Real Property Flashcards
Estates in Land
Possessory interest in land
May be a present possessory interest - present estates, OR
Future Interests - becomes possessory in the future
Fee Simple Absolute
Present Possessory Estate
“full ownership of real property” - Created with language: “To A” or “To A and his heirs” (and his heirs language was necessary at common law, but not required today
- Infinite duration
- Freely transferable, devisable by will, and descendible through intestacy
Defeasible Fees
Fee simple estates (uncertain or potentially infinite duration) that can be terminated upon the happening of a stated event
- To be defeasible has to be capable of forfeiture
- Subject to the Rule Against Perpetuities (unless property is to revert to the grantor)
Three Types
- Fee Simple Determinable
- Fee Simple Subject to Condition Subsequent
- Fee Simple Subject to an Executory Interest
Fee Simple Determinable
Terminates upon the happening of a stated event and automatically reverts to the grantor (possibility of reverter)
Creation: Durational language (i.e. “to A for so long as, to A while, to A during, to A until…)
Transferable, devisable by will, and descendible through intestacy always subject to the attached condition
Example: Paul conveys Blackacre “to Ringo so long as the premises are used as a recording studio.”
Possibility of Reverter
Accompanying Future Interest in Grantor to a Fee Simple Determinable
The estate automatically reverts back to the grantor upon the happening of the stated event
FSDPOR
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, meaning the state does not automatically terminate - the grantor must take some action
Creation:
- Use of conditional words (“upon the condition that, provided that, but if, and if it happens that”)
- An explicit statement of the grantor’s right to re-enter
Most courts hold that the right of entry is not transferable inter vivos, but are devisable by will, and descendible through intestacy
Example: B conveys “To S, but if S ever serves alcohol on site, B reserves the right to re-enter and retake”
Fee Simple Subject to an Executory Interest
Terminates upon the happening of a stated event and then passes to a third party rather than back to the grantor or giving the grantor a right to terminate
Third Party has an executory interest
Creation: look for a third party who will take upon forfeiture of a fee simple estate
If the condition occurs, the estate is automatically forfeited in favor of someone other than the grantor
Example: To A and his heirs for so long as liquor is not sold on the premises; in that event, to B. B has an executory interest
Rules of Construction for Defeasible Fees
Words of desire, hope, or intention do not create a defeasible fee
Absolute Restraints on Alienation are Void (Example: O conveys “to A so long as she never attempts to sell” - in this case, the language of restraint is void, and A is left with a fee simple absolute)
Conditions and Limitations Violating Public Policy are Void - i.e. condition to penalize marriage or encourage divorce will likely be struck down
FLORIDA DISTINCTION: Rules of Construction
FL Statute limits the duration of reverters or forfeiture provisions to 21 years from the date of the deed conveying the realty
Life Estate
Ownership interest for life
Created:
- For the life of the grantee (To A for life)
- Life Estate Pur Autre Vie (life of another - To A, for the life of B) Also results if when a life tenant conveys their life estate to another
- Example: A, the holder of the life estate, conveys their interest to B. B has a life estate for the life of A)
Future Interests: If held by O - Reversion, if held by a third party - Remainder
Life Estates: Rights and Duties of the Life Tenant
Doctrine of Waste: life tenant is entitled to all ordinary uses and profits from the land, but must not commit waste
- Voluntary Waste: affirmative, actual, overt conduct causing a drop in value
- May not consume or exploit natural resources on the property
- Exception: If mining was done on the property before the life estate began, then the life tenant may continue to mine ONLY IN MINES ALREADY OPEN
- Permissive Waste - failure to take reasonable measures to protect land (neglect)
- FL DISTINCTION: if a life tenant makes improvements, generally they cannot demand that the owner of the remainder pay any part of the cost unless they expressly agreed otherwise. But a life tenant may complete improvements begun by the donor of the estate and demand contribution from the remainderman
Voluntary Waste
Voluntary Waste: affirmative, actual, overt conduct causing a drop in value
May not consume or exploit natural resources on the property
Exception: If mining was done on the property before the life estate began, then the life tenant may continue to mine ONLY IN MINES ALREADY OPEN
Permissive Waste
Permissive Waste - failure to take reasonable measures to protect land (neglect)
FL DISTINCTION: if a life tenant makes improvements, generally they cannot demand that the owner of the remainder pay any part of the cost unless they expressly agreed otherwise. But a life tenant may complete improvements begun by the donor of the estate and demand contribution from the remainderman
FLORIDA DISTINCTION: Waste and Improvements
If a life tenant makes improvements, generally hey cannot demand that the owner of the remainder pay any part of the cost unless they expressly agreed otherwise
But - a life tenant may compete improvements begun by the donor of the estate and demand contribution from the remaindermen
Ameliorative Waste
Change that benefits the property economically.
