Land Tenure: What is the difference between Fee Simple and Leasehold properties?
A fee simple buyer acquires ownership of the entire property, including both the land and buildings. A leasehold buyer owns the home or structure but only a "leasehold interest" in the land beneath it. A leasehold interest is created when a fee simple landowner enters into an agreement or contract called a ground lease with the lessee, or the buyer (homeowner).

Most importantly, the buyer of residential leasehold property does not own the land and must pay ground rent. The rent is usually fixed for anywhere from 10-55 years; from there, the rent has to be renegotiated based on terms of the lease and may increase. (The ground rent is in addition to the monthly mortgage payments for the home.)

At the end of the term, the landowner may opt to take the property back. Depending on the provisions of any surrender clause in the lease, the buildings and other improvements on the land may also revert to the lessor.

In addition, the use, maintenance, and alteration of the leased premises may be restricted by terms contained in the lease.

Conversion of leasehold property to fee simple ownership involves purchasing the landowner's remaining interest, called the leased fee interest. The lessors of many leasehold properties in Hawaii are currently offering to sell their leased fee interests to their lessees or prospective buyers of a leasehold property.

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