Real Property Flashcards
How may ownership in real property be transferred?
by sale, by gift, or, upon death, by devise or intestate succession
The seller or donor is called the “grantor,” and the buyer or recipient is called the “grantee.”
Main Categories of Land Interests
Present and future possessory interests in land (which are subject only to the rights of others), and nonpossessory interests in land (which are subject to specific restrictions as to the use of the land).
What is a freehold?
To be categorized as a freehold, an estate must be (i) immobile (either land or some interest derived from or affixed to land) and (ii) for an indeterminate duration (as opposed to a leasehold, which is for a limited duration).
Present Estates
- Fee Simple Absolute
- Defeasible Fees
- Fee Tail
- Life Estate
The owner of a present estate has the right to currently possess the property.
What are the three main types of defeasible fees?
(i) fee simple determinable,
(ii) fee simple subject to a condition subsequent, and
(iii) fee simple subject to an executory interest.
Fee Simple Absolute
- Absolute ownership of potentially infinite duration
- Most common form of property ownership and the broadest ownership interest recognized by law
- “Freely alienable” because it is able to be transferred inter vivos, by will, or intestacy without restriction
- Has no accompanying future interest
Although common law required words of limitation (e.g., “and heirs”), conveyances that are ambiguous (e.g., “to B”) are now considered fee simple by default.
Ex. A conveys Blackacre “to B and his heirs.” C conveys Whiteacre to “B.” Both conveyances give B a fee simple absolute estate in the property.
Defeasible Fees
- Ownership of potentially infinite duration, but may be terminated by the occurrence of an event
- Freely alienable during life and upon death
- Three defeasible fee simples are (i) fee simple determinable, (ii) fee simple subject to a condition subsequent, and (iii) fee simple subject to an executory interest.
If a statement in a conveyance of real property merely indicates a grantor’s desire, intent, or purpose for which the property is to be used rather than imposing a condition on the ownership of the property itself, the property interest is treated as a fee simple absolute, rather than a defeasible fee.
Fee simple determinable
- A present fee simple estate that is limited by specific durational language (e.g., “so long as,” “while,” “during,” “until”).
- Terminates automatically upon the happening of the stated event.
- Future Interest mathc: possibility of reverter
Possibility of reverter
- Type of future interest retained by the grantor in a fee simple determinable
- Upon the occurrence of the stated event, the estate automatically reverts to the grantor or her successors.
- The grantor retains a future interest in the estate, even though the conveyance does not mention this future interest or the grantor as its owner, unless the conveyance provides otherwise.
- A possibility of reverter is freely alienable during the grantor’s life, and upon her death devisable and, if not devised, descendible.
Ex. A conveys Blackacre “to B and his heirs until B gets married.” The estate reverts back to A if B gets married. B has a fee simple determinable in Blackacre, and A has a possibility of reverter.
Executory Interest
- A future interest in a 3rd party that generally cuts the prior estate short upon the occurrence of a specified condition.
- Follows a Fee Simple subject to an executory interest
- Upon the occurrence of the stated event, the passage of the estate is automatic; the third party is not required to take any action in order to become the owner of the estate.
- Freely alienable during life, and upon death devisable and, if not devised, descendible.
- Two types of executory interests: shifting and springing.
Ex. A conveys Blackacre “to B and his heirs until B gets married, then to C.” B has a fee simple determinable in Blackacre, while C has an executory interest. A does not have an interest in Blackacre.
When the future interest is in a third-party grantee, some jurisdictions label the present defeasible fee interest as a “fee simple subject to an executory interest” rather than a “fee simple determinable.”
Fee simple subject to a condition subsequent
- A present fee simple that is limited in duration by specific conditional language (e.g., “provided that,” “on condition that,” “but if”)
- Upon the occurrence of the condition, the grantor (or his successor interest) has the right to terminate this estate, but the termination is not automatic. The present fee simple will terminate only if the grantor affirmatively demonstrates intent to terminate (e.g., by going to court).
- The grantor must explicitly retain the right to reenter. When the grantor fails to retain this right, a court may find that the condition constitutes only a covenant for which the owner may be entitled to damages or an injunction, but that the owner does not have the right to regain possession of the property.
Ex. A conveys Blackacre “to B and his heirs, but if B gets married, then A can reenter Blackacre.” B has a FS subject to a condition subsequent in Blackacre, and A has a right of reentry. If B gets married, B will retain his current possessory estate in Blackacre until A exercises his right to terminate B’s estate. Until A retakes Blackacre, B continues to own the land.
