Photo by Spenser Sembrat on Unsplash
By Shannon Smith, REALTOR® CRS | Team Hawaii Real Estate | teamhawaii.realestate
If you've been browsing Oahu condos and noticed two seemingly identical units in the same building — one priced at $600,000 and another at $380,000 — you've just stumbled into one of Hawaii's most unique real estate concepts: leasehold versus fee simple ownership. That price gap isn't a mistake, and understanding why it exists could save you from a very expensive surprise.
Fee Simple: What Most People Mean When They Say 'Own'
Fee simple is the standard form of ownership most buyers are familiar with. You own the unit and the land beneath it — outright, permanently, with no expiration date. In Hawaii, fee simple properties are the most common and are what most lenders — including VA and FHA — require.
Leasehold: You Own the Unit, Not the Land
With leasehold ownership, you own the physical structure — the condo, the townhome — but you're leasing the land underneath it from a separate landowner. That landowner is often a large estate or trust that has held land in Hawaii for generations. The lease has a fixed term. When it ends, ownership reverts to the landowner unless the lease is extended or the underlying land (the "fee") is purchased.
That lower price tag on a leasehold unit isn't a deal — it's a reflection of the time limit on your ownership. The fewer years left on the lease, the lower the value.
What Makes Hawaii Different
Hawaii has more leasehold properties than almost any other state in the country — a direct result of the islands' unique land ownership history. Large estates and trusts have historically preferred to lease rather than sell. As a result, leasehold condos are especially common in Waikiki, Hawaii Kai, and parts of Kaneohe. It's not unusual to find a building where some units are fee simple and others are leasehold, side by side.
Four Things to Know Before You Even Look at a Listing
• How many years are left on the lease? Under 30 years and most banks won't finance it.
• What is the monthly ground rent — and when does it reset?
• Does the listing say 'Fee Available'? That may mean you can purchase the land and convert to fee simple.
• Are you using a VA or FHA loan? Neither works on most leasehold properties.
Next week: we go deeper into the specific risks of leasehold — including what happens when the ground rent resets and why resale is more complicated than most buyers realize.
Questions about a specific listing? Contact Team Hawaii Real Estate — we'll decode the details before you fall in love with a property that doesn't work for your goals. teamhawaii.realestate
