California Real Estate Practice Exam

You own the business you run and lease the building in which you operate. You hold a (an):

1. Freehold estate

2. Interest in, but not an estate

3. Less-than-freehold estate

4. Remainder

The correct answer is: Freehold estate

In the scenario described, you are running a business and leasing the building where it operates. The correct classification of your situation is a less-than-freehold estate. When you lease a property, you hold a *leasehold interest*, which is considered a less-than-freehold estate. A freehold estate refers to ownership of real property for an indefinite duration and usually involves full rights to the property, which applies to situations where one owns the land or property outright. In contrast, a less-than-freehold estate, such as the one you hold by leasing the building, implies that you have the right to use and occupy the property for the duration of the lease agreement, but you do not own the property itself. A remainder refers to an interest that is to be transferred to a third party upon the termination of a prior estate, thus not applicable in this case. Understanding these distinctions is crucial in real estate, as it helps in identifying the rights and responsibilities of different parties involved in property use and ownership.