Fee Simple vs. Leasehold Kauai Real Estate: What Buyers Need to Know

Fee Simple vs. Leasehold: What's the Difference When Buying Kauai Real Estate?

You've found a condo on Kauai with a beautiful ocean view, an attractive price, and everything you've been looking for. Then you notice two words in the listing: LEASEHOLD. Wait... what does that mean? And why is it important?

Fee simple and leasehold are two different forms of property ownership. This article explains how they work, why lease terms matter, and what buyers should investigate before purchasing a leasehold home or condo.

One of the most important things to understand when buying real estate on Kauai is whether the property is fee simple or leasehold.

The difference can have a substantial impact on the purchase price, financing, future expenses, and resale options.

What is fee simple?

Fee simple ownership generally means you own the property and the associated land interest. This is the form of ownership many mainland buyers are familiar with and accustomed to.

What is leasehold?

With leasehold ownership, the land is owned by another party and leased to the property owner for a specified period under a lease agreement.

Depending on the property, the lease may have specific provisions regarding rent, renegotiation, expiration, and other terms.

So why does this matter?

A leasehold property may have a lower purchase price than a comparable fee simple property. However, buyers need to consider:

• How many years remain on the lease?
• When does the lease rent change?
• What are the current lease payments?
• What happens when the lease expires?
• Are there lease renegotiation provisions?
• What financing options are available?
• How might the lease affect resale?

A property with 40 years remaining on a lease is a very different proposition from one with only a few years remaining.

Don’t assume that all leasehold properties have the same terms.

Never compare two properties based solely on their asking prices if one is fee simple and the other is leasehold. Have the lease documents reviewed and make sure you understand the financial and legal implications before proceeding.

Have questions about a fee simple or leasehold property on Kauai? We would be happy to help you understand what to investigate before making an offer.