Many people aspire to property ownership. More than two-thirds of Canadian households own the home they live in. But what does it really mean to “own” your home (or any property)?
Turns out, ownership is pretty simple! Fee simple, that is.
Normally, you don’t think too hard about what owning a home actually means. It means you own it, right? It’s yours.
But when you buy or sell property, you might come across the term “fee simple.” It’s one of several types of property ownership in Canada, along with condo/strata, leasehold, and others. We’ll touch on leasehold further down; click here for an explanation of strata and condo ownership.
“Fee simple ownership is the most prevalent type of common law estate,” says Vancouver-based realtor Haydn Eviston. “It is what most people think of when they speak of ‘owning’ land.”
“Fee simple is often referred to as freehold ownership,” he continues. “It is the highest form of property ownership as it has the fewest restrictions.”
The “fee” in “fee simple” doesn’t have anything to do with money. In this case, “fee” comes from the word “fief,” which you may remember from high school history class.
In feudal societies like medieval England, a lord or monarch could grant land to others in exchange for services given or pledged. These land holdings were called fiefs, and they were the only way someone other than the Crown (the ruling monarch) could own land.
In modern times, landowners can sell or grant their land to whomever they wish. But, since Canada’s laws were born from British common law, our legal system is full of vintage terms that originate from feudalism—like fee simple.
If you have fee simple ownership, it means the property is yours to do with as you wish. Your only obligations are to obey the law (including zoning laws and building codes) and pay your taxes and debts.
Thanks to the aforementioned British connection, Canadian landowners don’t technically own their land — they have “land tenure.”
Land tenure sounds kind of feudal, but it’s not really different from outright ownership in practice.
“Although land [in Canada] is technically owned by the Crown (that’s why we pay property taxes), the holder of fee simple property can use the land, exclude others from it, and dispose of it,” says Eviston.
Fee simple or freehold ownership in Canada has these important qualities:
Number 3 includes appointing heirs to inherit the property when the owner dies. Not all types of ownership allow the owner to name an heir.
A life estate, for example, grants the owner full rights to the property for the duration of their life. After they pass away, however, the estate passes to whoever’s named in the will that granted the life estate in the first place; the life estate owner can’t pass it down to their own heirs. Life estates are uncommon in Canada, so don’t worry too much about them.
Back to fee simple ownership: When the property passes to an heir, they become the owner, with all the associated rights. They can develop, sell, or gift the property however they see fit.
We’ve established what fee simple or freehold ownership is. What about leasehold ownership?
“In contrast [to freehold], leasehold is the opposite of fee simple in that the owners have complete access to the property but do not own the land,” says Eviston.
Leasehold ownership is also common in Canada. Undoubtedly, you’re familiar with signing a lease, whether it’s on an apartment, an office, or a car. When you lease a piece of property, you have leasehold ownership of that property.
A lease is where the property’s owner (the lessor) enters into an agreement with someone else (the lessee) to let them use the property for a set period of time. Normally, this agreement involves the lessee paying the lessor for the use of their property—we sometimes call these payments “rent.”
The lessee can use the property for the duration of the lease. They don’t have fee simple ownership, so they can’t sell the property or give it away, but they can generally modify the property to suit their needs (depending on the terms of the lease).
Basically, they have limited ownership of the property for the duration of the lease agreement.
Once the lease agreement ends, the property returns to the owner/lessor. If the lessee made any modifications to the property during the lease, the owner gets those as well. For example, if you lease a plot of land and build a workshop on it, the property’s owner would take possession of the workshop once the lease is up.
There are a few common terms associated with leasehold ownership that are worth knowing:
ready for an online quote? Policies start at $12/month if you rent your home and $40/month if you own your home. To see how much you can save with Square One, get a personalized online quote now.
The type of home insurance policy that one buys does change depending on the type of ownership. However, the occupation of the property is also a key factor.
If the owner of a freehold property lives there themselves, they’d buy a homeowner’s policy. If they rent it out to others, they’d buy a landlord insurance policy and their tenant would buy a tenant insurance policy.
When it comes to leasehold property, most leased residential properties are ready-to-live-in homes, like apartments or townhouses. There aren’t many people who lease empty land to live on and build their own house.
Accordingly, most people who lease their homes need tenant insurance policies as well. They don’t own the building they live in, so they don’t need to insure it—their landlord (the freehold owner) does.
Finally, condo owners need condo insurance policies. Condo insurance policies have features unique to condo ownership, mainly that they’re meant to work with the condo corporation’s master insurance policy.
If you’re unsure about what type of insurance you need for your home, get in touch with your insurance provider. They’ll be happy to help you figure out the best policy for your ownership and occupation status.
Fee simple and fee simple absolute are effectively interchangeable. Fee simple absolute is the type of ownership we’ve talked about throughout the article: complete, no-restrictions ownership of property. Almost all fee simple ownership in Canada is of the absolute variety.
There are other types, though, such as fee simple determinable. An example of this is the life estate, which we mentioned earlier. The inheritor of a life estate gets fee simple determinable ownership of that property. They have total ownership of the property and can do whatever they want, but when the inheritor dies the property reverts back to the party that originally granted the life estate (or their heirs).
“Best” is a matter of one’s personal viewpoint.
“Freehold ownership offers you more than just a depreciating asset (the building); it gives you the land as well,” says Eviston. “Which is where the majority of value is when it comes to Vancouver real estate.”
So, while it may be true that fee simple ownership is the best in terms of holding the most value to the owner, there are situations where someone might not consider that important.
For example, if you live in a major city, you may not be able to afford to buy a freehold property.
You may instead choose to join the millions of Canadians who own condos. Condo ownership is not quite the same as freehold ownership. It’s similar, but because condos are restricted by strata bylaws, they aren’t considered fee simple properties. You can still modify, sell, or lease your condo, but anything you do with it has to adhere to your strata council’s bylaws. As well, condo ownership includes shared property with the other owners in the condo building—hallways, elevators, parking lots, and so forth.
Many people don’t own property at all; in famously-expensive Vancouver, for example, more than half of households are rental properties.
Want to learn more? Visit our resource centres for hundreds of helpful articles created specifically for homeowners, condo owners, landlords, and tenants. Then, get an online quote in under 5 minutes and find out how affordable personalized home insurance can be.
Even when you take precautions, accidents can happen. Home insurance is one way to protect your family against financial losses from accidents. And, home insurance can start from as little as $12/month.