Future Interests (NOT ON EXAM)

Question 1

Interests in property can be either ?

Answer 1

a. An interest vested in possession, or
b. A future interest.

Question 2

What is interest vested in possession?

Answer 2

• “When a person has a present right to the immediate enjoyment of property it can be said that his interest is vested in possession. Here the term ‘possession’ does not necessarily mean physical occupation but denotes that the person is entitled to the ultimate benefit of the land.” (Coughlan, 1998)
  o E.g., If a landlord leases out land, his freehold interest in the land is still vested in possession.
  o E.g., I give this field to Ann for life, with remainder to Jenny in fee simple.
• In this example, Ann is immediately entitled to possession, but Jenny is not. Therefore, Ann’s interest in the field is vested in possession.

Question 3

What is a future interest?

Answer 3

• An interest in property conferring a right in possession in the future.
• “A future interest arises where a person’s entitlement to the enjoyment of property is postponed.” (Coughlan, 1998)

Question 4

What are the two types of future interest?

Answer 4

1. Vested in interest (sometimes referred to as simply vested)
2. Contingent Interest

Question 5

what is vested in interest?

Answer 5

• “An estate vested in interest is one where, although the person taking is identified, and there are no conditions to satisfy, some other person has a prior right to possession.” (Pearce &Mee, 2011)
• Example: I give this field to Ann for live, with remainder to Jenny in fee simple.
• In this example, Ann is immediately entitled to possession, but Jenny is not. Therefore, Jenny’s interest in the field is vested in interest- some other person has prior right to possession.

Question 6

What is contingent interest?

Answer 6

• “A contingent interest is an interest which is given to a person who cannot be identified by name, or who must satisfy some outstanding condition, or both.” (P&M, 2011)
• Example:
  o “I give this field to the eldest child of James living at his death.” This is a contingent interest as it is unknown who James’s eldest living child will be upon the death.
• Example:
  o “I give this field to Sam if he becomes a solicitor.” This is a contingent interest as it is unknown if Sam will qualify as a solicitor.

Question 7

How do you define between vested or contingent interest?

Answer 7

It is necessary to be able to distinguish between vested and contingent interests. This is because contingent interests were traditionally subject to certain restrictions.

If there is doubt, vested interests are favoured over contingent interests.
Therefore, a transaction might be interpreted so that it is a vested interest subject to being divested. This is due to the presumption in favour of early vesting.

Example:
o Remainder to Jack but if he dies under the age of 35 years, to Roger.
o This would be interpreted as giving Jack a vested interest liable to divestment to Roger, should Jack die before the age of 35.

Question 8

How do you determine if a future interest is vested or contingent?

Answer 8

1. Is the identity of the grantee known and born?
2. Is there no condition upon their interest in the property?

If the answer to both questions is “yes”, then the interest is a vested interest.

If the answer to either question is “no”, then it is a contingent interest.

Question 9

Examples of future interest: Vested

Answer 9

“Land is conveyed “to Frank for life, remainder to Margaret for life”. Frank’s interest is vested in possession while Margaret’s future interest is vested in interest (it takes effect once Frank dies – there is certainty as to the person and no conditions)

Question 10

Examples of future interest: Contingent

Answer 10

“Land is conveyed “to Robert and Frances for their joint lives, remainder to the survivor in fee simple”. As it is uncertain who will die first, the identity of who will get the remainder is unknown- there is no certainty as to person who will receive the future interest, therefore it is a contingent interest.

Question 11

Exception to the two-stage test for future interests in wills: Edwards v. Hammond (1683) 3 Lev 132:

Answer 11

• The rule in Edwards v. Hammond only applies to wills.

“Where property…is given in a will to a person on his or her attaining a certain age and a gift over is given on the event of that person not attaining the age, the primary gift is considered as vested and not contingent, but liable to be divested if the person fails to attain the age.”

A gift in a will of a remainder in a fee simple to Ted if he reaches the age of 18 and if he does not to John.”

Ted’s interest is vested subject to divestment to John should he not reach the age of 18.

Question 12

Class Gift: Interpreted as vested

Answer 12

• Vested interest subject to open:
  o “Land is conveyed “to Arthur for life, remainder in equal shares to such of Arthur’s children as attain 18 in fee simple”.
  o This is a class gift.
  o Although the people in the class (Arthur’s children who attain 18) may increase over time, the gift will vest subject to divesting as new children reach 18 and the original share vested in the first child to reach 18 will be altered accordingly (i.e., if two children reach 18, then the fee simple remainder will be halved).
  o Here there are no conditions, and the class is known (although it may alter appropriately).

