Definition
A possessory interest gives the holder right to current possession and control of property, including fee simple, life estates, and leaseholds. These are the most valuable interests because they allow current use.
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Possessory interests are property rights that allow current use and control. A fee simple owner has a possessory interest and can occupy, improve, rent, or mortgage the property. A life estate holder has a possessory interest for their lifetime. A tenant has a possessory interest in leased property. Possessory interests are the most valuable because the holder controls the property now. Non-possessory interests (like remainders and easements) give rights but not current control. Possessory interests can be absolute (fee simple—lasts forever) or limited (life estate—lasts during someone's life). In property disputes, determining who has the possessory interest is crucial because possessory interest holders have the right to exclude others, defend against trespass, and make decisions about the property. Adverse possession requires possessory interest to be open and obvious. Eminent domain (government taking property) must respect possessory interests—government must pay or provide alternative possession. Mortgage foreclosure transfers the mortgagee's interest to a possessory interest (occupancy/rental rights) unless the mortgagee chooses to occupy.
Pro Tip
Possessory interest is powerful because it allows control. If another claims a possessory interest, hire an attorney immediately.
Example
A homeowner with fee simple ownership has a possessory interest allowing them to live in the house, make improvements, and exclude others. A remainder interest holder in the same property has a non-possessory interest until the life estate ends.