Fee Available

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I was looking at condo listings today when I came across a term worth discussing in the Blog. When purchasing condos in Hawaii, occasionally you will see a condo for sale that advertises itself as a leasehold condo with fee available. In a previous blog post, I discussed leasehold condos. To summarize quickly, with leasehold condos you own the individual condo, but you are paying a monthly lease for the underlying land. There is some uncertainty as to what happens with leasehold condos when leases expire. Fee simple is the more conventional ownership that you come across on the mainland. The monthly lease and uncertainty is what makes leasehold condos less expensive than a comparable fee simple condos. There are a few leasehold condominiums where the lessors are allowing the lessees to convert their condo to fee simple by purchasing the fee. This is a leasehold condo with fee available. The cost of the fee is based on the value of the underlying land and the remaining length of the lease. As the lease gets closer to expiration, the more expensive the lease. Usually, that price ends up being close to the difference in market value between fee simple condos and leasehold condos.

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