An estate in land represents an individual’s current or future ownership interest in a piece of real estate. The four major types of estate in land are freehold, leasehold, concurrent, and equitable estates. Each type dictates specific rights that can affect a property’s overall value, such as the ability to earn income off the property.
To determine what type of estate in land you have, check the language of the most recent deed of transfer. If the language isn’t clear or you have questions about the extent of your estate in land, check out Rocket Lawyer. Their team of professionals can help you understand your deed, easements, or other legal documents and determine your interest in a property.
Why Your Estate in Land Matters
In general, property owners have the right to use their property, earn income from their property, and transfer the property to others; they also have the right to enforce these property rights if others infringe on them. However, the extent to which a property owner can enjoy these rights—and the correlating value assigned to the property—is affected by the type of estate in land they have.
Your estate in land matters because:
It Determines How You Can Transfer the Property
Certain types of estates are dissolved when sold—or are otherwise limited by how the owner can sell or transfer their ownership right in the property. This is especially common in concurrent estates. For example, if you have a tenancy in common with other co-owners, the tenancy is broken if one of the co-owners sells or otherwise transfers their interest to a third party.
It Dictates How You May Use the Property
The type of estate in land you have affects how you can use your property. For example, if you have a fee simple absolute estate in land, you generally have an absolute right to use and possess the property. Alternatively, if you have a leasehold estate, you do not own the property, but are a tenant who can use the property subject to the terms of a lease. Someone with an equitable estate in land may only have the right to extract minerals from the land.
It Affects the Value of Your Interest
The ability to use and possess your land can also affect the property’s value. If you own 100 acres of pasture but part of it is already subject to a grazing lease, it may not be as valuable to a residential developer. Likewise, if you’re leasing the basement of your home, it may be harder to sell than a property not encumbered with a lease. Alternatively, an already-leased commercial property may be more valuable to an investor who wants income-producing property.
It Can Limit When You Own the Property
Sometimes, an owner’s interest in an estate is contingent on a specific event or measured by the lifetime of a third party. For example, if you have a fee simple defeasible estate in land, your interest may be extinguished because of a specific event like a marriage. If, instead, you have a life estate pur autre vie, you own the property for as long as someone else lives, and then the property transfers to someone else.
The 4 Main Types of Estates
An estate in land can be categorized as a freehold, leasehold, concurrent, or equitable estate. These four categories generally describe an owner’s right to use and possess the property. Each category of an estate in land is further subdivided depending on the type and extent of an owner’s rights to property.
The four major types of estates are:
1. Freehold Estates
If a homeowner has a freehold estate, they have exclusive rights to use the property for an undefined length of time. There are three types of freehold estates: fee simple absolute, defeasible, and finite. Rights in a freehold estate are alienable, devisable, and descendible, meaning they can be sold, devised in a will, or otherwise transferred by the owner.
Fee Simple Absolute Estate
A fee simple absolute estate means an owner can use and possess the property without restriction, now and in the future. In fact, fee simple absolute is the greatest possible property interest someone can have because the estate will never end automatically. When selling a fee simple estate to another owner, the sales contract will use language like “fee simple” and “fee simple absolute,” indicating there are no limitations on property ownership or use.
Fee Simple Defeasible Estate
A defeasible estate in land is a fee simple absolute estate that’s subject to contingencies that can terminate the estate. If none of the conditions or contingencies occur, the owner will keep their interest in the property. However, if the contingency occurs, the estate automatically ends and reverts back to the person who initially transferred the property with the contingency.
In general, there are three types of fee simple defeasible estates:
- Fee simple determinable: An estate granted as long as it is used for a specific purpose; for example, “To John Smith for as long as the property is used for a school.”
- Fee simple subject to condition subsequent: An estate granted with conditions; for example, “To John Smith, but if John Smith does not use the land for a school, then the grantor has a right of entry.”
- Fee simple subject to an executory limitation: An estate granted with conditions that, if not met, gives ownership to a third party; for example, “To John Smith so long as the land is used for a museum, but if used for anything else, to Jane Doe.”
A finite estate is one that is limited to the lifetime of the property owner or a third party. If the duration of the estate is for the lifetime of a third party, it is referred to as a life estate pur autre vie. For example, a deed that transfers a simple life estate will say, “To John Smith for life, then to Jane Doe.” A life estate pur autre vie is transferred using deed language like “To John Smith for the life of Jane Doe, then to Ross Geller.”
2. Leasehold Estates
A leasehold estate is one in which the owner has the right to live in or otherwise possess a property but does not actually own that property. There are four kinds of leasehold estates: an estate for years, a periodic estate, an estate at will, and a tenancy sufferance. Each type of leasehold estate is characterized by the lease duration and renewal.
The four types of leasehold estates are:
Estate for Years
An estate for years involves a lease of any length that lists a specific beginning and ending date. Once the end of the lease contract occurs, the tenant does not need to give notice of termination but must vacate the property. A standard one-year lease agreement is a classic example of an estate for years.
Also known as a periodic tenancy, a periodic estate involves a lease that automatically renews from month to month or week to week. Unlike an estate for years, a periodic tenancy has no specific ending date and the tenant and landlord can agree for the lease term to go on indefinitely. Alternatively, the landlord and tenant can agree on termination with prior notice.
