Leasehold property in Hawaii

[Patrick Aime]

Hi guys,

I am new to this forum, and wanted to see if anyone ever bought a leasehold property in Hawaii?

Any success story?

What should i watch out for?

Thank you!

Patrick

[Mark Waite]

The biggest fear as a condo owner is what happens at the end of the contract. So its important to realize who owns what. The land owner, who is leasing the property to the owners association, owns the physical dirt, the parcel upon which all of the improvements lie. They do not, however, own the improvements. Those are owned by the owners association.

At the end of the 50 year lease agreement, one of three things usually happens: 1) they renegotiate another lease for 50 or so years, 2) the land owner offers to sell the land to the owners association, or 3) the land owner buys all of the improvements (buildings, pool, tennis court, etc.) from the owners association. #3 is not likely to happen because the land owner would need very deep pockets to buy out every owner and all of the common elements. #2 could happen during the lease or at the end of the lease, and does on occasion. This, however, will require the owners association to get a bank loan to buy the property, the cost of which is then passed along to the owners, who in turn are given the opportunity to buy the fee simple rights to their property. If they do not, then the owners association then becomes the lease holder and lease payments are made to the association. All that aside, the highest probably is #1.

But without a crystal ball, hard to say what can happen in 20 to 30 years.