Question 13

What are the different kinds of future interests?

Answer 13

• Right to entry/ re-entry
• Possibility of riveter
• Reversion
• Remainder

Question 14

What is the right to entry/ re-entry?

Answer 14

• As we saw in respect of modified fees simple, the grantor of a fee simple with a right to re-entry/entry is a future interest in the fee simple should a condition not be fulfilled by the grantee.
• This is an example of an interest vested subject to divesting as the interest vests in the grantee subject to being divested to the grantor if the condition subsequent is not fulfilled.

Question 15

What is the possibility of reverter?

Answer 15

• The possibility of reverter is the future interest the grantor retains when transferring a fee simple determinable.
• The fee simple is vested automatically to the grantee but will be divested if the determining event or state of affairs is not fulfilled.

Question 16

What is a reversion?

Answer 16

• We saw that a reversion is the future interest which the grantor of a life estate retains an interest in the fee simple after the life interest ends. They are vested in interest and only exist in equity subsequent to the 2009 Act.
• Therefore, as the life interest will be subject to an overall trust, any reversion will go to the trustees for the benefit of the grantor (or their heirs) in what is called a resulting trust.

Question 17

What is a remainder?

Answer 17

• A remainder is the future interest that a specified person other than the grantor has in the fee simple once a life estate ends.
• It may be a vested or contingent interest. It can be sold or transferred in a will.
• In the past there were rules which restricted the creation of contingent remainders, but these were removed by the section 16(a) of the 2009 Act.
• Vested or contingent interest.
• Traditionally contingent remainders were subject to various rules.

Question 18

Contingent remainders: rules against remoteness

Answer 18

• As we have seen earlier, the concept of alienability of land is of core importance.
• Therefore, “attempts to dispose of land in such a way that it would be tied up indefinitely or until a remote time in the future began to be regarded with suspicion”.
• In response, a number of rules developed to prevent mechanisms which unduly tied up land in the future. These rules are collectively known as rules against remoteness.

Question 19

What are the rules against remoteness?

Answer 19

• Section 16 of the Land and Conveyancing Law Reform Act 2009 has abolished the rules limiting contingent remainders.
• However, there is a savings clause under Section 17 which means that the rules are still of technical importance.
• There are 3 rules which apply to the contingent remainders which have been abolished both prospectively and retrospectively (unless S.17 applies).
  1. The Rule in Whitby v. Mitchell (also called the old rule against perpetuities)
  2. The Rule against Accumulations
  3. The Rule against Perpetuities

Question 20

What is the rule in Whitby v Mitchell?

Answer 20

• As we saw earlier, the fee tail was originally devised to keep land in the family for generations.
• However, the Fines and Recoveries (Ireland) Act 1834 enabled the barring of entails, thus negating their intended effect.
• In response to this people, began to create “perpetual freeholds”. These were constructed so that each heir would have a life estate thus circumventing the effect of the Fines and Recoveries (Ireland) Act 1884.
• The Rule in Whitby v. Mitchell (1890) 44 Ch D 85 removed this possibility. It held
• “if an interest in real property was given to an unborn person, then any further grant to his or her issue, however described, was void together with all subsequent limitations.” (H & McG (2019).)
• You could give a gift to one unborn person as a remainder. Only a problem if unborn issue of an unborn person.
• This rule is now abolished under Section 16.
• Example:
  o “To X for life, remainder to his eldest son for life, remainder to that son’s eldest for life”
  o If X had no living son at the time the gift came into effect, then last remainder would be void (additional remainders would also be void).

Question 21

What is the rule against accumulations?

Answer 21

• As an extension of the modern rule against perpetuities (see below), if a trustee was directed to accumulate the income generated by trust property and distribute it at a particular event, if this event might occur outside the perpetuity period, then the direction to accumulate was void.
• This rule is now abolished under Section 16.

Question 22

What was the rule against perpetuities?

Answer 22

• This rule did not allow the creation of future interests which were too remote.
• It thereby did not allow the creation of a future interest that might not vest within a specific time period (the perpetuity period).
• The rule therefore placed a time limit on the future interest taking effect. Any possibility of the interest vesting outside the time period and the interest was lost.

Question 23

Why was the rule against perpetuities designed?

