Buying a home or condo in Maui and seeing the words “fee simple” and “leasehold” in listings? You are not alone. These terms shape price, financing, and resale, so it pays to get clear before you tour or make an offer. In this guide, you will learn what each ownership type means, where leaseholds show up on Maui, how lenders view them, and the due diligence to complete in Wailuku, Maui County’s hub. Let’s dive in.
Fee simple basics
Fee simple means you own the land and the improvements, subject to taxes, mortgages, and zoning. It is the standard form of “full ownership” and is typically easiest to finance and resell. If you plan to hold long term or pass the property to heirs, fee simple often aligns with that goal.
In listings, you will see “Fee Simple” called out in the property details. That usually signals a more straightforward path for financing and title insurance, and a larger pool of future buyers.
Leasehold basics
Leasehold means you own the improvements and the lessee’s interest, while the land is owned by someone else and leased for a defined term. When the lease ends, the landowner’s rights take over, and in some leases, improvements may revert to the landowner.
In listings, leasehold properties are labeled “Leasehold.” You should see the lease expiration date, current ground rent, and any scheduled rent resets or step-ups if disclosed. Always ask the agent for the full recorded lease and amendments so you understand transfer rights, resets, and what happens at expiration.
Where leaseholds appear on Maui
Leaseholds are more common in resort developments, older condo projects, and master-planned resort parcels that were developed on leased land held by large private landowners or trusts. Single-family subdivisions created as standard residential lots are more likely fee simple. The pattern varies by parcel, so do not assume by neighborhood alone.
Wailuku is Maui County’s seat and a practical place to verify records. You can check with the Maui County Real Property Tax Office for tax classification and bills, and Planning and Permitting for zoning or short-term rental eligibility. Local title companies and real estate attorneys in Wailuku or elsewhere in the county can help retrieve recorded leases and estoppel information.
Impact on price and resale
Leasehold properties typically trade at a discount compared to similar fee simple homes or condos. The size of the discount depends on several factors:
- Remaining lease term
- Timing and size of rent resets or renewal terms
- Whether the lease is assignable and what happens to improvements at expiration
- Local demand and buyer preferences
A lease with many decades remaining and modest, predictable rent escalations may be treated by some buyers as near fee simple and can price closer to fee simple comparables. Short remaining terms or steep upcoming resets can reduce the buyer pool and price.
Financing differences
Lenders see leasehold as higher risk because the borrower does not own the land and lease terms can change outcomes at expiration. You may see:
- Some lenders declining to finance leasehold properties
- Larger down payments or shorter amortization for those that do
- Higher interest rates or a required minimum remaining lease term relative to the loan term
Loan program rules vary. Conventional, portfolio, and specialized Hawaii lenders treat leaseholds differently, and government programs have their own requirements. Contact lenders who regularly underwrite Hawaii leaseholds early and seek pre-qualification using the specific lease terms.
Title, insurance, and taxes
Title insurance for a leasehold transaction covers your leasehold interest, not fee simple ownership. Lenders and title companies will review the recorded lease for assignment rights, required landlord consents for sale or mortgage, and protections for mortgagees such as notice and cure provisions.
For operating costs, leasehold owners usually pay property taxes on the improvements or their assessed interest, while ground rent is a separate cash outflow. Some leases pass through taxes, insurance, or maintenance obligations. The tax treatment of ground rent and depreciation depends on your situation, so speak with a tax professional.
Short-term rental use may be restricted by county rules and by the lease or condo documents. If rental income matters to you, confirm both county eligibility and the lease or HOA rules before you rely on revenue.
