Freehold Estate Guide: 3 Types of Freehold Estates

A freehold estate is a type of real property ownership that is indeterminate, meaning there is no fixed duration of the leasehold. A freehold estate deems the right of the title of the piece of real estate to the property owner. Freehold estates can be “estates of inheritance”—which the owner conveys to their heirs after they die—or “life estates,” where an owner forfeits all rights to the property upon death.

Three of the most common types of freehold estates are fee simple absolute, fee simple determinable, and life estate. Learn more about each of these types of real property ownership:

1. 1. Fee simple absolute: The fee simple absolute estate grants the property owner rights to the property title in perpetuity. They can do whatever they want with their property, provided that they do not violate any active easements or restrictions on it. This type of estate also grants the owner the right to pass on the property to heirs indefinitely. Learn more about fee simple ownership.
2. 2. Fee simple determinable: This form of fee simple estate—also known as a base fee, qualified fee estate, or fee simple defeasible—grants the property owner the title within specific conditions or parameters. For example, suppose the grantor grants the estate to the grantee under the condition that the property operates as a working farm. In that case, the grantee owns it in perpetuity unless they break this agreement. If they break the agreement, the property title undergoes a reversion back to the grantor immediately.
3. 3. Life estate: Life estate ownership lasts for the duration of the owner’s life. A life estate is not as much of a standard ownership agreement in common law as it is a deed or leasehold estate (where the leaseholder or life tenant is the property owner for their lifetime or the grantor’s lifetime). The owner holds the right to mortgage the property and can only create liens or easements in relation to it during their lifetime.

Non-freehold estates are real estate agreements that do not convey ownership interest or rights to the title of a piece of real property, which refers to a physical piece of land, everything attached to it, and the rights that accompany ownership. The most typical type of non-freehold estate is a landlord-tenant lease agreement, with the lessee retaining occupancy of the property that the lessor owns.

Unlike a freehold estate, these non-inheritable agreements don’t bind a property occupant to land or property. Non-freehold estates typically have an end date determined in the lease agreement or have established terms for how the agreement will end in the case of open-ended agreements.

The four main types of non-freehold estates are different types of tenancy. Here is a brief overview of those types of agreements:

1. 1. Estate for years: An estate for years has a definite start date and end date, which determines the period of time that the grantee will hold the estate. This is standard for year lease agreements between landlords and tenants in rental properties.
2. 2. Periodic tenancy: Periodic tenancy, similar to an estate for years, has no definite end date. Instead, the tenant and landlord agree on a period that the rental agreement renews, like year-to-year, month-to-month, or week-to-week. This standard agreement between landlords and tenants is ongoing.
3. 3. Tenancy at will: This type of tenancy is an agreement between a tenant and property owner that either party can terminate at any time.
4. 4. Tenancy at sufferance: A tenancy for sufferance occurs when a tenant in one of the above agreements retains possession of the property after the terms of their lease agreement have ceased. This unlawful tenancy is often referred to as squatting. A tenant at sufferance may return to a tenant from year to year upon payment of rent or agreement of terms with the property owner.

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

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