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Key takeaways
- Fee simple is a legal term indicating full ownership of real estate.
- In fee simple ownership, the land and the structures on it are owned outright, with no limitations.
- Most home purchases in the U.S. provide fee simple ownership to the buyer.
In real estate transactions you might hear the term “fee simple” used. Though it may sound anything but simple, the concept is actually not difficult to understand: Fee simple applies to ownership of land and is the dominant form of ownership in the United States. Most homes purchased in the U.S. are fee simple purchases.
Fee simple definition
Fee simple is a legal term used in real estate that means full and irrevocable ownership of land, and any buildings on that land. Fee simple is the highest form of ownership — it means the land is owned outright, without any limitations or restrictions other than local zoning ordinances. The term fee simple applies only to real estate, which includes land, immovable property and any property directly attached, such as a building, road, pond or machinery.
When you buy a home, you usually purchase it fee simple. You own the property the home sits on and all rights to its use, and your name is on the title and deeds.
In the instance of condominiums or apartments, the owners of individual units receive fee simple ownership that gives them full legal rights subject to an agreement known as a restrictive covenant. The owners share common rights for the use of public areas and also carry certain obligations toward its upkeep.
What are the different types of fee simple ownership?
There are two types of fee simple ownership, absolute and defeasible. The latter has a few different varieties as well. Here’s a breakdown:
Fee simple absolute
Fee simple and fee simple absolute are the same thing. When you own land completely, without any limitations, it is also known as absolute. The land is still subject to property taxes and the like, though.
Fee simple defeasible
Fee simple defeasible is a similar type of property ownership. In this case, however, ownership is dependent on very specific, pre-established conditions. What’s more, if the conditions of ownership are violated, the property may be returned to the grantor or to a specified third party.
There are three different types of fee simple defeasible: subject to condition subsequent, determinable and subject to executory limitation. Each type of fee simple defeasible includes different results or actions if the conditions of property ownership are violated. Here’s more about the three types:
Fee simple subject to condition subsequent
In the case of fee simple subject to condition subsequent, property does not automatically transfer back to the grantor if the conditions of ownership aren’t met or are violated. Instead, if the conditions are violated or fail to be met, the grantor has the option to take back the property. This option is referred to as right of reentry. If the grantor does not take any action in response to ownership conditions being violated, then the property remains with the party that violated the terms.
Fee simple determinable
Fee simple determinable takes that one step further. In fee simple subject to condition subsequent, when conditions are not met, the grantor must take action. But in fee simple determinable, if conditions are violated or somehow not met, ownership of the property is automatically transferred back to the grantor. There is no further action required on their part.
Fee simple subject to executory limitation
This final type of fee simple defeasible is very similar to fee simple determinable. However, in the case of fee simple subject to executory limitation, if conditions are violated or somehow not met, ownership of the property is automatically transferred to a third party with no further action required. (As opposed to being transferred back to the grantor, as in fee simple determinable.)
FAQs
Fee simple is the type of ownership that embraces every interest in a property.
What is an example of a fee simple? ›
For example, a homeowner may choose to build an addition onto their house and would not be limited by a lease or other contractual obligation. Owners of fee simple land maintain full control over the interests of the land for an unlimited duration, usually until they convey the interests of the land to someone else.
What are the advantages of fee simple ownership? ›
Owners with fee simple can use or transfer their property freely, but they still have to follow certain legal rules. Advantages of fee simple include total control of the property, being able to transfer rights, limited liability, and a better chance of keeping the land from being seized for unpaid debts.
What is the disadvantage of fee simple? ›
Fee Simple Estates
| Pros | Con |
|---|
| Can manage the property as desired | Subject to certain limitations (taxation, escheat, eminent domain, police powers, covenants/restrictions) |
There are two main types of fee simple ownership: fee simple absolute and fee simple defeasible ownership.
What is another term for fee simple? ›
The fee simple estate is also called "estate in fee simple" or "fee-simple title", or sometimes simply "freehold" in England and Wales. From the start of the Norman period, when feudalism was introduced to England, the tenant or "holder" of a fief could not alienate (sell) it from the possession of his overlord.
Is fee simple the best? ›
Simply put, fee simple ownership is the highest possible ownership that one can have in real estate. However, there are different levels of ownership rights, even within the fee simple ownership status.
What are the limitations of fee simple? ›
- Unlike leasehold or life estate, fee simple ownership has no limitations on duration. The owner holds the property indefinitely, subject only to legal restrictions (such as zoning laws or environmental regulations).
Is a fee simple estate inheritable? ›
Fee simple ownership allows you to pass down the property to your heirs or beneficiaries as stated in a will or by the law. This type of freehold estate is sometimes referred to as an estate of inheritance because it's passed on to the owner's beneficiaries upon their death.
In what type of ownership the owner holds fee simple title? ›
The real estate term fee simple describes a landowner's complete and total ownership of a piece of land and all properties on it. The fee simple owner may do anything they wish on the land as long as it falls within established easem*nts and zoning laws.
The rules pertaining to the fee simple absolute are simple. The holder has absolute ownership; his or her ownership lasts forever unless the holder transfers it. There are no limitations on who the holder can give, sell or devise the land to.
What is the difference between a fee simple estate and a life estate? ›
Fee Simple: Full control over the property, including the right to sell, lease, or modify it. Life Estate: Control is limited to the lifetime of the life tenant. The life tenant can use the property but cannot sell or transfer full ownership.
Which of the following best defines a fee simple estate? ›
A fee simple absolute estate is the most comprehensive form of property ownership, providing complete ownership rights that are inheritable and transferable. It allows the owner to use, sell, or bequeath the property without restrictions. Therefore, it can be defined as the greatest interest one can own in land.
What is fee simple in real estate example? ›
Here's an example of fee simple subject to a condition subsequent: The land is located near a protected wildlife area. The property will be sold on the condition that the land must be preserved. If the property is ever developed, that would violate the condition and result in loss of ownership.
What is the difference between ownership and fee simple? ›
Fee simple is a legal term used in real estate that means full and irrevocable ownership of land, and any buildings on that land. Fee simple is the highest form of ownership — it means the land is owned outright, without any limitations or restrictions other than local zoning ordinances.
What are the three basic ways in which a fee simple estate may be held? ›
A fee simple estate may be held in three basic ways: in severalty, in trust, or in co-ownership.
What is fee simple absolute an example of? ›
“Fee Simple Absolute” is an estate in real property, by which the owner has the greatest power over the title, which it is possible to have, being an absolute estate. In modern use, it expressly establishes the title of real property in the owner, without limitation or end.
What is a fee in simple terms? ›
an amount of money charged for a service or for the use of something: an admission fee.
What is the difference between a fee simple and a leased fee? ›
When possessory leases (representing the actual custody of real estate by a tenant) are added to the mix, appraisers distinctly differentiate the ownership of real property into the fee simple estate (property without leases in place) and the leased fee interest (property with custodial leases in place).
What is a fee simple subject? ›
A fee simple is the greatest possible property interest in land, granting its owner all traditional property rights. Because a fee simple interest stretches out in time forever, there can only be one fee simple at a time for any given chunk of land.
