Oct 30, 2019
A lot goes into the decision to buy a house.
Everything from the number of rooms to the square footage to the local economy will affect this all-important decision. You might also be interested in the school district, commute times to work, and nearby amenities.
While all of those factors are important, there are also certain legal aspects to purchasing a house that you need to pay attention to, as well. It’s easy to overlook some of these, but that mistake could cost you in a big way – literally.
The perfect example of this is “fee simple ownership.”
In simplest terms, fee simple ownership is a legal term that refers to property ownership. It means that the owner has complete and irrevocable ownership over the property, including any buildings that were built on it. Fee simple ownership also gives them complete control over features like ponds, roads, and any machinery that is “attached” to the property. It even includes air and mineral rights.
As a result, said owner can do whatever they want on that land. This makes fee simple ownership the highest level of property ownership. It’s also why you may sometimes hear it referred to as “fee simple absolute.”
Property that falls under fee simple is also considered part of the owner’s estate. Therefore, whoever inherits the estate also takes ownership over the property that was included.
Though the concept remains as relevant as ever, the history of fee simple ownership actually goes all the way back to feudal times. Back then, “fiefs” were arrangements between land-owning lords and workers (e.g. knights). The lords would lease out land to them in exchange for their services. The term “fee” actually comes from “fiefs.”
Eventually, these class-based arrangements were abolished. “Simple” ownership replaced them, hence “fee simple ownership.”
If you’re not sure what kind of ownership you have of your property, it’s probably fee simple if you bought your house and own the deed.
This isn’t always the case, though.
In some jurisdictions, you can buy a house and take ownership of the deed, but there are stipulations in place that would allow another entity to, say, drill on your property for oil.
This probably isn’t an issue for most people, but if you’re thinking of buying a home in an area that is historically oil-rich or otherwise well-known for mineral deposits, it’s worth checking to see if your purchase will give you absolute ownership.
In fact, you should speak to a lawyer who has experience in this field as deeds that were originated after rights for mining were sold may not mention that this ever happened. You could be in for a very rude awakening if you one day discover that a drilling company can freely mine your land even though your deed made no mention of this.
As we covered, fee simple ownership takes precedence over any other form of property ownership.
That doesn’t mean you can do whatever you want on your own property, though.
For example, if local zoning laws prohibit swimming pools, it doesn’t matter what kind of ownership you have. You can’t install a pool.
Obviously, you can’t commit capital offenses just because you have fee simple ownership over a property, either.
Also, you’re still obligated to make your mortgage payments and pay taxes. The government and lenders can still put liens on your property despite your level of ownership.
So far, fee simple ownership probably seems pretty straightforward.
Still, a bit of a gray area emerges if the property is “fee simple defeasible.” This occurs when the property is transferred with certain conditions attached to it. If the conditions are violated, the property is returned to the former owner, even if it was otherwise fee simple ownership.
For example, the owner of a property may decide to sell it to you, meaning you’ll have fee simple ownership and can do with it whatever you like.
However, they may stipulate that you cannot cut down the woods that exist on it. So, you’d have fee simple defeasible ownership, which means that your ownership is contingent upon respecting the former owner’s requirement about leaving the woods alone.
Another important distinction to understand is between fee simple ownership and leasehold ownership.
This refers to someone who simply rents a property. For example, someone may have fee simple ownership over a property and decide to let you live in the house on it in return for paying rent. The same would apply to an apartment. You are paying for your unit, but you don’t own the property. Furthermore, while you are given access and use of it, there may be restrictions involved. Perhaps, the owner won’t allow pets or smoking inside the building.
Leasehold ownership also applies to condos. In that case, you have actually bought your unit, yet you don’t own the land it’s on. Likewise, you can’t leave the land to your heirs as part of your estate.
These agreements can also apply to just land. For example, some property owners will lease out farmland for cultivation. Someone may be allowed to farm it for five years, but they don’t actually own it. They can’t build a house on it or decide to pave a driveway without the owner’s permission first.
In all of these situations, fee simple ownership is still in place. It’s just that the owner is allowing someone to use their properties within predefined confines. While people who have been allowed to live on or work the land may still have certain rights (e.g. tenants’ rights), ultimately, the person with fee simple ownership has the final say about the property.
Fee simple ownership is just one example of the types of legal considerations that need to be made before you buy a house.
At SimpleShowing, we’d love to connect you with a real estate agent who can help you better understand these terms, so you’re able to buy a house with complete confidence.
Even better, with our Buyer Refund Program, you’ll receive up to $15,000 at closing. Want to learn how it works?