A deed is the written document that conveys a property from a grantor (e.g., seller) to a grantee (e.g., buyer). Among other things, the deed indicates the form of the estate that passes.
Fee simple (sometimes, “fee simple absolute”) is the most complete form of ownership one can have. It gives the owner the right to use, possess, or dispose of the land however the owner sees fit.
A life estate permits someone (often a parent) to possess a home (or other structure) until their death, at which time the home automatically conveys to someone else (the “remainderman”). For example, “A conveys to B in fee simple, but reserving unto A a life estate in the property for her own life.” This means that B can’t take over the property as long as A is alive, but once A dies, the property passes to B automatically. However, A could add to the end of that quote, “but with the authority to A to sell, convey, or dispose of the property or to mortgage all or any part of the property.” This gives A the right to change her mind as circumstances change. She can sell the property (extinguishing B’s future interest in it), or take out a mortgage on the property.
In some areas of the country (locally, Baltimore City and Anne Arundel County, MD), the owner of the land on which a house (or other structure) is built is owned by one person, and the home by another. In such a case, a leasehold interest is passed from one homeowner to the other. The owner of the home must pay an annual “ground rent” (usually $50 to $150 per year) to the owner of the land on which it’s built, who is quite literally their landlord. A new owner must be careful not to ignore their landlord’s payments even if the landlord is hard to find (often the case). The highest court in Maryland has allowed for a land owner to evict a homeowner for a relatively small amount of rent due.
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Rob Bodine is a Virginia attorney focusing his practice on real estate and intellectual property law. He’s currently Virginia counsel with First Class Title, Inc., a Maryland title insurance and settlement company. Rob is also a licensed title insurance agent in Maryland and Virginia.