ESTATES

The most common type of freehold estate is the fee simple estate. This may also simply be called a fee estate. Unless a deed or will specifically indicates a different type of estate, it is presumed that the owner has a fee estate. A fee estate is the maximum estate and the greatest interest that a person may hold in land. This is because it is of indefinite and unlimited duration, the most freely transferable and inheritable estate.

A fee estate is an estate of inheritance. It has no restrictions as to inheritance of the estate. It may be transferred by will; such a transfer is referred to as a devise, and those receiving the estate by devise are called devisees. The estate may pass to the estate holder's heirs upon his death, even if he leaves no will, through the laws of descent. As a result, the estate may pass on in perpetuity (forever).

An estate may be created in a number of ways, including the following:

Grant to another Reservation Operation of law

he estate may or may not be free of encumbrances. Virtually all real property is encumbered by rights or claims of others to an interest in the property. The most common encumbrances include property tax liens, mortgage or trust deed liens, and utility easements. The presence of these encumbrances does not alter the nature of the fee estate. A person holding a fee estate: holds title to the property. has the right to dispose of it through sale or gift during his lifetime or through will or inheritance upon his death. may impose conditions or restrictions on future use which would apply to all persons who later acquire the estate.

He may convey a fee estate to another with or without conditions, or even convey a lesser form of freehold estate, called a life estate. If he gives a life estate, he gives the new owner title for a lifetime and designates the party to whom the estate would pass at the end of that lifetime. That party could be himself, or his heirs, or some other person.

One can have a freehold estate, dispose of various interests in the property, and still have the freehold estate. In most states, a property owner could sell the air, mineral or oil rights in property to a third party. A property owner could lease the land on a long-term lease, convey an easement for a right of way over the land, or assign a right of way to a railroad; none of these actions would alter the fact that he has a freehold estate.

However, a freehold estate could be converted to a less-than-freehold estate by a saleleaseback arrangement. In this arrangement, an owner sells the property, terminating his freehold estate. At the same time he agrees to lease the property back from the purchaser under a long-term lease. This would result in him having a less than freehold estate. The seller/lessee gives up the title to the real estate to the buyer/lessor, and at the same time is able to retain possession of the property.

The fee simple estate is the most common type of freehold estate. Unless a deed or will specifically indicates a different type of estate, it is presumed that the owner has a fee simple estate. Fee simple is an estate of inheritance and is the maximum estate one may hold, as it is of indefinite and unlimited duration and is freely transferable to others.

It may be absolute or qualified: If it is absolute, there are no conditions imposed on it. If it is qualified or determinable, certain conditions or qualifications attached to it create the possibility of automatic reversion (or return) of title to the grantor of the estate or the grantor's heirs, upon the occurrence of an event specified in the condition. Upon termination, all leases, encumbrances, and sales that had occurred or been placed on the property after creation of the qualified fee estate become invalid.

An estate is a possessory right or ownership interest in real property. A person has an estate when he has a possessory right or ownership interest in real estate. Therefore, a person has an estate when he owns or leases property. In either instance, the holder of the estate would have the right to use and possess (control) the property and the right to dispose of his interest in the property. More than one person may hold an estate in a particular property at the same time. If Mr. and Mrs. Smith were co-owners of a property, they would hold the estate together at the same time. A person who holds an estate is called a tenant, and the way in which he holds the estate is called a tenancy.

Other persons or entities may hold interests in real estate that give them rights, but these rights do not include the right to possess the property. These interests would then be short of an estate.

The sale-leaseback is used as a financing technique. It enables the seller to: get cash for the value of the property to use for other purposes. possess the property. deduct the entire rental payment from his taxable income, if the property is used for business purposes. improve the balance sheet by converting a fixed asset (real property) to a liquid asset (cash) and eliminate a major liability (the mortgage debt).

The advantage of the arrangement to the buyer/lessor is that he is able to: receive rent payments over a long term from a reliable tenant. realize appreciation in the value of the property. declare depreciation on the building for tax purposes.