What is leasehold property in Maui? This trips up buyers all the time. Leasehold means you’re buying the right to use a condo or home for a set period while someone else owns the land underneath.
We’ve seen clients get excited about a $400,000 condo in Kaanapali, then realize it’s leasehold and panic. Don’t. These properties typically cost 30-50% less than fee simple, which honestly can be a game-changer if you want premium Maui locations without the massive upfront cost.
When searching for Maui properties, you’ll mostly find fee simple ownership (what mainlanders are used to). But about 8% of current condo listings are leasehold. Very few homes, mostly condos.
Look, leasehold isn’t for everyone. But if you understand how it works, it might just fit your situation perfectly.
Key Takeaways:
- Leasehold Ownership Basics: You acquire usage rights for a set time (typically 30-99 years) while the land remains with the lessor.
- Key Terms to Know: Leasehold properties involve ground rent, lease duration, and renegotiation terms that impact both costs and long-term value.
- Renegotiation Process: Ground rent gets renegotiated periodically—typically every 10-15 years—which affects your future expenses.
- Leasehold vs Fee Simple: Leasehold properties offer lower upfront prices but come with ongoing ground rent and potential property value decline as the lease nears its end.
- Market Opportunities: These properties offer access to desirable areas like Kihei, West Maui, and Wailea at lower prices, but require careful financial planning.
Understanding Leasehold Property in Hawaii: Key Components
Understanding how leasehold property works in Hawaii is different than what most people expect. When you buy a leasehold property in Maui, you’re purchasing the right to use the building or unit for a set period, typically 30 to 99 years.
The landowner (called the lessor) still owns the dirt under your feet. They grant you these rights through a lease agreement, and honestly, these documents can be intimidating. We’re talking dozens of pages of legal terms.
The four things you need to understand:
Ground Rent: You’ll pay the landowner regularly for using their land. Sometimes it’s fixed, sometimes it goes up. This isn’t your HOA fee; it’s separate.
Lease Term: How long you get to use the property. Extension options? Maybe. Depends on your specific lease.
Maintenance: You’re responsible for upkeep, just like any homeowner. Major repairs, regular maintenance, it’s all on you.
Renegotiation Points: Every 10-15 years, you’ll renegotiate terms. This process can significantly impact your costs.
The reality is that a property with 50 years left is worth way more than one with 15 years remaining. The closer you get to lease expiration, the more nervous buyers get.
How Lease Rent Renegotiation Works
One of the most significant aspects of leasehold ownership involves renegotiating lease rent. This typically happens every 10 to 15 years, and honestly, it’s the part that makes many buyers nervous. The process determines your future ground rent payments and follows specific procedures outlined in your lease document.
The Appraisal Process
Independent appraisers assess the fair market value of the land, which is then used to determine a fair market ground rent. Here’s how it usually works: the AOAO (your condo association) hires an appraiser, and the lessor hires their own appraiser.
You’ll get two different valuations, and they’re rarely the same. This is normal, but it sets the stage for what comes next.
Negotiation Phase
The condo association and the lessor negotiate a new lease based on the respective appraisals. This is where things can get interesting. Both sides want the best deal, and sometimes those appraisals are pretty far apart.
The negotiation can take weeks or even months. Your lease rent could stay similar, or it could jump significantly depending on how much land values have increased.
When Arbitration Happens
If an agreement can’t be reached, predetermined arbitration procedures take effect. Think of this as the backup plan when negotiations stall. The arbitration process is outlined in your original lease, so there’s a clear path forward even when things get complicated.
Should You Buy Leasehold Property in Maui?
Look, this is the question we get asked most about Maui leasehold real estate. The answer isn’t simple because it depends on your financial situation, timeline, and risk tolerance. Understanding the pros and cons of leasehold in Maui helps you decide if it’s right for you.
Leasehold can be a smart move for some buyers, but it’s definitely not for everyone. Let’s break down what you need to know.
Leasehold vs Fee Simple Maui: Which Should You Choose?
This is the comparison every buyer needs to see. Understanding the key differences between leasehold and fee simple ownership helps you make the right choice for your situation.
Side-by-Side Comparison
| Factor | Leasehold | Fee Simple |
|---|---|---|
| Purchase Price | 30-50%+ less | Full market value |
| Land Ownership | Lessor owns land | You own land or an interest in the land with a condo. |
| Ongoing Costs | Ground rent + HOA + taxes + insurance | HOA + taxes only + insurance |
| Financing | More restrictions | Standard options |
| Lease Term | 30-99 years. Leasehold resales may have shorter terms. | Does not apply. There are no leases. |
| Resale | Can be challenging | Easier to sell |
| Appreciation | Limited by lease terms | Full appreciation potential |
When to Choose Leasehold
Leasehold makes sense if you:
- Want to access premium locations at a lower upfront cost
- Have strong income but limited capital
- Plan to hold the property short to medium term (5-15 years)
- Are comfortable with ongoing ground rent payments
Real example: That $525,000 leasehold condo in Papakea vs. the $999,000 fee simple version. If you’re planning to use it for 10-15 years and want to save $474,000 upfront, leasehold could be smart.
