Real Property Flashcards
List the four main types of Present Estates.
- Fee Simple Absolute
- Defeasible Fees
- Fee Simple Determinable
- Fee Simple Subject to Condition Subsequent
- Fee Simple Subject to Executory Interest
- Fee Tail
- Life Estate
Name and briefly summarize Future Interests
- Reversion - Future interest of the grantor who conveys a life estate (or est. of years) without a third party future interest.
- Possibility of Reverter - Future interest retained by the grantor in the event of a fee simple determinable.
- Right of Reentry - Future interest retained when a fee simple subject to condition subsequent is conveyed.
- Remainder - Vested or Contingent; future interest in a second grantee of a life estate or est. of years.
- Executory Interest - Future interest of a third party in a conveyance of a fee simple subject to executory interest.
Briefly describe the characteristics of a Fee Simple (Absolute).
- Most common form of property ownership;
- Is freely alienable;
- May be transferred inter vivos, by will, or by intestacy with no restrictions;
- Has no accompanying future interest;
Note: In the past, common law required specific language (i.e. “to so and so and heirs”); but now ambiguous language defaults to a fee simple (i.e. “to so and so”).
Describe the characteristics of a Fee Simple Determinable;
What is it?
When does it terminate?
What are the possible future interests (grantor, grantee, third party)?
A Fee Simple Determinable is a present fee simple estate that is limited by durational (“time”) language (e.g. “so long as”, “during”, “while”, etc.). A Fee Simple Determinable terminates automatically when the event occurs.
The grantor retains a possibility of reverter. If nothing is otherwise provided, the estate reverts to the grantor or his heirs upon satisfaction of the condition.
The grantee has a fee simple determinable.
If a fee simple determinable is set up to convey the rights to a third party after the condition is satisfied, then the third party has an executory interest. In such a case, the grantor no longer has any interest in the property.
Describe the characteristics of a Fee Simple Subject to Condition Subsequent;
What is it?
When does it terminate?
What are the possible future interests (grantor, grantee, third party)?
A Fee Simple Subject to Condition Subsequent is a present fee simple that is limited in duration by specific conditional language (e.g. “provided that”, “on condition that”, “but it”, etc.). If language is ambiguous, limiting language is assumed to create a Fee Simple Subject to Condition Subsequent as opposed to a Fee Simple Determinable.
A Fee Simple Subject to Condition Subsequent does not terminate automatically on satisfaction of the condition, but rather satisfaction of the condition triggers the right of the grantor (or his heirs) to terminate the estate (usually by starting eviction proceedings).
Regarding future interests, the grantor retains a “right of entry” / “right of reentry” / “power of termination”, while the grantee gets the Fee Simple Subject to Condition Subsequent. There are no rights for third-parties, as the existence of a third party would instead create a Fee Simple Subject to Executory Interest.
Describe the characteristics of a Fee Simple Subject to Executory Interest;
What is it?
When does it terminate?
What are the possible future interests (grantor, grantee, third party)?
A Fee Simple Subject to Executory Interest is a present fee simple estate that is limited by specific conditional language (e.g. “provided that”, “on condition that”, “but if”, etc.), but where upon satisfaction of the condition, the estate automatically passes to a designated third party.
Unlike the Fee Simple Subject to Executory Interest, the estate terminates automatically upon the satisfaction of the condition, whereupon it is conveyed to the third party.
The grantor retains no rights; the grantee maintains a Fee Simple Subject to Executory Interest, and the third party retains an Executory Interest.
Note: The Executory Interest is freely alienable during life, devisable upon death, and descendible.
Describe the characteristics of a Life Estate;
What is it?
When does it terminate?
What are the possible future interests (grantor, grantee, third party) in the typical scenario?
A Life Estate is a present possessory estate that is limited in duration by a life; language creating it must be clear (typically “to A for life”) and the duration is measured in terms of a life as opposed to a specific duration.
A Life Estate will terminate after the measured life ends. The measured life does not necessarily have to be the life of the grantor; it may instead be the life of another individual (called a “Life Estate Pur Autre Vie).
If there is no subsequent future interest spelled out in the conveyance, the property will revert to the grantor or his heirs upon the death of the measuring life. This future interest is called a reversion. If there is a subsequent future interest, the ownership vests in the new party after the measuring life ends. This future interest is called either a remainder or an executory interest.
Note: The Life Estate itself is not subject to the Rule Against Perpetuities, but a subsequent future estate. if measured by a life, might be.
Can a Life Estate be cut short before the death of the measuring life?
