Typically beginning with the words ‘to have and to hold’, a habendum clause is a contract provision included in a deed or a lease that the defines the property interests and legal rights enjoyed by the grantee/lessee.
If you are part of a real estate transaction — whether you are buying property, selling property, or representing another party in a professional capacity — you need to have a clear understanding of what exactly is being transferred in the agreement. In real estate contracts, every term matters.
A habendum clause is relatively basic legal language that is included in property transfer documents. If properly drafted, this clause should clearly articulate the ownership rights and interests that will be granted to the buying party upon the execution of the contract.
How it Works: Understanding a Habendum Clause
In most cases, a habendum clause is comprised of relatively simple, formulaic legal language. This is because most property is transferred without any specific restrictions being put on it by the seller. For example, if you are representing a buyer who is making an outright purchase of a home, the habendum clause should make that fact clear: the new owner of the home will have an absolute right to the property, and they will be able to sell it, gift it, or transform it in accordance with government regulations. This is known as a ‘fee simple’, and it is the greatest title one can own in real property — it comes with no restrictions and it runs indefinitely.
There are, of course, some circumstances in which habendum clause will be used to outline and explain the restrictions on property. While these types of transactions are somewhat less common, they do certainly occur. For example, in some cases, property may be transferred for a limited period of time. A habendum clause could state that after a pre-selected period time, perhaps 50 years, the property ownership will revert or be transferred to a new entity. This is one reason why habendum clauses are especially common in the oil, gas, and mineral exploration industries. Habendum clauses are frequently used to define specific rights and interests in property leases.
The bottom line: The most important thing that you need to remember is that a habendum clause defines property interests and legal rights. In the most simple terms, this clause tells the buyer exactly what they are getting.
Study Tip #1: ‘To Have and to Hold’
In the vast majority of cases, a habendum clause begins with the words ‘to have and to hold’. This is the standard, boilerplate legal language. If you see this phrase in a real estate contract, or if you see it on your real estate exam, it should trigger your memory to think about a habendum clause. Watch for that language and use it to help put yourself in the right mindset to answer any specific question that you are facing.
Study Tip #2: Know Your Real Estate Terms
Before you take the real estate exam, it is highly recommended that you take the time to go through a comprehensive real estate glossary. One of the keys to passing any state’s real estate licensure exam is ensuring that you have an in-depth understanding of all of the industry-specific terms and other language that could potentially appear on the test. Habendum clause is just one of many real estate terms that are not frequently used in everyday parlance, but that could absolutely show up on your test. It is crucial that you understand the meaning of this term and how it applies to real world situations.
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