Leasehold vs. Fee Simple in Hawaii: What Every Buyer Must Know

You found a two-bedroom condo in Waikiki listed at $285,000. It has ocean views, a renovated kitchen, and monthly maintenance fees that seem reasonable. Then you notice two words in the listing that change everything: leasehold property. Many buyers have never heard the term. Your lender gets quiet. And suddenly the cheapest condo on the island does not look so simple.

Hawaii is one of the only states in the country where leasehold real estate is common. Roughly 10% of Oʻahu condos are leasehold — meaning you own the building (or your unit in it) but you do not own the land underneath. The land belongs to a separate entity, and you pay them rent to use it. When the lease expires, the land and everything on it reverts to the landowner. You walk away with nothing.

That sounds alarming, and it can be. But it can also be an opportunity — if you understand exactly what you are buying, what the risks are, and whether the math works for your situation. This guide covers all of it with verified data and no sugar-coating.

What Do "Fee Simple" and "Leasehold" Actually Mean?

Fee simple means you own the property and the land it sits on, outright, forever. This is the standard ownership most buyers expect. You can sell it, pass it to your kids, tear it down and rebuild — the land is yours.

Leasehold means you own the structure (or your unit in a condo) but the land belongs to someone else — a trust, an estate, or a government entity. You pay them monthly or annual ground rent for the right to use the land. You hold a long-term lease, typically 50 to 99 years originally, and when that lease expires, everything reverts to the landowner.

Fee simple means owning the property and the land outright — forever. Leasehold means you hold a long-term lease on the land, and when that lease expires, the land and everything on it reverts to the landowner. It is an important distinction, and we always explain it carefully before showing any leasehold property.

Why Does Hawaii Have Leasehold Property?

Hawaii's leasehold system dates back to the era of large private land ownership. For much of the 20th century, a small number of estates controlled vast amounts of land on Oʻahu:

(Source: Honolulu Magazine, Beat of Hawaii)

Rather than sell land to developers and homeowners, these estates leased it — keeping ownership of the land while allowing development on top of it. At one point, 72 private landowners held 47.5% of Oʻahu's fee simple titles. (Source: Hawaii Housing Authority v. Midkiff, U.S. Supreme Court, 1984)

The Hawaii Legislature passed HRS Chapter 516 (the Land Reform Act) in 1967, allowing the state to use eminent domain to convert leasehold residential land to fee simple. The U.S. Supreme Court upheld this law in an 8–0 decision in 1984. That law converted most single-family home lots — which is why only about 2% of single-family homes remain leasehold today. But condominiums were largely excluded from the mandatory conversion, which is why the leasehold issue persists in the condo market.

How Leasehold Affects Property Value

The discount is real and significant:

• With 50+ years remaining, leasehold values can hold relatively steady — the discount might be 20–30%
• The decline accelerates noticeably when 25–35 years remain
• Below 20 years remaining, values collapse — financing becomes nearly impossible and the buyer pool shrinks to cash investors willing to bet on an extension

The Kahala Beach Apartments Warning

This is not a hypothetical. Kahala Beach Apartments is a 196-unit oceanfront condo on Oʻahu where the 60-year ground lease, held by Kamehameha Schools, expires July 15, 2027.

• Units that were once valued at up to $2 million have sold for as little as $22,000–$45,000
• Kamehameha Schools declined to extend the lease and refused multiple purchase offers from the condo association
• Owners will surrender their units when the lease expires
• The landowner may offer temporary month-to-month rentals while planning redevelopment

(Source: Hawaii Business Magazine, Hoodline, November 2025)

This is the worst-case scenario for leasehold — and it is happening right now on Oʻahu. It does not mean every leasehold property will end this way, but it proves that lease expiration risk is not theoretical. It is real, and it can erase your entire investment. We always make sure buyers understand this before proceeding.

Can You Get a Mortgage on a Leasehold Property?

Yes — but the requirements are strict, and the remaining lease term is the single biggest factor.

