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Freehold Estates | Real Estate Exam Prep Concepts

A freehold estate is an estate in which you have exclusive rights to enjoy the possession of a property for an undefined length of time. In contrast, a less than freehold estate is held for a fixed, defined period.

The types of freehold estates you should know are:
1. Fee simple absolute
2. Fee simple defeasible
3. Life estate

1. Fee simple absolute
Fee simple absolute is the greatest interest in a parcel of land that one can possibly own. Sometimes it is designated simply as “fee” and is the most common way real estate is owned. In a fee simple absolute estate ownership cannot be defeated by the previous owner or the previous owner’s heirs; however, it is not free from encumbrances. Fee simple ownership is limited by the four basic government powers of taxation, eminent domain, police power, and escheat, and could also be limited by certain encumbrances or a condition in the deed.

2. Fee simple defeasible
A defeasible estate is created when a grantor places a condition on a fee simple estate . Upon the occurrence of a specified event, the estate may be lost. Two types of defeasible estates are the fee simple determinable and the fee simple subject to a condition subsequent.
– If the grantor uses durational language in the condition such as “to Adam, as long as the land is used for a park,” then upon the happening of a specified event such as the land being used for something other than a park, the estate will automatically terminate and revert to the grantor or the grantor’s estate; this is called a fee simple determinable.
– If there is a condition such as “no alcohol to be served,” then it would be a condition subsequent, as you can lose the title if you serve alcohol on the property.

3. Life estate
A life estate is an interest in real property which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person.

For example, Anne can give a property to Dan for the life of Anne. Dan would be the life tenant.

A life tenant receives the property and is responsible for maintenance of the property and paying taxes. If a life tenant allows a property to deteriorate, it would be committing waste; a life tenant cannot commit waste.

A life tenant cannot leave a property to anyone in their will. However, a life tenant may sell, mortgage or lease the property for the duration of the estate, and thus all contracts would be terminated upon the death of the life tenant.

For example, if Dan dies and the property goes back to Anne, Anne would have the estate in reversion. If Anne dies, then the property would not be Dan’s because he had it as long as Anne was alive.

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