Confused by fee simple versus leasehold when browsing condos in Ala Moana or nearby Kakaʻako? You are not alone. These two ownership types can look similar online, but the fine print changes price, financing, and your long-term plan. In this guide, you will learn how each tenure works, what to read in a ground lease, how lenders view leasehold, and how to compare options in mixed-tenure buildings. Let’s dive in.
Fee simple vs leasehold in Hawaii
Fee simple explained
Fee simple means you own the condominium unit plus an undivided interest in the land. It is the most common form of ownership outside Hawaii and gives you the broadest rights to use, mortgage, and sell your property. In a fee-simple condo, your monthly costs typically include your mortgage, property taxes, insurance, and HOA fees.
Leasehold explained
Leasehold means you own the improvements, such as the condo unit itself, but you do not own the land. You pay ground rent to a separate landowner under a ground lease. The lease sets the rent, how and when it resets, whether you can renew or extend the term, and what happens when the lease ends. At expiration, the land and sometimes the improvements may revert to the landowner, depending on the lease language.
Why leasehold is common around Ala Moana and Kakaʻako
Because land is scarce and large institutions have owned key parcels for generations, many condo projects in Ala Moana and Kakaʻako were developed on leased land. You will also see mixed-tenure buildings where some units are fee simple while others are leasehold. Always confirm the tenure of the exact unit you are considering, even within the same address.
How a ground lease affects your purchase
The lease terms to review first
A ground lease is a business contract that drives value and risk. Ask for the documents early and review these items closely:
- Remaining lease term and the exact expiration date.
- Current ground rent, the escalation schedule, and the next rent-reset date.
- Rent-reset method: fixed steps, inflation index, market-based, or a hybrid.
- Renewal or extension rights and whether terms are clearly defined.
- Reversion provisions at expiration and whether improvements revert.
- Transfer rules, approvals, and any right of first refusal.
- Remedies and default terms and how severe the consequences are.
- Allocation of property taxes and insurance between owner and association.
If the language is unclear, bring in a Hawaii real estate attorney before you write an offer.
Rent resets and what they mean for you
Leasehold affordability can change at reset dates. Reset methods commonly include:
- Fixed-step increases that jump at preset intervals.
- CPI-based increases tied to inflation.
- Market resets that reprice rent to current market levels.
- Hybrids that mix formula and negotiation.
A large reset can push your monthly costs higher, affect loan qualification, and reduce resale value. If a reset is coming soon, plan conservatively.
Renewal and reversion at the end of term
Two outcomes matter most near the end of a lease: the right to renew and the risk of reversion. Some leases include an extension option with a formula for new rent. Others require negotiation or provide no right to renew. If the lease ends and reversion applies, the landowner can take back the land and, depending on the lease, the improvements. Clear renewal rights tend to preserve value. Uncertain renewals or strict reversion language increase risk and discount.
Value, financing, and resale in Ala Moana
How tenure shapes price
Leasehold condos usually sell for less than similar fee-simple units. The discount is not fixed. It depends on the years left on the lease, how predictable the future rent is, and whether you have a defined extension right. Shorter remaining terms, large upcoming rent resets, and vague renewal language increase discounts.
What lenders look for on leasehold
Most lenders set minimum remaining lease terms and project-level requirements. They also review the rent-reset schedule and how it affects your ability to repay. You may see lower maximum loan-to-value ratios or higher rates to account for risk. Appraisers must use leasehold comparables or make careful adjustments, which can affect value. Contact a lender early to confirm acceptable lease terms and programs before you make an offer.
Marketability and exit timing
Leasehold narrows the buyer pool because many buyers and some investors prefer fee simple. Units approaching a rent reset or lease expiration may take longer to sell or require price adjustments. Ground rent changes can ripple into HOA budgets and assessments, so study association financials and meeting minutes for signs of stress linked to the ground lease.
Buyer checklist for Ala Moana and Kakaʻako condos
Documents to request immediately
- Full copy of the ground lease and any amendments.
- Current ground rent schedule and the next reset date and formula.
- Condo declaration, bylaws, and board minutes addressing ground rent allocation and any disputes.
- Association budget, reserve study, audits, and any assessments tied to lease matters.
- Title report and property tax records confirming tenure.
