What are Leasehold and Fee Simple properties in Hawaii?
Leaseholds are properties where an owner (lessor) leases real estate to buyers (lessees) for specific time periods. The lessee is permitted to occupy the property for the lease period and pays rent on the lease. The lessee may be responsible for paying the property taxes. Lease periods are typically very long and can extend beyond the term of a typical 30-year mortgage.
Tip: Mortgage companies usually require that the lease be at least five years longer than the loan. For example, to get a 30-year mortgage on a leasehold property, the lender would want to see at least 35 years remaining on the lease term.
Fee Simple is the type of ownership where a buyer purchases a property outright and has the right to use the property indefinitely. The buyer pays the mortgage, property taxes, and association/maintenance fees to stay in good standing.
Common Land Tenure statuses
In Hawaii, Leasehold and Fee Simple are the two common “Land Tenure” statuses. Hawaii leasehold properties are usually less expensive than comparable fee simple properties. Almost every buyer prefers fee simple, however, not everyone can afford them.
It is very difficult to compare leasehold properties unless they are two condos in the same building or two land parcels of similar size and lease terms. There are many lessors in Hawaii, and each property can have a different lease term, monthly payment, and fee purchase price.
RPR does not take land tenure into account in our RVM® or AVM estimates. This means that leasehold properties will almost always be overvalued.
Hawaii, unlike other areas of the United States, has two property recording systems: the Land Court system and the