• Fee simple is a term in real estate that shows the highest level of ownership for land and any buildings on it.
• The term “fee simple” comes from the old French word “fief,” meaning land leased to knights for their services, and “simple,” meaning ownership that depends on no other conditions.
• Owners with fee simple can use or transfer their property freely, but they still have to follow certain legal rules.
• Advantages of fee simple include total control of the property, being able to transfer rights, limited liability, and a better chance of keeping the land from being seized for unpaid debts.
• Fee simple also has downsides, such as being responsible for following zoning laws, high costs, the risk of losing the property, and the need for maintenance and upkeep.

Fee simple is a type of ownership that gives a single person or entity the greatest possible rights to a piece of real estate.

When someone has fee simple ownership of a property, they have total control over it. They can use the property, sell it, lease it, mortgage it, or get rid of it as they wish[1]. They can also stop others from using or living on the property, within certain legal limits[2].

Fee simple ownership usually assures full legal title, meaning no restrictions or conditions limit its use. This is different from other ownership forms like partnerships and trusts, which may come with specific conditions.

Although fee simple involves complicated legal details, understanding it is crucial to grasp real estate ownership. Understanding fee simple is particularly important when buying a property or developing one for rent or sale. It sets the rights of the owner and future buyers or renters. By understanding this, you can protect your investment and make informed real estate decisions.

Why Is It Called Fee Simple?

Fee simple ownership originated from English common law during the feudal system[3]. Kings or lords gave people exclusive use of land and resources in return for services like military service or working on their land.

The word “fee” comes from an old French term “fief,” referring to an estate owned by the nobility but rented out for services offered by tenants like knights. “Simple” means that the fee doesn’t depend on any conditions. It signifies full ownership with no other party having a claim or legal right to it.

Nowadays, fee simple applies to modern real estate dealings, mainly residential properties like single-family homes[4].

Fee simple ownership operates through three key features[5].

1. Property owners can use their space without limits, except for local laws and rules.
2. Ownership lasts a lifetime, ensuring the property remains theirs indefinitely.
3. Owners have the privilege of deciding who benefits from their property, letting them pass on ownership if they wish.

In terms of taxes and liability, the fee simple owner is responsible for all property-related costs like maintenance, improvements, property taxes, and mortgage payments.

The owner is also accountable for the use of their property, whether rented out or not. If the property is sold or given to a new owner, this new owner will take on the same responsibilities.

Different types of fee simple estates exist, but the three main types are:

Fee Simple Absolute

Fee simple absolute gives the owner full rights to the property, without any conditions or restrictions. The owner can use the property as they wish, within local zoning laws and other regulations[6].

When people mention fee simple, they typically mean the fee simple absolute type.

By opting for absolute ownership, owners can protect the value and use of their land forever. If mortgage payments are timely, taxes are up-to-date, and any changes to the property comply with regulations, the owner can keep a fee simple absolute estate indefinitely.

This type of ownership can involve more than just transferring land or a life estate. Owners can set conditions on their property that dictate how future generations, direct descendants or not, manage it.

For example, some owners may prohibit demolishing existing buildings. Others may specify which heirs will inherit ownership rights, ensuring their legacy stays within the family for years.

Fee Simple Defeasible

Fee simple defeasible estate comes with a potential for reversion of property due to non-compliance with certain stated conditions or events. Under this setup, owners must follow conditions set by previous owners, or they risk losing their land and possessions[7].

Common types of defeasible estates may only be passed to direct descendants or require the owner to pay a third party under certain conditions. Some owners may also limit their land from being used for specific commercial or development purposes.

Fee Simple Subject to Condition Subsequent

Fee simple subject to condition subsequent is a subtype of fee simple defeasible where the grantor retains the right to terminate the estate if certain conditions are not met[8].

However, unlike fee simple defeasible, condition subsequent allows the original grantor to regain the property if the current owners fail to meet certain conditions.

For example, if a property owner sets restrictions that prevent commercial use of their land, the current owner can regain full ownership by modifying these conditions and using the land commercially.

Fee simple ownership has distinct benefits and drawbacks. Understanding these can help potential owners determine if this type of ownership suits them and their property.

Advantages

• Complete control over the property – Owners can use their property as they want, provided they follow local regulations.
• Ability to transfer rights – Once ownership is transferred, it can be transferred again in the future without restrictions. After death, ownership can be passed to direct relatives.
• Liability limits – Owners will only face legal issues if they violate local laws and regulations.
• Greater chance of protecting land from foreclosure – Lenders are more inclined to accept fee simple property as collateral for a mortgage due to its unrestricted nature.

Disadvantages

• Liability for zoning laws – Property owners may face legal repercussions if their property usage violates local zoning laws.
• Costly fees – Owners need to cover taxes and other costs associated with land ownership.
• Potential for reversion – If the owner fails to meet certain conditions in a defeasible estate, the property may revert back to the grantor.
• Maintenance and upkeep – Owners must ensure their property stays up to code and in good condition by handling necessary repairs and maintenance.

1. What is a Fee Simple? (n.d.) Midland Title. Retrieved from https://www.midlandtoledo.com/why-buy-title-insurance/what-is-a-fee-simple
2. Kimmons, J and Hottenstein, H. (2023, January 13.) What Is Fee Simple Ownership? The Balance. Retrieved from https://www.thebalancemoney.com/fee-simple-ownership-in-real-estate-2866601
3. Madigan, B. (n.d.) History of Fee Simple Ownership of Real Estate. Ontario Real Estate Source. Retrieved from https://ontariorealestatesource.com/history-of-fee-simple-ownership-of-real-estate/
4. Dehan, A. (2021, March 2.) Fee Simple Ownership In Real Estate: What It Means And How It Impacts Homeowners. Quicken Loans. Retrieved from https://www.quickenloans.com/learn/fee-simple
5. Kelly, M. (2022, August 21.) Fee simple ownership guide. Square one. Retrieved from https://www.squareone.ca/resource-centres/homeowner/fee-simple-ownership
6. Fee Simple Ownership Guide: 2 Types of Fee Simple Ownership. (2021, September 3.) MasterClass. Retrieved from https://www.masterclass.com/articles/fee-simple-ownership-guide
7. Rafter, D. (2023, February 24.) What Is Fee Simple In Real Estate? How It Works And Why It Matters. Rocket Mortgage. Retrieved from https://www.rocketmortgage.com/learn/fee-simple
8. Rafter, D. (2022, November 23.) What is fee simple defeasible in real estate? Bankrate. Retrieved from https://www.bankrate.com/real-estate/what-is-fee-simple-defeasible/
9. Gordon, J. (2021, September 24.) Fee Simple – Explained. The Business Professor. Retrieved from https://thebusinessprofessor.com/en_US/property-law/fee-simple-defined