Rejected OffersNovember 7, 2022
Methods of OwnershipJanuary 25, 2023
Types of Ownership
There are different types of ownership in New Jersey real estate. Let’s examine the three freehold estates – that is, estates that have an uncertain or indefinite duration.
Fee Simple is the form of ownership that is most common and you are probably familiar with it. Fee simple has the highest degree of ownership recognized by law. It is an estate that lasts the owner’s entire lifetime and it can be passed on to the heirs. The owner can choose to end their ownership of the property during their lifetime by selling or gifting the property to another party. If kept until death, the property can be inherited by the parties designated in the owner’s will or by intestate succession if there is no will.
Conditional Fee – also called Determinable Fee – is an estate of inheritance that differs from Fee Simple in that it has certain limitations. An example would be if a property owner conveys a property to a non-profit, such as a soup kitchen, church, rec center or performing arts group. The Conditional Fee has specified that the property can only be used for a specific purpose. As long as that intended use is utilized, the property remains in the ownership of the non-profit. Should that use end, so does the ownership. The property then reverts back to the original owner or his estate.
The other type of ownership is a Life Estate. A life estate does not pass on to the owner’s heirs and it exists only during the duration of a particular person(s) life. Let’s clarify this Life Estate with an example. Suppose the Smith family wants to buy a 10 acre property that adjoins their residential home. An elderly couple owns and lives on that property and doesn’t really want to sell it while they are still alive. The Smiths can offer a Life Estate, meaning the elderly couple can live in the house for the rest of their lives, at which time the property reverts to the Smiths. So the elderly couple got to live out their days in their home, plus they got to enjoy the financial benefits of having the money to spend during their golden years. It’s a win-win for both parties.
As you can see, there are types of ownership to fit any life situation. While Fee Simple is the norm, the other forms of ownership are sometimes a great fit.