Real Property Flashcards
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Fee Simple Absolute (FSA)
This is the best type of estate.
- —-> A FSA holder has all possible rights that a person may have in that parcel of land.
- —-> May last forever – FSA is alienable, devisable, and descendible.
- —-> One way to terminate: Owner dies w/o a will or heirs, and property escheats to state.
EXAM TIP (terminology): Devisees take by will, heirs take by the law of intestacy in the relevant jurisdiction, and grantees take by inter vivos (literally “between the living”) transfer.
Creation
—–> “to A and his heirs” (CL); “to A” (modern law).
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Definition + 3 types)
An estate that may terminate upon some happening or event before its maximum duration (forever in fee) has run.
3 Types
(1) Fee Simple Determinable
(2) Fee Simple Subject to a Condition Subsequent
(3) Fee Simple Subject to Executory Interest
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Fee Simple Determinable)
Created by durational language—for so long as, during, until, or while.
- —-> “O to A for so long as liquor is not served on the premises.”
- —-> Terminates automatically on happening of a named future event.
- —-> The estate returns to the grantor.
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Fee Simple Subject to a Condition Subsequent)
Created by conditional language (provided however, however if, but if, on condition that, or in the event that) to occurrence of a condition that will terminate estate.
- —-> Power of termination must be expressly reserved to the grantor.
- —-> “A to B, provided that in the event the premises are not used for educational purposes, then A has the power to terminate B’s estate.”
- —-> “A to B, but if B stops using the premises for residential purposes, then A may reenter and retake the estate.”
- —-> “A to B for life, on condition that B uses the land for recreation, but if he fails to do so, A may re-enter and retake the estate.”
If the language is ambiguous, courts interpret the grant as an attempt to create a FSSCS; though, this often fails and the grant becomes a fee simple absolute for lack of a specific power of termination; thus, avoiding a forfeiture of the fee simple estate.
—–> NOTE: Courts disfavor forfeitures.
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Defeasible Estates (Fee Simple Subject to Executory Interest)
Created by either durational or conditional language.
- —-> Termination occurs on the happening of an event that terminates the estate; property then passes to someone other than grantor.
- —-> “A to B so long as B farms the property during his lifetime and, if he does not, then to C.”
- —-> “A to B on condition that B gets married. If B dies without marrying, the property will pass to C.”
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Fee Tail
Common law: An estate that descended to grantee’s children only.
—–> EXAMPLE: “A to B and the heirs of his body.”
Modern law: Fee tails are disfavored and are treated in most jurisdictions as fee simple absolutes.
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Life Estate
Life estates last for the duration of the grantee’s life.
—–> EX: “A to B for life.”
“Life estate pur autre vie” = The duration of the estate is measured by the life of someone other than the grantee.
—–> EX: “A to B for the life of C.” As long as C is alive, B owns the property.
Can be made defeasible.
—–> EX: “A to B for life, as long as B farms the land.”
Ownership of Real Property –> Present Possessory Estates: Freehold Estates - Non-Freehold Estates
Term estate = Estate that is limited in duration (basically a landlord-tenant relationship).
—–> Exs: “A to B for 50 years.” or “A to B for 1 year.”
Ownership of Real Property –> Future Interests: Grantor Future Interests - Possibility of Reverter
A future interest in the grantor that follows a determinable estate.
—–> “A to B so long as B farms the land” creates a possibility of reverter in the grantor.
Creation: a fee simple determinable automatically creates a possibility of reverter; no special language needed.
—–> Upon the happening of the event, the land automatically reverts back to the grantor.
Transferability
Common Law: The power of termination could descend through intestacy but could not be devised or transferred inter vivos.
Modern law/Majority: The power of termination is freely transferable, devisable, and descendible.
—–> NOT subject to the Rule Against Perpetuities (RAP) because the grantor’s possibility of reverter has already vested.
Ownership of Real Property –> Future Interests: Grantor Future Interests - Power of Termination (Right of Reentry)
A future interest in the grantor when the grantor attempts to create a FSSCS or a defeasible life estate.
Creation: Not automatic; must be spelled out in the conveyance or it does not exist.
—–> EXAMPLE: “A to B, provided that B uses the premises for residential purposes, but if he does not do so, A may retake and re-enter.” If B ever stops using the premises for residential purposes, A or A’s heirs can enter and retake the property.
Upon the happening of the event, the property does not automatically revert.
- —-> The grantor must exercise the right of reentry and take affirmative steps to retake the property.
- —-> Courts favor a fee simple subject to condition subsequent over a fee simple determinable to avoid an automatic forfeiture.
Transferability
- —-> Common law: The power of termination could descend through intestacy but could not be devised or transferred inter vivos.
- —-> Modern law/Majority: The power of termination is descendible and devisable. However, the power of termination is not transferable inter vivos.
NOT subject to the RAP because the grantor’s power of termination has already vested.
