Shopping for a condo or home in Honolulu and keep seeing “fee simple” and “leasehold” in the listing details? You are not alone. The difference affects how long you can own the property, how you finance it, and what it may be worth when you sell. In this guide, you will learn what each term means, how Honolulu’s history shapes today’s options, and the key steps to protect your interests before you buy or sell. Let’s dive in.
Fee simple vs leasehold basics
What fee simple means
With fee simple ownership, you own the land and any improvements indefinitely. You can sell, mortgage, or pass it on without needing permission from a landowner. You are still subject to property taxes, zoning, and any recorded covenants or easements.
What leasehold means
With a leasehold, you own a lease interest for a set period under a ground lease with a separate landowner. You usually pay ground rent. Many leases run for several decades and can include rent resets at set intervals. When the lease ends, rights typically revert to the landowner unless the lease is extended or renewed. Depending on the lease, improvements may also revert to the landowner.
Key differences at a glance
- Fee simple means land plus improvements, held indefinitely.
- Leasehold means a time-limited right to use the land, subject to the lease.
- Lease terms, rent resets, and remaining years directly affect value, financing, and resale.
Why Honolulu has many leaseholds
Honolulu has a unique land history. Large historic landowners and trusts retained extensive holdings across Oʻahu. To encourage development while keeping long-term control of the land, they often leased land for residential and commercial projects instead of selling it. As a result, you will still find leaseholds, especially in older Waikīkī buildings and in parts of the Ala Moana and Ward areas. Government and quasi-public entities have also used long-term leases for housing and public uses.
The takeaway for your search: always check the title type early and confirm whether a property is fee simple or leasehold before you fall in love with a listing.
How lease terms shape value
Remaining lease term
A shorter remaining term usually means a lower price and a smaller buyer pool. Many lenders have minimum remaining term requirements. As the lease shortens, financing options can narrow, which can affect resale.
Ground rent and resets
Review the rent schedule, the reset dates, and how resets are calculated. Sharp increases can raise your monthly costs and reduce marketability. Index-based or renegotiated resets can add uncertainty.
Renewal and extension options
Options to extend can help preserve value. Clear terms with predetermined rates or formulas are more predictable than open-ended renegotiations. Get the full lease and all amendments so you can see what is actually granted.
Reversion and consent clauses
Some leases state that improvements become the lessor’s property at expiration. Others require removal. Many leases also require the landowner’s consent for sales, mortgages, subletting, or major alterations. These items can impact timing, cost, and flexibility.
Financing a leasehold in Honolulu
Not all loans treat leaseholds the same. Conventional, FHA, VA, USDA, and portfolio lenders each have different rules. Underwriting often looks at the remaining lease term compared to the mortgage term, whether the lease will be subordinated to the mortgage, rent reset mechanics, and any consent requirements.
Practical steps:
- Get preapproved with a lender that will finance that specific leasehold. Share the complete lease early.
- If you plan to use FHA or VA, verify whether the condominium project is approved for that program.
- Ask your lender about minimum remaining term, subordination or mortgagee protection, and how they account for rent resets.
Taxes, dues, and total monthly cost
Your carrying costs can include property taxes, HOA or condo dues, and ground rent. Ground rent may increase at scheduled resets. The City and County of Honolulu may assess leasehold interests differently than fee simple interests, so confirm how your property is assessed with the Real Property Assessment Division. Build a budget that includes current ground rent and all scheduled increases.
Due diligence checklist
Use this checklist to reduce risk and avoid surprises.
Documents to review
- Full recorded lease with all amendments and exhibits
- Title report and any existing title insurance commitments
- Estoppel certificate from the lessor confirming rent and default status
- For condos: declaration, bylaws, house rules, financial statements, and recent meeting minutes
- Rent history and the schedule or formula for future rent resets
- Any notices of proposed lease termination or redevelopment
- Survey and list of improvements, plus reversion or removal terms at lease end
- Mortgage and subordination language, and any prior lender consents
Questions to ask
- Will the lessor subordinate to a buyer’s mortgage, and what consents are required?
