What is Fee Simple?

Fee simple is a term used to describe the ownership interest in a given property that is extended with no limitations of any kind on the recipient. For example, an heir who inherits property with this classification is free to retain the property, sell all or part of it, or lease it to a third party. However, fee simple does not free the recipient from the responsibility of meeting any and all requirements set by local and national governments, such as paying taxes on the property or observing any other requirements necessary by law to own property within the jurisdiction.

For the most part, a fee simple is utilized in countries that are categorized as common law nations. Within settings of this type, this type of ownership interest is often the most complete option available without the granting of an allodial title by the proper governmental regulating agencies. The arrangement does not usually limit the government’s right to eminent domain or the ability to seize control of the property in the event that taxes are owed. However, it does ensure the right of the property owner to sell or develop the property in any way that is in accordance with prevailing laws.

A property owner who has title to property via a fee simple is capable of using the real estate to arrange loans using the property as collateral. The private lender, bank, or loan agency will follow the same process as used with any other real estate deal. The buyer is still obligated to disclose any current mortgage on the property, make arrangements to comply with the terms of payment that govern the loan, and in general uphold his or her obligations as described in loan details.

It is also possible to sell a fee simple property. Both the seller and the buyer agree to the terms as outlined in the purchase agreement, and the transaction is registered with the proper governmental agencies. The same is true if the recipient chooses to lease the property, or develop the real estate in some manner, such as for business purposes or for multiple dwellings. As long as the development meets the requirements of the local jurisdiction, there are no limitations on how the property can be utilized.

In many cases, a fee simple does not require the recipient to pay any annual or other type of fee to the originator of the property ownership. However, there are some countries in which a freeholder would be required to pay what is known as a rentcharge. Essentially, the rentcharge takes the form of annual property taxes or estate charges that must be paid to local or national government agencies. Since the nature and applicability of a rentcharge varies greatly from one nation to another, it is important to consult a real estate professional before accepting property granted through a fee simple.