Shopping for property on Maui and seeing both fee simple and leasehold listings? You are not alone. Ownership structure shapes your rights, costs, financing options, and long-term plan, so understanding it is worth your time. In this guide, you will learn the differences, what to watch in Maui’s market, and how to do smart due diligence before you make an offer. Let’s dive in.
Fee simple: what it means
Fee simple is the broadest form of ownership under U.S. law. You own the land and the improvements on it, subject to zoning, easements, and any community rules. You can use, sell, or mortgage the property, and you pay county property taxes based on the assessed value of the land and improvements.
For most single-family homes on Maui, fee simple is the standard. It tends to appeal to buyers who value long-term security and simple resale.
Leasehold: how it works on Maui
Leasehold means you purchase the right to use land for a set period, while a separate landowner keeps the underlying land. You may own the improvements, like a condo unit or building, but the land is leased to you. Your rights end when the lease expires unless a renewal is negotiated.
On Maui, leaseholds appear most often in resort developments, some condominium complexes, timeshares, and select older or purpose-built projects. Lease terms commonly run 30 to 99 years, with 55, 65, and 99-year structures found in Hawaii. Renewal is not automatic in many cases and usually depends on agreement with the lessor and payment at renewal.
Typical lease provisions to expect
- Ground rent escalations based on CPI, fixed step-ups, or a formula.
- Transfer rules, including whether you need the lessor’s consent to sell and whether your lender’s mortgage can be recorded against the leasehold interest.
- Use restrictions, including rental policies and maintenance responsibilities.
- End-of-lease rules that may allow the lessor to take back the land, and possibly the improvements, depending on the lease.
Lessor types on Maui include private entities, trusts and legacy landholders, hotel or resort operators, and government bodies. If the property is in a condo association, those documents layer on top of the ground lease.
Key differences at a glance
- Ownership: Fee simple is land plus improvements. Leasehold is a time-limited right to use the land, typically with ownership of improvements only for the lease term.
- Price: Leasehold usually sells for less than a comparable fee simple property, especially as the remaining lease term gets shorter.
- Control: Fee simple gives broad control over use and sale. Leasehold is governed by the ground lease and any association rules.
- Long-term certainty: Fee simple offers permanence. Leasehold depends on the remaining lease term and whether renewal is available and affordable.
Price and valuation implications
Leasehold listings typically price lower than similar fee simple options. Appraisers and buyers discount value based on how many years remain on the lease, how ground rent increases, and how transferable the lease is. The shorter the remaining term and the steeper the rent escalation, the more impact on price and buyer demand.
If you plan to sell before the lease gets short, consider how the remaining term will look to your future buyer and lender. If you plan to hold through the end of the lease, understand the end-of-term rules for improvements and occupancy.
Financing and mortgageability
Many lenders will finance leasehold properties, but underwriting is tighter. Lenders often require a minimum number of years left on the lease beyond the loan maturity, and they review whether the lease allows the lender to secure and enforce its mortgage.
Government-backed programs like FHA and VA, and agency conforming loans, have specific leasehold rules that can change over time. Requirements vary by lender and loan program. The best move is to meet a lender early, provide the lease for review, and confirm the minimum remaining term and approval process in writing.
Title and insurability
Title insurance is commonly available for leasehold interests, but the policy may include exceptions tied to lease terms. Title companies review the recorded lease, amendments, and lessor rights. Confirm that your policy insures both your leasehold interest and your lender’s mortgage on that interest.
When you open escrow, order a title report that includes the lease and any recorded memoranda or amendments. Review all referenced documents, not just summaries.
Taxes and assessments
Maui County levies property taxes based on assessed value. The county’s approach to valuation can reflect the lessee’s interest and the improvements. Classification, such as residential, hotel, commercial, or short-term rental, also affects tax rates.
Transfers of leasehold interests are generally subject to conveyance tax similar to fee simple transfers. Lease termination, renewal, or conversion can have different tax outcomes. For exact treatment, consult the Maui County Real Property Tax Division and a local tax advisor.
HOA and condo considerations
Many Maui leasehold properties are condominiums, so association rules apply alongside the ground lease. Pay attention to bylaws, budgets, reserves, and any special assessments. If the association’s stability depends on the ground lease, the board’s ability to plan for renewal or negotiate with the lessor matters to your equity.
