Fee simple refers to the highest form of ownership interest in real estate, granting the property’s owner absolute rights over the property without limitations. It gives the owner broad legal rights, including owning, using, controlling, transferring, and destroying property within the law's limits. It is one of the dominant forms of ownership in the US. In the blog below, we will discuss several aspects of fee simple.
Essential Elements of Fee Simple
The elements of fee simple are as follows:
- Ownership Right: Fee simple ownership includes several important rights, such as the owner having the legal right to occupy and physically hold the property.
- Duration: Generally, fee simple ownership is permanent and has no set end date; it can be used unlimitedly. Owners can sell, transfer, or inherit the land and any assets. However, it's important to note that the government can acquire the land through eminent domain in specific circumstances.
- Restriction and Limitations: While fee simple ownership provides comprehensive rights, restrictions may apply. This includes municipal zoning laws, building ordinances, or other government regulations that govern the property's usage and development. Existing easements or covenants may limit the owner's rights in favor of third parties, such as allowing utility providers access or protecting certain property rights.
- Inheritance and Succession: Fee simple ownership can be inherited, allowing the owner to convey the property to their heirs via a will or the laws of intestate succession.
- Legal Protection: Fee simple owners have legal protections such as constitutional guarantees against unlawful seizure or deprivation of property and the right to seek legal remedies if their property rights are violated.
Types of Ownership in Fee Simple
The following are the types of fee simple ownership:
- Fee Simple Absolute: The terms fee simple and fee simple absolute are interchangeable. Absolute ownership of land refers to whole, unrestricted ownership.
- Fee Simple Defeasible: With fee simple defeasible, ownership is subject to some strict requirements. Additionally, if the terms of ownership are broken, the property may be given back to the grantor or another designated person. Subject to subsequent condition, determinable, and subject to executory limitation are three different sorts of fee simple defeasible.
- Fee Simple Subject to Condition Subsequent: If the requirements of ownership are not met or are broken in the case of fee simple subject to condition subsequent, the property does not instantly revert to the grantor. Instead, the grantor can reclaim the property if the requirements are broken or unmet. The right of reentry is the name given to this choice.
- Fee Simple Determinable: One step further is taken by fee simple determinable. When conditions are not met in fee simple subject to condition subsequent, the grantor must take action. However, under fee simple determinable, property ownership automatically reverts to the grantor if requirements are broken or in any other way not met.
- Fee Simple with Executory Restrictions: Fee simple determinable and this kind of fee simple defeasible are highly comparable. Property ownership is immediately passed to a third party in the case of a fee simple subject to executory limitation.
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Rights Granted by Fee Simple
There are several rights granted by ownership of fee simple, which are:
- Right of Possession: As a fee simple owner, you have the legal right to inhabit and physically hold the property. This implies you have the sole right to live on and control the property, and others cannot take possession without your permission.
- Right of Use: Fee simple ownership allows you to make any authorized use of the property. The lender has the right to legally use the land for various reasons, such as commercial, residential, agricultural, or recreational, as long as they comply with applicable and necessary legislation.
- Right of Transfer: Fee simple ownership allows you to transfer the property to another individual. The owner has the legal right to donate, sell, gift, or transfer the property to someone else via a deed or contract.
- Right to Exclusion: Subject to certain legal constraints, you can bar others from using or entering the property. This means you have control over who has access to your property and can prevent people from utilizing it without your consent. It should be noted, however, that some legal duties, such as easements or public access rights, may limit your power to exclude.
- Right of Destruction: You can change or destroy the property within the bounds of applicable rules and regulations. This implies you can make changes, renovations, or demolitions to the property if they comply with local building laws and environmental restrictions.
- Deeding: A fee simple estate can be deeded to others, with the owner acting as a grantor and the receiver functioning as a grantee. These deeds can be granted to the family (through a quitclaim deed) or the business buyers (via a warranty deed).
- Leasing: If you own a property for a fee simple, you can act as a lessor and rent it out to a lessee.
Restrictions Associated with Fee Simple
Fee simple ownership has certain restrictions attached to it, which are as follows:
- Tax Obligations: Fee simple ownership does not exempt property owners from paying taxes. Owners must pay their tax responsibilities, including property taxes, as the appropriate taxing authorities prescribe.
- Government Rules and Regulations: Local zoning rules, building codes, and other government requirements may apply to the property's usage and development. When constructing or altering their land, fee simple owners must follow specific regulations.
- Easements and Covenants: The owner's rights may be limited in favor of third parties by easements or covenants that already exist on the land. For example, protecting particular property rights or allowing access to utility corporations. All easements and covenants affecting the property of fee simple owners will be respected and complied with.
- Legal Encumbrances: The ability of the owner to freely transfer or encumber the property may be affected by mortgages, liens, or other legal encumbrances on the property. If there are any such encumbrances, the owners must address and remove them to preserve their fee simple ownership rights and the asset's marketability.
Key Terms for Fee Simple
- Possession: The legal right of the owner to physically inhabit and manage the property is referred to as the right of possession.
- Right of Use: Fee simple owners are free to use and put their property to their legal use in any way they see fit.
- Marketable Title: A marketable title is necessary for fee simple ownership, which means the ownership of the property is free from any material flaws or encumbrances that would prevent its sale or transfer.
- Foreclosure: The lender can proceed with the necessary foreclosure procedures to reclaim the property in case of a default on a mortgage or any other financial obligations.
Final Thoughts on Fee Simple
Fee simple ownership gives the owner the most comprehensive property rights and authority. The rights of possession, use, transfer, exclusion, and destruction are all included. Although they have many liberties, fee simple owners are nevertheless subject to any applicable laws, rules, and encumbrances on the land. Property owners must comprehend the fundamental concepts and ramifications of fee simple ownership to make informed decisions and safeguard their rights.
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