When to Choose Fee Simple
Fee simple makes sense if you:
- Want conventional ownership and control
- Prefer predictable costs (no ground rent increases)
- Plan to hold long-term or pass to heirs
- Want easier financing and resale options
The bottom line: Neither is “better”, it depends on your goals, timeline, and risk tolerance. We’ve seen clients succeed with both options when they match their choice to their situation.
The Main Advantage: Lower Purchase Price
The biggest advantage when you buy leasehold property in Maui? The price. You’re looking at 30-50% savings compared to fee simple properties, which can be huge when you want premium locations.
We’ve seen this firsthand. A leasehold listing in Papakea sold for $525,000, while a fee simple listing in the same building with the same floor plan sold just a few months later for $999,000. That’s nearly half the price for the exact same condo.
This price difference creates opportunities. If you have strong income but limited capital for a down payment, leasehold might make sense. You can enter premium markets while maintaining financial flexibility.
Some fantastic properties are exclusively leasehold. Alaeloa is a one-of-a-kind development in Napili, 42 cottages on 13 oceanfront acres. It’s the lowest-density condo development on the island with unmatched beach cottage charm. Kamaole Nalu is one of just a handful of beachfront vacation rental condos in South Kihei.
Check out our listing in Alaeloa »
The Financial Reality: What You Need to Know
When buying leasehold property, that lower purchase price is attractive, but you need to understand all the ongoing costs:
- Ground Rent: You’ll pay the landowner regularly for using their land. These payments typically increase every 10-15 years based on market values at renegotiation time.
- Standard Property Costs: Just like any property, you’re responsible for annual property taxes and maintenance fees. These costs continue throughout your lease term, regardless of ground rent changes.
- Property Value Changes: Leasehold property values can decrease as you approach lease expiration. This decline can be dramatic in the last 10-20 years, affecting both resale potential and financing options.
- Financing Requirements: Most banks require the lease term to exceed the mortgage term by at least five years. For a thirty-year mortgage, you’ll need a minimum of thirty-five years remaining on the lease. This protects their investment and ensures the property maintains sufficient value throughout the loan term.
The key is understanding these costs upfront so you can budget accordingly. Many buyers focus only on the lower purchase price and get surprised by the ongoing expenses later.
How Leasehold Affects Property Value Over Time
Here’s something that surprises many buyers: leasehold properties don’t follow the same value patterns as fee simple properties. Understanding this helps you make smarter investment decisions.
The remaining lease term plays a huge role in value. Properties with less than twenty years remaining often see significant depreciation. This gets worse if the lessor has shown reluctance to extend leases in the past.
We’ve seen this play out in real time. Market conditions affect both leasehold and fee simple properties, but leasehold properties are more sensitive to fluctuations. Why? The unique ownership structure adds extra variables that buyers have to consider.
What helps maintain value:
- Properties with favorable lease terms
- Clear extension options in the lease
- Lessors with a history of working with owners
Location still matters tremendously. Prime areas like beachfront properties often retain their desirability despite being leasehold. A great location can offset some of the lease-related value concerns.
Fee Available: When Leasehold Can Become Fee Simple
Something that gets buyers excited: occasionally, leasehold properties can convert to fee simple. This happens more often in condo developments that already have a mix of both ownership types. You’ll see these advertised as “leasehold fee available” or LHFA.
But there’s a catch, people don’t always choose to buy the fee because the cost can be substantial. Sometimes it’s so expensive that it exceeds the equity you’d gain by converting. I recently looked at the MLS and found two leasehold fee available condos on the market. In both cases, buying the fee cost more than the value you’d get back.
Two ways this happens:
- Individual conversions: You can buy the fee for just your unit if it’s available.
- Complex-wide conversions: Sometimes an entire condo complex converts. The AOAO negotiates to purchase all the land from the lessor.
We saw this with Hale Ono Loa in Honokowai. Back in the mid-2000s, the Hawaii legislature got concerned about leasehold properties with shorter leases expiring. They passed a bill offering tax incentives to encourage lessors to sell. Hale Ono Loa was the only Maui condo that converted after that bill passed.
Honestly, most lessors prefer to keep properties leasehold. They’re getting substantial passive income from the ground rent, so they’d rather extend lease terms than take the tax hit from selling.
How to Make Smart Leasehold Purchase Decisions
The biggest question we ask clients considering leasehold: how long do you plan to own this property? If you’re thinking 5-10 years, that lower entry cost becomes really attractive. But if you’re planning to hold for decades, you need to think carefully about lease terms and future renegotiation points.
Financial readiness goes way beyond the purchase price. We’ve seen buyers get excited about the lower cost, then struggle with the ongoing reality. You need to be prepared for ground rent payments, potential increases during renegotiation periods, and all the standard costs of property ownership.
Risk tolerance matters more with leasehold than fee simple. You’re not owning the land beneath your property, and lease rent can increase significantly. Some people are comfortable with this uncertainty; others lose sleep over it.
Think about resale potential too. If you plan to sell in 15 years, will there be 20+ years left on the lease? Properties with shorter remaining terms become harder to sell and finance. This isn’t just theory—we’ve seen it impact our clients’ ability to exit their investments.
