What distinguishes a fee simple estate from a leasehold estate?

A fee simple estate and a leasehold estate differ fundamentally in the nature of the interest held by the owner. A fee simple estate represents the most complete form of ownership in real estate. It grants the owner full control over the property and the rights to possess, use, and transfer the property indefinitely. This type of ownership is inheritable and gives the owner the highest level of rights recognized by law.

In contrast, a leasehold estate is a temporary interest in property created by a lease agreement. The leaseholder has the right to use and control the property for a specified period, as defined by the lease terms, but does not own the property itself. When the lease ends, the rights revert to the property owner, meaning the leaseholder does not have a permanent interest in the property.

While duration of interest, right to transfer ownership, and amount of control are related factors that differentiate the two, the specific distinction lies in the very nature of the interest itself—permanent ownership versus temporary use—wherein the fee simple estate confers full ownership rights, and the leasehold estate reflects a limited, contractual right to use the property. Understanding this fundamental difference is crucial for navigating real estate rights and transactions.