Definition, Application, and Example of the Habendum Clause in Real Estate

Definition, Application, and Example of the Habendum Clause in Real Estate

The habendum clause is used when the original owner of a piece of land or property transfers their deed to another person. This specifies the extent of the new person's right to the property as well as the length of time they can expect to keep it. Find out more about the importance of a habendum clause.


What Is a Habendum Clause?

A person's rights when acquiring land or property are outlined in the habendum clause, along with any additional restrictions on the type or length of their ownership rights. Its name is derived from the Latin verb habere, which means "to have and to hold." Since it details the terms of a person's lease or purchase agreement, some people call it the "term clause."


3 Uses for the Habendum Clause

This kind of clause can be found in a number of agreements involving land, structures, and houses. Three common applications of the habendum clause are as follows:

1. Leases for oil and gas: The majority of oil and gas industry property zoning leases have two phases. The primary term of the habendum clause permits a drilling company to examine a piece of land to determine whether fossil fuels can be extracted from the soil. This also applies to the neighbourhood's mineral rights. After extraction gets off to a good start, the secondary term starts. The lease terminates at the end of the initial term if it never does.

2. Real estate leases: When a lessee accepts a property from a lessor, they do so aware that time is running out before they become the owner. The habendum clause in lease agreements describes the type of a person's property rights as well as the predetermined period of time during which they will be retained. They might decide to extend their lease or continue with the outright purchase of the property, but this would necessitate a new contract and a new habendum clause.

3. Real estate transactions: The habendum clause in the real estate contract grants the new owner of a property ownership rights. Many of these clauses give complete property rights without any restrictions or addenda, but some may have some restrictions.


Habendum Clause in Real Estate

The habendum clause is frequently used in real estate to transfer ownership free of conditions or liens. The property is transferred to the grantee as an asset by the grantor, and the grantee is then responsible for all liabilities, obligations, and mortgage payments. Other specific situations, however, make this "fee simple absolute" arrangement impossible.


Potential Habendum Clause Stipulations

The habendum clause is not always fee simple absolute; different real estate terms may be required. Here are just a few examples of possible restrictions:

1. Timeshare leases: The habendum clause in your lease or purchase contract may be affected by the type of property you intend to transfer or receive. For example, if you intend to buy a timeshare in a vacation property, you should be aware that your ownership is only valid for a limited time each year.

2. After-death transfer arrangements: Some owners may wish to leave their property to heirs without going through probate. In these cases, they may facilitate the transfer of ownership upon their death to the original owner or someone else.

3. Treaty land agreements: The nature of the land granted by a clause may affect property ownership in the long run. For example, certain treaty lands in the United States are available for purchase for a limited time. When the lease term expires, the property interests revert to the Native lessor.


Example of Habendum Clause

A habendum clause for a lease agreement might read something along the lines of this in plain legalese: "Lessee will have and hold the real property beginning at the Term Commencement Date of January 1, 2022, and terminating on January 1, 2032." This is frequently followed by a granting clause, which specifies the amount the lessee must pay and other important terms and conditions for renting or buying the land or other asset.