There was a recent article in the Honolulu Star Bulletin about the Queen Emma Land Company taking back a leasehold property in Waikiki. The property in question was the White Sands Waikiki Resort Club run as a time-share property by Celebrity Resorts. Negotiations to renew the long term lease were not successful, most likely because, “(t)he rent has gone up substantially,” said Les Goya, vice president of Queen Emma.
In most circumstances, it doesn’t make sense to buy leasehold. The Queen Emma story is a perfect example why - the Landowner can (and has the right to) take back the property at the end of the lease.
When Honolulu Mayor Mufi Hanneman came into office, he revamped the old mandatory “lease to fee” conversion, which used to say if you had a % of owners that wanted to buy the fee interest in a property, the seller would be forced to sell. A monumental case regarding this revamped law took place back in January of 2008, where Kaneohe Ranch took back property from home owners to redevelop in a partnership with DR Horton.
“…a historic landmark for leasehold ownership in Hawaii. The landowner (lessor), Kaneohe Ranch prevailed in a suit between themselves and the individual owners (lessees) of the Kailuan in Kailua. Over a dozen owners will be forced to surrender their homes…”
While leasehold properties are attractive because they tend to be less expensive then their fee simple counter parts, there are risks involved when buying these types of properties. For one, you don’t own the leasehold property - you are only leasing it. We get a lot of inquiries on leasehold property for people using our Hawaii real estate search engine.
What’s great about our real estate search tool, is you have the option to uncheck the leasehold checkbox under “more options” which brings up the advanced search. If you don’t want to look at property where someone else owns or will own the land you’re looking to purchase, I would suggest unchecking leasehold. When in doubt, I always advise my clients to buy fee simple.
David Buck, RA wrote this for http://www.hawaiilife.com/articles // David was born and raised in Hawaii, growing up on both Oahu and Maui. He is a 2nd generation real estate professional and 3rd gereration businessman in Hawaii. He graduated from Punahou School and went on to earn his degree in Environmental Analysis and Design from the University of California at Irvine. His hard work didn't stop there. He went on to become a Honolulu Firefighter. After 7 years of two careers "putting out fires" figuratively and literally, David made the decision in 2007 to sell real estate full time. However, he still carries on the Honolulu Fire Department's motto of Pride, Service and Dedication to servicing his clients' needs.
