What’s a fee simple?

Hint. It’s neither a fee nor is it simple.

Rather, the term is used to refer to the “bundle of rights” that accompany ownership of real property.

The “fee simple” is the largest bundle available for private ownership of land.

Included in the bundle of rights under “fee simple” are: right to occupy and use, right to build, right to restrict use, right to mine, drill, or farm, right to mortgage, right to easements, right to exclude others, right to sell, right to give away or abandon, right to refuse to sell, right to rent or lease, right to license, right to the fruits, and right to devise by will.

Hence, real estate ownership is also really just ownership of the rights to the land.

When a real property is mortgaged, this may be viewed as removing one right from the bundle and giving it to third parties (such as a bank or other financing institutions ).

Although the fee simple represents absolute ownership of land, it is still subject to government’s basic rights of taxation, exercise of police power, eminent domain, and escheat.

As many Philippine landowners know, aside from its yearly taxation on real properties, government also collects taxes on certain transactions — sale, donation, or mortgage — involving land and any improvements thereon such as a house or a building.

A landowner who doesn’t pay taxes risks having his property seized by the government.

Developments on real property are also limited by government’s implementation of building and fire codes and zoning.

Government’s eminent domain power gives it the right to take private property for public use after paying “just compensation.” Expropriating property for road right-of-way is one example.

Escheat is when private property reverts back to government after a landowner who does not have any legal heirs dies without leaving a will.

The fee simple concept has its origins in feudal times and is the most common way that real estate is owned in common law countries like the Philippines.

The word “fee” in fee simple has its origin in feudalism where it is used to refer to fiefdom, fief, feud, feoff, or fee, which takes the form of inheritable lands given by a liege lord in return for a form of allegiance.