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Earl Thacker Limited
Serving Hawaii since 1930
1833 Kalakaua Ave.# 609
Honolulu, HI.96815
Direct 808.386.1474
Office 808.923.7666
Fax 808.923-1010
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Fee Simple vs Leasehold
What Is Fee Simple Ownership?
Fee simple also known as fee simple absolute ownership
is probably the most familiar form of property ownership
to buyers of residential property, especially on the US
Mainland and common law countries. A fee simple buyer
acquires ownership of the entire property, including both
the land and buildings. The fee simple owner does not pay ground rent, but does pay maintenance
fees and real property taxes. The fee simple owner has the right to possess, use the land and
dispose of the land as he wishes - sell it, give it away, trade it for other things, lease it to others, or
pass it to others upon death. The fee simple estate is also called fee simple absolute(because it is
the most complete form of ownership), "estate in fee simple"or "fee-simple title."
What Is Leasehold Ownership?
A leasehold interest is created when a fee simple landowner enters into an agreement or contract
called a ground lease with a lessee. A lessee buys leasehold rights much as one buys fee simple
rights; however, the leasehold interest differs from the fee simple interest in several important
respects. First, the buyer of residential leasehold property does not own the land and must pay
ground rent. Second, his use of the land is limited to the remaining years covered by the lease.
Thereafter, the land returns to the lessor, and is called reversion. 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. Finally, the use, maintenance, and alteration of the leased premises are subject to any
restrictions contained in the lease.
Conversion of leasehold property to fee simple ownership involves purchasing the landowner's
remaining interest, called the leased fee interest. Many lessors currently offering to sell their leased
fee interests to their lessees or prospective buyers of a leasehold property.