If short-term rentals are part of your plan, verify both condo rules and county regulations. Never assume rental rights based on marketing remarks. Confirm in writing.
Due diligence checklist for buyers
Use this checklist to keep your review on track:
Documents to obtain
- The full recorded lease, all amendments, riders, and any memoranda.
- Lessor contact details, prior consents, and estoppel certificates.
- Condo declaration, bylaws, house rules, and the association’s financials if applicable.
- Title report and title insurance commitments.
- Survey and legal description of the lease area.
- Property tax records and current assessed values.
- Ground rent payment history and the escalation schedule.
- Any subleases, notices of default, and pending litigation.
Lease terms to analyze
- Remaining term and exact expiration date.
- Renewal or extension rights, renewal pricing, and notice deadlines.
- Ground rent formula and timing of increases.
- Assignment and sale restrictions, consent fees, and timelines.
- Subordination and non-disturbance terms tied to lending priority.
- Insurance, repair, and maintenance responsibilities.
- Default provisions, remedies, and cure periods.
- What happens at termination, including whether improvements revert and whether compensation is due.
Questions to ask lenders, title, and counsel
- Will you finance this leasehold and what remaining term is required?
- Will title insurance cover both my leasehold and my loan, and what are the exceptions?
- What taxes should I expect on assignment, renewal, or possible conversion?
- How does the lessor’s approval process work and what are the fees and timelines?
- Are there known lease renegotiations ahead that could impact value?
Involve a Hawaii real estate attorney, a lender experienced with Maui leaseholds, a local title company, and an appraiser who understands leasehold valuation.
Seller essentials and strategy
If you are selling a leasehold, gather and disclose the full lease, amendments, and estoppel documents early. Clarify whether the lessor must approve the sale and what the process looks like. Position your price and marketing around the remaining term, rent escalations, and realistic financing options for buyers.
Offer prospective buyers the key documents up front. A clean, complete file can shorten timelines and protect value.
Converting leasehold to fee simple
Conversion can happen by negotiation and payment to the lessor. Costs vary widely and depend on the lease, the parties, and any necessary approvals. Some projects do not offer conversion paths, while others may consider them at specific milestones.
If conversion is important to you, review the lease for any language that addresses it and speak with counsel. Ask whether the association has pursued or studied conversion in the past and what hurdles they encountered.
Which path fits your goals
Choose fee simple if you want long-term certainty, broad control, and the widest lender and buyer pool. It is usually a better fit for a primary residence or a legacy asset.
Choose leasehold if a lower entry price, a specific location, or an investment timeline makes sense for your plan. Make sure the lease term, ground rent escalations, and financing fit your budget and horizon.
A good rule of thumb: align the remaining lease term with your use plan and any loan term. If you will likely sell within a few years, consider how the remaining lease will look to the next buyer.
Work with a Maui expert
Leaseholds on Maui are a distinct category with their own language, timelines, and players. You deserve clear guidance on the lease, financing, title, taxes, and association health before you commit. With deep local roots and a proven track record across condos, resort properties, land, and estates, our team can help you evaluate options that fit your goals.
If you want straight answers and a smooth process from search to closing, connect with a trusted local advisor. Contact Josh Jerman for a confidential consultation and property valuation.
FAQs
What does fee simple ownership mean in Maui?
- Fee simple means you own both the land and the improvements, with broad rights to use, sell, and finance the property, subject to zoning and recorded restrictions.
How does a Maui leasehold work and who owns the land?
- In a leasehold, you buy the remaining lease term to use the land while a separate lessor owns the land; you may own the improvements only for the duration of the lease.
Can you get a mortgage on a Maui leasehold property?
- Often yes, but lenders require specific lease terms and a minimum remaining term, and they review renewal language and subordination; confirm details with your lender early.
What happens when a Maui leasehold expires without renewal?
- If not renewed, the lessor regains control of the land and improvements may revert or be purchased under the lease terms; always verify the termination clause.
How do Maui property taxes apply to leasehold homes or condos?
- Maui County taxes assessed value and may reflect the lessee’s interest and improvements; classification affects rates, so consult the county tax office and a local tax advisor.
Can a Maui leasehold convert to fee simple later?
- Sometimes, through negotiation and payment to the lessor; feasibility and cost vary by project and lease, and there is no guarantee of conversion.
