Trying to compare two similar condos in Lahaina and wondering why one is priced much lower? In Maui, the difference often comes down to tenure: fee simple or leasehold. If you are new to Hawaii real estate, these terms can feel confusing, especially with recent changes after the 2023 wildfires.
This guide breaks down how each tenure works, what it costs, how financing and insurance differ, and how it affects your timeline and resale. You will also get a simple checklist to use before you make an offer. Let’s dive in.
Fee simple in Lahaina: the basics
Fee simple means you own the land and the improvements outright. Your ownership has no set end date, and you control resale and financing subject to zoning, easements, and any association rules.
- Marketability is typically highest because the rights are clear and permanent.
- Mortgage underwriting and title work are usually straightforward.
- Resale values tend to be more predictable over time.
Leasehold in Lahaina: how it works
Leasehold means you own the right to use the property for a set number of years under a ground lease with the landowner. The lease controls rent, renewals, transfer rights, and what happens at expiration.
- Lease terms vary. Many Hawaii ground leases started as long terms, such as 50 to 99 years.
- The lease can be a master lease for a condominium, a sublease, or tied to government programs.
- Your rights, costs, and exit options flow from the recorded lease and its amendments.
Where you see leaseholds in West Maui
In Lahaina and wider Maui County, you will often find leasehold homes in older resort and condominium communities and in some planned developments. Inventory shifts over time, so check the MLS tenure field and recorded documents for each listing rather than assuming.
What drives value in leasehold
Leasehold properties often sell for less than comparable fee simple homes because the land interest is limited and the future is lease dependent. Value typically declines as the remaining term shortens, especially when the remaining years approach typical loan terms. The discount depends on:
- Years left on the lease and how renewals work
- Ground rent increases and reset formulas
- Lessor approval processes and any transfer fees
- Market demand for that property type and location
Post‑2023 wildfire considerations
The August 2023 fires affected property conditions, insurance availability, permitting timelines, and reconstruction planning in Lahaina and nearby areas. When a leasehold is involved, take extra care:
- Confirm who is responsible for rebuilding under the lease.
- Check for any emergency rules, special assessments, or changes to renewal or assignment procedures.
- Verify current county guidance before you budget for permitting or timeline.
Because rules and processes evolved after the fires, always confirm the latest county and association policies during due diligence.
Costs to plan for
Leaseholds can carry both added closing costs and ongoing expenses. Fee simple owners generally avoid lease-specific fees, but all buyers should budget conservatively.
Upfront and closing costs for leaseholds
- Lessor approval or assignment fees
- Estoppel certificate fees and document charges
- Possible subordination or non-disturbance agreements for lenders
- Added title and lease review costs
Ongoing costs and escalations
- Ground rent, often with periodic increases or CPI ties
- Shared costs specified by the lease, such as land insurance or taxes
- HOA assessments, which can incorporate lease-related pass-throughs
For both fee simple and leasehold, Maui County assesses property taxes. Classification and rates are county specific, so confirm how your property is classified and billed.
Financing and insurance
Lender basics for leaseholds
Many conventional, FHA, VA, and portfolio lenders will finance leaseholds, but requirements vary. Common lender concerns include:
- Minimum remaining lease term at loan maturity
- Clear rights to transfer, assign, and finance the leasehold
- Subordination and non-disturbance protections
The practical impact is that leasehold purchases often require specialized lenders or higher down payments, and they can take longer because lenders review the lease and request estoppel letters.
Insurance in today’s market
Ground leases often require you to carry fire and liability insurance and to name the lessor as an additional insured or loss payee. Since 2023, wildfire coverage availability and cost have changed across Hawaii. Get insurance quotes early and confirm the policy types your lender requires.
Resale and exit strategy
Your exit options depend on the lease you buy.
- Factors that can slow resale: short remaining term, steep rent resets, limited renewal rights, or slow lessor approvals.
- Factors that help resale: long remaining term, predictable escalations, clear renewal options, and a track record of smooth approvals or past buyouts.
If you are comparing comps, separate fee simple and leasehold sales to avoid misleading conclusions. Appraisers and lenders will do the same.
Due diligence checklist for Lahaina buyers
Use this list before you make an offer or as tight contingencies:
- Confirm tenure in public records and the MLS. Request the recorded lease and all amendments.
- Read the full lease. Note remaining term, renewal options, and whether renewals are automatic or discretionary.
- Map the rent schedule. Identify escalators, CPI links, and any market-based resets.
- Check assignment rules. Understand transfer fees, consent requirements, and any conditions for financing approval.
- Order title. Confirm that the lease and any subleases are recorded and enforceable.
- Obtain an estoppel letter from the lessor or management confirming status and no defaults.
- Review HOA documents. Look at budgets, reserves, insurance policies, and the master lease if it is a condominium.
- Get insurance quotes and lender pre-approval tied to this specific lease.
- Consult local pros. Engage a Hawaii real estate attorney, a title company familiar with Maui, a lender that regularly finances Hawaii leaseholds, an appraiser with leasehold experience, and an insurance agent who can price wildfire coverage.
Timeline expectations
Typical fee simple condo or home escrows often close in 30 to 45 days. Leaseholds can take longer. Plan for:
- Lessor approval and assignment processing: about 2 to 8 weeks or more
- Estoppel and title review: an added 1 to 3 weeks
- Lender lease review and any manual underwriting: additional time depending on the lender
If reconstruction or post‑fire approvals are involved, add more time for county permitting and recovery-related processes.
Red flags to pause on
Look closely or consider walking away if you see:
- Very short remaining term and no viable path to renew
- Large automatic rent resets to market at renewal
- Lessor consent that is discretionary or often withheld
- Unclear insurance and rebuild obligations
- Lease terms that appear to subordinate homeowner mortgages without non-disturbance protection
Is leasehold right for you?
Leasehold can be a smart move if you value location and amenities and the lease has a long remaining term, fair escalations, and clear renewal rights. It can also make sense if you plan to hold for a defined period that comfortably fits within the remaining term. Fee simple offers the most flexibility and marketability, which many buyers prefer for simplicity and long-term value.
If you want help comparing specific properties, reach out. You will get clear numbers, a realistic timeline, and coordination with trusted local professionals. Connect with Harrison Mccandless to start a tailored plan for Lahaina and West Maui.
FAQs
What is the main difference between fee simple and leasehold in Lahaina?
- Fee simple gives you full ownership of land and improvements with no end date, while leasehold gives you the right to use the property for a set term under a recorded ground lease.
How do leasehold prices compare to fee simple prices on Maui?
- Leaseholds often sell for less than similar fee simple homes, with the discount driven by remaining lease term, renewal terms, rent escalations, and overall demand.
Can I get a mortgage on a leasehold condo in Lahaina?
- Many lenders will finance leaseholds, but they require specific lease provisions and a minimum remaining term, so work with a lender experienced in Hawaii leaseholds.
What happens when a lease expires on a Maui property?
- Options include renewal under the lease, reversion of the leasehold interest to the lessor, or negotiation of new terms; the outcome depends on the recorded lease.
How did the 2023 Lahaina wildfires change the process for buyers?
- Buyers should confirm current insurance availability, county permitting timelines, and any lease obligations related to rebuilding or special assessments before proceeding.
What extra costs should I expect with leasehold ownership?
- Plan for ground rent with scheduled increases, possible lessor approval and assignment fees, estoppel fees, and any lease-related pass-throughs in HOA budgets.
Is a leasehold a bad idea for an out‑of‑state buyer?
- Not necessarily; a leasehold can be attractive if the term is long, the rent schedule is predictable, and renewal rights are clear, provided you complete careful due diligence.
