leasehold interest insurance

Fee Simple vs Leasehold: What’s the Difference?

There is more than one type of real estate ownership. Knowing the difference between fee simple and leasehold is key to understanding the value of the land. Leasehold interest insurance is essential for leasehold owners to protect their investment.

Fee Simple

Fee simple has the title of the property including the complete ownership. Also known as freehold, fee simple holds the land and its improvements indefinitely. The owner of the property can legally trade it, give it away, pass it to others as inheritance, sell it or lease it. There are only a few exceptions to an owner of a fee simple title.

Leasehold

When a fee simple owner leases his land via a contract, the signed contract creates a leasehold interest. The lessor still owns the land although the lessee can build and enjoy the land otherwise. The land is contracted to be used for a certain amount of time not indefinitely. Reversion happens upon the end of the contracted lease terms when the land reverts back to the owner even if that owner has changed. The improvements often revert to the landowner upon the end of the contract.

Protect your real estate investment with leasehold interest insurance. Hawaii is a prime example of a leasehold real estate ownership state here in the US.