BAR FLASHCARDS - P18 Estates and future ints

Question 1

Estates in Land

Answer 1

“Estates in land” are possessory interests in land. These interests may be presently possessory (present estates), or they may become possessory in the future (future interests)

Question 2

PRESENT POSSESSORY ESTATES.

Types (2)

Answer 2

A present possessory estate is an interest that gives the holder the right to present possession.
Fee Simple Absolute: A fee simple absolute is the largest estate recognized by law. It’s typically what we think of as full ownership of real property.
Defeasible Fees: Defeasible fees are fee simple estates (that is, of uncertain or poten- tially infinite duration) that can be terminated upon the happening of a stated event.

Question 3

Present possessory estate: Fee Simple Absolute

Answer 3

Fee Simple Absolute: A fee simple absolute is the largest estate recognized by law. It’s typically what we think of as full ownership of real property.

Question 4

Present possessory estate: Defeasible Fees.

What are they?

Types? (3)

Answer 4

Defeasible Fees: Defeasible fees are fee simple estates (that is, of uncertain or poten- tially infinite duration) that can be terminated upon the happening of a stated event.

a. Fee Simple Determinable (and Possibility of Reverter): A fee simple determinable terminates upon the happening of a stated event and automatically reverts to the grantor. It’s created by durational language, such as “for so long as,” “while,” “during,” or “until.” For example, O “to A for so long as no alcoholic beverages are consumed on the premises” gives A a fee simple determinable. The accompanying future interest in O is called a possibility of reverter. If alcohol is served on the premises, the estate automatically goes back to O.

b. Fee Simple Subject to Condition Subsequent (and Right of Entry): A fee simple subject to a condition subsequent is created when the grantor uses words like “upon condition that,” “provided that,” “but if,” or “if it happens that.” In contrast to the fee simple determinable, here, if the stated event happens, the grantee’s estate continues until the grantor exercises her right to terminate by bringing suit or making reentry. The grantor’s future interest is thus called a right of entry or power of termination. This right must be expressly reserved.

c. Fee Simple Subject to an Executory Interest: If a fee simple estate terminates upon the happening of a stated event (because it is determinable or subject to a condition subse- quent) and then passes to a third party rather than reverting to the grantor or giving the grantor a right to terminate, the third party has an executory interest.

Question 5

Fee Simple Determinable

Answer 5

a. Fee Simple Determinable (and Possibility of Reverter): A fee simple determinable terminates upon the happening of a stated event and automatically reverts to the grantor. It’s created by durational language, such as “for so long as,” “while,” “during,” or “until.” For example, O “to A for so long as no alcoholic beverages are consumed on the premises” gives A a fee simple determinable. The accompanying future interest in O is called a possibility of reverter. If alcohol is served on the premises, the estate automatically goes back to O.
F S D P O R

Question 6

F S D P O R

Answer 6

Fee Simple Determinable (and Possibility of Reverter)

Question 7

Fee Simple Subject to Condition Subsequent.

What is it?

What words create it?

Answer 7

b. Fee Simple Subject to Condition Subsequent (and Right of Entry):

In contrast to the fee simple determinable, here, if the stated event happens, the grantee’s estate continues until the grantor exercises her right to terminate by bringing suit or making reentry.

The grantor’s future interest is thus called a right of entry or power of termination.
This right must be expressly reserved.

A fee simple subject to a condition subsequent is created when the grantor uses words like “upon condition that,” “provided that,” “but if,” or “if it happens that.”

Question 8

Fee Simple Subject to an Executory Interest

Answer 8

c. Fee Simple Subject to an Executory Interest: If a fee simple estate terminates upon the happening of a stated event (because it is determinable or subject to a condition subse- quent) and then passes to a third party rather than reverting to the grantor or giving the grantor a right to terminate, the third party has an executory interest.

Question 9

Life Estate..

Followed by?

Answer 9

Life estates are what they sound like: they’re ownership interests for life.
When the interest ends, the land either goes back to the grantor (whose future interest is a reversion), or, more commonly, to a third party (whose future interest is a remainder).
Usually, a life estate is measured by the life of the grantee, called a “life tenant” (for example, O “to A for life”).
A life estate measured by the life of someone other than the life tenant is a life estate pur autre vie (for example, O “to A for the life of B”).

Question 10

Rights and Duties of Life Tenant.

Types of waste:

Answer 10

Rights and Duties of Life Tenant—Doctrine of Waste
A life tenant is entitled to any ordinary uses and profits of the land but can’t do anything that injures the interests of a remainderman
or reversioner.
A future interest holder may sue for damages or to enjoin such acts, and if they spend money to perform the life tenant’s obligations, they’re entitled to reimbursement.

