Seeing “LH” or “FS” on Maui listings and not sure what it means for you? You are not alone. Choosing between leasehold and fee simple affects your financing, monthly costs, and long‑term plans. In this guide, you will learn what each option really means in Maui County, how lenders view leaseholds, and the steps to protect yourself before you write an offer. Let’s dive in.
Fee simple basics
Fee simple means you own the land and the structures on it. You control resale, improvements, and long‑term decisions, subject to normal rules like taxes and permitting. This is the most common ownership type on the Mainland and across many Maui neighborhoods.
For most buyers, fee simple offers the most predictability. It typically supports straightforward lending, easier refinancing, and fewer unknowns down the road.
Leasehold basics
Leasehold means you own the home or condo unit, but not the land. You lease the land from a separate landowner for a set term that often ranges from 30 to 99 years. Your rights and costs are defined by the recorded lease.
When the lease ends, what happens depends on the lease language. Some leases allow renewal or extension. Others provide that improvements revert to the landowner. In Central Maui, you will see a mix of fee simple and leasehold, with leasehold more common in certain older subdivisions or specific condo developments.
Key lease terms to review first
- Term and expiration date
- Ground rent amount, payment schedule, and how increases occur, including fixed steps, index formulas like CPI, or market resets
- Renewal or extension rights and procedures, including whether a renewal is automatic or only a right to negotiate
- Assignment rules and whether your lender’s rights will be protected
- Reversion of improvements at lease end and whether removal is required
- Insurance, tax, and maintenance obligations
- Condemnation and eminent domain provisions
- Default and cure terms, including forfeiture risk
Financing differences on Maui
Lenders underwrite leasehold properties differently than fee simple. They look closely at remaining lease term, rent increases, and whether their collateral is protected.
What underwriters focus on
- Remaining lease term versus loan term and borrower’s age
- Escalation or reset risk that could raise monthly costs
- Subordination or non‑disturbance agreements that protect the lender
- Whether the lease can be assigned to a new buyer or to the lender after foreclosure
- Reversion risk at lease end
What it means for you
- Program rules vary by lender and loan type. Many lenders have a minimum required lease term that must extend beyond the mortgage term.
- You may see higher down payments, higher interest rates, or shorter amortizations for leasehold loans.
- Refinancing later can be harder as the lease term shortens or if lease costs increase.
- Expect extra steps. Lenders often require a full lease review, title endorsements, and sometimes a Subordination, Non‑disturbance and Attornment Agreement, called an SNDA.
Your action step
Get pre‑approved early and make sure your pre‑approval letter specifically states that the lender has reviewed and will accept the lease for the property you are targeting. Do this before you write an offer on a leasehold listing.
Resale and long‑term costs
Leaseholds often sell at discounts compared to similar fee simple homes. That lower price can help you get in the door, but you need to plan for long‑term costs and exit strategy.
- Ground rent can be fixed, indexed, or reset to market. Resets can create large increases.
- Property taxes, HOA fees, and assessments still apply, and the lease or county rules may decide who is billed for taxes.
- The buyer pool can be smaller if financing is limited, which can affect resale time and pricing.
- Value tends to be very sensitive to remaining lease term. Prices often decline as expiration nears, and may improve after a favorable extension.
End‑of‑lease outcomes to understand
- Renewal may be negotiated, and it can be costly
- Improvements may revert to the landowner, depending on the lease
- A buyout by the landowner can occur, but it is not guaranteed
- Disputes can arise, and legal action can be expensive and uncertain
Central Maui nuances
Central Maui includes communities like Kahului, Wailuku, and Pukalani. Many single‑family neighborhoods here are fee simple. Leasehold appears more in certain older subdivisions and some condominium projects. Always check the MLS “Tenure” field for LH or leasehold, then review the recorded lease documents.
When comparing listings, look beyond the sticker price. Include the ground rent, HOA fees, likely escalations, and financing terms to get a true picture of monthly cost. Also consider your resale horizon. If you expect to sell before a major rent reset or well before lease expiration, that timeline can matter for value.
Quick comparison: which path fits you
- Choose fee simple if you want maximum control, broader financing, and simpler resale.
- Consider leasehold if the upfront price discount is important and you are comfortable with the lease terms, including rent escalations and remaining term.
- If you are unsure, model your five‑ and ten‑year costs with ground rent increases, then compare to fee simple options in the same area.
