Present Estates and Future Interests Flashcards
Present possessory estate
An interest that gives the holder the right to present possession
Three categories of present possessory freehold estates
- fee simple absolute
- Defeasible fee (there are three of these)
- Life estate
Fee simple absolute generally
“to A” or “o A and his heirs”
Fee simple is presumed in the absence of express contrary intent
Fee simple absolute distinguishing characteristics
Absolute ownership of indefinite or potentially indefinite duration
Freely transferable, devisable by will, and descendible through intestacy
IF given to A and her heirs, the heirs have nothing because living person has no heirs
Defeasible fees generally
Fee simple estates that can be terminated upon the happening of a stated event
Three types of fee simple with a catch - condition attached - that renders the estate subject to the risk of forfeiture
- defeasible means to be capable of forfeiture
Fee simple determinable
Terminates upon the happening of a stated event and automatically reverts to the grantor
- if stated event occurs, it automatically goes back to grantor
To create this, words limiting the duration of the estate must be used
- “To A . . . for so long as; while; during; until
- words like for the purpose of and to be used for are merely expressions of motive
Fee simple determinable - distinguishing characteristics
Transferable, devisable by will, and descendible through intestacy
- but always subject to the attached condition so grantee would take subject to the estate’s being terminated by specified event
Fee simple determinable and future interest
Reversionary future interest in the grantor from the condition that automatically reverts back to grantor is called a possibility of reverter
Whenever a grantor conveys a fee simple determinable, they automatically retain a possibility of reverter
- possibility of reverter is transferable, devisable by will and descendible by intestacy
Fee simple subject to condition subsequent
Estate in which the grantor reserves the right to terminate the estate upon the happening of a stated event
- doesn’t automatically terminate, the grantor must take some action
How to create fee simple subject to condition subsequent
Two main ingredients
- the use of conditional words (like upon condition that, provided that, but if, and if it happens that), and
- an explicit statement of the grantor’s right to re-enter (and retake)
fee simple subject to condition subsequent - distinguishing characteristics
Fee simple subject to condition subsequent is not automatically terminated if the stated condition occurs
- grantor has the right to cut the estate short at their perforative if the condition occurs
fee simple subject to condition subsequent - accompanying future interest in grantor
A right of entry must be expressly reserved - does not arise automatically
- most courts hold that rights of entry are not transferable
- most states agree that they are devisable
- all states agree they are descendible through intestacy
Fee simple determinable or fee simple subject to condition subsequent
Contains both durational language and a power of termination will likely be construed as creating a fee simple subject to a condition subsequent and not a fee simple determinable
Because forfeiture policy is optional at the grantor’s election and policy disfavors forfeiture of estates
So construe in favor of fee simple subject to condition subsequent
Fee simple subject to an executory interest
Terminates upon the happening of a stated event, the estate passes to a third party, rather than reverting to the grantor or giving grantor right to terminate
“To A, but if X event occurs, then to B”
Fee simple subject to an executory interest - third party interest
Third party has a shifting executory interest
Accompanying future interest
Fee simple subject to an executory interest - distinguishing characteristics
Just like fee simple determinable but if the condition occurs, the estate is automatically forfeited in favor of someone other than the grantor
Words of mere desire, etc
Words of mere desire, hope, aspiration, expectation, or motivation are insufficient to render an estate a defeasible fee
- merely an expression of motive rather than a limit on duration
Courts disfavor restrictions on free land use and won’t find a defeasible fee unless clear, durational language is used
Absolute restraints on alienation
Conditions that purport to restrict the transferee’s ability to transfer a fee simple
Absolute restrain on alienation is an absolute ban on the power to sell or transfer that is not linked to any reasonable time-limited purpose
Conditions and limitations violating public policy
Conditions or limitations that violate public policy generally are struck down, and the grantee takes free of the restraint
If purpose of condition is to penalize marriage or encourage divorce, will likely be struck down
- but if purpose is to give support until mortgage or in the event of divorce, it will likely be upheld
Life estate
One measured by the life or lives of one or more persons
Must be in explicit lifetime terms, never in terms of years
Usually measured by the life of the grantee but can be grantor
Grantee is known as a life tenant
Once party dies, reverts back to grantor
Life estate pur autre vie
Measured by a life other than the grantee’s
Also results when the life tenant conveys their life estate to another
Life estate - accompanying future interest
If the future interest is held by the grantor, it is called a reversion
If the future interest is held by a third party, it is called a remainder
Life tenant and doctrine of waste
Life tenant is entitled to all ordinary uses and profits from the land but must not commit waste
- voluntary
- permissive
- ameliorative
Thus cannot do anything that injures the interests of a remainder man or holder of the reversion
- future interest holder may sue for damages or to enjoin such acts
- if spend money to perform the life tenant’s obligations, they are entitled to reimbursement
Affirmative / voluntary waste - life tenant
Actual, overt conduct that causes a drop in value
Natural resources could constitute voluntary waste
Life tenant and natural resources
Exploitation of natural resources by a life tenant is generally limited to situations when
- necessary for repair or maintenance of the land
- the land is suitable only for such use, or
- it is expressly or impliedly permitted by the grantor
Open mines doctrine - if mining was done on the land prior to the life estate, the life tenant can continue mining but they’re limited to the mines already open
Permissive waste - life tenant
Life tenant fails to comply with their duties like allowing land to fall into disrepair or by failing to reasonably protect the land
anonymous with neglect
Obligations
Life tenant - repair
