In 2023, the FBI’s Internet Crime Complaint Center received 9,521 real estate fraud reports, resulting in over $145 million in losses. Separately, a May 2024 study found that seller impersonation fraud is common. These types of fraud are why clauses like the habendum clause are crucial in defining the scope and legitimacy of property transfers.
So, if you’re entering a lease or deed agreement, you must know how to scrutinize the habendum clause of the contract.
This article outlines its meaning, purpose, applications, and restrictions to ensure the agreement is cohesive, enforceable, and legal.
What Is the Habendum Clause?
The habendum clause defines the ownership interest a deed or lease grants to the receiving party. It outlines the type of interest, states the duration, and lists any conditions tied to the transfer.
This clause also uses standard legal phrasing and follows the granting clause in the document.
What Is the Purpose of the Habendum Clause?
In real estate contracts, the habendum clause addresses the transfer of ownership and any restrictions tied to that transfer. Because it begins with the phrase “to have and to hold,” it’s also referred to as the “to have and to hold clause.”
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How Does the Habendum Clause Apply to Leases and Deeds?
The habendum clause functions in different leases and deeds in the following ways:
Fee Simple Ownership
A fee simple grants the grantee full rights over the property with no conditions or expiration. It represents the most complete form of real estate ownership type available under common law.
The habendum clause confirms this ownership by stating the transfer is absolute and permanent.
For example, a residential deed might read, “To have and to hold the said premises unto the grantee and their heirs forever.”
This clearly establishes indefinite ownership without restrictions.
Life Estate
A life estate limits ownership to the lifetime of a named individual.
The habendum clause reflects this by ending the interest upon that person’s death. This redirects the property to another designated party.
In a typical case, the clause may say, “To have and to hold during the natural life of John Smith.”
This example shows that ownership lasts only for the life of the named person and reverts after, regardless of any rent or lease arrangements in place during that time.
Lease Agreements
In lease contracts, the habendum clause defines the term of possession and the tenant’s legal right to occupy the space.
It may also account for sublease or sublet arrangements that allow a third party to occupy the space under the primary lease.
For instance, a commercial lease might say, “To have and to hold for a term of five years commencing on January 1,” which sets fixed limits on use and access.
Oil and Gas Leases
Oil and gas leases use the habendum clause to establish a two-part term. A fixed primary period and a secondary term that continues based on production.
The clause anchors on the phrase “and so long thereafter.” It extends the lease beyond the initial term if oil or gas is still being produced in paying quantities.
One example would be, “To have and to hold so long as oil or gas is produced in paying quantities.” It allows the agreement to remain active as long as production meets the required threshold.
Timeshare Leases
Timeshare leases divide occupancy rights among multiple owners, usually by calendar week and term length.
The habendum clause defines each owner’s usage schedule and duration.
For instance, it might read, “To have and to hold for the third week of July annually, for a term of 20 years,” which specifies both the recurring time slot and the total period of ownership.
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Why Is the Habendum Clause Important?
The habendum clause carries legal significance due to the following outcomes it serves within leases and deeds.
The Habendum Clause Clearly Defines the Type of Ownership
The type of ownership is crucial in properties that may carry different legal implications, such as homesteads, duplexes, and studio or 1-bed units.
In a transaction involving a loft apartment, for instance, a deed stating “fee simple” ownership would clearly indicate that the buyer holds permanent rights to the property, with no expiration or limitations on use or transfer.
Protects the Interests of Buyers and Sellers
The habendum clause states the exact nature of the transfer, ensuring both parties understand the agreement’s limits. This prevents situations where either side assumes rights that were never granted.
For example, in a sale involving a life estate, a seller can use the clause to retain a reversion interest. At the same time, the buyer agrees to possession only during the named individual’s lifetime.
This could also apply in cases where a campervan or motorhome is permanently placed on leased land.
Prevents Future Legal Issues
Ambiguity in property transfers may lead to future claims, title disputes, and litigation.
This is why a well-drafted habendum clause eliminates these risks by specifying the rights under specific conditions.
Let’s say you enter a property development deal. A commercial buyer may rely on the clause to restrict tenant use to specific business functions.
You can back this with a property condition report or findings from a property inspection checklist, which document the space’s suitability for the intended use.
Helps in Property Zoning Leases
Zoning compliance depends on contract clauses. The habendum clause defines when and how the property may be used, especially in buffer or mixed-use areas where zoning restrictions apply.
For instance, a commercial lease for a ground-level unit next to a residential zone included habendum terms limiting business hours to avoid code violations.
The unit operated as a small café with limited seating, and the clause restricted early morning deliveries and late-night service. Aligning the lease terms with the zoning laws prevented enforcement issues and maintained the building’s legal status.
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What Are the Restrictions of the Habendum Clause?
In many agreements, the habendum includes the following limitations that affect how long or under what terms the interest remains valid.
Property Usage Restrictions
The habendum clause usually reflects zoning rules, homeowners association (HOA) rules, and grantor preferences. These restrictions may prevent the grantee from engaging in uses that conflict with these standards.
For example, a deed might prohibit you from using a residential unit for commercial purposes.
If the new owner plans on converting your home into an Airbnb, the clause may prevent short-term use altogether, restricting occupancy to primary residential purposes only.
Ownership Period in Timeshare Leases
Timeshare agreements assign usage rights to fixed periods rather than granting permanent ownership. The habendum clause can restrict this access to those specific dates, preventing any use outside the assigned window.
For instance, a clause that reads, “To have and to hold for one week annually for a 10-year period,” limits use to that timeframe.
As a result, the timeshare is classified in a vacation property investment portfolio since it doesn’t count as full title ownership.
Specific Arrangements in Transfer After Death
In some agreements, the habendum clause blocks automatic inheritance. It limits ownership to the grantee’s lifetime, ensuring the property reverts to another party instead of passing to heirs.
A life estate might read, “To have and to hold during the natural life of the grantee, with remainder to the grantor,” which legally ends the grantee’s interest at death.
This can complicate estate planning, especially when it relates to larger decisions like buying a house or car, or jointly held assets and liabilities.
Mineral Rights
In transactions involving land with potential resources, the habendum clause may restrict ownership to surface rights only. This limitation creates a legal separation between what’s above and below ground.
For example, a deed might state, “To have and to hold the surface estate only,” excluding the grantee from accessing or profiting from minerals like oil or gas.
Buyers should confirm this distinction before closing, especially if the property underwent a recent inspection that flagged evidence of underground deposits.
Treaty Lands
Properties located on treaty lands are subject to tribal or federal law, which limits what rights a habendum clause can legally transfer. These clauses must align with jurisdictional requirements and may include provisions for oversight or consent.
A deed may state, “To have and to hold subject to tribal approval,” restricting the grantee’s ability to sell or lease without prior authorization.
In such cases, a security deposit may be required until the necessary approvals are finalized.
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Conclusion
The habendum clause sets enforceable terms that control how property rights begin, end, or shift. It outlines these legal boundaries to ensure the grantor and grantee understand the terms of the contract.
However, since contract language can vary and carry long-term consequences, it’s best to consult a lawyer before signing.
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