The Definition of Freehold Estate Types
June 8, 2023
Do you know what a freehold estate is? It can be confusing getting to grips with different terms used in real estate law. In this article, we'll break down exactly what a freehold estate is and then look at the three main types. Whether you're just starting to study for real estate or looking for a refresher on real estate law topics, this guide will provide the information you need to make sure you have a solid understanding of the ins and outs of freehold estates.
A freehold estate allows you to possess a property without worrying about time constraints, while owning the less than freehold variation entails finite and stipulated occupancy lengths.
When it comes to freehold estates, there are several key categories that you should have in your real estate toolkit. These include:
- Fee Simple Absolute
- Fee Simple Defeasible
- Life Estate and Leaseholds
All types provide different forms of ownership rights - let’s explore…
Freehold Estate Definitions
Fee Simple Absolute
Ownership of an estate or parcel of land through the Fee Simple Absolute conveys extensive rights and privileges. It is, by far, the most common form of real estate ownership without any restrictions from previous owners or their heirs. Nevertheless, it can be subject to limitation under certain conditions such as taxation powers created at government level including eminent domain or police power delegations; additionally encumbrances may apply in some cases too.
Fee Simple Defeasible
A defeasible estate provides a grantor the opportunity to have more control over their property even after it has been conveyed due to its conditional nature. Specifically, two types of such estates exist: fee simple determinable and subject-to-condition subsequent. When predetermined conditions are met or acted upon, these specialized properties can be revoked entirely from ownership by the original grantor.
Grantors can utilize a Fee Simple Determinable to automatically shift property titles back in their name when certain conditions are no longer met. By including durational language into the condition of the grant, such as "as long as this land is used for a park," should that event cease occurring then ownership will revert without further action or process needed on behalf of either party.
If a condition of the contract prohibits serving alcohol on the property, then it's classified as "condition subsequent." Failure to comply with this important clause may result in title forfeiture.
Life Estate
A life estate provides a unique way for individuals to hold an interest in real property for the duration of their lifetime or that of another person. It offers those with ownership interests a flexible and tailored approach to managing their estates, allowing them time-limited rights over certain properties while maintaining transferrable control after death.
Life tenants can reap the benefits of ownership, such as occupancy and income; however, with this privilege comes responsibility. Maintenance of a property is expected to ensure its preservation for future owners, while taxes must also be paid in order to keep up legal obligations. Failing to do so would constitute waste – an act that life tenants are not allowed to commit under any circumstances.
To protect the longevity of an estate, life tenants are responsible for maintaining and safeguarding its value. This includes paying taxes timely as well as preserving it from any intentional damage or decline in condition - a concept known as "waste". By abiding by these obligations, life tenants can ensure their inheritance remains unharmed.
A life tenant may still reap the benefits of property ownership without passing it down to future generations. They retain control over certain areas, including selling, mortgaging and leasing during their tenure as a legal owner but once they pass away these agreements will no longer be valid.
In conclusion, different types of estates can easily be used to meet the needs of various estate owners. Fee simple absolute is the most inclusive type of estate with the most extensive rights and privileges for the owner. On the other hand, defeasible estates provide conditional rights that remain valid even after property has been conveyed. Lastly, life estates provide an opportunity for individuals to hold an interest in property during their lifetime or that of another person while they are alive.
It is important to understand all aspects of real estate ownership and different types of estates in order to obtain the best possible outcome when either purchasing or selling a piece of land or transferring it. To stay up-to-date on what you need to know about these concepts and to ensure success on your next real estate or law exam, use ExamSmart's online practice exams and tutorials prepared by industry experts!
