Have you ever found a great Honolulu condo only to see the words “leasehold” and wonder what that really means for you? You are not alone. On Oahu, both fee simple and leasehold properties are common, and understanding the difference is key to making a confident offer. In this guide, you will learn what you actually own, how lease terms drive value and financing, and the due diligence that protects you. Let’s dive in.
Ownership types on Oahu
Fee simple in plain English
Fee simple means you own the land and the home or condo unit. Your ownership is not tied to a lease term and can continue indefinitely, subject to zoning and association rules. Most single-family homes across suburban Oahu and many newer condos are fee simple.
Leasehold in plain English
Leasehold means you buy the right to use the property for a set number of years under a ground lease. A separate landowner holds title to the land. When the lease ends, your rights can end unless the lease is renewed or extended under its terms.
Key takeaway: Leasehold value depends on the remaining lease term, renewal rights, and ground rent. These items also affect financing and resale.
Where you will see each in Honolulu County
Fee simple is typical in many suburban neighborhoods across Windward, Central, and other parts of Oahu. Leaseholds are more common in older urban Honolulu corridors and resort-adjacent areas, including parts of Waikiki and some buildings in Kakaako. Luxury properties are often fee simple, but you will find select luxury leasehold condos in prime locations. Always verify the title type for each property.
How leaseholds work in practice
A ground lease sets the rules. You will see long original terms, often 55 to 99 years, but what matters to you is the time left today. Some leases include tenant options to extend. Others do not and require a new negotiation at expiration.
Ground rent may be a fixed number or tied to a formula, such as consumer price changes or periodic step-ups. In condo projects, the association may pay the ground rent for the parcel and collect it as part of your dues. Leases can also limit transfers, require lessor approval, and set out clear remedies if an owner defaults.
Why this matters: Remaining term, rent escalations, and renewal language drive your carrying costs, your ability to finance, and your resale market.
Value and resale marketability
Leasehold properties usually sell at a discount to fee simple because of the lease risk and financing limits. That discount can be attractive, especially in areas where fee simple prices are high. But shorter remaining terms tend to reduce value and narrow your buyer pool when it is time to sell.
Predictable renewal or extension rights help maintain value. If a lease offers long, clearly priced extensions, many buyers and lenders view it more favorably. If renewal is uncertain or costly, expect more caution from the market.
Financing realities on Oahu
Lenders treat leaseholds differently from fee simple. Many want the lease to extend well beyond the loan term. Short remaining terms can mean stricter underwriting, lower loan-to-value ratios, higher rates, or no loan at all. Government-backed programs have specific leasehold requirements, and banks vary in how they apply them.
Your best move is to bring the full ground lease to your lender early, even before you write an offer. Ask for written confirmation that your lender can finance this specific leasehold. If the lease lacks strong lender protections, such as subordination and non-disturbance language, expect extra scrutiny.
Taxes, insurance, and HOA dues
Property taxes will reflect market value, but appraisals treat leasehold differently than fee simple. Insurance should align with any lease requirements and coordinate with condo master policies. In many leasehold condos, the HOA includes ground rent in your dues. If the lease has escalations, dues can increase over time.
Pro tip: Review the HOA budget and reserve study to see how ground rent is handled. Look for past or planned assessments linked to lease costs.
Who should consider leasehold
- Buyers seeking a prime location at a lower entry price compared with fee simple.
- Investors who understand lease terms, financing options, and exit timing.
- Luxury buyers who value a flagship location and are comfortable paying cash or planning for financing hurdles.
Leasehold is not inherently better or worse than fee simple. It is a different tool with its own tradeoffs. If the numbers and terms align with your goals, it can be a smart choice.
Due diligence checklist
Request these items as early as possible, ideally before your offer is accepted.
- Complete ground lease with all amendments and exhibits.
- Estoppel certificates from the lessor and condo association confirming key terms and payment status.
- Condo documents, including CC&Rs, bylaws, budgets, reserve studies, and recent meeting minutes.
