Are you seeing two prices for similar Honolulu condos and wondering why one is so much lower? You are likely comparing fee simple to leasehold. If you are new to Oahu or buying your first condo, the differences can feel confusing. In this guide, you will learn how each ownership type works in Honolulu, how lease terms affect price and financing, what to review before you tour, and when a leasehold can be a smart move. Let’s dive in.
Leasehold and fee simple basics in Honolulu
Fee simple means you own the condo unit and a share of the land underneath it, subject to normal rules like zoning and condominium documents. This is the form most buyers across the U.S. expect and it is common across Oahu.
Leasehold means you own the condo unit itself but you do not own the land. A separate landowner leases the land to the condominium through a ground lease that sets the lease term, rent, renewal rules, and other conditions.
In Honolulu, you will see leasehold most often in Waikiki, some hotel-condo and resort settings, and select older planned developments. Lease terms vary. Some leases started long, others include rent increases or reset dates. This structure often creates a lower asking price compared with a similar fee simple unit, with tradeoffs in financing and resale.
How lease terms shape value and risk
Price and valuation
Leasehold condos usually sell at a discount to fee simple units. The discount reflects a finite remaining lease term, future rent increases, a smaller buyer pool, and perceived risk. Appraisers consider the remaining lease years and any scheduled rent escalations. The shorter the remaining term, the more sensitive value can be to even small lease changes.
Financing and lender approval
Lenders treat leaseholds differently. Many loan programs consider the remaining lease term in relation to the loan term. Longer remaining lease terms usually help. Shorter terms or aggressive rent escalations can limit loan options or require a larger down payment. These rules vary by lender and program over time, so you should confirm requirements with your lender and ask for a pre-approval that specifically covers a Honolulu leasehold condo.
Resale and liquidity
The buyer pool for leaseholds is smaller, which can slow resale and increase price sensitivity, especially near lease milestones such as scheduled rent resets or approaching expiration. If ground rent increases after renegotiation, resale prices can decline. If the association completes a land buyout and converts to fee simple, values can rise, but buyouts are large, complex, and uncertain.
Costs, taxes, and HOA impacts
Ground rent is separate from HOA maintenance fees. Depending on the governing documents and the ground lease, the association may have specific duties to the landowner, such as certain insurance requirements or approvals for alterations. Property tax treatment depends on local assessment rules. You should confirm details with a title company or the county tax office.
End of lease and reversion risk
At the end of the lease, rights to improvements can revert to the landowner unless the lease provides renewal or purchase options. A longer remaining term and clear renewal or purchase provisions reduce reversion risk. Always read the exact lease language.
Due diligence: what to review first
Before you tour, request and review the key documents. Securing these early helps you move faster and avoid surprises.
- Full ground lease and all amendments. Read every rent increase and renewal clause.
- Condominium declaration, bylaws, house rules, and plats.
- HOA budget, audited financials, reserve study, and board minutes for the last 12 to 24 months.
- Any side agreements with the landowner, such as consent agreements.
- Title report or preliminary commitment and recent endorsements.
- History of ground rent payments, disputes with the landowner, and any lease-related litigation.
- If available, an appraisal or recent comparable sales for leasehold and fee simple units in the same area.
Key questions to ask before touring
Use these questions with the listing agent, HOA, or seller so you can make an informed decision.
- What is the remaining lease term measured from the projected closing date? Please share the lease pages that show this.
- How are rent increases structured, and are there specific reset dates or CPI links? Please share the clause pages.
- Who is the landowner, and have they signaled plans to sell or change terms?
- Does the lease include automatic renewal, options to renew, or a right to purchase the land? What are the procedures and pricing formulas?
- What lenders financed recent sales in this building, and were any loans denied due to the lease? Can you provide recent sale examples with financing types?
- Are there special insurance requirements in the ground lease, such as additional insureds or loss payees?
- Are there pending or recent lawsuits, claims, or assessments tied to the ground lease or the landowner relationship?