A life tenant may not engage in acts that will enhance a property’s value unless all future interest holders are known and consent
Today: a life tenant may alter or demolish existing buildings if:
- the market value of the future interests is not diminished and EITHER
- the remindermen 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
FLORIDA DISTINCTION: Waste
A life tenant may not permanently reduce the value of the estate of the remaindermen and cannot acquire an interest adverse to that of the remaindermen. While a life tenant may be a purchaser at a sale to satisfy an encumbrance, the life tenant who allows the property to be sold for taxes or the satisfaction of an encumbrance cannot acquire a title adverse to the remainderman or revisioner by purchasing at the sale themselves or through and intermediary.
Future Interests
An estate that will or may give the owner possession in the future.
A present, legally protected right in property - not expectancy
Six Categories of Future Interests (see additional cards)
Adverse Possession and Future Interests
Future Interest: Definition
A future interest gives its holder the right or possibility of future possession of an estate.
Present, legally protected right
6 Categories of Future Interests
Future Interest in Transferor
- A possibility of Reverter
- A right of entry
- a reversion
Future Interests In Someone Else
- A contingent remainder
- A vested remainder (three types)
- A executory Interest (two types)
Reverter (Possibility Of)
Accompanies the Fee Simple Determinable - automatic reversion if the condition of the fee simple determinable is breached
Automatically retain a possibility of reverter.
Possibility of reverter is transferable, devisable by will, and descendible by intestacy
Right of Entry
Accompanies the Fee Simple Subject to Condition Subsequent
Power of termination - if the stated event occurs then the transferor has the right to terminate the estate, but it’s not automatic - the grantor must take some action
Not transferable inter vivos (generally and in most states) but are devisable and descendible
Transferable (Alienable) Inter Vivos
Means the interest is transferable within the holders lifetime (see/gift/or otherwise transfer)
Devisable
Passing by will (capable of being passed by will)
Descendible
To pass to heirs through statutes of intestate
Reversion
Estate left in the grantor who conveys less than they own
- Example:* O, owning land in fee simple, conveys “To A for Life” - O has a reversion in fee simple. O (or her successors) will be entitled to present possession of the land when the granted estate terminated
- Example*: O, owning a life estate in land, leases it “to A for 20 years.” O has a reversion in a life estate. If O is alive when A’s lease expires, title will revert to O for life.
- If 10 years after the transfer, O dies, then A’s lease will come to an end. He was given a lease by someone holding a life estate. O cannot convey a greater interest that she has
Reversions are transferable, devisable by will, and descendible by inheritance
Holder of a reversion can sue a possessory owner for waster and may recover against third-party wrongdoers for damages to the property (to the extent of the injury to the reversion)
Vesting of Reversionary Interests
All reversionary interests are vested and, thus, not subject to the Rule Against Perpetuities
Future Interests in Transferees
If a future interest is held by someone other than the grantor it has to be either:
- A Contingent Remainder OR
- A Vested Remainder (indefeasibly vested, vested subject to complete defeasance and the vested remainder subject to open)
- An Executory Interest (shifting executory and springing executory)
Remainders
A remainder is a future interest in a third person that can become possessory on the natural expiration of ht preceding estate (never in O)
Must be expressly created in the instrument creating the preceding possessory estate
Cannot divest a prior estate, and cannot follow a time gap after the preceding estate
Can be vested or contingent
Examples:
- O conveys “to A for life, then to B and his heirs” - B has a remainder
- O conveys “to A for life, then to B and his heirs one day after A’s death” - B does not have a remainder, because there is a gap
Remaindermen
Remainders are sociable, they never travel alone - remainders always accompany a preceding estate of known, fixed duration (such as a life estate or term of years)
Remainders wait for a proceeding estate to come to natural end - don’t come into possession through forfeiture
Patient and Polite: A remainder never cuts short or divests the prior taker. It waits it’s turn and won’t take until the present life estate or term of years comes to its conclusion
Contingent Remainder
A remainder is contingent if: (1) it’s created in unborn or unascertained persons, or (2) it’s subject to a condition precedent, or both.
