Fee Simple vs Leasehold: What's the Difference?

Fee Simple vs Leasehold: What's the Difference?

Fee simple and leasehold are two distinct types of property ownership. Fee simple ownership grants the owner complete control over the property, including the land and any structures on it, with the right to use, sell, or bequeath the property at will. Leasehold ownership, on the other hand, gives the tenant the right to use the property for a specified period of time, after which the property rights revert to the landowner, often involving regular payments for the lease duration.

Here are some of the distinct rights, responsibilities, and durations that apply to each:

  1. Fee Simple: This is the most complete form of property ownership. When you own property in fee simple, you have full control over the land and the buildings on it, subject only to government regulations like zoning laws and taxes. You can sell, lease, or bequeath the property as you wish. It's an indefinite ownership that does not expire and is considered the highest form of property ownership.
  2. Leasehold: This form of ownership or interest gives you the right to use and occupy the land and/or buildings for a specified period as outlined in a lease agreement, after which the ownership rights revert back to the landowner or lessor. Leasehold terms can vary greatly, from a few years to several decades (often 99 years or more), and the leaseholder may have to pay ground rent to the landowner. Leaseholders can invest in the property (by building or making improvements), but the scope of what can be done is usually defined by the lease agreement, and all improvements typically become the property of the landowner at the end of the lease term.

The key difference is the permanence and extent of control: fee simple ownership offers perpetual rights and full control over the property, whereas leasehold is a temporary right to occupy and use the property, with various restrictions and obligations as determined by the lease agreement.

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