Conventional Loans

• Most lenders require the lease to extend at least 30 years beyond the loan term (so roughly 60+ years remaining for a 30-year mortgage)
• Some lenders will loan for only 90% of the remaining lease term
• Expect higher down payments, higher interest rates, and stricter credit requirements compared to fee simple
• If a rent renegotiation date falls within 5 years of purchase, lenders may use the estimated higher rent to qualify you — which can disqualify you entirely
• The IRS may not classify properties with less than 30 years remaining as real property, which creates additional complications

(Source: Locations Hawaii, HiCondos.com)

FHA Loans

• FHA will finance leasehold if the lease is renewable for at least 99 years OR has at least 10 years beyond the mortgage maturity (roughly 40+ years for a 30-year FHA loan)
• Sub-leasehold estates are not eligible

(Source: HUD Knowledge Base)

VA Loans

• VA loans technically allow leasehold, but require the lease to extend at least 14 years beyond the mortgage term — meaning at least 44 years remaining
• The lease terms must be reviewed and approved by the VA
• In practice, very few Oʻahu leasehold condos meet VA requirements

(Source: Hawaii VA Loans, Mortgage Solutions Financial)

If you are a military family using a VA loan, leasehold is almost certainly off the table unless the property has 44+ years remaining. For most other buyers, financing gets progressively harder below 35 years and essentially impossible below 20 years. Cash buyers have the most flexibility — but they also take the most risk. We are happy to walk you through what each scenario looks like for your situation.

The Ground Rent Trap: Renegotiation

Here is the risk that most buyers overlook. Leasehold ground rent is typically not fixed for the entire lease term. Most Oʻahu condo leases include scheduled renegotiation dates — usually every 10–15 years after an initial fixed period of 25–30 years.

At renegotiation:

• An appraiser determines the current land value
• A formula in the condo documents calculates the new rent based on that value
• There is no upper limit other than current market conditions
• If the parties disagree, Hawaii law requires mandatory arbitration

Historically, some renegotiations have produced increases of over 1,000%. A ground rent that was $200/month could become $1,200/month or more after a renegotiation tied to surging Oʻahu land values. (Source: HiCondos.com)

This matters because your total monthly housing cost is not just your mortgage and maintenance — it includes ground rent. And that ground rent can change in ways you did not anticipate when you bought.

Remaining Leasehold Condos on Oʻahu

Most leasehold condos are concentrated in Waikiki, Downtown Honolulu, Makiki, and the University area. Only about 14 leasehold condo buildings remain in Waikiki alone. Some notable ones:

(Source: Hawaii Home Listings, Hawaii Living)

The trend is clear: leasehold inventory is shrinking as leases expire or convert. The remaining leasehold properties are an increasingly narrow slice of the market, which means less comparable sales data and less predictable resale values.

When Leasehold Can Make Sense

We are not telling you to never buy leasehold. There are scenarios where it works:

Long remaining term. A leasehold condo with 50+ years remaining, a reasonable ground rent, and no renegotiation for 15+ years can be a genuine value play — especially if you plan to live there for 5–10 years and sell before the term becomes a financing issue.

Investment with a clear exit. Some investors buy leasehold units at steep discounts, rent them out for cash flow, and plan to sell before the lease term becomes a problem. The math can work if the rental income exceeds all costs (mortgage, maintenance, ground rent, taxes) by a comfortable margin. Check our investment property guide for how to evaluate this.

You are buying your lifestyle, not an appreciating asset. A leasehold unit in a beachfront Waikiki building might give you 30 years of ocean-view living at a fraction of what fee simple would cost. If you are buying for the experience and understand that the asset may depreciate, that can be a conscious, reasonable choice.

When Leasehold Is Dangerous

Under 30 years remaining. Financing options collapse. The buyer pool shrinks to cash investors. Resale value declines accelerate.

Renegotiation within 5 years. Unknown future ground rent is a wildcard that can destroy your monthly budget and your ability to sell.

No path to conversion or extension. If the landowner has not indicated willingness to sell the fee interest or extend the lease, you are on a timer with no escape hatch.

You are using it as your primary investment vehicle. If this is your only real estate investment and you are counting on equity appreciation, leasehold introduces a risk that fee simple does not.

What This Means for Buyers

If you are shopping for a condo on Oʻahu, roughly one in ten listings you see will be leasehold. The price will look attractive — often 25–50% below a comparable fee simple unit. That discount exists for a reason. Before you get excited about the price tag, check these five things in this order:

1. Remaining lease term — above 50 years is manageable; below 30 is high-risk

2. Next renegotiation date — if it is within 5 years, your ground rent could spike

3. Current ground rent amount — factor this into your monthly cost alongside mortgage and maintenance

4. Landowner identity — research their track record on extensions and conversions

5. Your financing type — VA loans need 44+ years; FHA needs 40+; conventional needs 60+

If you are a first-time buyer on a tight budget, leasehold can look tempting. But understand that the "savings" come with risks that fee simple does not carry. For most buyers, especially military families with a VA loan, fee simple is the safer path. Check how much house you can afford on Oʻahu before making any decisions.

