Ownership Flashcards
Present estates
An estate is a freehold if immobile and for indeterminate duration.
Types:
- Fee simple absolute (FSA)
- Defeasible fees: Fee simple determinable (FSD), Fee simple subject to condition subsequent (FSSCS), and Fee simple subject to executory interest (FSSEI)
- Life estate (LE)
Fee simple absolute
Absolute ownership of potentially infinite duration. “To A” or “to A and his heirs” Freely alienable and no accompanying future interest.
Defeasible fees
Potentially infinite duration, subject to termination by the occurrence of
an event.
3 types:
- FS determinable (FSD): Limited by specific durational language (e.g., “so long as,” “while,” “during,” “until”). Automatically terminates upon happening of a stated event and reverts to grantor. Alienable, devisable, and descendible, but always subject to a stated condition. Grantor retains possibility of reverter.
- FS subject to condition subsequent (FSSCS): A present fee simple that is limited by specific conditional language (e.g., “upon condition that,” “provided that,” “but if,” or “if it happens that”). Alienable, devisable, and descendible. Grantor reserves right to terminate estate upon happening of a stated event (will terminate only if the grantor affirmatively demonstrates intent to terminate). Grantor must specifically retain right to reenter (devisable/descendible)
- FS subject to executory interest (FSSEI): A present fee simple that is limited by specific durational or conditional language. Automatically terminates upon happening of stated event, and Title passes to third party (i.e., someone other than the grantor). “To A, but if X event occurs, then to B”. The future interest held by the third party is an executory interest.
Life estates
Present possessory estate fully transferable during measuring life.
If third party: “to A for life,” “to B after the life of A,” or “to B for the life of C” (pur autre vie); “to A for life, but if he drinks, then to B” (defeasible).
If measured by the grantee’s life, not devisable/descendible.
Life tenant’s (LT) rights/duties: Right to possess, Right to collect rents/profits, lease/sell/mortgage (must pay taxes on income or rental value of land), Duty not to commit waste.
Waste
May limit the rights of a holder of a life estate.
3 Types:
Affirmative—occurs when overt conduct causes a decrease in property value; can’t consume/exploit natural resources unless prior use; must make reasonable repairs.
Permissive—occurs when tenant permits the premises to deteriorate through neglect, failure to preserve, or a failure to reasonably protect the property; tenant must make reasonable repairs (up to amount of income produced by property) and pay all property taxes and mortgage interest.
Ameliorative—occurs when a change in use of the property increases its value; life tenant may alter structures on the property when a substantial and permanent change in the neighborhood makes it necessary in order to continue reasonable use of the
property, so long as the property value is not diminished.
Future interests
An interest in presently existing property or in a gift or trust, which
may commence in use, possession, or enjoyment sometime in the future.
Types:
- Reversion
- Possibility of reverter
- Right of reentry
- Remainder (vested vs. contingent)
- Executory interests
Reversion
Held by grantor who transfers a LE or estate for years without conveying the remaining FI to a third party; not subject to RAP
Possibility of reverter
Automatically reverts to grantor upon occurrence of stated event
when FSD conveyed
Right of reentry
Held by grantor after FSSCS granted
Remainder
FI that becomes possessory upon the expiration of a prior estate of known fixed duration created in same conveyance in which the remainder is created.
2 Types:
1. Vested—not subject to any conditions precedent + ascertainable grantee
-Vested subject to open (class gifts): Class gift—group of unspecified persons whose number, identity, and share of the interest is determined in the future. If at least one class member is qualified to take possession at the time of the conveyance, then each class member’s share is subject to partial diminution because additional takers not yet ascertained can still vest. Once a class closes, any person who might otherwise have become a class member cannot claim an interest in the property as a class member. Rule of convenience—closes the class when any class member is entitled to
immediate possession.
-Vested subject to complete divestment—the occurrence of a condition
subsequent will divest the remainder.
