If you have recently brought a house in the U.S, the chances are good that you got fee simple ownership of the actual property. Fee simple ownership is the most common type of real estate ownership in the U.S.
Fee simple means that you are the rightful owner of a piece of property, with all the rights to use it as you wish, unless your state or local jurisdiction has declared it to be otherwise. You can sell, give away, devise (pass on in a will), rent, or use it as collateral.
Fee simple is also called freehold estate, and the fee owner is said to have a freehold interest in the property. It differs from other forms of real property ownership, such as leaseholds, where one has a lesser right of use and less control over what happens to the property.
Fee simple ownership works like an exclusive license. You pay a fee to use the land, and you owe taxes. The difference between this and a lease is that you can transfer ownership of an estate in fee simple, but not with a leasehold.
There are two types of fee simple ownership: the fee simple absolute and fee simple defeasible. A Fee Simple Absolute gives you complete and total ownership of a property without any conditions. You can do what you want with it. It is the most common form of fee simple ownership in the U.S. A Fee Simple Defeasible interest can be lost. It requires some action on the holder’s part for it to remain valid. For example, a married couple who owns their property as Fee Simple Defeasible will lose their ownership rights if they divorce.
What is Fee Simple Ownership?
Fee simple ownership is a type of land ownership in which a person or group can gain outright title to a particular piece of property, undivided interest.
Property that has fee simple ownership allows the owners to do whatever they wish with the property, subject to any restrictions imposed by federal, state, and local laws. Quite often, though, the ability to make modifications is limited somehow. For example, homeowners associations typically limit what percentage of the exterior of a house can be altered.
Fee simple ownership gives owners several rights to use their land, including the right to build on their property, right of sale, and right to give it away. Fee simple ownership gives the owner the right to do as they please with their property unless local or legal restrictions prevent them from doing so.
An owner’s right to use their property exclusively distinguishes fee simple ownership from other forms of real estate ownership such as condominiums or co-operatives where owners own undivided interests in common areas with other owners. Fee simple ownership limitations include voting on issues, transferring the property, and giving the interest away.
How Fee Simple Ownership Works
Fee simple ownership allows the property owner to pass on their undivided interest in the property, either by will or by law. The term of fee simple ownership is unlimited. The only limitations placed on a fee simple owner are the covenants, conditions, and restrictions of a development or subdivision that may apply.
You can do whatever you want as long as you are not breaking any regulations. Any activities on the property must not negatively impact anyone else or its surroundings.
However, other laws may limit the fee for simple ownership. For example, state coastal use laws typically require that any property in the vicinity of the coast be reserved for public access. Because this land is not allowed to be held privately, it may take away some rights from private owners. If you are operating in an area where certain activities are regulated or restricted somehow, there may be limitations on what you can do with your property.
Fee simple ownership has some limitations that protect the public interest, such as preventing non-native species from entering a watershed or limiting home size, so it is not too large and out of scale for the neighbourhood. These restrictions may limit how much land you own and control, but they will not prevent you from having fee simple ownership.
What are the Types of Fee Simple Ownership?
There are two types of fee simple ownership. The first is the fee simple absolute, which means you own the land without any conditions or limitations on what you can do with it. The other type is the fee simple defeasible, which means the land is subject to certain conditions or limitations that could decrease your ownership rights.
The difference between these two types of fee simple ownership comes down to the owner’s interest if the condition occurs.
1. Fee Simple Absolute
Fee simple absolute is a type of fee simple ownership in which a person or group can gain outright title to a particular piece of property, undivided interest.
It is the most common form used for residential properties and allows you complete freedom of use as long as it does not violate local zoning restrictions or other laws. You can also transfer your interest to other owners or grantees.
Compared to the fee simple defeasible, this ownership allows the owner to be more accessible in using their property.
2. Fee Simple Defeasible
Fee simple defeasible is a type of fee simple ownership in which the owner will lose their interest in some way if certain conditions occur, such as mismanagement of property, and failure to pay taxes on time. They may also be subject to what is called “covenant restrictions.”
This type of fee simple ownership is often used with larger properties, such as apartment communities or planned developments. The fees are higher for this form of ownership because there may be more services you will receive, like maintenance of common areas. Compared to the fee simple absolute, this type of ownership is not as free in using their property.
What is the Example of Fee Simple Ownership?
It is the most common example of fee simple ownership when you buy a home. When you sign your contract to purchase the home, you will sign a Deed of Trust, which is essentially a contract that says, “I will pay off the house, and when I do, the title will be changed to reflect my name only.”
The deed also states that this property should not be used or allowed to be used in any way that does not comply with local city ordinances. The deed will also allow someone else (someone you designate) to be responsible for the taxes and utility bills.
What Rights Does an Owner in Fee Simple have?
The property owner has total and irrevocable ownership of the land and any buildings on that land. This type of ownership also includes mineral rights, which is the right to any oil, gas, or other minerals located under the surface.
The owner can sell or transfer their interest in this property to another person or entity, have the power of an eminent domain, have full legal rights to enter onto their property for almost any reason at any time, and exclude others from them entering.
The owner or any person in possession of the property or acting under their direction has the right to exclude all persons, including the state and its political subdivisions. It includes law enforcement officers, firefighters, and other emergency responders. There is also no duty to retreat if faced with a threat of violence when on your property.
The owner is allowed to do whatever they want on their property as long as they do not break any laws or violate city ordinances.
What are the Other Ownership Types?
There are several types of ownership, and they vary depending on the state and country. However, the most common ownership types are:
- Fee simple absolute: This is the most common form of fee simple and allows you to use your property in almost any way, with no restrictions.
- Fee simple defeasible: This type of ownership does not give you as much freedom in how you can use your property, but if certain conditions occur, such as the failure to pay taxes on time, then they may lose their property.
- Fee simple ownership subject to condition subsequent: The owner must continue to follow certain conditions, or they will lose their interest in the property.
- Community property: When two people purchase a property together, it is considered entirely separate from the other person’s real estate holdings. One spouse will own 50 percent of the land and buildings while the other owns 50 percent. Each spouse can sell, give away, or transfer their share without the other’s permission.
What is the Difference between Fee Simple and Leasehold Ownership?
Leasehold ownership happens when an owner pays a fee for the exclusive use and possession of a property, usually for some time. The owner has only limited rights to the land and buildings and may even have to pay additional fees during their lease or at the end of it. The length can vary from month to month, year to year, or even infinity.
In a fee simple situation, the owner can live on their property as long as they want without paying additional fees to the landowner. The property owner will have all rights associated with that land and buildings.
A property owner in a fee simple situation has all legal rights to do anything they wish on their property. It includes selling the property, entering the property without permission of others, excluding any person from entering, including law enforcement, and more. A Leasehold ownership situation gives the landowner some legal control over the building and property owner.
In addition, in a Leasehold ownership situation, the property owner is the only one allowed to live on and use the land and buildings. The rent must be paid each month (or year), and there can also be additional fees associated with that property during their lease or at the end of it.