When property is sold with a restriction that it can only be used for certain purposes, this is known as:

When property is sold with a restriction that mandates it can only be used for certain purposes, it is termed a fee simple defeasible. This legal concept means that the ownership of the property may be lost if a specified condition is violated or not fulfilled. In essence, the property is conveyed with a condition, and if that condition is breached, the former owner or their heirs might have the right to reclaim the property.

This type of arrangement is significant because it allows sellers to retain a form of control over how the property is utilized, despite transferring the ownership. It differs from other forms of property ownership, such as fee simple absolute, which does not carry any such restrictions.

The other answer options refer to different legal concepts. For example, a fee remainder estate concerns future interests in property that will pass to a designated person upon the termination of a current estate. A fee simple with a condition precedent involves a future interest contingent upon an event happening, but is not specifically about restrictions on use. A deed in lieu is a method of transferring property to avoid foreclosure and is not relevant to restrictions on use. Understanding these distinctions clarifies why fee simple defeasible correctly describes property sold with specific usage restrictions.