Leasehold VS Fee Simple

Understanding Leasehold and Fee Simple Ownership in Hawaii


"Leasehold' and "Fee Simple" ("FS") are two very important terms associated with purchasing a home or condominium in Hawaii.

"Leasehold" means that when you purchase property under this leasehold condition, the ownership of the land below and adjoining the home or condominium remains with the owner of the land. You do not own nor receive title to the land! When you purchase leasehold property under this condition, you have purchased the right to use the property under the conditions and for the time specified by the lease agreement. You are referred to as the "lessee". The owner/s of the land are referrd to as the "lessor". Review the lease carefully before you complete the purchase of property under this condition. The lease will have information describing the length of time the lease will run, when it will renegotiate the monthly lease amount, when and if it will be able to be extended, and how much the lease rent may be raised. Some leases are under negotiation for the land to be offered for sale to the "lessee" or owner of the building.  Some leases are currently being offerd for sale for a specific price at this time.  Ask us for more specifics!

"Fee Simple" sometimes seen as "FS" conveys full ownership of the land below and associated with the property to you without any obligation to the former owner (unless you have negotiated a specific contract with the owner changing the transfer of ownership).  This is the most common form of property ownership that we associate with purchasing property in the United States.  You receive title to the specific land associated with the property.

Benefits of  a "Leasehold" purchase

The primary benefit in considering the purchase of a leasehold property is the ability to initially get into the property at a lower price and with less money.  This type of property is attractive when the buyer wishes to own a home that is at a greater value than they would otherwise have been able to purchase.  Unlike the fee simple purchase, you are renting the use of the land (not buying the land) for a limited term, with the owner maintaining the right to take possession of the property at the end of the period specified in the lease agreement.

Disadvantages of a "Leasehold" purchase


The owner of the leasehold land maintains the the right to take possession of the property you aquired at the conclusion of the lease term or earlier if the terms of the lease are not met.  Obtaining a loan on leasehold property is a bit more complicated than on fee simple property.  Some lenders will only fund for a period of time shorter than the number of years remaining on the lease agreement making it difficult to obtain a mortgage.  The consideration to purchasing a leasehold property should be dependant upon the length of time you intend to to hold the property before selling it.

Jerry Tichy
Broker

jerry@jerrytichy.com
phone 808.280.5083

Maui Lifestyle Properties, LLC
161 Wailea Ike Pl.
Suite B102
Wailea, Maui, HI. 96753

Meet Jerry
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Steve Blackington
Broker in Charge

steve@steveblackington.com
phone 808.280.5084

Maui Lifestyle Properties, LLC
161 Wailea Ike Pl.
Suite B102
Wailea, Maui, HI. 96753

Meet Steve
View Testimonials

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