Due diligence checklist
Request these documents from the listing agent or seller and obtain recorded copies when possible:
- Full recorded ground lease or master lease and every amendment or assignment
- Estoppel certificate or owner’s statement confirming lease status
- Rent ledger and history, including any arrears or disputes
- Schedule of rent resets, step-ups, CPI adjustments, or formulae
- Condo declaration, bylaws, and lease allocation to units if applicable
- Recent HOA meeting minutes and reserve study
- Title report and any recorded encumbrances or easements
- Documentation on any lease renegotiations, litigation, condemnation, or notices
Verify key legal and transactional terms:
- Lessor identity and contact information
- Assignment rights, renewal options, or purchase options
- Whether improvements revert to the lessor and under what conditions
- Default remedies and cure periods
- Lender protections, including attornment or mortgagee clauses
Complete practical checks with local offices and professionals:
- Maui County Real Property Tax Office for tax classification and bills
- Maui County Planning and Permitting for zoning and short-term rental eligibility
- Title company experienced with Hawaii leaseholds for a title commitment
- Mortgage lender active in Hawaii for lease-specific pre-approval
- Real estate attorney familiar with Hawaiian ground leases for early lease review
- Local real estate broker with leasehold experience for market context and resale
Ask the listing agent or seller:
- What is the lease expiration date and what happens at expiration?
- What exact formula governs rent increases and when is the next reset?
- Are there any disputes with the lessor?
- Has the lessor ever refused or conditioned transfers?
- Is there a current estoppel certificate available from the lessor?
Before touring, request the recorded lease and recent amendments. Reviewing terms up front reduces the risk of falling for a property that will not work with your financing or timeline.
Buyer decision guide
Use this simple framework when comparing fee simple and leasehold:
- Time horizon: Fee simple fits long-term holds and legacy planning. Leasehold can fit shorter or medium horizons if you accept potential resale discounts.
- Use: Fee simple is usually easier for predictable financing and primary residence plans. Leasehold can work for cash buyers or for locations available only on leased land.
- Financing access: If you need conventional or government financing, confirm leasehold rules before making an offer.
- Risk tolerance: Weigh rent resets, renegotiation costs, and potential reversion at lease end.
Common scenarios:
- Scenario A: Long remaining lease with modest, predictable escalations. Financing and resale may be closer to fee simple.
- Scenario B: Short remaining term or large upcoming reset. Buyer pool often narrows to cash buyers or those comfortable with higher risk.
- Scenario C: Lease restricts short-term rentals where STR income drives values. Expect a value gap compared to fee simple units that allow STRs.
Recommended next steps:
- Obtain the recorded lease before you write an offer
- Pre-qualify with lenders experienced in Hawaiian leaseholds
- Budget for legal review and title discussions
- Request an estoppel certificate and written disclosure of any lease issues
Work with a local guide
You deserve a clear, calm process that matches your goals with the right ownership structure. From retrieving recorded leases to coordinating lender and title reviews, a concierge approach helps you avoid surprises and buy with confidence. If you want tailored guidance on Maui’s resort condos, hotel-zoned options, and luxury homes, connect with Matt Talbot to start your Maui search.
FAQs
What is fee simple ownership in Maui?
- You own the land and improvements, subject to taxes, mortgages, and zoning, which usually makes financing and resale more straightforward.
What is a leasehold property in Maui and how does it end?
- You own the improvements and a lease interest in the land for a set term; at expiration, the landowner’s rights control and improvements may revert depending on the lease.
How does leasehold affect financing for Maui condos?
- Some lenders do not finance leaseholds; others may require larger down payments, shorter terms, or higher rates, and they often set minimum remaining lease terms.
Where can you verify Maui lease records in Wailuku?
- Check with the Maui County Real Property Tax Office, Planning and Permitting, and local title companies or real estate attorneys for recorded leases and tax or permit details.
Can you run a short-term rental in a leasehold condo on Maui?
- Only if both county rules and the lease or condo documents allow it; confirm eligibility and any lessor approvals before relying on rental income.
What questions should you ask about a Maui ground lease?
- Ask about expiration date, rent reset formula and timing, transfer or assignment rules, what happens to improvements, and whether an estoppel is available.
