Chapter 1: The Fee Simples

Hello,

The following is an excerpt from my book titled 'Phillips on Land Title Examination: Estates in Blackacre.' The book consists of 13 chapters and I am posting two of these chapters on this blog.

Please read on!

Most people, including most real estate professionals, associate the term fee simple with land ownership. You will often hear someone ask, “Who is the fee owner?” But how many people actually understand what fee simple is? The answer is: probably not many.

The fee simple family consists of two members: 1) The fee simple absolute, and 2) The fee simples defeasible, often referred to as the defeasible fee simples. Collectively, the fee simple absolute and the defeasible fee simples constitute the family of fee simples.

Chapter one will focus on the first of these; the fee simple absolute. A discussion of the defeasible fee simples will encompass chapters three, four and five.

The Fee Simple Absolute:

In our society, the fee simple absolute is the most comprehensive estate regarding land ownership. It is the ownership structure that most people are familiar. The fee simple absolute is characterized by the following: 1) its potential longevity; 2) its free transferability, and 3) its lack of conditions or restrictions that may render the fee simple estate defeasible.

First up, what do I mean by potential longevity?

Let me use this example to help explain:

Let’s say that Dave Phillips is the owner of blackacre in fee simple absolute. Upon Dave’s death, if he has not previously disposed of blackacre, his ownership interest will pass, by operation of law, to his heirs. Let’s further assume that upon Dave’s death, he is survived by his son, Sparky, his only heir.

Sparky would be the new owner of blackacre in fee simple absolute. Upon Sparky’s death, if he has not previously disposed of blackacre, his ownership interest will pass, by operation of law, to his heirs, if any.

This succession of ownership could theoretically continue for all time; as long as the family tree is strong. Inheritability is one of the aspects that make the fee simple absolute so appealing. As long as there is an heir in existence at the death of the fee simple absolute owner, title will transfer.

Next, property held in fee simple absolute is freely transferable. The holder of a fee simple absolute may convey his interest at any time. He may convey his entire fee simple absolute interest, or only a portion thereof; it’s his exclusive choice.

Nuance: The holder of a fee simple absolute interest may have one or more potential heirs during his ownership period. I say potential because an heir does not exist, legally, until the actual death of the fee simple absolute owner. There may be numerous hopeful people, but the heirs will not be established until death. For this reason, the potential heirs have no legal standing to challenge a conveyance from the living owner of a fee simple absolute estate.

Finally, the fee simple absolute estate is free of conditions or restrictions.

Let me show you what I mean:

Conveyance #1: Julie Phillips, owner in fee simple absolute, conveys blackacre to Dave Phillips.

State of Title: Dave Phillips in fee simple absolute.

Conveyance #2: Julie Phillips, owner in fee simple absolute, conveys blackacre to Dave Phillips, as long as no liquor is sold on the subject property, and if liquor is sold, the property shall automatically revert back to Julie Phillips in fee simple absolute.

All right, conveyance #1 contains no restrictions or conditions. A text-book fee simple absolute interest was transferred. Conversely, conveyance #2 contains a specific restriction: that no liquor is to be sold on blackacre. This restriction makes it impossible to establish a fee simple absolute estate.

Conveyance #2 actually creates a fee simple determinable with possibility of reverter. A discussion of these estates will begin in Chapter three.

*What is important to remember is this: The moment you spot a condition or a restriction placed upon a grantee, as demonstrated in conveyance #2, you are not looking at a fee simple absolute.

As a practical matter, the marketability of property is often interfered with when a restriction exists. For example, a potential purchaser of blackacre may decide to back out once she learns that blackacre is subject to a possibility of reverter.

Now, to complete the circle, how is the fee simple absolute terminated? Here are some possibilities.

First, the holder of a fee simple absolute may convey his or her interest at any time, as discussed. This conveyance would act to terminate the grantor’s fee simple absolute interest.

Second, a holder of a fee simple absolute interest in blackacre may die without an heir and without having left a will. Dying without a will is referred to as dying intestate. This scenario would terminate the fee simple absolute estate. In this peculiar situation, blackacre would escheat to the State of Michigan. Escheat is when a governmental unit takes back property that has no takers. If the owner of blackacre dies without a legal heir and without having left a will, the property would, in effect, be abandoned. So, in this situation, the State of Michigan would be more than happy to take your land. However, in today’s day and age, the state may not be excited about taking possession of land that may have little to no value. I digress.