• Affirmative (Voluntary) Waste—
Natural Resources: Generally, a life tenant cannot consume or exploit natural resources on the property (like timber, minerals, or oil). Under the open mines doctrine, if mining was done on the land prior to the life estate, the life tenant can continue mining—but is limited to the mines already open.

• Permissive Waste” A life tenant is obligated to preserve the land and structures in a reasonable state of repair and pay certain carrying charges (such as mortgage interest and ordinary taxes). Permissive waste occurs when a life tenant fails to do so.

• Ameliorative Waste: Ameliorative waste is a change that benefits the property economically. Now, a life tenant may alter or even demolish existing buildings if:
••The market value of the future interests is not diminished; and
••either
••• The remaindermen do not object; or
••• A substantial and permanent change in the neighborhood conditions (for example, a change from residential to 90% industrial) has deprived the property in its current form of reasonable productivity or usefulness.

Question 11

Estate for Years, Periodic Estate, Estate at Will, Tenancy at Sufferance

Answer 11

These present estates are considered in Module 3, which concerns the landlord-tenant relationship.

Question 12

FUTURE INTERESTS

Answer 12

A future interest gives its holder the right or possibility of future possession of an estate. Despite the fact that possession is in the future, a future interest is a present, legally protected right in property.

Question 13

FutureInterests in Transferor—Reversionary Interests

Answer 13

Future interests retained by a grantor following a defeasible fee or a life estate are called reversionary interests.
There are only three capable of creation in the grantor: the possibility of reverter, the right of entry, and the reversion.

Question 14

Future Interests in Transferees

Answer 14

If a future interest is held by someone other than the grantor, it has to be either:

• A contingent remainder,

OR
• A vested remainder, of which there are three types:
(1) the indefeasibly vested remainder,
(2) the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and
(3) the vested remainder subject to open,

OR
• An executory interest (of which there are two types:
(1) the shifting executory interest, and
(2) the springing executory interest).

Question 15

Future Interests in Transferees—Remainders.

They may be either…

Answer 15

A remainder is a future interest in a third person that can become possessory on the natural expiration of the preceding estate.

Remainders always follow life estates.

The remainder can’t divest a prior estate, and it can’t follow a time gap after the preceding estate.

A remainder must be expressly created in the instrument creating the preceding possessory estate.

They may be either contingent (subject to a condition that must occur before the remainderman can take) or vested.

Only contingent remainders are subject to the Rule Against Perpetuities.

Question 16

1) “To A for life, and on A’s death to B and his heirs.”

Answer 16

1) “To A for life, and on A’s death to B and his heirs.” A has a present possessory life estate. B has a remainder in fee simple.

Question 17

2) “To A for life, and on A’s death to B if B survives A.”

A has a …
B has a …
O has a …

Answer 17

2) “To A for life, and on A’s death to B if B survives A.” A has a life estate; B has a contingent remainder in fee simple. The transferor has a reversion, which will become a possessory estate on the termina- tion of A’s life estate if B predeceases A. Here, B’s taking is subject to a contingency, stated as a condition precedent, that he must survive A in order to take.

Question 18

Future Interests in Transferees—Remainders:
Vested or Contingent.

Vested remainders are either…

Remainders are contingent if…

Answer 18

Vested or Contingent

Vested remainders are either
- indefeasibly vested (not subject to divestment or diminution),
- vested subject to total divestment (subject to a condition subsequent), or
- vested subject to open (a class gift).

Remainders are contingent
- if they are in unborn or unascertained persons or
- if they are subject to a condition precedent.

Question 19

Future Interests in Transferees—Executory Interests

Answer 19

There are two and only two future interests that can be created in a transferee:
remainders and
executory interests.

An executory interest is an interest that divests the interest of another.
So, remember: If it is not a remainder because the preceding estate is not a life estate, then it must be an executory interest.

Question 20

1) “To A and her heirs; but if B returns from Canada, then and in that event to B and his heirs.”

Answer 20

1) “To A and her heirs; but if B returns from Canada, then and in that event to B and his heirs.”
A has a fee simple subject to an executory interest. Because the future interest is created in a transferee, it has to be either a remainder or an executory interest. B’s future interest is not a remainder because it does not follow the natural termination of the preceding estate (here, A’s fee simple estate). If B’s interest does take in present possession, it will divest A’s fee simple, and title will shift to B.

Question 21

2) O conveys “to A for life, remainder to B and his heirs, but if B predeceases A, to C and his heirs.”