- How do renewal or extension options work, and what do they cost?
- When are the next rent resets, and how are they calculated?
- Are there any defaults or notices on record?
- Are there plans by the lessor that could affect the project, such as redevelopment?
Financing steps
- Secure lender preapproval tailored to the specific leasehold
- Confirm subordination or mortgagee protection requirements
- Verify eligibility for FHA or VA if needed
Structuring and disclosures
- Negotiate for clearer renewal formulas or longer options if possible
- Request seller representations about rent payment history and known issues
- Disclose remaining term, rent escalations, and contingent obligations in writing
Professionals to involve early
- Real estate attorney experienced in Hawaii leaseholds
- Title company familiar with Oʻahu leasehold insurability
- Lender comfortable with leasehold collateral
- Appraiser with local leasehold valuation expertise
- Condo association management for timely documents
Closing mechanics to expect
Title insurance for a leasehold insures your leasehold interest, not the fee simple land. Escrow will typically obtain required landlord consents, project documents for condos, and any needed estoppel certificates. Insurers may consider the lease’s terms, including subordination and reversion provisions, when deciding coverage.
What happens at lease end
Outcomes depend on the lease. You may extend, renew, renegotiate, buy the fee interest, or see the lease end without renewal. If it expires, rights usually revert to the landowner as stated in the lease. The lease may also control what happens to improvements at expiration.
Buyouts and conversions
In some cases, landowners negotiate buyouts or sell the fee interest to unit owners. In other cases, landowners may plan redevelopment near expiration. Some documents include rights of first refusal or priority for existing occupants. Terms are contractual and vary by project and landowner.
Who a leasehold may fit
- Buyers prioritizing location and value who are open to a shorter horizon or who can pay cash
- Investors with a defined hold period who can model rent resets and exit timing
- Occupants who want a long remaining term with predictable extensions and plan to stay within that window
If you need flexible resale or broad financing options, fee simple may better fit your goals.
Your next steps in Honolulu
- Confirm the title type on each property you tour.
- Build a 10-year cost picture that includes ground rent and planned resets.
- Share the full lease with your lender and attorney early.
- For condos, study association budgets, reserves, and project-level lease terms.
When you are ready to evaluate specific properties or need help modeling costs and exit scenarios, connect with a local expert who understands Honolulu’s leasehold landscape.
Ready to compare fee simple and leasehold options or prepare your property for market? Reach out to Luxum Group to Request Your Instant Property Valuation or Schedule a Private Consultation.
FAQs
What is the difference between fee simple and leasehold in Honolulu?
- Fee simple gives you land and improvements indefinitely, while leasehold gives you a time-limited right to use the land under a ground lease with terms that affect cost, financing, and resale.
Can you get a mortgage on a Honolulu leasehold?
- Often yes, but lender rules vary by program and lease terms, so obtain preapproval that confirms your lender will finance that specific leasehold and provide them the full lease early.
How do ground rent resets work on Oʻahu leases?
- Leases often include scheduled rent resets that follow a formula or renegotiation; review the exact reset dates and calculation method because sharp increases can impact affordability and resale.
What happens to my condo when the lease expires?
- It depends on the lease, which may allow renewal, renegotiation, or buyout, or it may end with reversion of rights to the landowner and possible transfer or removal of improvements.
Are leasehold condos cheaper than fee simple in Honolulu?
- They often sell for less due to the limited remaining term, rent reset risk, and tighter financing, although actual discounts depend on the specific lease and market demand.
What documents should I review before buying a leasehold condo in Waikīkī?
- Review the full recorded lease and amendments, title report, estoppel certificate, condo declaration and financials, rent history and reset schedule, and any notices of termination or redevelopment.
How do HOA fees and ground rent interact on a leasehold?
- You will typically pay HOA or condo dues plus separate ground rent, and resets can increase total monthly cost, so budget for both current payments and scheduled increases.
