Real Estate Trainers, Inc. Real Estate Principles Course Internet Edition Sample Lesson 1 Section 2 Freehold Estates Outline Text

ESTATES

(How long is it owned?) - Ownership rights and interests which are or could become possessory (estates or fees). The degree, quantity, nature and extent of interest which a person has in real property. There may be two or more estates in the same property (e.g., fee simple and estate for years). Estates are divided into two types: Freehold estates and less-than-freehold estates.

A. FREEHOLD ESTATE - Endures for a period which is not fixed or specified.

1. Fee Simple Estate (Fee, estate in fee, perpetual estate, estate of inheritance). It is indefinite in duration and can be conveyed during life or upon death. It may have encumbrances.

a. Fee Simple Absolute - The owner holds title without any qualifications. It is the greatest degree of ownership. It is indefinite in duration.

b. Fee Simple Defeasible - There are conditions or limitations on the use of the property. If they are broken (condition subsequent), the owner's title is defeated and the property will revert to the original owner (e.g., grantor gave title on the condition that no alcohol be sold on the premises).

c. Clear Title - If the property is unencumbered, owner has "clear title."

2. Life Estate - An estate limited in duration to the life or lives of one or more designated persons. It can be created by will or by deed, and it creates more than one estate in the property.

a. Holder of Life Estate (life tenant):

(1) Has the right of possession and use.

(2) Cannot allow waste.

(3) May sell, encumber or lease it for the duration of the life estate. When the life estate ends, the lease or encumbrance is terminated.

(4) Has an estate in property.

b. Estate in Reversion - Held by original grantor, if property is to revert to him upon death of designated person.

c. Estate in Remainder - Held by third party, if estate is to pass on to him upon death of designated person.

d. If holder of life estate (life tenant) dies before the designated person (not the life tenant), the property goes to the heirs of the life tenant until the death of the designated person.

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