Condos in the United States can be either fee simple or leasehold, and most are fee simple. With fee simple, you own your unit permanently along with an undivided share of the common elements. With a leasehold condo, you own the unit but the land underneath belongs to someone else, and your ownership runs only as long as the ground lease. The difference shapes your financing, your monthly costs, and what the unit will be worth when you sell.
What Fee Simple Ownership Gives You
Fee simple is the most complete form of property ownership. When you buy a fee simple condo, you own the airspace inside your unit’s defined boundaries and an undivided percentage interest in all the common elements: the building’s structure, roof, hallways, elevators, parking, the land beneath the building, and shared amenities.
That ownership is permanent. There is no expiration date, no ground rent, and no landowner who can take the property back. You can sell, mortgage, renovate, or pass the unit to heirs with the same freedom as any other real property owner, subject to your HOA’s rules. Your percentage share of the common elements is fixed in the condominium declaration (sometimes called the master deed) and determines your share of common expenses.
What a Leasehold Condo Actually Is
Leasehold condos flip the arrangement. You buy rights to your unit, but the land under the building belongs to a separate landowner. Your ownership lasts only as long as the ground lease, which typically runs 40 to 99 years from its original execution. Some leases go longer, but the defining feature is that your interest has an expiration date.
You pay ground rent to the landowner on top of your regular HOA fees. It is a separate, recurring payment for use of the land, effectively a second monthly bill layered onto your housing costs. When the lease expires, the property and any improvements on it revert to the landowner unless the lease is renewed or the owners collectively buy the land.
How Ground Rent Escalates
Ground rent rarely stays fixed for the full lease term. Most ground leases include escalation clauses that let the landowner raise the rent at set intervals. Common structures are fixed percentage increases (say, 3% every five years), adjustments tied to the Consumer Price Index, and periodic reappraisals based on current market value. Resets usually happen every five to ten years, though some leases adjust annually.
The method matters over a long holding period. A CPI-linked adjustment tracks general inflation and stays fairly predictable. A market-based reappraisal can produce sharp jumps if land values in the area have surged since the last reset. A lease that looks affordable today can become burdensome two or three resets down the road, so reading the escalation clause carefully before you buy is essential.
How Ownership Type Affects Mortgage Financing
Financing is where the fee simple versus leasehold distinction creates the most immediate friction. Lenders treat leasehold condos as riskier collateral because the borrower’s ownership has an expiration date, and each major loan program sets its own minimum for how much lease term must remain.
For conventional loans backed by Fannie Mae, the ground lease must have an unexpired term extending at least five years beyond the mortgage’s maturity date. On a 30-year mortgage closing in 2026, that means the lease must run at least through 2061. The lease must also permit unlimited assignment, transfer, and subletting, and it cannot contain default provisions that wipe out the lender’s security without notice and a cure period.1Fannie Mae. Special Property Eligibility and Underwriting Considerations: Leasehold Estates
FHA loans are more restrictive. Under standard HUD guidelines, the remaining lease term must be at least 75 years from the date the mortgage is executed. A 99-year renewable lease also qualifies regardless of how much time remains before renewal, provided the lessee has the right to renew with all original provisions intact. For condominiums specifically, a remaining term as short as 55 years can work if the lease includes an option to extend it to a total of 75 years.2U.S. Department of Housing and Urban Development. Chapter 3: Ground Leases
VA loans fall in between. The VA generally requires the lease to extend at least 14 years beyond the mortgage term.3U.S. Department of Veterans Affairs. VA Home Loan Guaranty Buyer’s Guide
The practical effect is that as a ground lease ages and its remaining term shrinks, the pool of eligible buyers narrows. A leasehold condo with 60 years left on its lease can still qualify for a conventional loan. One with 25 years left may not qualify for anything except a cash purchase, which sharply limits your buyer pool when it is time to sell.
Resale Value and Long-Term Costs
Leasehold condos almost always sell at a discount compared to equivalent fee simple units, and that discount widens as the remaining lease term shortens. Buyers are paying for a right that is shrinking with each passing year. A unit with 80 years on the lease feels close to fee simple ownership in practice. A unit with 30 years left looks more like a long-term rental than an investment.
Total ownership costs also run higher. You are paying HOA fees just like any condo owner, and ground rent is an additional layer that fee simple owners do not face. If the lease uses market-based escalation, that rent can rise significantly over your ownership period. Fee simple condo values generally track the broader real estate market. Leasehold values work against a ticking clock.
Can a Leasehold Condo Be Converted to Fee Simple?
Sometimes. Owners can convert their interest to fee simple by purchasing the underlying land from the landowner, but this usually requires the condo association to negotiate a collective purchase on behalf of all unit owners, since no individual can buy a slice of the land beneath a shared building. The price is negotiated between the association and the landowner, and the cost is typically divided among unit owners based on their percentage interest in the common elements.
Whether conversion is possible depends on the landowner’s willingness to sell and the terms of the original ground lease. Some leases include a purchase option at a predetermined price or formula. Others contain no such provision, leaving owners to negotiate from scratch. A few states have enacted legislation giving leasehold owners some right to acquire the underlying fee, though this is far from universal. Conversion eliminates ground rent permanently and removes the lease expiration concern, which can raise each unit’s market value substantially.
How to Check Which Type a Condo Is
The property deed is the definitive source. It will identify the interest being conveyed as either “fee simple” or a “leasehold estate.” Deeds are recorded with the county recorder’s office and are publicly accessible, either in person or through the county’s online records portal.
The condominium declaration also spells out the ownership structure and describes each unit’s boundaries, the common elements, and the percentage interest assigned to each owner. A knowledgeable real estate agent can usually tell you the ownership type before you get that far, and listing descriptions for leasehold properties will often disclose the remaining lease term and monthly ground rent.
If you are looking at a leasehold condo, do not stop at confirming the ownership type. Get a copy of the actual ground lease and read the escalation clause, the renewal provisions, and any restrictions on assignment or subletting. Those details shape the true cost and flexibility of what you are buying far more than the purchase price alone.