Fee Simple Ownership Guide In NSW

Fee Simple Ownership Guide In NSW

Fee Simple Ownership Guide In NSW

 limits to what the property owner may do on the land, except adhering to any local zoning ordinances because the property is entirely and irrevocably his. Real estate property that cannot be moved and property immediately attached, including land, a building structure, machinery, pond or road. Property ownership comes in many forms, but fee simple is the highest.

Another way to look at fee simple is that the property it covers becomes part of the owner’s estate, and when they die, their heirs inherit it. 

Example Of Fee Simple

When a person purchases a home, they usually do so fee simple, meaning their name is on the title deeds, and they own the property and all associated rights. Subject to any local ordinances, the owner can develop both the land and buildings on the property.

Of course, should a person buy a home with a mortgage, as most do, the bank or company that loans you the money or grants your mortgage is legally allowed to take over possession of the property if you default on your mortgage payments. In this type of arrangement, the mortgage granter is known as a lienholder. While the homeowner continues to meet their agreed mortgage payments, they’re still entitled to full property ownership. The only limits are zoning laws, subdivision or deed restrictions, and covenants.  

Where Did Fee Simple Originate?

Suppose we look at feudal times when feudal lords or overlords paid knights and other particular workers with land for services rendered. They provided the services that their overlords required, and the land was bestowed upon them in return. But, of course, the overlords were also responsible for protecting their workers. These arrangements were known as fiefs, and that is from where the word fee is derived. These landholding arrangements eventually died out, and simple no-strings-attached ownership took their place. 

How Does Fee Simple Ownership Work?

So long as the owner doesn’t break the law or infringe upon the public’s welfare, there are no time limits of fee simple ownership, and they can do just about anything they want on the property. They can keep it to pass on to the next generation, rent it out to others and create regular income or sell it for an instant injection of funds. An owner can also place encumbrances, such as a mortgage, against the property. They will probably be taxed on the value of the property. 

While fee simple ownership is the highest and safest form of ownership, there are still some possible threats to ownership. Defaulting on mortgage payments is one. In addition, third parties may place other liens on the property if an owner fails to pay property taxes or owes money to a creditor who goes to court for a judgment against them. 

Fee Simple Ownership Is Not One Size Fits All

There are two types of fee simple ownership, and distinguishing between them can be a bit confusing. They are fee simple absolute ownership and fee simple defeasible ownership. Fee simple defeasible ownership is not as common as fee simple absolute ownership. It has provision for five possible restrictions:

  • Restrictions or covenants stating how the property may and may not be used. Prior owners typically place covenants on a property, and they pass from owner to owner.
  • Police power.
  • The government’s right to seize property to use for its own purposes or eminent domain.
  • Ownership that has the potential for the property to revert to the state or escheat.
  • Taxation.

Fee Simple Ownership Or Leasehold Ownership?

There will always be many people who want to buy their own homes, to have their own little patch of land, but there are plenty of people who are quite happy renting. What owners want in a piece of real estate differs, too. Some want a townhouse, while others want a condo. We’re all different, and we need options. Contrasting with fee simple ownership is leasehold ownership. It covers the choices owners need. 

Fee simple ownership provides property ownership, while leasehold ownership provides full access to the property without ownership. 

Fee simple owners can encumber their property as collateral for loans, while a leaseholder cannot. 

Fee simple owners can leave the property to their heirs, while leaseholders have no such rights. 

Fee simple owners have no limitations other than the law, while leaseholders may have restrictions placed upon them by the property owners.

While true leasehold ownership allows a person full access and use of a property, they don’t own it. Owners of rental or leased properties can place conditions upon tenancy, such as prohibiting pets. However, when the lease ends, the property still belongs to the owners. 

When purchasing a condo or apartment, the purchaser doesn’t acquire any land because they don’t own the entire building. Of course, a buyer may be able to purchase the whole building. 

Leaseholder ownership also applies to land, whereby the tenant may be afforded by the landlord the right to plant or cultivate certain areas for a specified length of time. Again, however, there may still be restrictions as to exactly what they can do. 

FAQs About Fee Simple Ownership

1. What Are Some Other Names For Fee Simple Ownership?

  • Fee ownership;
  • Fee simple absolute;
  • Absolute ownership; and
  • Estate ownership.

2. What Is The Legal Meaning Of Fee Simple?

Fee simple is an interest in land. It is land owned wholly, without condition or limitation. Such unlimited estates are called absolute. Fee simples are generally created when deeds give the land with no conditions, particularly when using words such as ‘to Jane Doe’ or ‘to Jane Doe and her heirs’. Freehold land provides purchasers with the most complete form of land ownership into perpetuity. Freehold land allows the landholder to deal with everything to do with the land including, leasing, mortgaging or licensing the land, selling, subject to their compliance with planning and environmental laws.

3. Is Fee Simple Ownership The Only Way Land Can Be Legally Occupied?

No. Property, including land, can be leased from the owner. A leasehold estate, otherwise known as a lease, is a written contract between the lessor (owner) of the property and the lessee (leaseholder) that allows occupation of the property for a specific length of time and with certain conditions. Typically known as a ground lease, this type of arrangement allows the tenant to occupy and develop the property during the stated length of the lease. The lessee is also required to pay the lessor for the use of the property. At the end of the lease, the land and fixed property revert to the owner, including any improvements made by the lessee during their occupation. A life lease remains in force until the lessee dies and is primarily used in senior housing. It gives the lessee the right to stay at the property while they are living. Once they die, the property reverts to the owner. Owners of individual units, apartments or condominiums have full legal rights, subject to any restrictive covenant because the owners share the use of shared or public areas, so they’re all obliged to assist toward its upkeep. 

4. What Are The Simple Facts I Should Remember?

Fee simple ownership gives purchasers complete control and enjoyment of their property.

Fee simple owners may use their property as collateral for loans. They can also bequeath it to beneficiaries in their will. These owners are still not allowed to break the law or local ordinances on or within the property.

Fee simple owners are still responsible for paying their creditors or facing the threat of losing their property to pay their creditors. 

Related articles
Torrens Title NSW
Torrens Title NSW

Learn more about property titles in NSW, including the Strata, Community, Old System and Torrens Titles. What are the advantages, Read more

When is Stamp Duty Payable NSW
When is Stamp Duty Payable NSW

Find out more about stamp duty in NSW, how long you have to pay, and what factors to consider when Read more

Eminent Domain – What This Means in Australia
Eminent Domain

Most of us dream of becoming property owners, of purchasing our own little piece of Australia, and we tend to Read more

What Is A Caveat On A Property?
What Is A Caveat On A Property

Find out how to lodge a caveat, why you may need one and the benefits and protection it can provide. Read more