The Two Types of Freehold Estate Ownership
As the owner of Schuyler Brown Land Title in Illinois, Heidi Scott prepares real estate deeds and related transfer paperwork, and conducts title examinations. Drawing on her extensive background as an attorney and CPA, she concurrently serves as the owner of the Illinois-based Law Offices of Heidi Scott, where she practices general law with a concentration on estate planning, tax law, and real estate properties.
The majority of real estate in the United States exist as freehold properties; the land is owned outright by an institution or individual for life. Freehold properties, however, are divided into two categories. Knowing the distinction between the two is important before acquiring property under such an agreement; otherwise, a freehold property owner can lose their ownership rights.
In the United States, buyers of freehold properties are said to have a “fee simple ownership interest.” This arrangement transfers complete ownership rights to the buyer. If the ownership interest is a “fee simple absolute,” the buyer has the right to do whatever they want with the property. They can tear down the buildings on the lot, add new ones, remodel existing structures, or even convert a residential building to a commercial building and vice versa. There is no limit to what they can do with the property, except for the limitations that may exist in their zoning. The owner also has the right to specify what a new buyer cannot do with the property when they sell it. Fee simple absolute is the most common ownership right in the country.
The second type of freehold property ownership interest is called “fee simple defeasible.” Sometimes called “fee simple determinable,” this gives a buyer ownership rights to a property with some rules set by the previous owner that can revoke those rights if violated. A typical example is when a seller transfers ownership of a residential property to a buyer, where the deed states that the buyer should not, under any circumstance, use the property for commercial purposes. If the buyer violates this condition, the ownership right can revert to the previous owner.
