Maui Real Estate Q & A - What does LEASEHOLD mean?

Maui Real Estate Q & A - What does LEASEHOLD mean?

I get asked this quite often so I have decided to write a post about it.  Here in Hawaii you will find some properties for sale called Leasehold - (LH).  The majority of homes and land here on Maui are able to be bought Fee Simple (FS), where you own it outright.

Leasehold is a type of land tenure, a way of taking title to a property, as opposed to Fee Simple.  With Leasehold, you are buying the rights (a lease) to occupy a property for a specific period of time (term), and will be required to pay monthly lease payments to the actual owner. 

While leasehold properties are less expensive, keep in mind that when you add up the lease payment, the maintenance fees and the property taxes, you will have a large nut to crack each month.  They might seem attractive from the start, but in the long run I think a Fee Simple property is more appealing to most buyers.  The only time a client tells me they are specifically looking for a LH property on Maui, is if they are Hawaiian and thinking of buying a DHHL property.

The lease term In Hawaii usually starts at 99 years, but as time goes by the remaining term gets shorter.  This is something to consider if financing is involved, as a lender will not not look favorably on a lease which is getting near the end.  A lease will also have some built in renegotiation dates, so be prepared to have your monthly payment adjusted from time to time, at market rates.

You'll find a lot of Leasehold properties on Oahu, and not so many on Maui.  Most often it will be condos, but occasionally can be vacant land or land with a single family home.  The latter is the case with properties set aside for native Hawaiians by the Dept. of Hawaiian Home Lands (DHHL).  In order to lease one of the DHHL properties, there will be certain requirements to be met, such as being 50% Hawaiian.  Check with your Realtor for more details.

There is a trend to buy out these old leases which is called Fee Available in our MLS system.  In other words, when a property (usually a condo) is being sold, you can either pay the lower price which covers the lease, or pay a higher price which then converts the property to Fee Simple.  Gradually many condo buildings are phasing out any units that are still Leasehold.

Some examples of properties on Maui that are Leasehold:

• Hawaiian Home Lands, vacant land or residential in Wailuku and Kula
• South Maui condos - Maui Hill; Kealia
• Maalaea condos - Lauloa; Maalaea Yacht Marina; Kanai A Nalu
• West Maui condos - Lahaina Residential; Kaanapali Shores; West Maui Trades; Hale Ono Loa; Alaeloa; Channel House; Maui Eldorado; Napili Point; Papakea Resort

Other Maui Real Estate Q&A posts:

• What's a tsunami?
• What's a Residential Condo?
• What's an Ohana?
• What's Makai and Mauka?
• DOM - huh?
• What's a TMK?
• What's a condo-tel?