- HOA budgets showing how ground rent is allocated, plus recent invoices and any tax bills.
- Title report and commitment showing how the lease is recorded and any subordination or other encumbrances.
- Recent appraisal or relevant comparable sales supporting value.
- Lender pre-approval that references this specific leasehold property.
- Legal opinion from a Hawaii real estate attorney covering renewal and extension rights, rent escalation formulas, default remedies, and lender protections.
- Any correspondence or history of fee purchases, buyouts, or renegotiations with the landowner.
What to verify in the lease document
- Remaining term and exact expiration date.
- Renewal or extension options, including how pricing is set.
- Ground rent formula, frequency of increases, and any caps.
- Who pays property taxes, assessments, and land maintenance.
- Sale and assignment restrictions, approvals, or rights of first refusal.
- Lender protections such as subordination and non-disturbance.
- Default provisions, cure periods, and remedies.
- What happens to improvements at termination and whether a purchase formula applies.
Questions to ask the seller or HOA
- Who pays ground rent and how is it collected?
- Have ground rent or assessments increased recently, and are increases expected?
- Have recent buyers obtained financing, and with which lenders?
- Who is the landowner, and is there any history of renegotiation or fee purchase efforts?
- Has the HOA explored buying the fee interest, and what would that process entail if it becomes available?
Guidance for investors
Model three scenarios before you buy. First, assume the lease extends on reasonable terms. Second, assume it renews but at a higher cost. Third, assume it does not renew and the property reverts or requires a buyout. Compare your net yield in each case and stress test for higher dues when ground rent escalates. Build a conservative exit plan that aligns with the remaining term.
Guidance for luxury and second-home buyers
If you prefer permanence and easy resale, fee simple aligns with those goals. That said, a long-term leasehold in a prime Honolulu location can deliver lifestyle and views at a lower upfront price. If you plan to pay cash, financing friction is less of a concern, but you still need clarity on renewal rights and what happens at expiration. For legacy planning, verify whether extensions are available and on what terms.
Your advisor team
- Hawaii real estate attorney with leasehold expertise.
- Local lender or mortgage broker experienced with Oahu leaseholds.
- Title company familiar with ground lease recording practices.
- Appraiser with leasehold valuation experience.
- CPA or tax advisor for complex income or non-resident considerations.
Make a confident move
Choosing between leasehold and fee simple comes down to clarity on what you own, how long you control it, and what it costs over time. With the right documents in hand and the right team by your side, you can buy with confidence in Honolulu’s most desirable neighborhoods. For discreet guidance and senior-level representation across Oahu, connect with Steve Cohen to review your goals and structure a clear plan.
FAQs
What is the difference between fee simple and leasehold on Oahu?
- Fee simple gives you ownership of the land and improvements indefinitely, while leasehold gives you a right to occupy for a set term under a ground lease.
How does the remaining lease term affect value and financing?
- Shorter terms usually reduce market value and can limit loan options, while longer, renewable terms with clear pricing are viewed more favorably by buyers and lenders.
Can a Honolulu condo association buy the underlying fee interest?
- It can happen through coordinated negotiations, but it is complex and not guaranteed; any potential deal depends on the specific property and landowner.
Are leasehold condos always cheaper than fee simple?
- They typically sell at a discount because of lease risk and financing limits, but pricing varies by building, location, and the lease’s remaining term.
What happens when a ground lease expires in Hawaii?
- Your rights can end unless the lease provides for renewal or extension, and some leases specify what happens to improvements at termination.
Do HOA dues in leasehold buildings include ground rent?
- Many leasehold condo HOAs collect ground rent as part of dues, and increases may occur based on the lease escalation terms.
Is leasehold a good option for luxury second-home buyers?
- It can be if the lease has a long remaining term, predictable costs, and you are comfortable with financing or cash; fee simple may suit buyers seeking permanence.
What documents should I review before making an offer on a leasehold?
- Obtain the full ground lease and amendments, HOA documents and budgets, title report, lender pre-approval, and a legal opinion from a Hawaii real estate attorney.
