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Fee Simple Estate and Leasehold Estates
Real estate and all its jargons can be quite confusing to many people, especially those who do not show much interest in it until they have to decide on the future of their property. To assure customer safety, Jersey Shore Realtor® Associate Pizzi Properties try to ensure that every client understands what they are dealing with before they sign any documents. But if real estate is not your forte, then there are some jargons such as fee simple estate, leasehold estate, tenancy and such, that you might want to know and understand.
What is fee simple estate?
A fee simple estate is the highest form of ownership in real estate that the United State law recognizes. The owner of the property enjoys full every part of the property that includes both the land and the structure. The owner is not limited, and you can do anything on it as long as you are not breaking any law or infringing on public welfare. You can even sell, rent, lease, encumbrances against it and take a mortgage on the property, or pass it on to an heir. Due to its several properties, it is also known as ‘absolute ownership,’ ‘fee ownership,’ ‘fee simple absolute,’ or ‘estate of inheritance.’
The only limitations come from zoning laws, covenants or any agreement made, and deed or subdivision restrictions. It is the most common form of ownership in the country, and most of the single-family homes fall under fee simple estate ownership. This type of property ownership offers a lot of benefits, but you will also be taxed on the value of the property.
- Have you heard of the bundle of rights?
Bundle of rights refer to a set of legal rights that are transferred along with the property when the property is sold. The rights are bestowed upon the holder of the title of the property. They include the following.
o The right of possession
o The right of control
o The right of exclusion
o The right of enjoyment
o The right of disposition
The title insurance policy is a document that protects these rights when the property changes hands, and a new policy is purchased by the owner who bought the property. The title insurance policy covers several claims that threaten the ownership of the property bought.
There are several types of ownership of real estate property which are briefed as below. Jersey Shore & South Florida Realtor® Associate always quote ‘Real Estate sells itself; I sell Service’ and they mean every word they quote. You can always contact them to understand what kind of ownership best suits you.
- What is joint tenancy?
In simple, joint tenancy is a deed or legal agreement between two or more people over a real estate property. As per joint tenancy, the property is owned by two or more people together, and each person has equal rights and obligations. As per this agreement, an owner cannot take a mortgage over the property without the joint consent of all owners.
In case of death of one of the owners, the deceased owner's interest in the property passes to the surviving owners without having to go through the courts. This legal concept is called 'Right of survivorship', and it mostly applies to real estate. But a broader legal notion, 'joint tenancy with the right of survivorship' may also apply to a wide range of assets. It entitles the owner of other assets such as businesses and brokerage accounts of the deceased owner, to the remaining owner or owners.
- What is tenancy by the entirety?
Tenancy by entirety is a form of ownership that is entitled only to a married couple, and sometimes to registered domestic partners in some states in the U.S. It is a default form of asset to a married couple unless it is a real estate property and is governed by the following five rules, also known as unities.
- Unity of title states that both spouses or partners will receive the title to the property through the same deed.
- Unity of possession states that both spouses or partners have joint ownership and control over the said property.
- Unity of interest states that neither of the spouse's or partner's interest in the property is superior to the other.
- Unity of time states that the ownership of the property must be taken by both the spouses or partners simultaneously.
- Unity of marriage states that the spouses must be married when they obtain the property. Domestic partners are recognized by some states only if they are registered under law as partners. In some states, the property automatically converts into tenancy by entirety if unmarried partners acquire a property and then get married.
It is important to note that these unities must be present in the deed for it to be valid. This type of ownership prevents one spouse from selling, leasing, or placing a debt over it without the consent of the other spouse.
What is tenancy in common?
Tenancy in common is a deed or legal agreement between two or more people over a real estate property in which the ownership of the commercial or residential property is shared. Tenancy in common and joint tenancy may sound to be similar to each other, but they are not. In the case of tenancy in common, each partner or owner is entitled to control an equal or predetermined percentage of the total property. They have the right to leave their share of the property to their beneficiary, and when the tenant in common dies, the ownership of the property passes on to the deceased tenant’s estate.
A mortgage can be taken against the property, if and only if it is signed by all owners. As it is signed by all owners, they are entitled to contribute to the mortgage in case of a default by the borrower. All owners become borrowers and are entitled to pay back the loan borrowed to avoid foreclosure.
What is a leasehold estate?
Leasehold estate, on the other hand, is quite different from fee simple estate ownership. It refers to a lease wherein the renter has the right to possess the property that is leased to them, for the mentioned period. The rights and obligations are specifically mentioned in an agreement that is signed by the property owner and the tenant, which gives the renter temporary ownership-like rights to the property. A leasehold estate agreement is a binding legal contract that lets the renter use the property as they see fit unless otherwise mentioned in the agreement or if it breaks any law.
The renter is allowed to use the property until a certain period, as mentioned in the agreement. Once the has expired, it is up to the owner of the property to decide whether to lease it again or use for a different purpose.
- What is a tenancy at sufferance?
Tenancy at sufferance refers to an agreement between the owner and the renter wherein the renter is legally permitted to use the property or live in the property even after the agreement has expired, and until the owner demands that the property be vacated. It is legally binding only if the renter meets the original lease conditions that include payment of rent, failing which the renter can be evicted as the owner sees fit, without any notice.
There are several other aspects of real estate ownership that can have an impact on your property. You can reach out to Pizzi Properties or Jersey Shore & South Florida Realtor® Associate for more information. When you are ready to invest in real estate, make sure to check out Homes for sale by Pizzi Properties & eXp Realty. Their tagline ‘You are going to Like where you Live I Guarantee it’ will prove that they are at your service, always!