The two ways to hold title on a property is by owning or leasing it. A landlord’s claim to property is considered a freehold estate while a tenant’s title to a property is classified as a non-freehold estate. There are some key differences between the two types of claims that you should be made aware of regardless of if you are an owner or tenant.
Freehold estate is ownership of land. Two conditions must be met for a property to be considered freehold:
- No fixed length of ownership – There is no predetermined timeline for the claim of the property to expire – it can be passed on forever.
- Immovable – The title cannot be moved so it must be land or possess some sort of interest in land.
Types of freehold estates
There are three classes of freehold properties. They can all be passed on indefinitely, and some require specific conditions to be met to do so while others do not.
- Fee simple absolute – The most common type of property ownership. The land can be used unrestrictedly within the confines of the law, especially zoning laws. There is no set length of ownership as long as taxes and the mortgage are paid. It can be transferred or sold to someone else. This type of property can also be inherited if the owner dies.
- Fee simple defeasible – This type of land ownership is subject to specific conditions. These could be that the land must be used to grow corn or solely for educational purposes. If these conditions are violated then the ownership of the property is automatically terminated. The ownership of the land can also be terminated by the owner, which is instead called a fee simple subsequent.
- Life estate – This type of property remains in the title of an individual for as long as the person who granted them the title in it is living. The person awarded the title is called the life tenant. They are responsible for making sure the property is in adequate condition. Although, the life tenant ceases to have claim over the property once the grantor dies.
There are four types of non-freehold properties:
- Estate for years – This type of lease has a set duration with a beginning and ending date. Most lease agreements would be classified as an estate for years.
- Year to year estate – This type of lease renews each year. Typically, after a fixed term lease expires, a tenant becomes an individual becomes a periodic tenant. For example, this could happen when a one year lease ends on December 31st, and the landlord accepts payment on January 1st so that the tenant can continue to live there. The tenant would now be considered a periodic tenant. The landlord or tenant would now have to give notice of termination of the agreement much further in advance. Usually, one to two months before the lease would automatically renew.
- Tenancy at will – There is no written contract between the tenant and landlord in this agreement. Either party can end the lease at any moment. There may still be requirements for how much notice must be given depending on municipal laws.
- Tenancy to sufferance – Also known as a holdover tenant, this happens when the tenant’s legal right to reside at a property ends. The tenant no longer has the landlord’s permission to remain and could face legal action to be removed.
Whether you are looking to rent or own property, knowing the difference between these two estate types is crucial. Contact Cherry Yeung before you sign an agreement, and she will make sure the contract is in your favour.