Life tenant is obligated to preserve the land and structures in a reasonable state of repair
Life tenant - taxes
Life tenant is obligated to pay ordinary taxes on the land
But duty to pay takes is limited to the extent of the total income or profits generated from the land since the life tenant acquired ownership
- if no income or profit, life tenant is required to pay all ordinary taxes only to the extent of the premises’ fair rental value
Life tenant - mortgage and special assessments
Life tenant is obligated to pay interest on mortgages, not the principal
And is obligated to pay special assessments for public improvements of short duration
- improvements of long duration are apportioned between the life tenant and future interest holder
Life tenant - insurance and responsibility from third parties
Life tenant is not obligated to insure the premises for the benefit of the future interest holders and is not responsible for damages caused by a third-party tortfeasor
Ameliorative waste - life tenant
Change that benefits the property economically
Life tenant cannot engage in acts that will enhance the property’s value, unless all future interest holders are known and consent
- honors the future interests holders’ reasonable expectations and sentimental value
Exception
Life tenant exception to alter or demolish existing buildings
Notwithstanding the common law’s recognition of ameliorative waste, a life tenant today can alter or even demolish existing buildings if
- the market value of the future interests is not diminished, and either
- the remainder men do not object, OR
- a substantial and permanent change in the neighborhood conditions has deprived the property in its current form of reasonable productivity or usefulness
Grantors’ future interests
Only three future interests capable of creation in the grantor
- possibility of reverter (with fee simple determinable)
- right of entry (with the fee simple subject to condition subsequent)
- reversion
Reversion
Estate left in a grantor who conveys less than they own - lesser duration than what they started with
All reversionary interests are vested and not subject to rule against perpetuities
Future interests in transferees generally
If a future interest is held by someone other than the grantor, has to be either
- contingent remainder, or
- vested remainder (3 types), or
- executory interest (shifting and springing)
Remainder generally
Future interest in a third party that can become possessory on the natural expiration of the preceding estate
- cannot divest a prior state
- cannot follow a time gap after the preceding estate
Must be expressly created in the instrument creating the preceding possessory estate
- always accompany a preceding estate of known, fixed duration
Either vested or contingent
Contingent remainder
Remainder is contingent if
- its created in unborn or unascertained persons, or
- its subject to a condition precedent
Contingent as to a person or as to an event
Transformed automatically to a indeafesibly vested remainder on the condition happening
Unborn or unascertained persons - contingent remainder
A remainder created in a unborn or unascertained persons is contingent because until the remainder man is ascertained, no one is ready to take possession if the preceding estate ends
Subject to condition precedent - contingent remainder
Must be satisfied before the remainder man has a right to possession
- condition appears before the language creating the remainder or for it to be woven into the grant to the remainderman
An event that is a prerequisite to the remainderman’s admission - must do in order to succeed in taking possession
Technical rules of common law
Just know that its all abolished and all the below on an mc choice will be wrong answer
- destructibility of contingent remainders
- shelley’s case - rule against remainders in grantee’s heirs
- doctrine of worthier title - rule against remainders in grantor’s heirs
Vested remainders generally
One created in an existing and ascertained person, and not subject to a condition precedent
Three types of vested remainders
- indefeasibly vested remainder
- vested remainder subject to total divestment / complete defeasance, and
- vested remainder subject to open
Indefeasibly vested remainder
Vested remainder that is not subject to divestment or diminution
Certain to acquire an estate in the future, with no strings or conditions attached
“To a for life, remainder to B”
Vested remainder subject to total divestment
Also called vested remainder subject to complete defeasance
Vested remainder that is subject to a condition subsequent
Remainderman exists and his taking is not subject to any condition precedent but his right to possession could be cut short because of a condition subsequent
Condition subsequent vs. precedent
If condition precedent, then contingent remainder. But if condition subsequent, then its vested remainder subject to total divestment
Comma rule - when conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder, the condition is a condition subsequent
- for condition precedent, the condition appears before the language introducing the remainderman
If language is ambiguous, preference is for vested remainders
Vested remainder subject to open
Created in a class of persons that is certain to become possessory, but is subject to diminution
Group of persons, at least one of whom is qualified to take possession but each group member’s share could get smaller because additional takers may join the class
“To A for life, then to B’s children”
Class open - vested remainder subject to open
A class is open when it’s still possible for others to join
Class is closed when no others can join
To figure out whether class has closed, apply the rule of convenience
Rule of convenience - vested remainder subject to open, when closes
In the absence of express contrary intent, a class closes (so no one born after that time may share in the gift) when some member of the class can call for distribution of their share of the class gift
So it closes when any member of the class can demand possession
Womb rule
Womb rule - vested remainder subject to open
Persons in gestation at the time the class closes are included in the class
Executory interests generally
Future interests in third parties that either
- divest a transferee’s preceding freehold estate (shifting interests), or
- follow a gap in possession or cut short a grantor’s estate (springing interests)
Executory interests distinguished from remainders because must take effect by cutting short some interest either in another person (shifting) or in the grantor (springing)
Shifting executory interest
Always follows a defeasible fee and cuts short someone other than the grantor
“To A, but if B returns from Canada, to B” B has a shifting exactor interest
Springing executory interest
Cuts short the interest of the grantor
“To A, if and when she becomes a lawyer”