FS determinable v. FS subject to a condition subsequent
- Durational Laungauge v. Conditional Language
- In a FS determinable, the present interest automatically terminates upon the occurance of the stated event. Future Interest is a possibility of reverter.
- In a FS subject to a condition subsequent, the occurance of the stated event brings about a right to reentry, but does not automatically terminate without some further affirmative action by the grantor (or his sucessor in interest).
- If the language in the conveyance is ambiguous, courts typically adopt a preference for the FS subject to a condition subsequent over a FS determinable.
Right of Reentry
A.k.a. “right of entry,” “right to terminate,” “power of termination”
- A future interest retained by the grantor after a fee simple subject to a condition subsequent is granted.
- Must be explicitly retained in the covenant
- In most jurisdictions, this right is freely alienable during life, and upon death devisable and, if not devised, descendible.
- The owner may waive this right, but the mere failure to assert it does not constitute a waiver.
Fee simple subject to an executory interest
also known as a fee simple subject to an executory limitation
- A present fee simple estate that is limited by specific conditional language (e.g., “provided that,” “on condition that,” “but if”), such that, upon the occurrence of the specified event or condition, title will automatically pass to a third party (i.e., someone other than the grantor or the holder of the present fee).
- Future interest is an Executory Interest.
Fee Tail
- A fee tail is a freehold estate that limits the estate to the grantee’s lineal blood descendants by specific words of limitation (e.g., “heirs of the body”).
- The fee tail estate has been eliminated in most states; it is treated as a fee simple absolute estate.
Life Estate
- A present possessory estate that is limited in duration by a life.
- The language in the document must be clear (e.g., “to A for life”), and the duration must be measured in terms of a life, not a unit of time (e.g., years).
- Future Interest: Remainder (3rd party) ot Reversion (grantor) - If no future interest is specifically stated, ownership of the property reverts to the grantor on the death of the measuring life.
- Transferable while the person by whom the life estate is measured is alive, but the interest terminates at the death of the person by whom the life estate is measured.
Ex. A conveys Blackacre “to B for B’s life, and then to C.” B has a life estate in Blackacre, which terminates upon B’s death. C has a remainder. On B’s death, ownership of Blackacre vests in C.
Ex. A conveys Blackacre “to B for life.” B has a life estate in Blackacre, which terminates upon B’s death. A has a reversion; upon B’s death, ownership of Blackacre reverts to A.
Measuring life of a life estate
- Unless the conveyance specifies otherwise, the life of the grantee (i.e., the life tenant) is the measuring life. A life estate measured by the grantee’s life is transerable inter vivos but is neither devisable nor descendible by the grantee.
- May be measured by the life of an individual other than the grantee; known as a “life estate pur autre vie.” When the measuring life survives the life tenant, the life estate may be devised by the life tenant or inherited by the life tenant’s heirs.
Ex. A conveys Blackacre to “B for life.” B has a life estate that is measured by his own life.
Ex. O conveys Blackacre to “A for the life of B, with a remainder to C.” A has life estate for the life of B. A dies before B and devises the life estate to D. D has a life estate until B dies, at which time C’s remainder becomes possessory.
Defeasible life estate
also known as a determinable life estate
- A life estate subject to a condition that may cut it short of the duration of the measuring life
- Qualified by language that specifies one or more events that might cause the life estate to terminate before the death of the individual who serves as the measuring life.
- Future Interest: Executory Interest
Example: A conveys Blackacre “to B for life, but if B remarries, then to C.” B has a defeasible life estate. C has an executory interest.
Rights of a Life Estate Grantee
- Right of Alienation: A life tenant has the right to possess the property, as well as the right to lease, sell, or mortgage his interest in the property.
- Right to Rents: Generally, rents generated from the lease of the property belong to the life tenant.
- Right to Profit: The life tenant may have the right to profit (take natural resources from the land) when the grantor expressly or impliedly gives the life tenant this right. When this right is not expressly or impliedly given, exploitation of natural resources can constitute waste.
- Right to Sale the Property: Generally, a life tenant can only sell her life estate when the future interest holders agree to the sale of the property in fee simple. However, in a majority of jurisdictions, a life tenant may seek a court order compelling the sale of the property in fee simple when future interest holders cannot be ascertained or are unwilling to sell the property. Courts consider equitable factors, such as whether the income generated by property is insufficient to meet the life tenant’s obligations with respect to the property, when deciding whether to compell a sale. The proceeds from the sale are distributed based on the present value of each interest.
