Shopping condos in Honolulu and seeing both fee simple and leasehold? You are not alone. The terms sound technical, and the differences can shape your financing, monthly budget, and future resale. In this guide, you will learn what each ownership type really means in Honolulu, how it affects your options, and a simple checklist you can use before you write an offer. Let’s dive in.
Fee simple basics
What you own with fee simple
In a fee simple condo, you own your individual unit plus an undivided interest in the land and common areas through the condominium declaration. You control the property within local laws, your mortgage, and HOA rules. This is the ownership type most buyers picture when they think of buying a home.
Pros and practical tradeoffs
Fee simple ownership typically aligns with the widest choice of mortgage programs and the broadest buyer pool when you resell. Monthly costs are more predictable because there is no ground rent. You still have HOA dues and normal ownership responsibilities, but you avoid lease resets and expiration timelines.
Leasehold explained
How a leasehold condo works
With a leasehold condo, you own a leasehold interest in the unit but not the land underneath. A separate ground lease grants you long-term rights to use the property. The landowner is the lessor, and you are the lessee for the term of the lease.
Typical lease terms in Honolulu
Ground leases in urban Honolulu often run for multiple decades and may include options to renew or extend. Ground rent can rise over time through fixed increases, inflation indexing, periodic market reappraisals, or a mix of these. When the lease ends, rights can revert to the landowner unless the lease provides renewal or purchase options.
Pros and practical tradeoffs
Leasehold condos often sell at a discount compared to similar fee simple units. That lower buy-in can help you access a preferred building or location. The tradeoff is ongoing ground rent, potential step increases, and more limited financing choices as the remaining lease term shortens.
Honolulu market context
Why you see leaseholds here
Hawaii’s land history and urban development led many landowners, including government entities and private trusts, to lease land for large projects rather than sell it. In dense neighborhoods like Kakaako, Ala Moana, and downtown Honolulu, ground leases helped create high-rise homes while preserving land ownership.
Building-by-building differences
In Kakaako and nearby urban areas, some towers are fee simple and others are leasehold. You should confirm the ownership type for each building and unit instead of assuming fee simple. Reviewing the title report, MLS details, and condo documents will clarify what you are buying.
Financing and appraisal impacts
Mortgage eligibility and terms
Lenders look closely at the remaining lease term, any renewal rights, and how ground rent will change. A shorter or uncertain lease term can reduce the number of loan programs available. You may see higher down payment requirements or rates for leaseholds, so it helps to get pre-approved with a lender that regularly finances Hawaiian leasehold condos before you make an offer.
Appraisal and valuation
Appraisers consider lease terms when valuing a leasehold condo. Values tend to discount as the lease nears expiration or if a scheduled rent reset will materially raise costs. Sales comps also reflect that leaseholds usually trade lower than comparable fee simple units.
Monthly costs and resets
Understanding ground rent
Ground rent can change in different ways. Some leases tie increases to inflation, while others reset to market rates at set intervals. Because these jumps can be large, it is smart to model what your payment could be after the next reset, not just today.
Who pays and how it shows up
In some projects, the HOA pays the ground rent and covers it through assessments. In others, each unit owner pays a proportionate share directly. Your true monthly housing cost should include your mortgage, HOA dues, and ground rent, plus a plan for potential increases.
Resale timing and strategy
Buyer pool and pricing
Leasehold resale can take longer because some buyers and lenders pass on shorter or uncertain leases. Pricing usually reflects this smaller buyer pool and any upcoming rent increases. If a rent reset or lease negotiation is coming, plan for it during listing prep and pricing.
Lease expiration and options
What happens at the end of a lease depends on the lease language. Some leases allow renewals or fee buyouts, while others do not. Buyers and sellers should identify renewal rights, purchase options, and notice timelines early to avoid surprises.
Due diligence checklist
Use this list to gather facts before you commit.
Core documents to review:
- Ground lease and all amendments
- Recorded memorandum of lease or lease registration
- Condominium declaration, bylaws, CC&Rs
- HOA meeting minutes, financials, and reserve study
- Estoppel certificate from the HOA stating balances and compliance
- Preliminary title report noting lease-related exceptions
- Any agreements among developer, landowner, and association
- Insurance policies for the association and required coverages
Key lease terms to find:
- Remaining lease term and exact expiration date
- Renewal or extension rights and notice deadlines
- Ground rent formula and reset schedule
- Who pays ground rent and how it is allocated
- Rights at expiration, including any purchase options
- Assignment and consent provisions
- Default and cure timelines for both parties
Questions to ask early:
- Have ground rent increases and resets occurred on schedule?
- Has the landowner historically granted extensions or consents?
- Does the HOA budget for future ground rent increases or buyouts?
- Are any lease renegotiations, disputes, or redevelopment plans pending?
Negotiation levers to consider:
- Price adjustments for upcoming resets and the smaller buyer pool
- Seller delivery of updated estoppel and a title commitment showing lease terms
- Financing contingency tied to lender acceptance of the lease
- Attorney review contingency
- Credits or holdbacks if a significant reset or buyout is imminent
Steps and local team
A clear process reduces risk and stress. Here is a practical timeline that works well in Honolulu’s condo market:
- Early stage: Confirm ownership type from the listing or seller disclosure and order a title search.
- Concurrent: Obtain pre-approval from a lender comfortable with leasehold properties and ask for their leasehold checklist.
- Due diligence: Collect the ground lease and association documents for legal review and cost modeling.
- Before closing: Secure title insurance for a leasehold interest and satisfy any lender conditions tied to the lease.
You may also benefit from a team that includes a lender with Hawaiian leasehold experience, a local real estate attorney well versed in ground leases and condo law, a title company familiar with leasehold insurance endorsements, and an appraiser who understands leasehold comps in urban Honolulu.
Which path fits your goals
If you want the widest loan options, simpler budgeting, and broad resale appeal, fee simple usually fits best. If your priority is a lower purchase price in a preferred location and you are comfortable modeling ground rent and lease timelines, a leasehold condo can be a smart move. Either way, focus on the documents and the numbers, not assumptions.
With our design-plus-data approach, we help you read the fine print, model future costs, and align your offer or listing strategy with your goals. If you prefer Korean, we can walk you through this process in your language for clarity and confidence.
Ready to compare real units and lease terms in Kakaako and across Honolulu? Reach out to Sue Jo for a calm, thorough consult that puts your interests first.
FAQs
How to tell if a Honolulu condo is leasehold
- Check the MLS remarks, title report, and condominium declaration, and ask the listing agent to confirm. Do not assume fee simple.
Can I get a mortgage on a Honolulu leasehold condo
- Some lenders will finance leaseholds, but approval depends on the remaining lease term and lease language. Get pre-approved with a lender experienced in Hawaiian leaseholds.
Are leasehold condos cheaper than fee simple
- They often sell at a discount compared to similar fee simple units due to financing limits and future ground rent risk.
What happens when a ground lease expires in Honolulu
- The lease controls the outcome. Options may include renewal, a fee buyout, or reversion to the landowner if no renewal rights exist.
Can a condo association buy the land under a leasehold project
- Sometimes, if the lease and parties allow it. Such buyouts are complex and can be costly, so review the lease and HOA plans early.
