Peacock Tales • Fall 2011
 


Understanding 'Fee Simple' Not So Simple    

By Andrew S. Chumney

When our clients approach us regarding a real estate problem, they will often ask whether they have "fee simple" title to their property. However, what a client is usually thinking when he/she says "fee simple" and what the attorney is thinking when he or she hears "fee simple" are often two very diff- erent things. That difference being that many times a client thinks that title in "fee simple" means they own all the associated property interests such as the coal, oil, gas, and other minerals, but this is not the case.

The term "fee simple" is derived from early English law and is defined as having acquired the highest level of ownership interest in land possible; one that is of infinite duration, without limitation or condition, and freely disposable either by deed or will. In other words, acquiring property in fee simple means that the owner has the right to deal in the land without having to account to anyone else, other than certain restrictions instituted by the government such as zoning regulations or taxation. However, it does not necessarily mean that you own the coal, oil, gas or other minerals underlying the property.

If fee simple title is the highest level of ownership interest in land, what other lesser levels of ownership exist? Two examples of such lesser levels of ownership are a life estate and a joint tenancy with the right of survivorship.

A life estate is a property interest lasting only for the natural life of the owner. Alife estate can be transferred; however the transfer cannot change its original duration, which is limited by the natural life of the original owner. For example, I can transfer my life estate to my child, but the life estate will terminate upon my death and not the child's.

A joint tenancy with the right of survivorship means that upon the death of one co-owner, the surviving co-owner becomes the sole owner of the estate in "fee simple." Ajoint tenancy with the right of survivorship can be transferred during a tenant's life terminating the right of survivorship and creating a tenancy in common. Then, upon the death of a co- owner his or her undivided interest in the whole, which is now in "fee simple," passes to his/her heirs and not the other co-owner.

In summary, fee simple title is the absolute highest of all the rights available with respect to ownership of real estate, but it does not mean that the owner automatically has title to each individual stick in the bundle, e.g. coal, oil, gas, etc. Conversely, the lack of ownership of a specific "stick", such as the coal, does not mean that you cannot have fee simple ownership to one or more of the other "sticks" such as surface and gas. So, if you're interested in acquiring the coal, oil or gas when you purchase surface, do not be fooled into thinking you are getting all the sticks in the bundle just because someone simply tells you that you are acquiring the property in fee simple. . .it's not that simple.


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