Types of Real Estate Ownership and Methods of Transferring the Property

Listed below are the types of ownership (estates) that one may have, the methods of holding title and methods of transferring the property.

Ownership is the interest, share, right or equity that has and varies say from the rights of a renter.  Ownership gives full maximum rights of a full owner.

Fee Simple.  Fee simple is the greatest interest one can hold in a property.  It is perptual, freely transferable and inheritable. 

Conditions can be placed on fee simple estates by the grantor.  For example a condition may be imposed on a property donated to the State on the condition that the State agrees to build a college on the site.  If the State disagrees, the transfer does not take place.  Technically this condition describes a condition precedent.  An action must be performed before title is transferred.

A condition subsequent gives the grantor (giver) the right to terminate if no action has occurred in a designated time frame.  For example if the condition stipulated that the State had to start the building of a college in five years and no action has been taken in the building, the property goes back to the grantor.

A Fee Simple Determinable is when it is determined that a certain act has to be carried out.  If the property owner donates the land to the State “so long as” the land is used for a college.  If the State uses the land for some other purpose it automatically goes back to the grantor.

Life Estate.  This represents an ownership that only exists for the life of a designated person(s).  The intent usually is to provide a lifetime residence for an individual.  For example I know of a husband and wife who granted a life estate to a very close friend.  Upon their death their daughter inherited the property but the parents in a will designated that their friend have the right to live in the residence until her death.  At the friends death it goes back to the daughter.

The person holding a life estate cannot grant more rights than they hold.  The life tenant:

• has the right of physical possession of the property;
• has the right to rents and profits, but this terminates when the life estate holder dies;
• can usually lease, sell or finance the property, but not beyond the time frame of the life estate;
• is obligated to keep the property in good repair.  The person is not required to make improvements;
• may not damage or destroy any permanent part of the property to the detreiment of succeeding interests; and

is usually responsible for all annual costs and expenses.  In the example of the parents, their friend was responsible for all real estate property taxes, insurance and the normal expenses faced by a home owner (not the daughter).