Leasehold Princeville Pali Ke Kua
Pali Ke Kua Unit 238 is an ocean view unit listed for $350K. Other units in the same complex, also with varying degrees of ocean views, range from $530K on up to $1.1M- which is quite a price range. So what accounts for the disparity? I can explain why there is a difference between the first 4 and the last 4, and that is, the first four, which are priced from $350K to $695K, are all leasehold.
If you are not familiar with “leasehold” this term means that you own the condo space but not the land under it. Think of it as being similar to a trailer park where you own your trailer but must pay for the space to park it. When you have a leasehold property, you pay a monthly “rental” or leasehold rent to the lesser for the use of the land which is an amount owed in addition to the Maintenance or Homeowner’s fees.
The lease is an agreement, set for a number of year, usually 55 or more, with pre-set renegotiation periods. The method for renegotiation of the lease fee is set forth in the leasehold document which is provided in escrow as part of the condo docs. Also in the leasehold document is the termination date along with all the renegotiation dates. Review of this document is one of the purchase contract contingencies.
To the best of my knowledge, there are only about 8 leasehold PKK units in the complex. My understanding is that there used to be many more, but that the “fee” or “right to the land under the building,” was offered throughout the years, with only 8 remaining units where the owners never took advantage of the opportunity to purchase. The opposite of leasehold is fee simple, which means you own the condo space as well as the land under it, which is why the term “buying the fee” is used when referring to leasehold to fee simple conversion.
To continue, Pali Ke Kua had a relatively low leasehold fee until the most recent renegotiation period, which took place several years back. It had been quite awhile since the last renegotiation with the end result being a huge increase from somewhere in the low to mid $100’s up to the low $700’s for the leasehold rent. This huge jump, when coupled with the HOA fees of approximately $575 made the LH units difficult if not impossible to sell. As it stands right now, the leasehold agreement expires in either 2038, 2039 or 2040, depending on if the unit is in phase I, II or III. Same for the renegotiation period– it is set for 2013, 2014 or 2015. What happens when the lease expires? Technically, I must say that the land reverts to the land owner, but typically in practical application, either there is a new lease agreement or the fee is sold.
As the lease moves towards expiration, the unit may become impossible to finance. Clearly, a lender does not want offer a 30 year mortgage for the purchase of a unit with only 10 or 15 years remaining on the lease. Remember, lenders are conservative and are not interested in sharing the element of surprise with you as you wait to see what happens at the end of your lease agreement!
My next blog will specifically discuss PKK unit 238 which is priced almost $200K less than the other leasehold units and more than $500K less than the least expensive fee simple unit. Here are all the PKK units on the market…..And one more thing- If a write off is what you are seeking, keep in mind that both the lease rent and maintenance fees are tax deductible as an expense of an investment property.
Copyright 10/2/2007 by Hawaii Information Service
MLS # Tp St DOM Taxkey Tnr Price Location Land area Details
174822 T A 488 4-5-4-12-9-28 LH $350,000 Pali Ke Kua Iii #238 993 1/1.5
200136 T A 42 4-5-4-12-9-26 LH $530,000 Pali Ke Kua Iii #236 1,135 2/2.0
197847 T A 95 4-5-4-12-8-24 LH $649,000 Pali Ke Kua Ii #130 1,100 2/1.5
192740 T A 204 4-5-4-12-5-28 LH $695,000 Pali Ke Kua I i #210C 1,127 2/2.0
196893 T A 117 4-5-4-12-9-30 FS $899,000 Pali Ke Kua Iii #242 1,135 2/2.0
173096 T A 562 4-5-4-12-9-24 FS $995,000 Pali Ke Kua Iii #234 1,135 2/2.0
196871 T A 105 4-5-4-12-8-20 FS $1,100,000 Pali Ke Kua Ii #227 993 2/2.0
194640 T A 145 4-5-4-12-9-27 FS $1,100,000 Pali Ke Kua Iii #237 1,135 2/2.0
This information has been supplied by third parties and has not been independently verified by Hawaii Information Service and is, therefore, not guaranteed.
More on this next time. Please email any questions and I’ll try to obtain answers!
Aloha,
Elaine Schaefer (R, GRI, ABR)
Broker in Charge - Princeville Resort Office
Graduate, Realtor’s Institute
Accredited Buyer’s Representative
Top Producer 100% Club
RE/MAX Kauai
Princeville Resort Office
POB 223632
Princeville, HI 96722
cell: 808 639 2935
home fax: 1 808 440 4552
email:soldonkauai@yahoo.com
website: www.kauairealestatenow.com
blog: www.blogs.alohaliving.com/princeville-condo-sales
……you can have your own piece of paradise
ask me how!
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