By Benjamin Finnerty (S), REALTOR® (RS-83812) with Keller Williams Realty Maui · Kīhei, Maui · 808-481-9748

Quick Answer: Leasehold vs fee simple on Maui comes down to whether you own the land. Fee simple means you own the property and land interest, with no end date. Leasehold means you own the right to use it for a set term under a ground lease, usually pay lease rent, and the right ends at expiration. Read the ground lease first.

I’m Benjamin Finnerty, a REALTOR® in Kīhei with Keller Williams Realty Maui, and I focus on South Maui condos. Most buyers who shop Maui condos eventually see a listing that looks like a bargain, then spot the word “leasehold.” It’s one of the most misunderstood parts of Hawaiʻi real estate, so here’s how I explain what it means and how to evaluate it before you make an offer.

What Is the Difference Between Leasehold and Fee Simple on Maui?

With fee simple you own the property and its land interest with no expiration; with leasehold you buy the right to use the property for whatever time remains on a ground lease. Fee simple is the ownership most mainland buyers are used to. You hold title to the property, and in a condo you own your unit plus an undivided share of the common elements, including the land. You can sell, refinance or pass it to your heirs.

Leasehold separates the building from the land. A landowner (the lessor, or “fee owner”) leases the land for a fixed term, and you buy the lessee’s interest for whatever time remains. Leasehold interests are common in Hawaiʻi because, historically, large tracts of land were held by a small number of landowners and estates that leased rather than sold.

That history led to the Hawaiʻi Land Reform Act of 1967 (Hawaiʻi Revised Statutes Chapter 516), which created a way for some residential lessees to buy the land under their homes. The U.S. Supreme Court upheld that approach in Hawaii Housing Authority v. Midkiff in 1984. Whether any conversion path exists for a particular Maui property depends on the property and its lease, so it’s something to verify, never assume.

What Should I Look for in a Maui Ground Lease?

Start with the years remaining, the lease rent schedule and what happens at expiration. These are the questions I go through with buyers:

• How many years are left? A lease with 50 years remaining is a very different asset than one with 12 years left. Value generally declines as the expiration date gets closer.
• What is the lease rent, and when does it change? Many leases have fixed rent for a period, then a step-up or renegotiation date. A low payment today can rise sharply at the next reopening.
• What happens at expiration? Read what the lease says about the improvements when the term ends. In many leases the right to occupy ends and the property returns to the landowner, but the exact terms matter.
• Is there an option to extend or buy the fee? Some leasehold buildings have negotiated extensions or fee purchases in the past. Ask whether anything is in the works, and get it in writing.
• Who is the lessor? Knowing whether the landowner is a trust, a private owner or another entity helps you understand how negotiations have gone historically.

How Are Lease Rent Renegotiations Handled in Hawaiʻi?

For leases of residential lots, HRS §519-2 caps renegotiated lease rent at 4% of the “owner’s basis,” which is based on the current fair market value of the lot without the structures. Reopenings can’t be scheduled more often than once every 15 years, and if the parties can’t agree, the Hawaiʻi Housing Finance and Development Corporation arbitrates.

Condominium ground leases can be structured differently, so your lease document controls the details. That’s why the lease itself, along with the condo documents, should be on your due-diligence list from day one.

Can I Get a Mortgage on a Leasehold Condo on Maui?

Often yes, but the lease term matters. Fannie Mae’s Selling Guide requires that a leasehold have an unexpired term that runs at least five years beyond the maturity date of the loan. On a 30-year mortgage, that means a lease with roughly 35 or more years left. The lease also can’t be in default, rents must be current, and the lender must get notice and a chance to cure if a default occurs.

When the remaining term is too short for conventional financing, buyers may need a shorter loan, a portfolio lender or cash. A smaller pool of qualified buyers can also make a leasehold unit slower to resell, which is another reason it may be priced below a comparable fee simple unit.

Is a Leasehold Condo a Good Deal?

It can be, if the price reflects what you’re really buying. A leasehold unit can make sense if you want a Maui place for a defined number of years and plan around the expiration date, or if you’re paying cash and have done the math on the lease rent schedule. It’s a poor fit if you need conventional financing on a short remaining term, or if you expect it to appreciate like a fee simple property.

My Take: What I’m Telling Maui Condo Buyers

Leasehold isn’t automatically good or bad. It’s a different product, and the details decide whether it’s right for you. When a price looks unusually low for a building, I check the tenure first, then pull the ground lease before anything else.

The simplest way I know to compare is total cost over the years you plan to own: the purchase price, the lease rent over that period, maintenance fees, and the likely resale value given the remaining term when you sell. Run that side by side with a fee simple unit and the “bargain” either holds up or it doesn’t.

If you’re financing, confirm the remaining term with your lender early. On a 30-year loan, roughly 35 or more years left is the line to watch under Fannie Mae’s rule. And have a Hawaiʻi real estate attorney review the expiration, surrender and renegotiation terms before you’re committed.

This is general information, not legal advice. Please confirm your situation with a Hawaiʻi real estate attorney.

Frequently Asked Questions

What does fee simple mean on Maui?

You own the property and its land interest outright, with no expiration date.

Do leasehold condos on Maui pay lease rent?

Usually yes, on top of association fees. The amount and how it changes are set by the ground lease.

Can I finance a leasehold condo?

Often, if the lease runs long enough. Fannie Mae requires the lease to extend at least five years past the loan’s maturity date.

What happens when a Maui ground lease expires?

It depends on the lease. In many cases the lessee’s right to occupy ends. Read the expiration and surrender terms carefully and ask about extension or fee-purchase options.

How do I know whether a listing is leasehold?

The listing and the title report will show the tenure. If a price looks unusually low for a building, check the tenure first.

If you’re shopping condos, you may also want my guide to the condo financing rule change on Maui and my look at Maui condo prices by area.

Ask Benjamin

If you’re comparing leasehold and fee simple options on Maui, I’m happy to be a second set of eyes on the numbers and the lease terms so you can decide with confidence. I’m Benjamin Finnerty; feel free to call or text me at 808-481-9748 or email benjaminfinnerty@gmail.com.

Sources: Hawaiʻi Revised Statutes Chapters 516 and 519 (Hawaiʻi State Legislature); Fannie Mae Selling Guide B2-3-03; Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984).