What Is the Difference Between Leasehold and Fee Simple in Hawaii?

Fee Simple Ownership

Fee simple is the standard form of property ownership most buyers are familiar with from the mainland. You purchase both the structure and the land beneath it. You have full ownership rights in perpetuity. Your heirs inherit a complete asset. Financing is straightforward. Resale is unrestricted. Fee simple is the more common preference among buyers and generally commands a price premium.

Leasehold Ownership

In a leasehold transaction, you purchase the right to occupy and use the property for a defined period — typically 50 to 65 years from the lease's original start date. You pay monthly or annual rent to the landowner (the lessor). When the lease expires, the land and all improvements revert to the landowner unless the lease is extended or the land is purchased separately.

Hawaii has a significant amount of leasehold property, particularly in resort communities, due to the historical concentration of large land holdings by a small number of families and trusts (Bishop Estate, Kamehameha Schools, James Campbell, and others).

Key Questions to Ask About Any Leasehold Property

• How many years remain on the lease?
• What is the current monthly ground rent?
• When does the rent next renegotiate, and by what formula?
• Has the landowner offered fee simple conversion, and at what price?
• Will financing be available? (Many lenders will not finance leasehold with under 30 years remaining.)
• What happens at lease expiration?

Financing Leasehold Properties

This is where many buyers encounter their first significant complication. Most conventional lenders require at least 30 years remaining on the lease beyond the loan term. A 30-year mortgage on a leasehold with 35 years remaining will find very few willing lenders. Cash purchases or portfolio lenders are often the only option for shorter leases.

Resale Considerations

Leasehold properties sell for less than comparable fee simple — and the discount grows as the lease shortens. As the remaining lease term shortens, financing and resale options may narrow. Understanding the full timeline before purchasing is important.

Jolanta's Feedback

I am always transparent about leasehold vs. fee simple with my clients. Both can be appropriate depending on circumstances — but both require complete understanding before you sign. If you are considering a leasehold property, I will walk you through the lease document line by line and connect you with a Hawaii real estate attorney for independent review. This is not a decision to make without full information.