Freehold Estates: Definition & Key Terms

Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

There is more than one way to own property, and not all types of ownership are equal. In this lesson, you'll learn what a freehold estate is and the different types of freehold estates one might encounter. A short quiz follows the lesson.

Estates in Land

You may be a bit surprised, but saying you 'own' a piece of real estate doesn't really mean much from a legal standpoint. It is more precise to say that you own an estate in a particular piece of land. In real property, an estate has two characteristics. First, you either legally possess the land (called a 'possessory interest') or you may eventually have possession of it. For example, if you live on your land, you are in possession of it. However, if you lease your land to another person, you are not in possession of it, but will be when the lease terminates. The second characteristic of an estate in land is the duration of your interest in it. Some estates have indefinite durations while others have a clearly defined duration.

Keep in mind that estates can be held by just one person or entity or by many people or entities at the same time. If only one person or entity, such as a corporation, holds the estate it is called a tenancy in severalty. If more than one person or entity holds the estate, it's called a 'cotenancy'.

Freehold Estates Defined

A freehold estate is an estate in land that is of indefinite duration, which simply means there is no definite time in which the person's interest in the land terminates. You can contrast that with a non-freehold estate, such as an 'estate for years', a type of leasehold where the tenant's rights to the leased property terminates by a certain date. A freehold estate is also characterized by certain rights that you would consider relating to 'ownership' of land. However, the nature and extent of these rights depends on the type of freehold estate. Let's take a look.

Fee Simple Absolute

When most people purchase a piece of land, the estate in land they are receiving is a fee simple absolute, which is the most unrestricted type of estate you can have. A fee simple absolute is of indefinite duration, can be conveyed (transferred to another person), and is inheritable. Basically, if you hold the property in fee simple, you have all the rights that you think of when you think of real estate ownership. Keep in mind, however, that nothing is truly unrestricted in the world of law and real property. Even when a person holds land in fee simple absolute, they must obey land use regulations. And they may not use the property in a way that unreasonably interferes with another person's use of his or her property.

Fee Simple Defeasible

You can think of a fee simple defeasible estate as a fee simple absolute that is subject to certain conditions or contingencies that can terminate the estate. So long as the conditions are met and the contingencies don't occur, you retain the estate. A common type of defeasible fee is the fee simple determinable, which is a fee simple that will automatically end if a certain event either happens or doesn't happen. For example, you may convey a piece of property to a local college as long as the property is used for educational purposes, excluding collegiate sports. You further provide that if the property ceases to be used for educational purposes, the property will revert (return) back to you or your heirs. Thus, the college holds the property in fee simple so long as it uses it for educational purposes. However, should the school decide to build an athletic stadium on the property, the estate will end automatically and the property will revert back to you. If you're already dead, title to the property will revert back to your heirs.

Life Estates & Life Estates Pur Autre Vie

Sometimes people own property during their lifetimes but do not have the right to control the disposition of the property upon their deaths. An estate in land that is held during the duration of a person's life but automatically reverts to someone else upon the death of that person is called a life estate. A life estate is sometimes used in estate planning. For example, let's say you have a second marriage and want to make sure your spouse is able to live in the house you own until he dies, but you also want to make sure that the kids from your first marriage get the property after your spouse passes. You may convey a life estate in the property to your husband that reverts to your children upon his death.

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