- Any right-of-first-refusal, transfer-consent, or approval requirements from the landowner.
- Correspondence or negotiation history about extensions, buyouts, or landowner concessions.
Questions to ask the seller, agent, or association
- What is the exact remaining lease term and expiration date?
- When is the next rent reset and what formula applies?
- Is there a defined renewal or extension option and what are the terms?
- Who pays property taxes and insurance related to the land and improvements?
- Has there been litigation, disputes, or late payments to the landowner?
- Has the landowner exercised rights that delayed or blocked past transfers?
- Are there active plans to negotiate an extension or buyout?
- How have leasehold resales in this building priced relative to fee-simple units?
Red flags that warrant caution
- Lease expiration within a couple of decades with no clear, binding extension.
- A market-based reset scheduled in the next 1 to 5 years without a predictable formula.
- Vague renewal language that leaves wide discretion to the landowner.
- Association financial stress tied to ground-lease obligations.
- Landowner approval required for sales with a history of delays or denials.
- Pending litigation between the association and the landowner.
When to bring in specialists
- Pricing Strategy Advisor for modeling the discount and comparing mixed-tenure comps.
- Real estate attorney to interpret renewal and reversion language.
- Lender early in the process to confirm lease-term thresholds for underwriting.
- Appraiser with Hawaii leasehold experience if you need an independent value opinion.
Common paths and negotiation tips
Negotiating as a buyer
Use the lease as your guide. Price should reflect remaining years and any scheduled increases. Build contingencies for full lease review, lender approval of the leasehold structure, and attorney sign-off. Ask for disclosure of rent history, prior negotiations, and any concessions granted by the landowner.
If you plan to sell later
Think about the likely buyer pool and timing. If a rent reset or expiration is approaching, consider whether you can negotiate an extension ahead of time to strengthen your future resale. Be prepared to justify your pricing with leasehold comparables rather than only fee-simple comps.
Exit strategies that fit your goals
- Hold and pursue an extension or buyout if viable.
- Use leasehold for a defined use window if the pricing discount fits your timeframe.
- For investment purposes, model different reset scenarios and consider shorter loan terms to reduce long-range risk.
Choosing between leasehold and fee simple in Ala Moana
If you want long-term control and predictability, fee simple is usually the cleanest path. If you value location and amenities in Ala Moana or Kakaʻako and you are comfortable with a defined timeline, leasehold can offer a lower entry price. Your decision should weigh:
- How many years you plan to hold the unit.
- The lease’s next reset and renewal clarity.
- Your financing options and how resets affect qualification.
- Association health and how ground rent flows through HOA budgets.
Run the numbers for several scenarios and compare them to fee-simple options in the same buildings or nearby blocks. A small difference in reset timing or renewal language can change the outcome.
Ready to talk through specific buildings or units in Ala Moana and Kakaʻako? Reach out for a calm, data-informed review of your short list and a clear plan for financing and negotiation.
Start your Honolulu search — book a consultation with Raymond Kang for personalized guidance grounded in local leases, comps, and lender realities.
FAQs
What is the difference between fee simple and leasehold in Hawaii?
- Fee simple includes ownership of the condo unit and land interest, while leasehold gives you ownership of the unit only and requires ground rent to a separate landowner under a ground lease.
How do rent resets affect a leasehold condo in Ala Moana?
- A reset can increase your ground rent based on a fixed step, inflation index, market rate, or hybrid method, which can change affordability, loan qualification, and resale value.
Can I get a mortgage on a leasehold condo in Honolulu?
- Many lenders will finance leasehold condos if the remaining lease term and project meet program guidelines, but loan-to-value limits or rates may differ and resets are considered in underwriting.
What happens when a ground lease expires on a condo?
- If there is no extension and reversion applies, the landowner can reclaim the land and possibly the improvements, depending on the lease; renewal rights and terms must be verified in the lease.
Are mixed-tenure buildings common in Ala Moana and Kakaʻako?
- Yes. Some buildings have both fee-simple and leasehold units, so you must confirm tenure on the specific unit and review the ground lease and condo documents.
What documents should I review before offering on a leasehold unit?
- Request the full ground lease, current rent schedule and reset details, condo declaration and minutes, association budgets and reserves, title and tax records, and any landowner consent or right-of-first-refusal requirements.
