The Future of Leasehold Properties in Hawaii: A Potential Time Bomb for Lesees

By
Real Estate Agent with Hawaii Life Real Estate Brokers

This past Friday, the 18th marked 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 by Febuary 15, 2008.  As of December 31st of 2007, the lease expiration date, the owners/lesee's equity in the property is all gone.  They were given eviction notices prior to the end of the lease, however decided to take Kaneohe Ranch to court with the hopes of being able to salvage their home or investment.  This is the first time a landowner was successful in taking their property back. 

Every leasehold transaction involves a leasehold disclosure, where every potential owner/buyer must sign a disclosure saying that when the lease term, is up the property reverts back to the landowner.  I have always recommended to my clients the potential of not owning the property when the lease is set to expire and be sure the read the leasehold disclosure docs very carefully.  This now sets a precedent for many other buildings and thousands of other leasehold owners in the state that have leases set to expire in the next ten years.  This could have a time bomb effect in that the longer you hold on to your leasehold property, the less and less it will be worth...

Click here to see additional buildings where the lease is set to expire in the next 10 years.

These next several years will be really interesting... Some other buildings that are in some great locations that the lessors or landowners have made it pretty clear will not renegoiate are the Kahala Beach which expires in 2027 and the Diamond Head Beach Hotel set to expire in 2032.  Like I said, this is like a time bomb and I wouldn't want to be one of the lesees holding on at the end....

 

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