What does fee simple mean in real estate?
- Definition of Fee Simple
In real estate, a fee simple estate is a form of freehold ownership. It grants a property owner exclusive rights on a property, which means that they own the land and property completely and without any limitations or conditions, aside from taxation, debt obligations and zoning or building restrictions. Fee simple is the highest form of ownership recognized by law and the most common type of land ownership in Canada.
Why is this term important?
Fee simple ownership guarantees the owner full rights to the property. In fee simple real estate, the owner is free to do what he wishes on his own property including destroying or disposing of the property at any time.
Fee simple is often referred to as freehold ownership, as it is the highest form of property ownership as it has the fewest restrictions. In contrast, leasehold is the opposite of fee simple in that the owners have complete access to the property but do not own the land.
There are three types of legal property ownership in Canada: freehold (aka: fee simple), cooperative and strata (also known as a condominium). Each term is used to define an owner's rights and responsibilities in relation to the property.
- The owner exclusively owns the land and property;
- This type of ownership offers the most privacy;
- This type of ownership offers the most freedom as an owner is free to renovate and decorate as they please (as long as the owner adheres to city planning and zoning departments);
- The owner is responsible for deciding when and where and at what cost maintenance will be performed on the land and property.
- Similar to condominiums, cooperatives (aka: co-ops) allow owners to share the ownership of a property. Unlike condos, co-op owners own shares in a building complex rather than the unit itself;
- Like condos, co-op owners are required to pay monthly fees that are used for maintenance and repairs on the building;
- Unlike condos, if you decide to sell your shares and move out of the cooperative, the co-op board has a legal right to reject any prospective buyer that opts to purchase your co-op shares.
- Condo ownership means you own a unit of property within a larger condo complex.
- The complex and the common elements—the parts of the building utilized or accessed by all condo-unit owners—are governed and maintained by a condo corporation, which is governed by a condo board.
- The condo corporation is created solely to manage the affairs of the condo complex.
- Owners and residents are required to comply with the documents (which includes by-laws, legal description and the declaration) which govern the complex.
- A condo owner is able to sell and transfer ownership of the unit, but any alterations or changes to the unit must be approved by the condo board.
Examples of term
If a buyer were to purchase a detached home, they would own a fee simple interest in that detached home. This same buyer could opt to change the external siding of the home or alter the deck (or any other aspect), as long as they were compliant of municipal zoning and bylaws. If a buyer were to buy a condo-townhome, the condo board would Fee Simple Townhome means when the Home Owners Association tells you that your deck needs to be painted you must do it and pay for it out of pocket. Same goes for Roof and other exterior maintenance as prescribed by the homeowners Association.
However, if a buyer were to buy a condo-townhome, the condo board would dictate when a deck would be altered, and the owner would simply be asked to pay for any other external maintenance or upgrade.