A remainder may be contingent as to a person or as to an event
Unborn or Unascertained Persons
A remainder created in in unborn or unascertained persons is contingent because until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends
Example: “To A for life, and on A’s death, per stripes to such of A’s descendants as survive her.” A the time of this disposition, A is in poor health and she has two adult children (B&C) who are healthy. Sate of title: A has a life estate; there is a contingent remainder in such of A’s descendants as survive A; the transferor has a reversion (for A may not be survived by any descendants)
Subject to Condition Precedent
A condition is precedent if it must be satisfied before the remainderman has a right to possession.
Look for the condition to appear before the language creating the remainder or for it to be woven into the grant to the remainderman
Pre-requisite to the remainderman’s admission - something they must do in order to succeed in taking possession
Example: “To A for life, and then to B if she graduates from college.” A is alive. B is now in high school. Before B can take, she must graduate from college. She has not yet satisfied this condition precedent
- B has a contingent remainder
- O has reversion
- If B graduates during A’s lifetime, the contingent remainder becomes indefeasibly vested remainder
Destructibility of Contingent Remainders
At common law, a contingent remainder had to vest prior to or upon termination of the preceding freehold estate or it was destroyed
Most states today have abolished this rule. Today property reverts to grantor; springing executory interest upon meeting condition
Rule in Shelley’s Case (Rule Against Remainders in Grantee’s Heirs)
At common law if the same interest created a life estate in A and gave the remainder only to A’s heirs, the remainder was not recognized, and A took the life estate and the remainder
Abolished in most jurisdictions
Doctrine of Worthier Title
A remainder in the grantor’s heirs is ineffective, so grantor has a reversion.
Generally, this is treated as a rule of construction only, grantor’s heirs are said to have a contingent remainder
FLORIDA DISTINCTION: Doctrine of Worthier Title
Abolished in Florida - a remainder to the grantor’s heirs does not presumptively create a reversionary interest in the grantor
Vested Remainders
A vested remainder is 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 (Subject to Complete Defeasance)
- Vested Remainder Subject to Open
Indefeasibly Vested Remainder
Vested remainder that is not subject to divestment or diminution. The holder is certain to acquire an estate in the future, with no strings or conditions attached.
Vested Remainder Subject to Total Divestment
Vested remainder subject to a condition subsequent. The remainderman exists, his taking is not subject to any condition precedent. However, his right to possession could be cut short because of a condition subsequent.
Example: O conveys “to A for life, then to B and his heirs. But if B dies unmarried, then to C and his heirs.” B is alive and unmarried. He has a vested remainder subject to total divestment by C’s executory interest
Condition Subsequent v. Condition Precedent
Condition Precedent: appears before language introducing you to the remainderman
Condition Subsequent: appears after language that, alone and set off by commas, creates remainders
*Whenever you have ambiguous language, the preference is for vested remainders subject to divestment (CS) rather than contingent remainders or executive interests
Vested Remainder Subject to Open
Vested remainder created in a class of persons that is certain to become possessory, but is subject to diminution (i.e. by the birth of additional persons)
Class Gifts
A class is a group of persons having a common characteristic (children, nephews). The share of each member is determined by the number of people in the class
A class gift of a remainder may be vested subject to open (where at least one group member exists) or contingent (where all group members are unascertained)
When does the Class Close
The Rule of Convenience
A class is open when it’s still possible for others to join in
A class is closed when no other can join in - in the absence of express contrary intent, a class closes when some members of the class can call for distribution of their share of the class gift (i.e. when any member of the class can demand possession)
Survival of the Class
Survival of a class member to the time of closing is usually unnecessary to share in a future gift - unless survival was made an express condition (example: to A for life and then to her surviving children)
Some terms are construed to create implied survivorship conditions (widow, issue, heirs, next of kin)
Executory Interests
Future Interest in third parties that either diest a transferee’s preceding freehold estate (shifting interest) or follow a gap in possession or cut short a grantor’s estate (springing interests)
Executory Interests must take effect by cutting short some interest - either in another person or in the grantor or the grantor’s heirs
Shifting Executory Interest
Always follows a defeasible fee and cuts short someone other than the grantor
Example: To A for life, then to B and his heirs; but if B predeceases A, then to C and his heirs. (A is alive; B is alive), C has a shifting executory interest because if B predeceases A, C will take, thereby divesting B’s estate of B’s interest.