Yes. The conveyance may contain conditions upon which a life estate will terminate prior to the death of the measuring life. This is known as a defeasible life estate. E.g. A conveys Blackacre “to B for life, but if B remarries, then to C.” Here B has a defeasible life estate, C has an executory interest.
Historically, these were called a “Life Estate Subject to ….” a “special limitation”, “an executory limitation”, or “a condition subsequent”.
Briefly list and discuss the rights of the Life Tenant
The life tenant may:
- Possess the property;
- Alienate the property (lease, sell, or mortgage the life estate)(Sale of the property generally cannot proceed unless the future interest holders agree to sell it as a fee simple absolute; courts may compel sale in the interests of justice e.g. income from the property is insufficient to maintain life tenant’s obligations to the property).
- Profits from the property (exploitation of natural resources)(presumed to have been granted to the life tenant if the conveyance is ambiguous; if permission was not express or implied, may constitute waste).
Notes: Rents collected from the lease of the property will typically belong to the Life Tenant.
What is the Doctrine of Waste; what are the three type of waste?
Broadly, the Life Tenant must deliver the property to the future interest holder in substantially the same condition that it was in when he took possession, with allowance for normal wear and tear. The grantor (owner in fee simple absolute) may alter or eliminate this duty. Future interest holders may give consent for the life tenant to violate the duty.
Waste Types Include:
- *Permissive** waste (neglect)
- *Affirmative / Voluntary** waste (direct action)
- *Ameliorative** waste (affirmative action that does not diminish value but substantially changes the condition of the property)
Does the Life Tenant have any duties with respect to preventing Permissive Waste?
Yes. The Life Tenant must prevent permissive waste by making reasonable repairs, only to the extent that the life tenant receives a financial benefit from the property. (E.g. if the land is farmed, repairs are not obligated to exceed the income from farming. If the Life Tenant occupies a residency, the fair rental value of the space occupied).
The Life Tenant is not responsible for acts of God/nature or acts of third parties that the Life Tenant could not prevent. Both the Life Tenant and any future interest holder can sue a third party for damages.
Regarding insurance, the Life Tenant is not obligated to insure the land for the benefit of a future interest holder.
Describe how obligations are handled under the Life Estate
(Property Taxes, Pre-Existing Mortgage, Assessment for Public Improvement)
Property Taxes incurred during the life estate are generally considered to be the personal liability of the life tenant.
If a Mortgage exists before the live estate is conveyed, the payment obligations depend upon the nature of the loan. If a balloon loan, the life estate is responsible for the interest payments during its duration. If principal is also regularly due, the payments are allocated based on the present value of the life estate and future interest between both. The future interest holder can sue to recover from the life tenant if the former pays the mortgage, but only to the extent that the life tenant benefited financially.
Assessments for Public Improvement (paving roads, water/sewer lines, etc.) is typically subject to allocation between the life tenant and the future interest.
Where does the Rule Against Perpetuities apply concerning vested and contingent remainders?
It generally applies to contingent remainders and vested remainders subject to open. See Also: Rule of Convenience
RAP also applies to Executory Interests
Under what conditions is a remainder considered to be vested? (Not subject to open)
When the remainder is an interest that is not subject to any conditions precedent, and the grantee is ascertainable.
e.g. A conveys Blackacre “to B for life, then to C and his heirs”. - No preconditions (other than the termination of the life estate) to C taking the remainder, and C is clearly designated and is therefore ascertainable.
Under what conditions is a remainder considered to be vested subject to open?
Occurs when a remainder interest is conveyed to a class or group (e.g. “Children”, “Grandchildren”, etc.) where at least one member is ascertainable at conveyance, but which may be expanded upon later, requiring the ascertainable member to share.
Under what conditions is a remainder considered to be vested subject to complete divestment?
Occurs when a condition subsequent will completely divest the remainder interest.
e.g. A conveys Blackacre to “B for life, and then to C, but if C has no children, then to D’s Children.” If “C” has no children when B dies, C’s vested remainder interest is dissolved; hence it is a vested remainder subject to complete divestment.
What is a contingent remainder?
Occurs when a remainder is created in an unascertainable grantee, or where the remainder is subject to an express condition precedent to a grantee’s taking.
- e.g. A conveys Blackacre “to B for life, and on his death to his children.” B has no children at conveyance. B’s potential children are unascertainable at the time, and have a contingent remainder interest.*
- e.g. A conveys Blackacre “to B for life, then to B’s children who attain 21 years of age.” B has one child who is 10 years old. B’s child has a contingent remainder.*
What happens if a contingent remainder does not vest before the preceding estate terminates?