Answer 23

to protect the alienability of property. It is still obviously possible to transfer property, which is subjected to a contingent interest, but the more uncertain this interest is, the more risk is involved and the more difficult the possibility of alienating the property becomes.
- If there was any possibility of the contingent remainder not taking effect within the perpetuity period (no matter how unlikely) then the contingent interest would fail.

Question 24

What did the perpetuity period include?

Answer 24

• The perpetuity period included any relevant gestation period for someone not yet born, the life or lives in being and 21 years.
• “a contingent interest in property is valid only if it is certain from the beginning to vest, if it vests at all, within the period of a life or lives in being when the instrument takes effect and 21 years thereafter. IF there are no such lives, the period is 21 years” (H & McG, 2019).

Question 25

Rule against Perpetuity:
Smithwick v Hayden 1887

Answer 25

• In his will the testator left all his property in trust to his sister for life, after her death the property was to go to a friend, Edward Hayden, and then after Edward’s death to “any female niece or relative” of Edward who marries “a person by the name of John Hayden who should reside in Tipperary”. This gift was too remote as it fell outside the perpetuity period. It was possible that it could take place over 21 years after any of the lives in being mentioned in the gift were dead.
• The Rule was so strict however that even if the contingency had already occurred within the perpetuity period, the court would ignore this so that if it was possible for the event to take place outside the perpetuity period (even though it didn’t), the gift would still be void.

Question 26

Impossibility

Answer 26

• “The slightest possibility of vesting occurring outside the perpetuity period is fatal.” (Coughlan, 1998)
• The courts were so strict on this that it would ignore the fact that a person might be physically incapable of procreating.
• Therefore, legal anomalies such as the “precocious toddler” and the “fertile octogenarian” were created.
• This meant that people who were either too young (the precocious toddler) or too old (the fertile octogenarian) were viewed as capable of having children for the purposes of assessing whether the grant offended the rule against perpetuities.
• Re Gaite’s Will Trust- potential for five-year-old giving birth accepted.
• In Ward v. Van der Loeff, the HLs held that a gift was void due to possibility of a 66-year-old woman giving birth to more children. (Maybe not such an impossibility today; also, adoption (though in past clauses biological children more likely to be focus of gifts).
• Although Irish courts were suspect of this. See Exham v. Beamish [1939] IR 336 considered this to be a rebuttable presumption as opposed to a legal rule.

Question 27

Impossibility:
Re Wood aka ‘The Magic Gravel Pits Case’ [1894] 3 Ch 381

Answer 27

o A remainder interest was to vest when the deceased’s gravel pits ran out. There was evidence that this would occur very soon.
o Indeed, the gravel pits were exhausted by the time the case was heard. However, as the court could not say for certain at the time the gift was made, that the gravel pits would run out within the perpetuity period, the gift was ineffective under the rule against perpetuities.

Question 28

The rule against perpetuities - A work around:
Re Villar [1929] 1 Ch 243

Answer 28

“All my descendants who shall be living 21 years after the death of the survivor of all the lineal descendants of Queen Victoria living at my death”. = valid contingent gift

• The gift takes effect 21 years after the death of a life in being when the gift takes effect.

Question 29

Removal of the rules against remoteness

Answer 29

• Section 16 of the Land and Conveyancing Law Reform Act 2009 abolished the rule against perpetuities, the rule in whitby and the rule against accumulations.
• Section 17 of the Land and Conveyancing Law Reform Act 2009 made this abolition retrospective, BUT the abolition will not apply if
• “before the commencement of this Part, in reliance on such an interest being invalid by virtue of the application of any of the rules abolished in this section-
• The property has been distributed or otherwise dealt with, or
• Any person has done or omitted to do anything which renders the position of that or any other person materially altered to that person’s detriment after the commencement of this Part.

Question 30

Under Section 17 there are two circumstances where the rules against remoteness are not retrospectively affected:

Answer 30

1. Where property has been dealt with in reliance that a contingent interest was invalid due to the old rules.
2. Where a person did something or omitted to do something in respect of property due to the old rules and because of the operation of the abolition of the rule would now suffer a detriment.

Question 31

Abolition of the Rules against Remoteness

Answer 31

• De Londras notes that the saving clause does not take into account that anyone who gained a property interest due to the old rules is now adversely affected by its abolition.
• She also argues that most people would not have had an awareness of whether they were acting in reliance of the rule against perpetuities or not, it being so convoluted and not commonly understood (even amongst lawyers!).