A freehold estate is an estate in land that has an indefinite duration or in other words, there is no definitive termination date for ownership. You can think of it as, “I own the property” since the estate lasts at least a lifetime and then the property can be willed to the owner’s heirs. You can contrast this with the opposite, a non-freehold estate, which has a specific termination date for the tenant’s leased property rights. Freehold estates are characterized by specific rights in relation to “ownership” of the land. The particularities and extent of these rights depend on which type of freehold estate it is. There are three main types of freehold estates in the United States:
- Fee simple absolute
- Fee defeasible
- Life estate
Let’s go into depth on each of these types of freehold estates.
Fee simple absolute
Fee simple absolute is the highest degree of ownership and the most extensive interest in a freehold property that an individual can possess. This type is not subject to limitations or conditions set, it is subject only to government rules and regulations. In common law countries, this is the most common way real estate is owned. The owner can do whatever they like with the property as it has no restrictions. For example, the person can farm crops on the land, remove trees or build structures on it. It has an unlimited duration of ownership and unless the owner has stated otherwise is a will, the property is automatically distributed to the owner’s heirs. In essence, fee simple absolute means that other than specialized government circumstances and regulations (such as taxation, eminent domain, police power and escheat), this type of freehold property is complete, unrestricted and inheritable.
Fee simple defeasible
A fee simple defeasible estate is conditional and created when a grantor places a condition on the fee simple estate. These conditions are specific and if they are not met or disobeyed, the estate may be lost. For instance, a grantor may specify that no alcohol be served on the premises, but if a wine and cheese party is thrown, then the grantor would have the right to take back the property. There are three types of defeasible estates:
- Fee simple determinable: This type of defeasible estate means the contract is automatically ended if conditions are violated. An example would be that the property must be used as a school, however once the property is not a school, it immediately is returned to the grantor without any further action.
- Fee simple subject to a condition subsequent: This is very similar to fee simple determinable, however the difference is that if the condition is violated, the owner has to option on whether to take back the property or not.
- Fee simple subject to executory limitation: Also similar to fee simple determinable, however in this instance, if the condition is violated, it is immediately returned to a third party that the grantor has specified.
A life estate is an interest in property that does not amount to ownership, it is limited by the life of another person. The owner designates a life tenant who may hold it for the duration of the owner’s life. The life tenant becomes responsible for the property’s maintenance, taxes and they must not let the property fall into disrepair or waste. Life tenants are not allowed to will the property to heirs, though they can mortgage or lease the property at their discretion for the duration of the estate, but once the tenant dies, all contracts are terminated and the property is given back to the owner. To make it more simple, John is the owner of the land and he deems that Jane will be the life tenant of said land. If Jane dies, the land is given back to John. If John dies, Jane does not get to keep the land since she only possessed it while John was alive, it would be given to another that John specified previous to his death.
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