in the year 2054, which is 30 years out. Even on those, you can’t get a 30 year loan. Whenever you see leasehold property online, be conscious that if there’s less than 35 years remaining, you can’t get a 30 year mortgage.
Sans Souci in Diamond Head
With that said, there was a property where the land lease expired this year. I did a blog about it earlier this year. That was Sans Souci at Diamond Head. There, the land lease expired this year in 2024 and it was extended for another 65 years. That’s the good news. You can also finance it with that much time remaining. However, the monthly lease rent has gone up significantly. Currently, for the 2 bedroom units there, the lease rent to the land owner (lessor) is about $5,000/month and it’s about $3,000/month for the 1 bedrooms. Those are all costs/factors to keep in mind when you’re purchasing leasehold property in Hawaii.
Leasehold Not Your Cup of Tea?
If leasehold isn’t your cup of tea, what’s cool about our website is you can filter out the leasehold stuff and search specifically for fee simple (under "Land Tenure"). If you need help with your property search here in Hawaii, I can be reached at 808-371-3509. Mahalo!