Monday, February 4, 2013

What Are the Differences Between Hawaii Fee Simple and Leasehold Properties?

Buying a home in Hawaii can be a very different experience for those used to real estate ownership on the mainland. There are unique factors you must take into account as you shop for a house or condo in Hawaii. The biggest one of all is understanding the difference between Fee Simple & Leasehold properties.

Fee Simple Properties in Hawaii - What You Own
Let's start with the one you are familiar with most, Fee Simple ownership. This is the most common form of land or property ownership in the U.S. In Hawaii, fee simple works the same way anywhere else. That simply means that you own the land itself, fully and in perpetuity until you dispose of it. That property is yours unless you sell it, give it away or trade it. You can lease it out or live on it as you wish. Easy to understand and straight forward.

Hawaii adds another category, though, found in few other places that makes it unique.

What Leasehold Properties are in Hawaii
In Hawaii, there's another designation that a lot of our real estate comes under, called Leasehold. With these you can own a house or condo, but not the land beneath it. This can cause confusion because it's something completely new for some.

The real estate laws here allow for Leasehold properties to be leased out by the owner for a certain number of years. In Hawaii, that means you purchase the use of land for only a specific time span.

Many Hawaii leasehold homeowners are on a 55 year leasehold, for instance. During that time they have the rights to use and enjoy the property. Often the enjoy a wide range of freedom just as if they possessed the land fully.

However, there are exceptions. The range of improvements allowed can be limited in the lease. At the end of the term, the property rights return to the lessor. The buildings and structures on the land may also revert to the lessor as well, if designated in the original lease. That will all be set out in what's called the 'Surrender' section of the agreement.

This type of property ownership took hold for a variety of reasons, including the vast landholdings that still reside in trusts set up in pre-Statehood Hawaii. It makes for an interesting, yet always rewarding, real estate market. There are pluses and minuses to each type, so the choice isn't always clear.

It's why you need to understand what you're actually purchasing, a Fee Simple or Leasehold property, and what it means long-term.

That's why it's important to have someone experienced in the Hawaii real estate market and its pitfalls to help you. The Islands are truly like nowhere else, and that applies to property sales, too.

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