2. Contingent—created in an unascertainable grantee or is subject to an express condition precedent to grantee’s taking (because of unknown beneficiary or known beneficiary subject to condition precedent that has not yet occurred). Survivorship contingency: majority—applies at termination of interest that precedes remainder; minority—requires surviving only testator, not life tenant.
Executory interests
FI in third party (not a remainder) that cuts the prior estate short
upon the occurrence of a specified condition; transferable and subject to RAP.
2 types:
- Shifting—cuts short a prior estate created in same conveyance, so the estate shifts from one grantee to another grantee upon the happening of a condition.
- Springing—divests the grantor’s interest or fills a gap in possession in which the estate reverts to grantor.
Rule Against Perpetuities (RAP)
Specific FIs are valid only if they must vest or fail by the end of a life in being plus 21 years.
Affected FIs—RAP applies to contingent remainders, vested remainders subject to open, executory interests, powers of appointment, rights of first refusal, and options; RAP does not apply to FIs that revert to the grantor (reversion, possibility of reverter, right of reentry).
Measuring lives—must be human; there can be more than one; if not specified, then the measuring life is the life directly related to the FI that is subject to RAP.
Creation events—RAP tests the FI as of the time that it is created
“Vest or fail” requirement—if there is any possibility that it will not be known whether the interest will vest or fail within the applicable period, then RAP has not been satisfied
Effect of violation—except in rare cases when voiding the FI undermines the grantor’s intent, only the offending interest fails
Special rule for class gifts (“bad as to one, bad as to all”)—if RAP voids a transfer to any class member, then the transfer is void as to all class members, even those whose interests have already vested
- Rule of convenience—can operate to prevent application of RAP to a class transfer, but the application of the rule of convenience to a class transfer does not automatically forestall the application of RAP
- Exceptions—transfers of a specific dollar amount to each class member; transfers to a subclass that vests at a specific time
Common violations: o “Survival beyond age 21” condition o Fertile octogenarian o Unborn spouse o Defeasible fee followed by executory interest o Conditional passage of interest
Concurrent estates
3 types:
1. Tenancy in common (TC) (default co-tenancy): Two or more grantees with unity of possession. No right of survivorship (ROS). Each co-tenant holds undivided interest with unrestricted rights to possess whole. Interest freely devisable/transferable.
- Joint tenancy (JT): Requires express language creating JT. Two or more tenants own the property with ROS. Interest is alienable (but not devisable/descendible).
-Four unities (PITT): Equal rights to possess the whole, With identical equal interests, Created at the same time, By the same title.
-Severance—converts a JT into a TC (but only with respect to the severed share); Sale—don’t need consent; severs JT as to seller but JT of non-transferors remains intact. Mortgage—severs JT under title theory, but not under lien theory. Judicial lien—the lien typically will not sever the JT; severance occurs when the
property is levied and sold. - Tenancy by entirety (TE): JT between married persons with ROS. Neither party can alienate or encumber the property without the consent of the other. Not recognized in community-property states.
Rights/obligations
• Each co-T has the right to possess the entire property and is generally not required to pay rent when other co-Ts do not use the property (unless co-T has been ousted)
• A co-T is liable to other co-Ts for third-party rents
• A co-T can collect contribution from other co-Ts for operating expenses (e.g., taxes) but not for repairs or improvements (unless in an accounting or partition action)
• Partition—a TC or JT (but not a TE) generally has the right to unilaterally partition property; a partition in kind, preferred by courts, is a physical division of the property
Special Real Property issues
1. Fair housing and discrimination—owner-occupied buildings with no more than four units and single-family homes not subject to Fair Housing Act (FHA)
• Prohibits discrimination in renting/selling, terms, refusing financing, etc.
- Conflict of laws—generally apply law of the situs in RP cases (i.e., state where RP is located)
• Exceptions: document (instrument, will) specifies applicable law; certain issues involving marriage; mortgage notes; foreclosure-related rights