Ownership of Real Property –> Future Interests: Grantor Future Interests - Reversionary Interest
Reversion = A future interest retained by the grantor when the grantor transfers less than a fee interest to a third person.
—–> EXAMPLE: “A to B for life.” A has given a life estate to B but has not provided for who is going to own the land after B dies. The property will return to A after B dies.
Transferability
- —-> Common law: The power of termination could descend through intestacy, but could not be devised or transferred inter vivos.
- —-> Modern law: The power of termination is freely transferable, devisable, and descendible.
NOT subject to the RAP because the grantor’s right has already vested.
—–> The RAP does not apply to any reversionary interests.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Remainder
A future interest created in a 3rd person that is intended to take effect after the natural termination of the preceding estate.
EXAMPLE: “A to B for life, then to C.” C has a remainder.
Contingent Remainder = Any remainder that is not vested.
—–> EXAMPLE: “A to B for life, then to the oldest child of C then living.” This would be a contingent remainder because we do not know who the oldest child is going to be until B dies. There is a condition precedent to that person taking – they must be alive when B dies.
Vested Remainder is vested at the point that it is:
(1) Created in an ascertainable person; and
(2) Is not subject to any condition precedent, other than termination of the preceding estate.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Special Types of Vested Remainders (Vested Remainder Subject to Total Divestment)
A remainder that is presently vested but may be terminated on the happening of a future event.
—–> EXAMPLE: “A to B for life, remainder to C, so long as liquor is never served on the premises.” C has a vested remainder but could lose it by serving liquor on the premises.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Special Types of Vested Remainders (Vested Remainder Subject to Open)
A remainder that has been made to a class and has at least one member who is ascertainable who has satisfied any conditions precedent to vesting, but may have other members join the class later. -----> “A to B for life, then to the children of C.” As soon as C has a child, that child is an ascertainable person and there is no condition to their taking other than the termination of the preceding estate (B’s death). Child would have a vested remainder, but it is subject to open because as other children of C are born, they will also share in the gift.
Class Opening
- —-> Inter vivos conveyance: class opens at the time of the conveyance.
- —-> Testamentary conveyance: class opens at the death of the testator.
Class Closing The RAP can void a future interest. -----> Generally, does not apply to vested interests except vested remainders subject to open. -----> If any member of a class could potentially claim in a way that violates the RAP, the entire class gift fails. -----> Rule of Convenience: Class closes as soon as one member of the class becomes entitled to immediate possession of the property.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Executory Interests (Definition)
Executory Interest = A future interest in a third person that cuts short the previous estate before it would have naturally terminated.
- —-> Because a fee estate has the potential to last forever, any interest created in a third party that follows the granting of a fee will always be an executory interest.
- —-> EXAMPLE: “A to B so long as liquor is not served on the premises in B’s lifetime. If liquor is served on the premises in B’s lifetime, the property will pass to C.” C has an executory interest.
Subject to the RAP.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Executory Interests (Two Types)
Shifting Executory Interest: The interest passes from one grantee to another—i.e. a grantee to a grantee (most common).
—–> EXAMPLE: “A to B so long as B completes law school by age 30. If B fails to do so, then to C.” Shifts the property from grantee B to grantee C.
Springing Executory Interest: The interest transfers from a grantor to a grantee.
—–> EXAMPLE: “A to B for life. Then 20 years after B’s death, to C.” B has a life estate. When B dies, the property reverts back to the grantor, A. 20 years later, the property transfers to C. A’s reversion would be in fee.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Rules Affecting Future Interests (rules abolished in majority of jdxs)
Have a brief understanding of:
• Doctrine of destructibility of contingent remainders
• Doctrine of merger
• Rule in Shelley’s Case
Ownership of Real Property –> Future Interests: Grantee Future Interests - Rules Affecting Future Interests (Doctrine of Worthier Title)
It is worthier to take by descent than by devise, meaning a grantor cannot create a remainder in his or her heirs.
• This is a rule of construction, not law.
EXAMPLE: “A to B for life, remainder to A’s heirs.” Whether or not A included “remainder to A’s heirs,” the property would have gone to A’s heirs via a reversion. Should pass by descent rather than the devise.
Ownership of Real Property –> Future Interests: Grantee Future Interests - Rules Affecting Future Interests (Waste)
Determines what someone who owns land can or cannot do with it.
- —-> Owner of a fee estate can do whatever he or she wants with the property.
- —-> Owner of less than a fee estate cannot commit waste (e.g., harm the property at the expense of the person who will hold it after them).
Three Types of Waste:
(1) Voluntary Waste = A life tenant cannot intentionally or negligently damage property. If they do, they are liable for the damage.
(2) Permissive Waste = A life tenant must take reasonable steps to avoid damage. Failure to do so constitutes permissive waste, and the life tenant will be liable.
(3) Ameliorative Waste = A life tenant makes improvements to the land.