Buyer checklist for Central Maui
Documents to request before you offer
- Full recorded lease with all amendments and exhibits
- Any recorded memoranda or existing non‑disturbance agreements
- Rent payment history or rent roll if applicable
- Estoppel letter from the lessor if available
- HOA documents and budgets if a condo, including any ground lease schedules
- Title report or commitment, showing the recorded lease and any encumbrances
- Seller disclosures and any legal opinions the seller has about the lease
Questions to ask the seller or listing agent
- Exact lease expiration date and years remaining at your expected closing
- Ground rent calculation, current amount, and the schedule for increases or resets
- Whether there is an existing renewal right or formula, and whether it has been renegotiated in the past
- Whether improvements revert to the landowner at lease end
- Whether the property has recent financing and what protections the lender required
- Who pays property taxes, insurance, and major assessments
- Whether there are any claims or disputes involving the lessor and leaseholders
Questions to ask your lender early
- Do you lend on this specific leasehold, and under which programs
- What minimum remaining lease term do you require for purchase or refinance
- What endorsements or agreements you require, such as an SNDA or attorney opinion
- How the lease escalation or market resets affect loan eligibility
- What down payment, rate, or mortgage insurance changes apply to leasehold collateral
Practical timeline for due diligence
- Pre‑offer: confirm tenure in the MLS, request a preliminary copy of the lease, and get pre‑approval that references lease acceptance
- Offer: include contingencies for lease review and lender approval, and consider a longer inspection period for legal review
- Escrow: obtain the title commitment, estoppel documents, and lender conditions, and engage a Hawaii real estate attorney for lease review
- Closing: verify required endorsements and any SNDA are finalized and recorded as needed
Negotiation and buyer protections
Pricing on leaseholds should reflect the remaining term, rent escalation risk, and financing difficulty. Use those factors to negotiate.
Contract provisions to include
- A contingency for lender approval that names required documents, such as an SNDA and title endorsements
- A contingency for full lease review, including all amendments, not just a summary
- A lease‑document contingency that allows you to cancel or renegotiate if lease economics are materially adverse or financing is unavailable
- An escrow holdback or seller credit if a required landlord consent or SNDA cannot be obtained before closing, if acceptable to your lender
When to involve counsel
Leaseholds in Hawaii are technical. Local language and state law can change rights and obligations in important ways. Engage a Hawaii real estate attorney who handles leaseholds, and work with a title company experienced with Maui leasehold endorsements and recordings.
How to make a confident choice
Start with your time horizon and your budget. If you want long‑term control and less complexity, fee simple may be the right fit. If you value a lower purchase price and you can manage the lease terms and financing, a leasehold can work, especially when the remaining term is long and increases are predictable.
Focus on the single most important factor, the remaining lease term and how future rent increases or renewals are calculated. Then build a full cost picture, including ground rent, taxes, HOA fees, and financing terms. If the numbers and the lease language make sense, you can move forward with confidence.
If you want help reading the fine print or comparing options across Central and South Maui, connect with a local team that knows these leases and the neighborhoods. For thoughtful guidance from search to closing, reach out to Leslie-Ann Yokouchi.
FAQs
What is the difference between fee simple and leasehold in Maui real estate
- Fee simple means you own the land and improvements. Leasehold means you own the improvements and lease the land under a long‑term recorded lease.
Can you get a mortgage on a leasehold property in Maui County
- Often yes, but it depends on the lender and program, the remaining lease term, and whether the lender can obtain protections such as an SNDA and title endorsements.
What happens when a Maui ground lease expires on a home or condo
- Outcomes vary by lease, including renewal at negotiated terms, reversion of improvements to the landowner, a possible buyout, or other actions set by the contract.
Are leasehold properties always cheaper than fee simple in Central Maui
- Leaseholds typically sell at lower prices than comparable fee simple homes, but your long‑term cost depends on ground rent increases, financing, and any renewal costs.
What should Central Maui buyers review before offering on a leasehold
- Obtain the full lease and amendments, title commitment, any SNDA or estoppel, HOA documents if applicable, and lender pre‑approval that confirms acceptance of the lease.
How do lease resets and escalations affect monthly costs in Maui
- Ground rent can rise on a set schedule, by an index, or at market resets, and those increases can materially change your monthly payment and loan eligibility.
