The term "fee simple" is typically found on a house's official deed, one of those nondescriptive real estate terms whose meaning is not clear immediately—or even after a few hours' pondering. You might have a dark suspicion, as a cash-strapped new homeowner, that fee simple means more fees. Well, rest assured it does not.
As a matter of fact, having a fee simple estate is a good thing when it comes to property ownership. It means you own the property outright, and no one else has claim to it. It's described by many different sources as the highest form of land ownership in common-law countries. "Fee simple" may be only three short syllables, but it packs a lot of power.
Here are some of the main characteristics of a fee simple ownership:
1. The property—and everything above and below it—is yours
The house and the land it's on is yours and yours alone. You may do with it as you please—although you're still subject to laws and restrictions (more on those later). Not only do you own the property on the surface of the land, but you also own the air rights above and the mineral rights in the ground below.
"The mineral properties may include oil, gas, mineral rocks, or coal," says real estate journalist Marie Huntington. That's right. If you strike oil on your fee simple property, the proceeds are all yours!
2. You can pass the property along to your heirs
If you have fee simple ownership of a property, it becomes part of your estate, and you have the right to decide who inherits it after you die. Whether you pass it along to a friend, family member, charitable foundation, or your dog, the decision is yours alone. The recipient might have to pay inheritance taxes, and your heirs can challenge one another in court for interest in the property, but you can minimize these complications by consulting a probate attorney shortly after you acquire fee simple ownership.
3. You can sell the property without restrictions
Put your property on the market and sell it to any person or organization at whatever price you find acceptable. No one (except the government in certain instances) can tell you who can buy it or what price you can ask for it.
Be aware that if you've purchased a townhouse, co-op, or condo, you probably don't own it fee simple; your deed is likely to say "lease ownership." While you own the residence or unit itself, you probably don't own the land on which the development is built. Check your covenants, conditions, and restrictions, or CC&Rs, to find out what type of ownership you've purchased. They may require you to get approval from a board or committee before you can sell your unit.
4. The government still has a say
Although you have fee simple ownership interest, be aware that Uncle Sam still has the right to make demands of you and your property. For example, you have to pay taxes (duh), and you're still subject to compulsory purchase (if the city decides to build a freeway through your property and offers to pay you fair market value for your place) or police action (as in, "Open up! This is the police!").
Local zoning laws can also come into play; certain structures and types of businesses cannot be built near a school or park. And then there are building codes and restrictions you have to adhere to, such as easements, zoning ordinances, and fire regulations.
But while you won't be completely free from restrictions, know that fee simple ownership is the most complete form of ownership we have here in the United States. In nutshell: You bought it, you paid for it, it's yours.
courtesy of realtor.com