Springing Executory Interest
Cuts short O’s interest (the grantor)
Example: O conveys “To A, if and when she becomes a lawyer”
Transferability of Remainders and Executory Interests
Vested remainders are fully transferable, descendible by intestacy, and devisable by will. At common law, contingent remainders and executory interests were not transferable inter vivos, but most courts today hold that they are freely transferable
Contingent remainders and executory interests are descendible and devisable, provided survival is not a condition to the interest’s taking
*TIP: Any future interest that is transferable is subject to involuntary transfer; that is, it is reachable by creditors
The Rule Against Perpetuities
Certain kinds of future interests are void if there is any possibility, however remote, that the interest might vest more than 21 years after a person alive at the time of the grant has died.
- Applies only to contingent remainders, executory interests, vested remainders subject to open, options to purchase, and rights of first refusal. The grantor’s interests (reversions, possibilities of reverter, rights of entry) are safe from the rule
When Does the Perpetuities Period Begin to Run
The time the interest is created and the perpetuities period begins to run depends on the instrument and the interest created
- Interests Granted by Will: runs from the date of the testator’s death
- For Deeds: it is the date of delivery
Must Vest
An interest vests for purposes of the Rule when it becomes:
- Possessory, or
- An indefeasibly vested remainder or a vested remainder subject to total divestment
The issue is when the interest could possibly vest - examine the grant as of the time of its creation and be sure that if the interest vests it will be within the period (the life in being plus 21 years). If there’s any possibility that it could vest beyond the period, it’s void.
Lives in Being
Unless other measuring lives are specified, one connected with the vesting of the interest is used.
Looking for a person alive at the date of the conveyance whose life and/or death is relevant to the prescribed condition’s occurence
Interests Exempt from the Rule
Except for vested remainders subject to open, the Rule does not apply to vested interests.
Does not apply to any disposition from one charity to another, and an exception for options to purchase held by a current tenant.
Effect of Violation of the Rule
Violation of the Rule destroys only the offending interest.
Four-Step Technique for Assessing Rule Against Perpetuities Problems
Step 1: Determine the Interests
- Why future interests have been created by the conveyance and whether the rule could apply to that interest
- Potentially applies only to contingent remainders, executory interests, and certain vested remainders subject to open
Step 2: How Does the Future Interest Holder Take?
- What has to happen for the future interest holder to take - does the holder of a previous estate need to die? Holder need to have children? Certain conditions have to be met?
Step 3: Find the Measuring Life
- Look for people alive at the date of the conveyance whose lives and/or deaths are relevant to what has to happen for the future interest holder to take
Step 4: When Will We Know if the Future Interest Holder Can Take?
- Will we know for sure within 21 years of the death of the measuring life if the future interest holders can take - if so the conveyance is good
- In other words “at time of creation will we know for sure within 21 years of measuring lifetime if suspect future interest holder is certain to take or not”
- If we won’t know for sure if the interest will vest within 21 years of the death of the measuring life, the future interest is void
The Rule in Operation - Common Pitfalls
- Bright Line Rule - Executory Interest with No Time Limit Violates the Rule
- Age Contingency Beyond Age 21 in Open Class
- Fertile Octogenarien
- Unborn Widow or Widower
- Administrative Contingency
- Options and Rights of Furst Refusal
Reform of the RAP
Wait and See or Second Look Doctrine: majority reform effort - the validity of any suspect future interest is determined on the basis of the facts as they exist at the conclusion of our measuring life
Uniform Statutory Rule Against Perpetuities: Codifies the common law RAP and, in addition, provides for an alternative 90-year vesting period
FLORIDA DISTINCTION: Uniform Statutory Rule Against Perpetuities
Nonvested Property interest (real or personal) is invalid unless:
- when the interest is created it is certain to vest or terminate within the common law period; or
- it actually vests or terminates within 90 years after its creation
The Rule Against Restraints on Alienation
Three Types of Restraints on Alienation:
- Disabling restraints, under which attempted transfers are ineffective
- Forfeiture restraints, under which an attempted transfer forfeits the interests; and
- Promissory restraints, under which an attempted transfer breaches a covenant
A disabling restraint on any legal interest is void. Forfeiture and promissory restrains may be valid depending on the nature of the restraint and the interest void