The key is being honest about your timeline, financial situation, and comfort with risk before you fall in love with a property.
Leasehold Property Due Diligence
When submitting an offer on a leasehold property, the offer includes a leasehold property addendum. That document defines some of the important terms you encounter when purchasing a leasehold property and establishes a timeline for the seller to provide a leasehold disclosure for the buyer to review.
The leasehold disclosure is required to include the following:
- A complete and accurate copy of any leases and any amendments.
- A standardized summary of the length of the lease, lease rent terms, lease rent renegotiation dates, how renegotiated lease rents will be calculated, and surrender clause provisions.
- A standardized glossary of commonly used lease terms.
- For condos, a statement that there are currently no statutory provisions for the mandatory conversion of leasehold condominiums, and that there are no assurances that such measures will be enacted in the future.
The leasehold disclosure is one of the contingencies in the purchase contract. If the buyer reviews these documents and finds them objectionable, they may cancel the purchase contract, provided that the cancellation is made within the specified contingency period.
Types of Leasehold Properties in Maui
Not all leasehold properties are created equal. Understanding where you’ll find them and what types are available helps you focus your search and set realistic expectations. Most leasehold properties on Maui are condominiums, but there are also some single-family homes and commercial properties worth knowing about.
Leasehold Condominiums on Maui
The majority of leasehold properties on Maui are condominiums. About 8% of current active Maui condo listings are leasehold, giving buyers several options across the island.
You’ll find leasehold condominiums in some of Maui’s most desirable areas:
- Ma’alaea – Oceanfront properties with great whale watching
- Kihei – South Maui’s popular beach town with multiple leasehold developments
- Ka’anapali – West Maui’s premier resort area
- Napili, Kahana, and Honokowai – Quieter West Maui communities with beach access
Unfortunately, we lost a couple of leasehold condo developments in Lahaina Town during the devastating fire. These properties represented some unique leasehold opportunities that are no longer available.
Leasehold Homes
Single-family leasehold homes are much rarer on Maui. The vast majority are located in Hawaiian Homelands, which are exclusively available to individuals with at least 50% Hawaiian ancestry, as determined by their Hawaiian Blood Quantum.
Hawaiian Homelands leasehold land rarely comes to market, and there are long waiting lists of qualified Hawaiians for these lots.
Occasionally, you’ll find a leasehold home outside Hawaiian Homelands. The most common example is when one of the Pires Place Residential Condominiums becomes available in Kula. This is a small community of just 11 homes.
Commercial Leasehold Properties
While we don’t frequently represent commercial buyers or sellers, it’s worth noting that leasehold properties exist in the commercial market too. Commercial leasehold constitutes a very small fraction of the overall commercial inventory on Maui.
Your Next Steps in Maui’s Leasehold Property Market
Leasehold property ownership isn’t right for everyone, but it can open doors to Maui real estate that might otherwise be out of reach. The key is understanding what you’re getting into and making sure the numbers work for your specific situation.
Don’t go it alone. Leasehold properties have unique legal and financial considerations that require experienced guidance. You need someone who understands lease terms, renegotiation processes, and how these properties perform in different market conditions.
We’ve helped dozens of clients navigate leasehold purchases successfully. Some have saved hundreds of thousands of dollars accessing premium locations. Others have decided leasehold wasn’t the right fit after reviewing the details, and that’s okay too.
Ready to explore your options? Contact the Maui Real Estate Team today. We’ll help you understand whether leasehold properties align with your goals and guide you through the entire process if they do.
FAQs About Leasehold Property
How do I know if a property is leasehold or fee simple?
If you’re searching on our site, the property’s leasehold or fee simple status will be displayed right next to the property address. Our local Realtor Association also requires all agents to indicate if a property is leasehold in the listing remarks, so you won’t miss it.
What happens when a leasehold property's lease expires?
Technically, when a lease expires, the property reverts to the landowner. The lease includes a surrender clause that spells out what happens.
But here’s the reality: we haven’t seen any recent examples of leases actually expiring and reverting to the landowner on Maui. Most lessors are making substantial income from these properties, so they’d rather extend the lease than lose that income stream.
Can I modify or renovate a leasehold property?
Most leasehold agreements let you make modifications with the landowner’s approval. Just remember that significant renovations require specific permissions, and you’re putting money into a property you don’t own forever.
How does financing work for leasehold properties?
Financing exists, but it’s trickier than fee simple properties. Lenders typically want at least five more years on the lease than your loan term. So for a 30-year mortgage, you’ll need 35+ years remaining.
Some local lenders specialize in leasehold financing and understand Hawaii’s unique market. Expect slightly higher interest rates and different down payment requirements compared to fee simple properties.
Should I buy leasehold property in Hawaii?
It depends on your situation. If you want to access premium Maui locations at a lower price point and you’re comfortable with the ongoing costs and lease terms, leasehold can be a smart choice. We’ve helped clients save hundreds of thousands of dollars this way.
But if you prefer the security of owning your land outright or you’re planning to hold the property for decades, fee simple might be better. The key is understanding your timeline, budget, and risk tolerance before making a decision.