Answer 21

2) O conveys “to A for life, remainder to B and his heirs, but if B predeceases A, to C and his heirs.” C’s interest does not await the expiration of B’s vested remainder, but instead may cut it short.

Question 22

THE RULE AGAINST PERPETUITIES

Answer 22

The Rule Against Perpetuities provides that, to be valid, an interest in property must vest or fail not later than 21 years after a life in being at the time of the creation of the interest. If there is any chance the interest will vest after that time, the interest is void and is stricken from the grant. In other words, an interest is void if there is any possibility, no matter how remote, that it might vest (or fail) more than 21 years after some life in being at the creation of the interest. The Rule applies to executory interests, contingent remainders, class gifts, options and rights of first refusal, and powers of appointment.

Question 23

THE RULE AGAINST PERPETUITIES: When Perpetuities Period Begins to Run

Answer 23

When Perpetuities Period Begins to Run
The validity of an interest under the Rule is determined at the time the interest is created. That means that when an interest is created in a will, the perpetuities period begins to run on the date of the testator’s death.

Question 24

THE RULE AGAINST PERPETUITIES: “Must Vest”

Answer 24

An interest vests for purposes of the Rule when it becomes:
(1) possessory, or
(2) an indefeasibly vested remainder or a vested remainder subject to total divestment.

Question 25

THE RULE AGAINST PERPETUITIES: “Lives in Being”

Answer 25

Any lives can be used to show the validity or invalidity of an interest, but no lives are of any help unless they are somehow connected with the vesting of an interest.

Question 26

“To A for life, then to such of A’s children as attain the age of 21.”

Answer 26

“To A for life, then to such of A’s children as attain the age of 21.” Here, the relevant measuring life is A. All of A’s children are going to attain age 21, if at all, within 21 years after A’s death. (This includes a child in the mother’s womb at A’s death, for the perpetuities period includes any period of gestation actually involved.)

Question 27

THE RULE AGAINST PERPETUITIES: Interests Exempt from Rule

Answer 27

The following interests are exempt from application of the Rule Against Perpetuities: a charitable gift following a charitable gift, vested interests (other than open class gifts), and reversionary inter- ests.

Question 28

THE RULE AGAINST PERPETUITIES: Common Pitfall Cases

Answer 28

• An executory interest that follows a defeasible fee
• An age contingency beyond age 21 in an open class
• The fertile octogenarian (people are conclusively presumed to be capable of having children regardless of age) and
• The unborn widow or widower (widows and widowers are not determined until the spouse’s death and may not be the same spouse as when the interest was created)

Question 29

THE RULE AGAINST PERPETUITIES: Perpetuities Reform Legislation

Answer 29

Most states have enacted statutes designed to eliminate some of the harsh results of the common law Rule Against Perpetuities:
a. A “wait and see” statute, under which the validity of an interest following one or more life estates is determined on the basis of facts existing at the end of the life estate rather than at the creation of the interest;
b. A cy pres approach, under which an invalid interest is reformed to comply with the Rule and carry out the grantor’s intent as nearly as possible; and
c. The Uniform Statutory Rule Against Perpetuities, which provides an alternative 90-year vesting period. The Uniform Rule takes a “wait and see” approach in determining whether an interest actually vests within 90 years

Question 30

THE RULE AGAINST RESTRAINTS ON ALIENATION

Answer 30

Generally, any restriction on the transferability of a legal (as opposed to an equitable) interest in property violates the common law Rule Against Restraints on Alienation and is void.

Question 31

Types of Restraints on Alienation

Answer 31

There are three types of restraints on alienation:
(1) disabling restraints, under which attempted transfers are ineffective;
(2) forfeiture restraints, under which an attempted transfer forfeits the interest; and
(3) promissory restraints, under which an attempted transfer breaches a covenant. A disabling restraint on any legal interest is void.
Forfeiture and promissory restraints may be valid, depending on the nature of the restraint and the interest involved.

Question 32

Restraints on a Fee Simple

Answer 32

Any total restraint on a fee simple—either forfeiture, disabling, or promissory—is void. The grantee may ignore the restraint and freely transfer the property. Partial restraints may be valid. Although absolute restraints on fee simple estates are void, a forfeiture or promissory restraint for a limited time and for a reasonable purpose may be upheld.

Question 33

Restraints on a Life Estate

Answer 33

Forfeiture and promissory restraints on life estates are valid. However, disabling restraints on legal life estates are void.

Question 34

Options and Rights of First Refusal

Answer 34

The right to have the first opportunity to purchase real estate when it becomes available, or the right to meet any offer, is valid if reason- able (for example, by specifying fair market value or other reasonable price).