What is leased fee interest?
The technical definition of “leased fee interest” is the Fee Simple interest in real property encumbered by a lease. Many people confuse “leased fee interest” and “fee simple interest”. If you own 100% of the interest in real property, you own the real property in fee simple. The owner of real property in fee simple can do many things with the property including selling the property, mortgaging the property or leasing the property. If the owner of real property in fee simple leases the property on a long term lease, the real property is divided into two parts: (1) leasehold interest; and (2) leased fee interest. The lessee owns the leasehold interest. The leasehold interest is the right to use the property for the term of the lease and the obligation to pay rent during the term. There are other obligations created by the lease. The leased fee interest is the right to receive rent during the lease term and the right to receive the property at the end of the lease term (reversion). The owner of the leased fee interest does not have the present right to use the property. The leased fee interest is less than the fee simple interest.