Have you spotted a Waikīkī condo priced far below its neighbors and wondered why? On Oahu, that price gap often comes down to ownership type. You want a place that fits your life and your budget, without surprises later. In this guide, you will learn the difference between leasehold and fee simple, how each affects financing and resale, and the key documents to review before you write an offer. Let’s dive in.
Leasehold vs. fee simple basics
Fee simple means you own the land and the improvements. It is the most complete form of private ownership and is common for single-family homes and many condos in Honolulu.
Leasehold means you buy the right to use the property for the remaining term of a ground lease. A separate landowner keeps title to the land. Lease terms can last decades, sometimes up to 99 years, and the lease document controls what happens next.
How ownership affects your plans
With fee simple, you can plan long term within zoning and any community rules. Remodeling, refinancing, or selling is usually more straightforward.
With leasehold, your rights are limited to the lease term and conditions. You may need landowner consent to sell, refinance, or alter the property. Your long-term plans should match the years left on the lease.
What happens when a lease ends
At lease expiration, the landowner’s rights typically control the future of the land and improvements. Some leases offer renewal or a chance to buy the fee; others do not. Terms vary by document.
The closer a lease gets to expiration, the more it can affect value, marketability, and financing options. Always confirm the years remaining at closing and any written renewal or purchase options.
Financing and monthly costs in Honolulu
Lenders treat leaseholds differently from fee simple. Many loan programs require a minimum number of years remaining on the lease, and underwriters review renewal, subordination, and consent provisions. Shorter or more restrictive leases can mean higher rates, larger down payments, or limited loan choices.
Carrying costs can include property taxes, HOA dues, and ground rent paid to the landowner. Ground rent may be fixed, tied to an index, or reset at intervals. Rising ground rent can change your monthly budget over time, so review the escalation schedule carefully.
Where leaseholds appear on Oahu
Leasehold properties are more visible here than in many mainland markets. You will see them in parts of Waikīkī, in some older condo projects, and on parcels held by large private or charitable landowners. Major landowners, including educational trusts such as Kamehameha Schools, have historically leased urban land for development. Each landowner uses different standard lease forms and policies.
Typical Oahu lease terms to watch
Remaining years matter most
The number of years left on the lease at closing affects eligibility for financing, insurability, rental plans, and resale value. This is the first number to verify.
Renewal and purchase options
Some leases include renewal or extension language with a formula for price and term. Others are silent, which means any renewal is by fresh negotiation. A few leases include a right of first refusal or an option to purchase the fee. Understand how rent escalates over time and whether resets are fixed, index-based, or at market.
Transfers, mortgages, and approvals
Many leases require landowner approval before you sell, assign, or refinance. There can be approval fees and timelines. Subordination clauses explain how the lease interacts with mortgages, which matters to your lender.
End-of-lease obligations
Some leases require demolition or restoration. Others state that improvements revert to the landowner with little or no compensation. Know who pays what at the end of the term.
Who leasehold may suit
- Buyers planning short-to-medium occupancy who want access to areas that fee simple prices put out of reach.
- Investors who can achieve a solid yield after accounting for ground rent, HOA dues, and tax and insurance costs.
- Buyers comfortable with the lease “as is,” with favorable remaining years and clear renewal economics.
Who should be cautious
- Buyers seeking decades of control, predictable value, and easier refinancing over time.
- Buyers who cannot secure acceptable loan terms because of lease restrictions or a short remaining term.
- Buyers uneasy with possible end-of-lease costs or major rent escalations.
Due diligence before you write an offer
Key questions to ask
- How many years will remain on the lease at closing?
- Who owns the fee simple land, and what are their approval policies?
- Is there a written renewal or extension option? How is the price set?
- What is the ground rent schedule, and when do increases occur?
- Is landowner approval required for sale, refinance, or alterations? What is the process, cost, and timeline?
- Is the lease subordinated to mortgages, and will the landowner consent to a new loan?
- Are there HOA dues, special assessments, or pass-through charges tied to the lease?
- Has the leasehold interest faced litigation or title issues recently?
Documents to request immediately
- Full executed ground lease with all amendments and riders
- Estoppel certificate or landowner confirmation of lease status
- Any recorded lease assignments or subordination agreements
- Condo declaration, bylaws, budgets, and recent HOA minutes (if a condo)
- Preliminary title report and recorded encumbrances
- Ground rent notices and payment history
- Any correspondence about renewal or redevelopment plans
Smart contingencies to include
- Financing contingency tied to lender approval of the specific lease terms
- Lease-document review by a Hawaii attorney experienced in ground leases
- Clear assignment or landowner-consent contingency if required by the lease
- Inspection and HOA document review to catch pass-throughs and assessments
Who to involve on your team
- A local lender experienced with Hawaiian leaseholds
- A Hawaii real estate attorney who handles ground leases and condominiums
- A title company familiar with insuring leasehold interests
- A qualified home inspector and, where needed, a building systems specialist
Fee simple or leasehold: choosing your path
If you want long-term control, simpler financing, and more predictable resale, fee simple often fits best. If you plan to live on Oahu for a defined period and want a lower purchase price in a desirable area, leasehold can be a smart, time-bound solution when the numbers and lease terms line up. Your comfort with ground rent escalations, approvals, and end-of-lease outcomes should guide the decision.
Next steps
- Ask for the full lease and amendments before you offer.
- Talk with your lender about minimum lease-term requirements and rate impacts.
- Have a Hawaii attorney review renewal language and end-of-lease obligations.
- Compare recent leasehold and fee simple sales to understand pricing and exit options.
If you want a clear read on a specific property’s lease terms and financing path, schedule a quick consult. You will get practical guidance, local context, and a plan tailored to your goals. Connect with Don Dietz to get started.
FAQs
What is the difference between leasehold and fee simple in Honolulu?
- Fee simple gives you ownership of the land and improvements, while leasehold gives you the right to use the property for the remaining lease term under rules set by the ground lease.
How do lenders view leasehold condos on Oahu?
- Many loan programs require a minimum remaining lease term and review renewal and subordination clauses, so terms and eligibility can differ from fee simple loans.
Why are some Waikīkī condos priced lower?
- Many Waikīkī buildings include leasehold units, and the limited lease term plus ground rent and approvals often lead to lower purchase prices than similar fee simple units.
What should I check first on a leasehold listing?
- Confirm the years remaining on the lease at closing, the ground rent schedule and escalations, any renewal or purchase options, and whether landowner consent is required for the sale.
Can a leasehold be renewed or converted to fee simple?
- Some leases have renewal or purchase options in writing, while others rely on negotiation; outcomes vary by the lease document and landowner policies.
Do leasehold owners pay property taxes in Honolulu?
- Yes, county property taxes apply, and the lease usually outlines who pays taxes on the leasehold interest and improvements, along with any HOA and ground rent obligations.