Right to Profit in the context of estates
a right to take natural resources from land (e.g., oil, gas, minerals)
“Open Mines” doctrine
When resources are being taken (mined) from the land when an estate becomes possessory, there is a presumption that the grantor intended the grantee to have the right to profit from the resources (mining).
Doctrine of Waste
- A life tenant generally must deliver the property to the future interest holder in substantially the same condition that it was in when she took possession, with allowance for normal wear and tear.
- The owner of property in fee simple absolute who divides ownership of the property into a life estate and one or more future interest may alter or eliminate the applicability of this doctrine to the life tenant. In addition, the future interest holders may consent to the life tenant’s conduct.
- Two kinds of waste, permissive and voluntary.
Permissive waste
- Occurs when the life tenant “permits” the premises to deteriorate through neglect or a failure to preserve or protect the property.
- A life tenant has a duty to make reasonable repairs. This constitutes a personal obligation of the life tenant only to the extent that the life tenant receives a financial benefit from the property (i.e., the amount of income generated by the property, or, if the life tenant uses the property (e.g., farms the land, occupies the residence), its fair rental value).
- In most jurisdictions, the life tenant is not responsible for damage caused by natural forces or 3rd parties that the life tenant could not prevent. For damage to the property caused by a 3rd party, the life tenant and the future interest holder each have the right to sue the 3rd party for damages.
- In most jurisdictions, the life tenant is not under an obligation to insure the land for the benefit of the future interest holder.
Voluntary (affirmative) waste
- Occurs when the condition of the property is substantially changed due to the life tenant’s affirmative action.
- Generally, a life tenant’s affirmative action that results in the diminution in value of the property is prohibited by the doctrine of waste.
Ameliorative waste
Type of waste where the life tenant’s affirmative action substantially changes the condition of the property but does not result in a dimunation of value (e.g., putting up a fence, house renovations)
- Common law: prohibited because the condition of the property was changed.
- Most jurisdictions today: permitted when the change results in reasonable use of the property.
A life tenant has a duty not to change the premises if the future interest holders have a reasonable ground for objection.
- A reasonable ground for objection does not exist if a substantial and permanent change in neighborhood surroundings makes the change necessary to continue reasonable use of the property, and the proposed change is one that an owner of a fee simple estate would typically make.
- In determining the reasonableness of a change, the life tenant’s life expectancy and good faith in making the change are factors to be considered.
Payment of Property Taxes on a Life Estate
- Only assessed to the life estate because they are imposed on an annual basis
- Generally, a personal obligation of the life tenant only to the extent that he receives a financial benefit from the property. Any excess can be assessed against the life estate interest as a lien which can be enforced through a judicial sale.
Payment of a pre-existing mortgage obligation on a Life Estate
Subject to allocation between the life tenant and the future interest holder.
Allocation can vary depending on the type of obligation.
- If the obligation requires only the periodic payment of interest until the principal amount is due, the life tenant is responsible for such interest payments.
- If the obligation requires the periodic payment of both interest and principal, the payment obligation is allocated between the life tenant and future estate holder based on the present value of each interest.
When the holder of a future interest pays the outstanding mortgage obligation because the life tenant fails to do so, the holder can bring an action against the life tenant personally to recoup his payment of the life tenant’s portion of the obligation, but only to the extent of the life tenant’s financial benefit from the property. Any excess can be assessed against the life estate interest as a lien which can be enforced through a judicial sale. A life tenant who pays a future interest holder’s mortgage obligation is entitled to a similar remedy.
Payment of an assessment for a public improvement on a Life Estate
An assessment for a public improvement (e.g., paving road, installing water or sewer lines) typically is subject to allocation between the life tenant and future estate holder.
Dower and Curtesy Rights
At common law, a surviving spouse had a life estate in property owned by deceased spouse. For a widow, this life estate interest was known as a dower right; for a widower, a curtesy right.
Because every jurisdiction now provides other protections for a surviving spouse, such as a surviving spouse’s right to at least a portion of the deceased spouse’s property in fee simple, less than a handful of jurisdictions have retained a surviving spouse’s right to a life estate in the deceased spouse’s property.
