2 TYPES OF ESTATE (LEASEHOLD AND FREEHOLD)

Estate, as I told you before, is an interest in land or landed property. There are two interests or estates that can be held in land or landed property: Freehold and leasehold.

Now, we explore each one of them.

FREEHOLD ESTATE

Freehold estate is exactly what it sounds like. A freehold estate is an estate that is free from the hold of any other entity other than the owner. 

It is an exclusive right to own a property for an unspecified length of time.

Holders of freehold estates are free to use the property as they see fit, as long as their actions comply with local and state laws.

TYPES OF FREEHOLD ESTATE

There are three major types of freehold estate. These are a few simple absolute, fee simple defensible, and life estate.

1. Fee simple absolute estate

This is the most complete interest that one can own in a property. 

In this kind of estate, the owner has a well-defined absolute and unrestricted ownership right. 

By unrestricted rights, we mean he is not restricted by any condition of the grantor (previous owner). Fee-simple absolute estate has the following characteristics:

  • Unrestricted ownership: The grantee is not restricted by any condition of the grantor.
  • Transferable: Fee simple absolute estate is easily transferable. For instance, the owner may sell the property. He can also give it out as part of estate planning.
  • Undefined length of time: The owner or the owner's heirs, can own the property for as long as they pay their taxes, mortgage, and respect the law. 
  • Inheritable: If the property owner passes away, his heirs assume the ownership of the property.

2. Fee simple defeasible estate

In legal terms, the word "defeasible" means something that can be "canceled and made void". Therefore, fee-simple defeasible estate is an estate that is subject to certain conditions.

If the holder of the estate violated these conditions, his ownership right may be canceled and the estate reverts to the grantee.

Few simple be feasible arises because grantors transfer land to the grantee conditionally.  Fee simple defeasible estate is also called fee simple qualified estate.

Two kinds of fee simple defeasible can be identified: Fee simple determinable and the fee simple subject to a condition subsequent

A. Fee simple determinable: This is an estate that ends automatically when the stated event or condition occurs. 

When this occurs, the land automatically reverts from the grantee to the grantor or grantor's heirs. 

For example, if Daniel (grantor) gives James (grantee) a piece of land with the condition "as long as this land is used for the library", the ownership of the land will revert to Daniel if James used the land for something else other than the library.

As you just in the example above, to convey a fee simple determinable estate, the conveyance words must be durational (for example, as long as, so long as, during, or until)

B. Fee simple subject to condition subsequent: This is similar to fee simple determinable. The only difference is that the grantor only has an option to reclaim the land.

Therefore, upon violation of the condition, the property does not automatically revert to the grantor, it only reverts to the grantor if, and only if, he decides to reclaim the land. Such grantor is said to have a "right of reentry" because he has the option to reclaim back to the grantor.

To convey a fee simple determinable estate, the conveyance words must state the right of reentry (for example, Daniel to James, but if the property is used for park, then Daniel has the right of entry).

Before we go any further, it is crucial to understand the difference between a fee simple determinable estate and feet simple subject to condition subsequent estate.

  • In a fee-simple determinable estate, the grantor immediately reclaims the property if the condition is breached; whereas, in a fee-simple subject to condition subsequent estate, the grantor can only regain the land if he reasserts his right of reentry.
  • For fee-simple determinable estate, the words of conveyance are durational (example, as long as), Whereas, for a fee-simple subject to a condition, the conveyance words are not durational, rather they only state the condition for which the grantor can exercise his right of reentry.

3. Life estate: As its name suggests, this type of estate is restricted by the lifetime of a specific person.  A person (referred to as the life tenant) is awarded ownership of an estate by the grantor for the term of a specified person's life. 

This Specified individual could be the life tenant himself or someone else.

Once the specified person dies, the land reverts to the grantor ( often called, remainder-man). 

The life tenant, however, has the right to exercise ownership rights such as receiving land income, paying taxes, and so on throughout the lifetime of the ownership. 

With the approval of the remainderman, a life tenant can sell, mortgage, and lease the property.  

All such contracts are, however, terminated when the specified person dies. That is, regardless of any sales, leases, or mortgage agreements, the property reverts to the remainder-man after the specified person dies.

To give an example, Daniel (the grantor) conveys his interest in property to James, for as long as Peter lives

The land will continue to be owned by James as long as peter lives. Once peter dies, the property will revert to Daniel. 

Assuming, James then decides to sell the land to a third party (say Joe), then Joe will continue to hold the land as long as peter lives. Once peter dies, the property automatically reverts to Daniel

LEASEHOLD ESTATE

A leasehold estate is exactly what It sounds like. A leasehold estate is an estate that is less than a freehold estate. 

More appropriately, we can define a leasehold as a legal arrangement in which a person (known as the lessee) has the sole right to inhabit a property for a fixed period. 

In leasehold estate, the lessee is only granted tenancy right to use and possess a property for a given period. 

The lessor or landlord retains ownership of the property. Leasehold estate can also be referred to as a non-freehold estate. 

In most cases of a leasehold estate, the lessee usually has complete access to the property but does not own the property. 

There are four major types of leasehold estate:

1. Estate for years: This is an estate in which the lessee has an exclusive right to own an estate for a fixed period. 

Such lease agreement usually has a specified start and ending date and therefore does not require any quit notice. Estate for years is also called a tenancy for years. or a fixed-term tenancy.

Despite its name, Estate for years does not have to be delineated in years — even a one-week tenancy might be referred to as an estate for years if the tenancy lasts for a fixed period.

If Daniel, for example, enters into a lease agreement with James for 5 months. This lease agreement would be considered an estate for years because it is for a fixed period.

2. Periodic tenancy: This kind of estate has no specified termination date. Rather, the lease agreement lasts for some period determined by the length of rent payment. This period may be month-month, week-to-week, year-to-year. 

All things beings equal, the lessee will continue to inhabit the property as long as he pays his rents. 

To end a lease arrangement, the landlord must provide a quit notice. The reverse is also true. The tenant must provide a notice of termination before ending the lease agreement.

Needless to say, Periodic tenancy is the most common form of the lease agreement. Another name for periodic tenancy is a tenancy for period-to-period.

3. Estate at will: This is a lease agreement in which the landlord allows the tenants to occupy the land for an unspecified period. The lease agreement continues as long as the landlord gives the tenant permission to use the property.

As is with periodic tenancy a notice from either of the two parties is required before the lease agreement can be terminated. 

4. Estate at sufferance:  When a tenant refuses to leave after the lease agreement without the landlord's permission, it is called estate at sufferance

More specifically, we can define estate at sufferance as a situation in which the tenant stays after the lease is over without the permission of the landlord.

In such a situation, the landlord may decide to take legal actions against the tenants (Often referred to as a holdover tenant). 

A tenant who does not pay rent but continues to live in a house without the landlord's consent is an example of the estate at sufferance.

A clue to remember estate at sufferance is that the "landlord is suffering".

It is worth noting here that holdover tenants are not regarded as trespassers because they formally have the right to the property.

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