What This Means for Sellers

If you own a leasehold condo, your buyer pool is smaller and more price-sensitive than fee simple sellers. The key to selling is total transparency — disclose the lease term, ground rent, renegotiation schedule, and any conversion prospects upfront. Buyers who discover these details after making an offer will back out, wasting everyone's time.

Price aggressively relative to comparable fee simple units. If your building has a conversion in progress (like Discovery Bay's partial fee acquisition), highlight that — it is a genuine selling point. If the lease is under 35 years with no conversion path, be realistic about who your buyer is: likely a cash investor or someone buying for lifestyle, not equity.

For a complete picture of selling costs, see our cost to sell guide. For sellers of fee simple properties, this leasehold dynamic actually works in your favor — fee simple inventory is in higher demand precisely because leasehold carries these risks.

Frequently Asked Questions

What happens when a leasehold expires in Hawaii?

When the ground lease expires, ownership of the land and all improvements (including your condo unit) reverts to the landowner. You walk away with nothing. Before expiration, three outcomes are possible: the landowner extends the lease, the landowner agrees to sell the fee interest to the lessees (conversion), or the lease simply expires and the property is surrendered. The Kahala Beach Apartments case — where Kamehameha Schools refused to extend, and unit values dropped from $2M to as low as $22,000 — demonstrates that surrender is a real and current outcome, not just a theoretical risk. (Source: Hawaii Business Magazine)

Can I use a VA loan to buy a leasehold property?

Technically yes, but practically it is very difficult. The VA requires the remaining lease term to be at least 14 years longer than the mortgage term — meaning at least 44 years for a standard 30-year VA loan. The lease terms must also pass VA review. Very few leasehold condos on Oʻahu currently meet these requirements. If you are a military family, you are almost certainly better served looking at fee simple properties. (Source: Hawaii VA Loans)

How much cheaper is leasehold compared to fee simple?

The discount varies based on remaining lease term, ground rent amount, and building condition. Generally, leasehold units sell for 25–50% less than comparable fee simple units. A fee simple condo listed at $500,000 might have a comparable leasehold unit at $250,000–$375,000. But the total cost of ownership — including ground rent of $200–$900/month — narrows that gap over time. You need to calculate total cost over your expected holding period, not just compare purchase prices. (Source: Hawaii Business Magazine, KE Team Hawaii)

What is ground rent renegotiation and why does it matter?

Ground rent renegotiation is the process where the landowner and leaseholders agree on a new rent amount at scheduled intervals — typically every 10–15 years. The new rent is based on the appraised land value at the time of renegotiation. On Oʻahu, where land values have risen dramatically over decades, some renegotiations have produced increases exceeding 1,000%. This means your monthly housing cost can jump substantially and unpredictably. Lenders factor this risk into their underwriting — if a renegotiation is within 5 years of your purchase, they may use the estimated higher rent to qualify you, which can disqualify the loan entirely. (Source: HiCondos.com)

Are there any leasehold condos that have converted to fee simple?

Yes. Many single-family neighborhoods in Kahala, Hawaii Kai, and Kailua converted after the 1984 U.S. Supreme Court ruling upholding Hawaii's Land Reform Act. For condos, conversions are harder but do happen. Discovery Bay in Waikiki is currently in the process of acquiring some of its underlying parcels from the landowner and converting them to fee simple. However, conversion requires the landowner's willingness to sell — and as the Kahala Beach Apartments case shows, that willingness is not guaranteed. There is no legal mechanism that forces a landowner to sell or extend a condo ground lease. (Source: Hawaii Business Magazine)

Should I avoid leasehold entirely?

Not necessarily. A leasehold property with 50+ years remaining, stable ground rent, and no renegotiation for 15+ years can be a legitimate value play — especially for buyers who plan to hold 5–10 years and sell before the term becomes a financing issue. The key is doing your homework: know the remaining term, the renegotiation schedule, the landowner's track record, and your financing options before you write an offer. If any of those factors raise red flags, walk away. The discount is not worth the risk if the fundamentals do not check out.