Future Interests
A future interest is an ownership interest in presently existing property, which may commence in possession or enjoyment sometime in the future.
- Reversion
- Possibility of Reverter
- Right of Reentry
- Remainder
- Executory Interests
Reversion
- The future interest held by the grantor who grants a life estate or estate for years but does not convey the remaining future interest to a 3rd party.
- Reversions are not subject to the Rule Against Perpetuities.
- A reversion is fully alienable during life, and upon death devisable and, if not devised, descendible.
Remainder
- A future interest created in a grantee that is capable of becoming an estate that is presently possessory upon the natural expiration of a prior estate (e.g., a life estate, estate for years) that is created in the same conveyance in which the remainder is created.
- By definition, a remainder interest cannot follow a defeasible fee interest; a future interest in a 3rd party that follows a defeasible fee is an executory interest.
- Freely alienable
- A remainder can be either vested or contingent.
Vested remainder
An interest that is not subject to any conditions precedent and is created in an ascertainable grantee.
Ex. A conveys Blackacre “to B for life, then to C and his heirs.” Here, the grantee, C, has a vested remainder. There are no preconditions on C’s entitlement to his remainder interest and C, as the designated individual, is an ascertainable grantee.
Vested remainder subject to open
a.k.a. vested remainder subject to partial divestment
When a remainder interest is transferred to persons designated as a group (class gift; e.g., children, grandchildren) and at least one member of the group is individually ascertainable and entitled to the remainder interest, but that person’s interest may be subject to being shared with other members of the group
Ex. A conveys Blackacre “to my son for life, and on his death to his children.” When A conveys Blackacre, his son is alive and has one child. That child has a vested remainder subject to open because his interest in Blackacre may be subject to being shared if A’s son has other children.
Ex. A conveys Blackacre “to my son for life, and on his death to his children who attain 21 years of age.” When A conveys Blackacre, his son is alive and has one child who is 30 years of age. That child has a vested remainder subject to open because his interest in Blackacre may be subject to being shared if A’s son has other children who attain 21 years of age.
Vested remainder subject to complete divestment
A vested remainder where the occurrence of a condition subsequent will completely divest the remainder interest.
Ex. A conveys Blackacre “to B for life, and then to C; but if C has no children, then to D’s children.” C has a vested remainder interest, but if he is not survived by his children at the time of B’s death, then C’s interest will be divested. Consequently, C has a vested remainder subject to complete divestment.
Contingent Remainder
A remainder is contingent if it is created in a grantee that is unascertainable, or if it is subject to an express condition precedent to a grantee’s taking.
Normally occurs when (i) the property cannot vest because the beneficiary is unknown, or (ii) the property cannot vest because the known beneficiary is subject to a condition precedent that has not yet occurred.
At common law, which a few jurisdictions continue to follow, a contingent remainder could not be transferred during life.
Ex. A conveys Blackacre “to B for life, and on his death to his children.” When A conveys Blackacre, B does not have any children. B’s unborn children have a contingent remainder.
Ex. A conveys Blackacre “to B for life, then to B’s children who attain 21 years of age.” When A conveys Blackacre, B has one child who is 10 years old. B’s child has a contingent remainder.
Destruction of contingent remainders
Common law: a contingent remainder was destroyed if it had not vested by the time the preceding estate terminated.
Most jurisdictions today: the grantor’s reversion becomes possessory, and the person holding the contingent remainder takes a springing executory interest, which becomes possessory if the condition precedent is met.
Ex. A conveys Blackacre “to B for life, remainder to C’s heirs.” B and C are alive. Subsequently, B dies and is survived by C.
- At common law, the contingent remainder in C’s heirs was destroyed, and A had in fee simple absolute in Blackacre by virtue of A’s reversion.
- Today, in most jurisdictions, A has a fee simple subject to an executory interest, and C’s heirs have a springing executory interest that will become a fee simple absolute interest on C’s death.
Rule in Shelley’s Case
- At common law, prevented a contingent remainder in the grantee’s heirs. The rule changed the interest that the grantor purported to give to the grantee and his heirs to a vested remainder in the grantee.
- Under the doctrine of merger, when the life estate in the grantee was immediately followed by a remainder in the grantee’s heirs, both the present and future interests were merged, and the grantee took the property in fee simple absolute.
- Most jurisdictions have abolished the Rule in Shelley’s Case, and the grantee’s heirs take the future interest as conveyed in the deed.
