Real Estate ads are subject to a couple of sets of regulations. One recently amended State requirement continues to generate numerous questions. Disclosing the value of an estate is fairly unique to Hawaii. Until 2003, designation of estate quality as fee simple (FS) or leasehold (LH) was required on all forms of advertisement. While leasehold ownership must still be specifically noted, properties not so designated are now assumed to be fee simple. Because the concept of leasehold ownership is fairly unique, it should be no surprise that people always question the distinction between the two.
In the most basic terms, fee simple means you own the property. As the name implies, leasehold properties include a lease as part of the conveyance. There are various forms of leases. Every lease is different. Conveyance of a leasehold property may include not only a transfer but a possible renegotiation of the ground lease as well. Additionally, leasehold conveyances involve both a lease transfer and a conveyance of the real property interests. Sales of leasehold properties are much more involved than fee simple transfers. Disclosures are more extensive. Leasehold prosperities in East Hawaii are basically limited to Hawaiian Homes, condo units along Banyan Drive and homes along Oceanview Drive. There may also be a few remaining leasehold units in Hale Moana Condominiums as well.
A common belief is that leasehold properties belong to either the State or one of the larger Estates. In fact, churches or individual families own many. As relates to ownership, property is always conveyed with a “bundle of rights” regarded as the ownership “estate”. Fee simple ownership rights include the right to use the property for any legal purpose not otherwise limited by deed or subdivision restrictions. A lease could add further restrictions. Fee simple ownership exists indefinitely. Leasehold estates have a definite duration. While the ownership concepts are simple, the details of any property transfer are not. Understanding the differences is key in choosing not only the property but also the agent who will help guide you through this not so simple process!
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