Red flags to watch for
- Very short remaining lease term. Shorter terms increase financing risk and can limit your exit options.
- Ambiguous renewal language or rent reset clauses that allow large, immediate increases.
- Landowner consent required for routine HOA actions without clear timelines or procedures.
- Recent or ongoing litigation between the HOA and the landowner.
- HOA reserves that look thin for the property’s age, especially if lease terms could trigger bigger future costs.
When a leasehold can make sense
Leasehold is not for every buyer, but it can be practical in the right situation.
- Lower entry price. If you value a lower upfront cost and understand the lease economics, you may find attractive options.
- Defined time horizon. If you plan to own for a shorter period and are comfortable with the exit plan, leasehold can work.
- Lifestyle or location premium. A specific Waikiki location, building amenities, or rental potential may outweigh lease risks for some buyers.
- Strategic plan. If you have the appetite to pursue an association land buyout in the future or to negotiate with the landowner, a leasehold purchase may fit your strategy, understanding that outcomes are uncertain.
Practical buyer strategies
- Engage a lender early. Ask for written confirmation that your lender will finance a leasehold condo in the specific building. Clarify any minimum remaining lease-term criteria.
- Tie price to lease risk. Request concessions if the remaining term is short or escalations are steep. Use a financing contingency tailored to the lease.
- Get full disclosures. Ask for documentation of past negotiations with the landowner. Consider whether escrowed reserves make sense if a near-term rent increase is scheduled.
- Compare comps carefully. Review both leasehold and fee simple sales in the same neighborhood to understand the price gap and liquidity.
- Hire local experts. A Hawaii real estate attorney can interpret the ground lease. An appraiser with Honolulu leasehold experience can help validate market value.
Local resources and who to call
- Hawaii Department of Commerce and Consumer Affairs, Real Estate Branch and Condominium Resource Center, for condominium law and document education.
- Hawaii Bureau of Conveyances, for recorded ground leases, amendments, and conveyance history.
- Professionals to engage: a lender with Hawaii leasehold experience, a Hawaii real estate attorney who reviews ground leases, a title or escrow team familiar with Honolulu ground-lease projects, and an appraiser with Honolulu condo experience.
Next steps with a trusted local advisor
Choosing between leasehold and fee simple in Honolulu comes down to your timeline, financing, and comfort with lease terms. The fastest way to clarity is to gather documents early, talk with the right lender, and have a local team walk you through the details.
If you want island-wide Oahu guidance with owner-led service, our boutique team can help you compare options, coordinate lenders and attorneys, and manage the process with care. Reach out to Hokua Hawaii Realty, LLC to start a focused search and get a clear plan for your next move.
FAQs
What is the difference between leasehold and fee simple in Honolulu?
- Fee simple gives you ownership of the unit and land share, while leasehold gives you ownership of the unit only and the land is leased under a ground lease with specific terms.
Can you finance a leasehold condo in Honolulu?
- Yes, but lenders and programs treat leaseholds differently, and approval often depends on the remaining lease term and lease clauses, so get lender confirmation early.
How do lease terms affect condo pricing in Honolulu?
- Shorter remaining terms and rent escalations usually reduce price compared with fee simple, since buyers face more risk and fewer financing options.
What happens when a ground lease ends on Oahu?
- Rights to improvements can revert to the landowner unless the lease provides renewal or purchase options, which is why you should read the exact lease language.
How do HOA fees and ground rent work for leaseholds?
- Ground rent is separate from HOA maintenance fees, and some lease provisions can add insurance or consent requirements handled by the HOA or owners.
What documents should I review before offering on a leasehold condo?
- Obtain the full ground lease and amendments, condo declaration and bylaws, HOA financials and minutes, title report, and any history of rent or lease disputes.
When might a leasehold condo be a smart choice in Waikiki?
- If you want a lower entry price, have a defined ownership timeline, or value a specific location and amenities enough to accept lease risks and resale tradeoffs.
