7. What is a “fee simple” interest in real property?
Fee simple is the term used to represent the maximum ownership interest in real property that is allowed under law. It can be referred to as complete ownership. A fee simple owner has full legal rights and powers to possess, use, and transfer the land. There are, however, certain limitations that can be placed on fee simple ownership, including:
• Fee Simple Absolute – Fee simple absolute ownership means that all interests in the property are transferred. There is no limitation or conditions attached to the transfer.
• Fee Simple Defeasible – Fee simple defeasible ownership means that a condition (or multiple conditions) are attached to a transfer of the property. This means that if a certain event occurs, the transfer is undone and the property either reverts back to the original owner or to a third party.
⁃ Example: Tom transfers property to Ann under the condition that it always be used for residential purposes. If the land is ever used for anything other than residential purposes, it reverts back to Tom (or his heirs).
⁃ Note: The rights retained by the transferor of a fee simple defeasible or a designated third party is discussed below in the context of a life estate.
These characteristics of a fee simple interest are important tools for individuals when determining the extent of property interest to transfer.
• Discussion: How do you feel about the ability of an owner of land to transfer and interest in that land subject to conditions? Can you see any advantages or disadvantages to limiting the owner of land’s use of her property? Does this ability in any way run afoul of the goals or objectives of government in recognizing ownership interest in land?
• Practice Question: Veronica wishes to transfer land she inherited from her grandfather to her alma mater, Great College. She drafts a deed that states that all interest in the property is transferred to Great College, so long as it is used for academic purposes. If it is ever not used for academic purposes, it reverts back to her estate. Years later, Great College decides to rent the land to a group of fast-food restaurants seeking to serve the student body. If Veronica has passed away, what are the rights of Veronica’s estate to demand return of the property?