Freehold vs Leasehold Land Laws

What gives you the right to live in your home?

You've plunked tens of hundreds of thousands of dollars to close your house deal. You probably think that money bought you the lot and the building and the nice cabinets and the leaky roof. OK, so it did. But it bought you something even more important – the legal rights to the property. Tear yourself away from that strangely mesmerizing damp patch on the bedroom ceiling and have a look instead at your Transfer/Deed of Land, which is the document that sets out those rights.

You'll have to hunt to find the section about your rights to the property, and when you do find it you won't be much wiser. In a little box are the words "Interest/Estate Transferred: Fee Simple." Your first thought will be that "simple" isn't quite how you would describe the fee associated with your house purchase... "sky high" or "ouch!" would be more like it. But in fact this "fee" means something like "ownership rights". The word comes from the English law (which is the basis of Canadian law) and is about a thousand years old.

English law gave us a basic distinction between "leasehold" and "freehold" land. If you occupy property under a lease, you don't own the property. You can live there but you can't do much else. When the term of the lease is up you either have to negotiate a new lease with the owner or else leave. Some leases are for a very long period-for example, cottage properties on government-owned (crown) land have often been leased to the cottage "owner" for 99 years.

Freehold land is land you own outright instead of leasing. You may have seen developers advertising houses for sale as "freehold". When they say that they're not suggesting that some other developments just lease out the land. What they're really trying to say is that you'll own your property individually rather than as pat of a condominium.

Still with us? In England, freehold land could be held in a couple of common ways, fee simple and fee tail. Fee tail was a way of keeping property in the family. When the owner died, the property automatically went to a certain heir, usually the nearest male relative (the eldest son was first in line). Whatever the owner might try to do with the property during his lifetime, it would still bounce to the heir when the owner died. This was great for aristocrats who wanted the family land to pass with the family title, but not so good for anyone else.

Fee tail doesn't exist in Canada – only fee simple. Fee simple is the highest form of ownership of real property. It gives you, the owner, the right to so whatever you like with your property. You can sell it, give it away, mortgage it, you can even destroy it. And you can bequeath it to any one you like in your will.