—–> Common law: A life tenant was not allowed to make substantial alterations unless authorized to do so and could be held liable for costs of restoring the land to its previous condition.
—–> Modern law: A life tenant is now allowed to commit ameliorative waste if:
• Market value of the remainderman’s interest is not impaired; and
• It is permitted by the remainderman OR a substantial and permanent change in the neighborhood justifies the improvement.
A remainderman has standing to sue for past or future waste.
- —-> Vested Remainderman: Can sue for damages or an injunction to stop the waste from occurring.
- —-> Contingent Remainderman: Cannot sue for damages and can only sue for an injunction to stop the waste from occurring.
EXAM TIP: Watch out for situations involving the mortgagor/mortgagee relationship and the landlord/tenant relationship. Both relationships are also governed by the doctrine of waste.
Ownership of Real Property –> Special Problems: Rule Against Perpetuities (RAP)
The common law Rule Against Perpetuities provides that “no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest.”
Purpose of the Rule:
- —> The law does not want land tied up forever with ridiculous contingencies that could go on in perpetuity.
- —> The rule attempts to place a limit on contingencies on ownership of land.
The rule deals solely with possibilities.
—-> If you can look at a future interest in a conveyance and can come up with an interpretation where someone could be claiming more than 21 years after everyone currently alive connected to the grant is dead, it violates the rule.
Application
—–> RAP does not apply to present possessory estates.
—–> RAP only applies to three future interests:
• Executory interest;
• Contingent remainder; and
• Vested remainder subject to open
—–> Two other interests subject to the rule:
• Purchase option; and
• Right of first refusal
—–> All other future interests are exempt from the RAP.
Steps for Dealing with a RAP Problem:
(1) Identify the type of interest and make sure the RAP applies:
• Executory interest;
• Contingent remainder;
• Vested remainder subject to open;
• Purchase option; and
• Right of first refusal
(2) Is it possible to interpret the facts so someone can claim an interest more than 21 years after everyone currently alive is dead?
—-> If yes, the future interest is wiped out and interpret the rest of the grant accordingly.
—-> If no, the interest will stand.
Ownership of Real Property –> Special Problems: Restraints on Alienation
EXAMPLE: “A to B for life, but if B tries to sell his interest, then to C.”
Total Restraint
EXAMPLE: “A to B, but if B ever tries to sell the property, then the property will revert to A.”
—> On a fee: This will generally not be valid.
—> On less than a fee: This will be upheld, if reasonable.
Partial Restraint (both are valid, if reasonable)
—> Purchase Option
EXAMPLE: “A to B and her heirs, but A reserves the right to buy back the property at any time during A’s life.”
—> Right of First Refusal
EXAMPLE: “A to B and her heirs, but if B ever attempts to sell during A’s life, B must first offer the property to A at the same price.”
—> Courts look to whether a restraint is limited in scope or time, the purpose of the restraint, the legitimate interests of the party, and whether the restraint is supported by consideration in assessing its reasonableness.
Ownership of Real Property –> Special Problems: Conflicts of Law Related to Real Property
If a property interest is involved, characterize it as either a “movable” or “immovable” interest.
—–> If an interest is closely connected with land (e.g., a leasehold or the right to rents), it is immovable. If it is not, it is movable.
—–> The law of the situs governs all rights in land and other immovables.
• Validity and effect of a conveyance (e.g., the form of the deed or the capacity of the grantor) are governed by the law of the situs.
• Mortgages, their creation, validity, and foreclosure are governed by the law of the situs.
• But the underlying contract or note is governed by law of the place of its making.
• Liens (e.g., mechanic’s or laborers’ liens) are governed by the law of the situs.
Ownership of Real Property –> Cotenancy: Generally
Any time property is being transferred to more than one person to be held concurrently, you have to determine how they are going to hold the property.
o Tenancy in Common = Each co-tenant owns an undivided possessory interest in the whole of the property.
o Joint Tenancy = Each co-tenant owns an undivided possessory interest in the whole of the property AND has a right of survivorship.
Ownership of Real Property –> Cotenancy: Right of Survivorship
If you have property that is jointly owned, and one of the co-tenants dies, the property passes to the surviving co-tenant automatically.
Common Law: A conveyance to two or more people to jointly own property was presumed to create a joint tenancy, unless specifically stated otherwise.
Modern Majority: A conveyance to two or more people to jointly own property is presumed to create a tenancy in common, unless specifically stated otherwise.
You MUST use language to demonstrate that you want the right of survivorship attached to the grant.
—–> EXAMPLE: If A and B own property as joint tenants and B dies, the property automatically passes entirely to A, and A owns the property outright.
The right of survivorship takes precedence over a will or inheritance by intestacy.
—-> If there is a tenancy in common (no right of survivorship) a concurrent interest held in a tenancy in common is freely transferable and can be willed away or inherited through intestacy.