Finally, a fee simple absolute interest, as well as any estate interest for that matter, may be terminated by forfeiture or foreclosure. Forfeiture and foreclosure are legal proceedings, the finalization of which acts to terminate all existing interests.

Additionally, although the fee simple absolute is an enduring estate, it is not free of governmental regulation. Governmental regulations such as zoning laws and police power represent inherent restrictions placed upon blackacre. Governmental regulations will maintain priority over any created estate.

Taxation is another beast. In Michigan, real property taxes are collected on all non-exempt parcels of land. If such taxes are not timely paid, forfeiture and foreclosure may act to oust the delinquent owner.

As a final twist of the knife, the hammer of eminent domain may be dropped on a land owner, completely destroying her ownership interest. Eminent domain is a legal process by which the landowner has property taken from them, called a condemnation proceeding. The landowner is compensated for such taking. Eminent domain is an animal of its own kind.

These points are made to demonstrate that the fee simple absolute, though our strongest form of land ownership, is not perfect.

Defining the Fee Simple Absolute:

Fee is synonymous with present possession and ownership. Simple refers to an estate that is inheritable. Absolute discloses that there are no impediments to the ownership, such as competing estates or restrictions, as discussed above.

Examples Creating A Fee Simple Absolute:

Conveyance #1: Mr. X, a single man, owner in fee simple absolute, conveys to Dave Phillips.

State of Title: Dave Phillips in fee simple absolute.

Notice that there are no conditions or restrictions placed on Dave’s interest. This conveyance creates a fee simple absolute and thereby satisfies the calculus of estates.

Conveyance #2: Susan Smith, a married woman, owner in fee simple absolute, conveys to Michael Thomas in fee.

State of Title: Michael Thomas in fee simple absolute.

Again, notice that there are no conditions or restrictions placed on Michael’s interest. This conveyance creates a fee simple absolute and thereby satisfies the calculus of estates.

Conveyance #3: Lisa Jones, owner in fee simple absolute, conveys to Rick Phillips in fee simple.

State of Title: Rick Phillips in fee simple absolute.

Again, notice that there are no conditions or restrictions placed on Rick’s interest. This conveyance creates a fee simple absolute and thereby satisfies the calculus of estates.

Conveyance #4: Tricia Title, owner in fee simple absolute, conveys to Bob Jones in fee simple absolute.

State of Title: Bob Jones in fee simple absolute.

Notice that conveyance #1 was to Dave Phillips; conveyance #2 was to Michael Thomas (in fee); conveyance #3 was to Rick Phillips (in fee simple); and conveyance #4 was to Bob Jones (in fee simple absolute). In all four examples, an estate of fee simple absolute was created. It is not necessary to add additional language, such as that used in conveyances 2 through 4. A conveyance to Dave Phillips will create the same estate as a conveyance to Bob Jones in fee simple absolute.

Summary:

Chapter one was predominantly a discussion of the fee simple absolute. The fee simple absolute, in our culture, is the most comprehensive estate regarding land ownership. It is characterized by 1) its potential longevity; 2) its free transferability, and 3) its lack of conditions or restrictions that may render the fee simple estate defeasible.

The family of fee simples consists of the fee simple absolute and the fee simples defeasible. Unlike the fee simple absolute, the fee simples defeasible are subject to conditions or restrictions. It is these conditions or restrictions that render the fee simple estate defeasible. Defeasible means that the owner of the fee simple interest may have his interest completely destroyed upon the breach of a restriction or the failure of a stated condition. Defeasible fee simples are very harsh, and the uneducated holder of such an estate may be in for some awful surprises.

The fee simple is made defeasible in one of three ways: 1) by creation of the estate of fee simple determinable; 2) by creation of the estate of fee simple upon condition subsequent; or 3) by creation of the estate of fee simple subject to executory limitation. These three estates are covered in detail beginning with chapter three. Please be patient!

The next chapter will concern the life estate and the reversion. The reversion is an estate of future possession created when the holder of a fee simple absolute conveys a life estate. Chapter two will offer us a good opportunity to make the distinction between present and future possession.

dave