Fee Simple Ownership in Real Estate: Definition and Exceptions

Fee simple ownership is always preferred

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The law recognizes fee simple ownership as the highest form of ownership in real estate. It entitles the property owner to full enjoyment of the property. He's limited only by zoning laws, deed or subdivision restrictions, or covenants. The duration of his ownership is not limited and it can be passed along in a will to his heirs. Fee simple ownership is also sometimes referred to as "fee ownership," "estate of inheritance," or "absolute ownership." 

In other words, you own the property. You can pretty much do whatever you like there, always assuming you're not breaking the law or otherwise infringing on public welfare and that's a whole separate area of the law.  

Can Ownership Be Limited? 

It can. Just as in the example of breaking the law—fee simple ownership does not mean you can murder someone in your basement with impunity—you might encounter other obstacles, such as with title insurance coverage. 

If you want to know just how much your ownership can be limited in this way, let's take a look at the Exceptions section of a title insurance binder in the state of New Mexico. 

An Example

You'll see the things in this binder that the title insurer will not cover, excepting them from the policy. 

"Standard exceptions 1, 2, 3 4, 6 and /or 8 may be deleted from any policy, and standard exception 7 may be modified on any policy, upon compliance with all provisions of the applicable regulations, upon payment of all additional premiums required by the applicable regulations, upon receipt of the required documents and upon compliance with the company's underwriting standards for each such deletion. Standard exception 5 may be deleted from the policy if the named insured in the case of an owner's policy, or the vestee, in the case of a loan policy, is a corporation, a partnership, or other artificial entity, or a person holding title as trustee. The policy to be issued pursuant to this commitment will be endorsed or modified in schedule B by the company to waive its rights to demand arbitration pursuant to the conditions and stipulations of the policy at no cost or charge to the insured. The endorsement or the language added to Schedule B of the policy shall read: "In compliance with Subsection D of 13.14.18.10. NMAC, the company herby waives its rights to demand arbitration pursuant to the title insurance arbitration rules of the American Land Title Association. Nothing herein prohibits the arbitration of all arbitrable matters when agreed to by both company and the insured." 16-16-19, 3-1-90, 6-1-97, 6­1-98; 13.14.5.9 NMAC — Rn, 13 NMAC 14.5.9,5-15-00;A, 8-29-06; A, 7-1-05

Schedule B of the policy or policies to be issued will contain exceptions to the following matters unless the same are disposed of to the satisfaction of the company.

I.   Rights or claims of parties in possession not shown by the public records.

  1. Easements, or claims of easements, not shown by the public records.
  2. Encroachments, overlaps, conflicts in boundary lines, shortages in area, or other matters which would be disclosed by an accurate survey and inspection of the premises.
  3. Any lien, claim or right to a lien, for services, labor or material heretofore or hereafter furnished, imposed by law and not shown by the public records.
  4. Community property, survivorship, or homestead rights, if any, of any spouse of the insured (or vestee in a leasehold or loan policy).
  1. INTENTIONALLY OMITTED
  2. Water rights, claims or title to water.
  3. INTENTIONALLY OMITTED
  4. Taxes for the year 2009, and thereafter.
  5. Defects, liens, encumbrances, adverse claims or other matters, if any, created, first appearing in the public records or attaching subsequent to the effective date hereof but prior to the date the proposed insured acquires for value of record the estate or interest or mortgage thereon covered by this Commitment.
  6. Reservations as contained in patent from The United States of America to Antonio Martinez Grant, dated May 8, 1896 and filed for record in Book A-16 at pages 68-97.
  1. 20' easements for ingress, egress and utilities, 50' easement for ingress, egress and utilities, overhead power lines, utilities as reflected on survey plat entitled "Lopez to Barron", dated October 14, 2003 by Jeffrey B. Stadler as Job #858 filed on November 5, 2003 in Cabinet Eat page 128.
  2. Easement as contained in Warranty Deeds filed for record in Book A-248 at page 569; Book A-

File Number: redacted                                                                              Commitment: redacted

  1. Right of Way Easement, dated June 3, 1987 in favor of Kit Carson Electric Cooperative, Inc., and filed for record in Book M-119 at page 810.
  2. Right of Way Easement dated November 14, 2003 between Terry Lopez, a single person to Daniel R. Barron, a married man dealing with his sole and separate property filed for record in Book M411 at pages 270-274.
  3. Road and Utility Easement, dated October 29, 2003 and' iled for record in Book M-413 at page 699.
  4. Declaration of Covenants, Conditions and Restrictions, dated May 29, 2006 and filed for record in Book M-550 at pages 516-535.
  1. Road Maintenance Agreement for Calle Emelina, dated May 29, 2006 and filed for record in Book M-550 at pages 536-556,
  2. Well as reflected on survey plat entitled "Daneeca C, Barron", dated June 20, 2005 and filed for record in Cabinet Eat page 136­B.
  3. PVC risers, setback lines, well, water hydrant, electric meter, propane tank, 50' easement for ingress, egress and utilities as reflected on Improvement Location Report dated August 28, 2009 by Jeffrey B. Stadler as Job #I858-B-2a."

The Takeaway

None of these are problems or restrictions on ownership, but they do give an idea of the many ways in which threats to ownership can surface regardless of how you hold title. All the same, fee simple ownership is by far preferred. These types of restrictions can occur with all properties, and they would be an added burden if you held title in any other way.

What Is Freehold Estate?