(Old Rule vs Current Trend)
Previously at common law, the remainder was simply destroyed.
In most jurisdictions today, the grantor’s reversion takes possession, and the person holding the contingent remainder receives an executory interest.
What is the Rule of Convenience as it relates to a Vested Remainder Subject to Open?
The Rule of Convenience is a mechanism for closing a class to avoid the application of the Rule Against Perpetuities.
If the grant does not contain an express closing date for a class, the Rule of Convenience closes the class when a member of the class becomes entitled to immediate possession.
- eg. Oliver conveys “to Anna for life, then to Ben’s children.” Ben has one child. When will this class close under the Rule of Convenience? On Ben’s Death.*
- e.g. “To A for life, then to B’s children, and their heirs who reach 21.” At A’s Death, B has two children, C, 21, and D, 10.*
- Class closes at A’s death. C takes fee simple on A’s death, but the fee is partially defeasible throughout D’s life, and will need to be shared if D reaches 21.*
What is the Doctrine of Worthier Title?
In essence, the Doctrine of Worthier Title avoids a remainder in the grantor’s heirs by simply classifying such language as conveying a reversion to the grantor (thereby giving him a “fee simple absolute”, which is descendible to the heirs).
What is a Shifting Executory Interest?
A shifting executory interest divests a prior grantee or partially divests another grantee in the same class of a contingent remainder or vested remainder subject to open.
e.g. A conveys Blackacre “to my son for life, and on his death to his children who attain 21 years of age.” At conveyance, the son has two children, one 30 and another 10. The older child has a vested interest subject to open. The younger child has a shifting executory interest because it will partially divest the older son’s vested remainder when the younger son hits 21.
What is a springing executory interest?
A springing executive interest divests the grantor, or else fills a gap in possession in which the the estate reverts to the grantor.
- e.g. Oliver conveys Blackacre “to Anna for life, then to ben one year after Anna’s Death.”*
- Anna has a Life Estate, Oliver has a reversion. Ben’s interest divest’s Oliver’s interest, and Ben’s interest is therefore a springing executory interest.*
State the general terms of the Rule Against Perpetuities
Under the RAP, specific future interests are only valid if they vest or failby the end of a life in being at the time of conveyance, plus twenty-one years.
What future interests are affected by the RAP?
Contingent remainders, vested remainders subject to open, executory interests, and powers of appointment. Also residential rights of first refusal and options.
Future interests of the grantor (reversion, possibility of reverter, and right of reentry) are not subject to the RAP.
What are the two exceptions to the “Bad as to One” rule of the RAP
- Transfers of a specific dollar amount to each class member;
- Transfers to a subclass that vests at a specific time.
What is the exception to the RAP for charities?
If property is passing from one charity to another charity, the RAP is inapplicable to the interest of the receiving charity.
What are the three common types of Concurrent Estates?
Tenancy in Common
Joint Tenancy
Tenancy by the Entirety
What are the characteristics of a Tenancy in Common?
(Possession, Interest, Survivorship, Unities)
A tenancy in common is the presumptive concurrent estate whenever a conveyance is made to more than one person.
Co-tenants have separate but undivided interests in the property, and each has the right to use or possess the whole property, unless they choose to contract out of the basic rule.
There is no right of survivorship; each co-tenant can transfer the property freely inter vivos or upon death.
The Tenancy in Common requires only the unity of possession (equal right to access or use the property)
What are the characteristics of a Joint Tenancy?
(Possession, Interest, Survivorship, Unities)
A joint tenancy is similar to a tenancy in common, but with rights of survivorship intact.
A joint tenancy requires four unities for its tenants;
Possession - The equal right to possess or use the property.
Interest - Each party’s interest must equal the other parties’.
Time - Each party’s interest must have been created at the same time.
Title - Each party’s instrument must have originated in the same instrument.
(PITT)
What is required to create a joint tenancy?
The Grantor must make a clear expression of intent, and
the conveyance must include survivorship language; e.g. “as joint tenants with a right of survivorship.”
What happens when a Joint Tenancy is severed?
With two Joint Tenants? With more than two Joint Tenants?
If a joint tenancy is held by two persons and one (or both) conveys his interest, the joint tenancy is severed converted into a tenancy in common with the remaining parties.
If three or more persons hold a joint tenancy and one conveys his interest, the other two original joint tenants remain in a joint tenancy, which is enjoined in a tenancy in common with the new party.
What happens at the death of a Joint Tenant?
(If his interest is devised; if he dies intestate)
Both outcomes are the same; the right of survivorship trumps a devise or intestate succession, and the joint tenant’s interest passes to the other joint tenant(s).
