Hi this is Joe from PrepAgent, and today we are going to talk about freehold estates.
A freehold estate is an estate in which you have exclusive rights to enjoy the possession of a property for an undefined length of time. In contrast, a less than freehold estate is held for a fixed,
defined period.
The types of freehold estates you should know are:
1. Fee simple absolute
2. Fee simple defeasible
3. Life estate
1. Fee simple absolute
Fee simple absolute is the greatest interest in a parcel of land that one can possibly own. Sometimes it is designated simply as "fee" and is the most common way real estate is owned. In a fee simple absolute estate ownership cannot be defeated by the previous owner or the previous owner's heirs; however, it is not free from encumbrances. Fee simple ownership is limited by the four basic government powers of taxation, eminent domain, police power, and escheat, and could also be limited by certain encumbrances or a condition in the deed.
2. Fee simple defeasible
A defeasible estate is created when a grantor places a condition on a fee simple estate . Upon the occurrence of a specified event, the estate may be lost. Two types of defeasible estates are the fee simple determinable and the fee simple subject to a condition subsequent.
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- If the grantor uses durational language in the condition such as "to Adam, as long as the land is used for a park," then upon the happening of a specified event such as the land being used for something other than a park, the estate will automatically terminate and revert to the grantor or the grantor's estate; this is called a fee simple determinable.
- If there is a condition such as "no alcohol to be served," then it would be a condition subsequent, as you can lose the title if you serve alcohol on the property.
3. Life estate
A life estate is an interest in real property which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person.
For example, Anne can give a property to Dan for the life of Anne. Dan would be the life tenant.
A life tenant receives the property and is responsible for maintenance of the property and paying taxes. If a life tenant allows a property to deteriorate, it would be committing waste; a life tenant cannot commit waste.
A life tenant cannot leave a property to anyone in their will. However, a life tenant may sell, mortgage or lease the property for the duration of the estate, and thus all contracts would be terminated upon the death of the life tenant.
For example, if Dan dies and the property goes back to Anne, Anne would have the estate in reversion. If Anne dies, then the property would not be Dan's because he had it as long as Anne was alive.
This is Joe from PrepAgent, remember to keep it concise and keep it simple.
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Key Takeaways
Freehold estate definition
Freehold vs. leasehold estate
Types of freehold estate
What are nonfreehold estates?
Types of nonfreehold estates
Broadly speaking, an “estate” means the right to occupy or own a particular piece of real estate. This is not the only type of right to use a property. An easement, for example, grants the right to access a property at particular times for particular reasons. But if you’re living somewhere or operating a business, you’re going to need an estate.
Estates for land and buildings fall into two broad categories: freehold estates and leasehold estates. In this article, we’ll be discussing everything you need to know about freehold estates. Let’s begin!
What Is A Freehold Estate?
A freehold estate generally refers to what we would call “ownership” in everyday speech. With a freehold estate, you have permanent ownership and control over the property. Keep in mind that this does not mean you have no obligations. If you fail to pay property taxes, for example, you could lose title to the property.
Furthermore, there are different types of freehold estate, each with its own obligations. For these reasons, it’s important to understand what type of estate you hold.
What Is The Difference Between A Freehold Estate & A Leasehold Estate?
A freehold estate is permanent. As long as you meet your legal obligations, you will always have the right to use and access your property. On the other hand, a leasehold estate represents a temporary right of occupancy. Think of a typical apartment lease. The tenant agrees to pay monthly rent for the course of a year. As long as they pay rent, they can continue to occupy the apartment. But at the end of the lease, the landlord regains that right.
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The 3 Types Of Freehold Estates
As we mentioned, there are three different types of freehold estate:
Fee Simple Absolute
Fee Simple Defeasible
Life Estate
Here’s a quick overview of each type.
Fee Simple Absolute
Fee simple absolute is the most straightforward form of real estate ownership. You hold full title to the property and can do with it what you will, provided you follow applicable zoning laws. And as long as you pay your taxes and mortgage payments, you can sell the property or leave it to your heirs.
That said, fee simple absolute isn’t entirely absolute. To begin with, the government can limit your activities due to public safety. For example, you can’t open a shooting gallery in a residential neighborhood. The government also maintains the right to forcibly purchase your property due to eminent domain. Your property could also be seized due to unpaid property taxes or as part of compensation in a civil judgment.
Fee Simple Defeasible
A fee simple defeasible is similar to a fee simple absolute in that you maintain complete ownership of the land. But in this case, there are additional restrictions on how the land may be used. This is most commonly done as part of open space policies by a local government. In exchange for giving up the right to develop land or sell it to a developer, landowners can obtain significant tax breaks. Limits are also common due to the requirements of a will. For example, a donor may leave a large building to charity, but only if it is used for certain purposes.
Life Estate
A life estate is a special type of estate that’s set up for estate planning purposes. Normally, if you want to leave your home to your children after you pass, the property will have to go through probate, which can take as long as a year. During that time, your children will not be able to occupy the property.
With a life estate, you create a shared ownership arrangement with your heirs. You maintain ownership as long as you are alive, and you remain responsible for property taxes and any other expenses. However, the inheritor, known as the remainderman, must approve any renovations or modifications. When you pass, your heir will obtain full ownership without going through the probate process.
What Is A Nonfreehold Estate?
A nonfreehold estate, also known as a leasehold estate, conveys a temporary right to occupy a property, most commonly via a lease. Unlike with a freehold estate, a nonfreehold estate holder cannot sell the property. And if they die during the term of their lease, their heirs do not inherit the estate.
The 4 Types Of Nonfreehold Estates
Nonfreehold estates are often called tenancies, and fall into four different categories:
Tenancy For Years
Tenancy From Period To Period
Tenancy At Will
Tenancy At Sufferance/p>
Tenancy For Years
A tenancy for years is typically used for long-term leases, lasting for a year or more. In this type of lease, the tenant and the landlord agree on a start date and an end date, as well as a fixed payment schedule. When the end date arrives, the tenant vacates the premises without the need for either party to give notice.
Tenancy From Period To Period
A tenancy from period to period has a defined length, just like a tenancy for years. However, this kind of tenancy automatically renews unless either the landlord or tenant gives notice. This is common for apartment rentals, whether they renew from month to month or from year to year.
Tenancy At Will
A tenancy at will is a tenancy that can be ended at any time by either party. This can be an informal arrangement between family members, or a formal written lease. If it’s a written lease, there will normally be a clause that requires the landlord to give a reasonable amount of notice.
Tenancy At Sufferance
A tenancy at sufferance happens when a tenant remains on a property after their lease has ended. The tenant may be paying rent, or they may be squatting. Either way, the landlord can have them evicted at any time, without prior notice.
Summary
A freehold estate is just a fancy legal term for what everyday people call “ownership.” Unless you’re studying real estate law, that’s probably all you need to know. Then again, if you have a fee simple defeasible or a life estate, it’s important to understand the legal nuances. We hope this guide has helped!
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