For example, a periodic estate may exist if you let your friend stay at your house for an indefinite period of time. Your friend has a periodic estate if she is paying you monthly rent and you have each agreed to give the other a certain amount of notice before terminating the living arrangement.
Estate at Will
An estate at will exists when there’s a leasehold interest for no fixed period of time. This can last as long as both parties desire and can be terminated by one party or by operation of law. For example, you have an estate at will if you’re staying in your friend’s vacation house until you can find a permanent home and there’s no lease or agreement regarding termination notice. You can leave whenever you want and she can ask you to leave at any time and for any or no reason.
Tenancy at Sufferance
A tenancy at sufferance exists when a tenant with an estate for years continues to live at the property after their lease expires. Once the lease expires, the resident becomes a holdover tenant. If the landlord accepts them as a holdover rather than starting eviction proceedings, the estate transforms into a holdover tenancy. Under these conditions, the tenant is still responsible for paying rent and meeting other lease obligations as if the lease never ended.
3. Concurrent Estates
Concurrent estates are those owned or possessed by two or more individuals at the same time. This can include a tenancy by the entirety, where two people are treated as a single legal person; a joint tenancy, where one co-owner inherits the other owner’s interest when they die; a tenancy in common, where each co-owner owns a separate and distinct portion of the property; or a statutory estate, such as a homestead or other estate created by law.
You have a concurrent estate if it falls into one of these four categories:
Tenancy by the Entirety
A tenancy by the entirety, or tenancy by the entireties, can exist between married couples or, in some states, same-sex partners. It describes a concurrent estate in land where two co-owners of property are treated as a single person. Under this ownership structure, each co-owner has a 100% ownership interest in 100% of the real estate in question, but neither one can sell or mortgage the property without the other’s consent.
A joint tenancy is also known as a joint tenancy with right of survivorship. In this type of concurrent estate, the co-owners of the property have a right of survivorship, meaning that if one of the owners dies, their interest in the property transfers to the living co-owner. The transfer of property interests happens automatically and without having to go through the traditional probate process.
This type of estate in land is similar to a tenancy by the entirety but does not require the co-owners to be married; it instead requires the co-owners to obtain equal shares of the property as part of the same deed and at the same time. Additionally, the tenancy can be broken if one of the co-owners sells or otherwise transfers their interest to a third party.
Tenancy in Common
In a tenancy in common, each owner has equal but separate and distinct shares of the same property and the right to use the entire property. What’s more, tenants in common can obtain their property interests at different times and as part of different deeds. This makes it easier to create and maintain than a joint tenancy, and enables owners to sell their shares to a third party without consulting with other owners or destroying the tenancy.
A statutory estate is one that is created by operation of law, meaning that state or local legislation gives someone the right to specific property without having to have their name on the title. This type of concurrent estate includes community property acquired by a spouse during marriage, homesteads that are protected from creditors, a wife’s dower interest in her husband’s property, and a husband’s courtesy interest in his wife’s property.
4. Equitable Estates
An equitable estate is one that you don’t yet own or possess. This category includes future interests that you won’t have possession of until specific future events; incorporeal interests that aren’t tangible, like easements; and liens, which represent a right to someone else’s property.
The three general types of equitable estates are:
A future interest exists where the owner of a property interest doesn’t yet have possession of the property or the ability to use and enjoy it. For example, if someone transfers property to your friend and the deed states that the property will transfer to you upon the friend’s death, you have a future interest in that property.
An incorporeal interest is a right that can’t be seen or touched but that can still be enforced. These rights apply to easements, real covenants, rights to minerals (sometimes known as profits a prendre), and other types of intangible property.
A lien is a legal right to someone else’s property. For example, if your homeowners’ association (HOA) puts a lien on your house because you failed to pay your annual dues, the HOA has a legal right to foreclose on your house if you don’t pay off the debt.
How to Determine Your Estate in Land
If you own property, the nature of your estate in land is dictated by the language of the deed or other conveyance document, like a will or trust. For example, if you have a fee simple absolute estate in land, the deed will use language like “fee simple” or “fee simple absolute” and will not include language that limits the ownership interest or indicates that the ownership right could be ended or transferred back to the previous owner.
Frequently Asked Questions (FAQs)
What is the difference between an interest & an estate in land?
Ownership interest is dictated by the estate in land as described in the deed or other conveyance document. A property owner’s interest in land depends on the nature and extent of the buyer’s and seller’s ownership in the land.
Is an easement an estate in land?
An easement is an estate in land that gives the easement holder the right to use land that is owned by someone else without taking ownership. More specifically, easements are classified as incorporeal interests that can’t be seen or touched but can still be enforced. For example, utility companies typically have easements for placement of electric lines or water and sewer infrastructure.
When would someone need to know about estates in land?
Estates in land are generally mentioned as part of trusts or wills that grant ownership of property to individuals upon their death or following other predetermined events. Those with aging or terminal family members should understand the types and implications of estates in land so as to be ready for execution of wills and trusts when their family member dies.
An estate in land describes the rights a property owner has to use or transfer their real estate. The estate may be described as freehold, leasehold, concurrent, or equitable, depending on the degree, quantity, nature, and extent of the interest as described in the applicable deed.
Determining what type of property interests you have can be difficult—especially when you inherit property or have an easement or other less tangible property interest. Rocket Lawyer’s team of professionals can help you understand your deed, easements, or other legal documents and determine your interest in a property. Click here to learn more.