Many buyers interested in Hawaii real estate are unfamiliar with the term â€˜Leaseholdâ€™, but it is of critical importance to understand. Most are familiar with real estate ownership in Fee Simple (also known as Freehold), in which a purchaser owns the land and any improvements and fixtures thereon.
However, in a few states, including Hawaii, there is another form of ownership: Leasehold.
When a landowner enters into an agreement/ground lease with a lessee, it creates a leasehold.
The main differences between ownership by Fee Simple and Leasehold are:
â€¢Â Â Â A leasehold buyer does not own the land on which improvements are located and, as such, must pay a ground lease.
â€¢Â Â Â The use, alteration, and maintenance of the premises are subject to conditions/restrictions named on the lease.
â€¢Â Â Â Use of the land is limited to the time remaining of said lease. At the expiration of the lease, either a new lease must be negotiated or the land reverts (and in many cases, the improvements thereon) back to the landowner, in what is called â€˜reversionâ€™.
Why would a potential buyer prefer a leasehold property over fee simple ownership? Continue reading this post