Ex. A conveys Blackacre “to B for life, remainder to B’s heirs.”
- If the Rule in Shelley’s Case applies, then after merger of the present and future estate, B owns Blackacre in fee simple absolute.
- If the Rule in Shelley’s Case has been abolished, then B has a life estate and B’s heirs have a contingent remainder in Blackacre.
Doctrine of Worthier Title
- Common law rule that prevents a grantor from creating a remainder in the grantor’s heirs; it applies in a minority of jurisdictions to an inter vivos conveyance.
- The rule creates a presumption of a reversion to the grantor, which is rebuttable by a showing of contrary intent.
Ex. A conveys Blackacre “to B for life, remainder to A’s heirs.”
- If the Doctrine of Worthier Title applies, then B has a life estate, and A has a reversion, unless a contrary intent is established.
- If this doctrine has been abolished, then B has a life estate, and A’s heirs have a contingent remainder.
Shifting executory interest
A shifting executory interest divests the interest of the grantee by cutting short a prior estate created in the same conveyance. The estate “shifts” from one grantee to another on the happening of the condition.
Ex. A conveys Blackacre “to B and his heirs, but if C returns from Paris, then to C.” This conveyance creates a fee simple subject to an executory limitation in B and a shifting executory interest in C.
Executory interest that follows a fee simple determinable
While a future interest that follows a fee simple determinable and is held by a third party (rather than the grantor) is an executory interest, it is not characterized as a shifting executory interest, even though the event results in the estate passing to a grantee, because the executory interest arises naturally out of the termination of the fee simple determinable rather than cutting the fee simple determinable short.
Ex. A conveys Blackacre “to B and his heirs until C returns from Paris, then to C.” This conveyance creates a fee simple determinable subject to an executory limitation in B and an executory interest in C.
Springing executory interest
A springing executory interest divests the interest of the grantor or fills a gap in possession in which the estate reverts to the grantor.
Ex. A conveys Blackacre “to B for life, and one year after B’s death to C and his heirs.” This conveyance creates a life estate in B, a one-year reversion in A (in fee simple subject to an executory limitation), and a springing executory interest in C.
Ex. A conveys Blackacre “to B if she passes the bar.” Creates a Fee Simple Subject to an Executory Condition in A and springing executory interest in B.
Creditor rights to a future interest
Most states permit a future interest to be reached by creditors of the interest holder, except for those interests held by unascertainable or unborn persons or those held in certain trusts (e.g., a spendthrift trust).
Transfer of an interest back to the grantor
Although a remainder or an executory interest is initially created in a grantee, not a grantor, these two future interests retain their designations if transferred back to the grantor.
Ex. A conveys Blackacre “to B for life, and then to C.” C has remainder interest. C conveys her interest in Blackacre to A. A has a remainder interest.
Classification of Interests
It is important to classify the various interests in a disposition clause in order (i.e., from left to right) because the characterization of the first interest usually determines the characterizations of the following interests.
Example 1: A conveys Blackacre “to B for life, then to C if C survives B; but if C does not survive B, on B’s death to D.”
- B has a present life estate.
- C has a future interest, which is a remainder because it can become possessory upon the termination of the preceding possessory interest (i.e., B’s life estate), and it is a contingent remainder because C’s taking is conditioned on C surviving B.
- D also has a future interest, which is a remainder because it can become possessory upon the termination of B’s life estate; it is a contingent remainder because D’s taking is contingent on C not surviving B.
Ex. A conveys Blackacre “to B for life, and on B’s death to C. But if C predeceases B, on B’s death to D.”
- B has a present life estate.
- C has a future interest, which is a remainder because it can become possessory upon the termination of B’s life estate. C’s remainder is vested because C is ascertainable and there is no condition precedent that C must satisfy to take Blackacre. However, C’s vested remainder is subject to complete divestment if a condition subsequent (C predeceasing B) occurs.
- D has a future interest, but it is not a remainder because C’s interest is not an estate of a fixed duration but is instead a fee simple estate, which has an unlimited duration. However, if the condition subsequent occurs, then D would be entitled to take possession of Blackacre, thereby cutting short C’s interest. Consequently, D has a shifting executory interest.
Class Gifts
A donative transfer during life or at death by will to persons as members of a group (e.g., children, heirs). The beneficiaries of the gift are subject to change as is each beneficiary’s share of the gift.