Real Property Flashcards
What are the interests of Wanda, Adele, and upon Adele’s death, Frank, in the family home?
As between Wanda and Frank, who is obligated to pay the property taxes on the family home?
Wanda has a life estate in the family home. Adele initially had a vested remainder in the home. Adele devised that interest to Frank in her will. As between Wanda, the life tenant, and Frank, the remainderman, the obligation to pay current property taxes is on Wanda because she is the life tenant.
Upon conveying the apartment building to Frank, what if any interest did Oscar have in the apartment building, and was that interest valid?
Oscar conveyed the apartment building to Frank. However, Oscar gave Frank an estate that would terminate upon the happening of a limitation, namely Frank’s ceasing to rent at least four apartments to low-income tenants. As a result of this conveyance, Oscar retained a reversionary interest in the property.
Upon Oscar’s death, what if any interest does Wanda have in the apartment building, and is that interest valid?
Oscar’s reversionary interest was devisable, and he subsequently devised it to Wanda by his will.
Wanda’s reversionary interest is valid under the Uniform Statutory Rule Against Perpetuities because from the moment of its creation in Oscar it was vested, and it did not lose that characterization because it was later bequeathed to Wanda.
After February 1, 2021, who owns the apartment building?
When, on February 1, 2021, Frank ceased renting any apartments in the building to below-median-income families, his estate automatically terminated and full title to the building (i.e., a title free of Frank’s interest) automatically returned to Wanda as the devisee of Oscar’s retained interest.
As between Wanda and Frank, who is obligated to pay the property taxes on the family home? Explain.
(a) The interests (estates) of Wanda, Adele, and Frank
Wanda has a life estate in the family home, and Adele had a vested remainder. When Adele died and devised her interest to Frank, he succeeded to Adele’s vested reminder.
Under the terms of Oscar’s will, he bequeathed Wanda a life estate in the family home as evidenced by the express direction in his will that she receive the estate in the home “for life.” Oscar also provided by his will that upon Wanda’s death, the home should pass to Adele. This future interest in Adele (a future interest is not currently possessory) was vested because it was not subject to any conditions. In other words, it did not terminate when Adele predeceased Wanda. And, because Adele’s interest was devisable, upon her death it passed to Frank, who currently has a vested remainder in the home. See Sheldon F. Kurtz, Moynihan’s Introduction to the Law of Real Property 166 (7th ed. 2020).
Payment of property taxes
Wanda, as life tenant, must pay the property taxes on the family home.
Under the terms of Oscar’s will, Wanda was given a life estate in the family home. As life tenant, Wanda has the exclusive right to use the property during her lifetime, including the right to rent the property to others to generate income. And, as a life tenant, Wanda is also responsible for the payment of all ordinary expenses associated with property ownership, including the payment of current property taxes. Kurtz, supra, at 79. “The life tenant must pay the carrying charges on the property to the extent of the gross income, or the fair rental value [of the property] if the life tenant personally occupies the property.” (Emphasis added.) Id.
Application
Here, the reasonable value of Wanda’s life estate in the family home that she occupies is at least $1,500 per month (the amount she could receive in rent for the house) or $18,000 annually. The annual amount of $18,000 is well above the $6,000 of annual property taxes. Thus, Wanda is subject to the usual rule that property taxes and other carrying charges are the responsibility of the life tenant. Id.
It is irrelevant that Adele gratuitously paid the property taxes on the family home during her lifetime. Nothing suggests that Adele’s gratuitous behavior was intended to, or did, modify Wanda’s obligation as life tenant or impose a legal obligation on Frank to continue Adele’s practice.
Upon Oscar’s death, what if any interest does Wanda have in the apartment building, and is that interest valid? Explain.
Under the terms of his conveyance of the apartment building to Frank, Oscar retained an interest in the building known at common law as a “possibility of reverter.” A “possibility of reverter” vests at the moment it is created and is not invalidated by the common law or Statutory Rule against Perpetuities.
Application
Oscar’s will conveyed the apartment building to Frank “so long as at least four apartments in the apartment building are rented to families with incomes below the state median income for a family of their size. If, at any time, fewer than four apartments are being rented to below-median-income families, the apartment building automatically reverts to Oscar.” Because this grant provides that Frank’s estate terminates upon the happening of the stated event, Frank’s estate is the type known at common law as a “fee simple determinable.” The nature of this estate is that it will automatically terminate if the terminating event occurs. Sheldon F. Kurtz, Thomas P. Gallanis & Herbert Hovenkamp, The Law of Property: An Introductory Survey 121–22 (7th ed. 2018); see also Restatement (Third) of Property: Wills & Other Donative Transfers § 24.3 (characterizing this estate as a “fee simple defeasible” and ascribing to it the same effect as a common law fee simple determinable).
The grant provided that if Frank’s interest terminated, the property would revert to Oscar. At common law, Oscar’s interest was called a “possibility of reverter.” Kurtz et al., at 154. The Third Restatement calls it a “reversion.” Restatement (Third) of Property § 25.2. Regardless of terminology, the effect of Oscar’s conveyance is that he would become the owner of the apartment building (in fee simple absolute) if the building ceased to be used for low-income rentals (as required by his conveyance to Frank). See generally Kurtz et al., supra, 44–51, 140–142.
At first blush, Oscar’s reversionary interest in the apartment building might appear to violate the common law Rule Against Perpetuities. That is because the condition on the conveyance to Frank (that at least four apartments be rented to low-income tenants) might occur many decades after the conveyance and well beyond the perpetuity period of 21 years after some life in being.
However, the common law Rule was not concerned with the untimely taking of possession of the property; rather, it was concerned with the untimely “vesting of title” to property. And, because a “possibility of reverter” was considered to be immediately vested from the moment of its creation, it was not subject to the common law Rule Against Perpetuities even though it might become possessory beyond the perpetuity period. See Sheldon F. Kurtz, Herbert Hovenkamp & Thomas P. Gallanis, The Law of Property: An Introductory Survey 123–24 (6th ed. 2014)
Interests that do not violate the common law Rule Against Perpetuities are not subject to the Uniform Statutory Rule Against Perpetuities and may continue in effect for the length of their term. Thus, because Oscar’s interest in the apartment building would be valid under the common law Rule, it remains valid under the Uniform Statutory Rule.
After February 1, 2021, who owns the apartment building?
When, on February 1, 2021, Frank ceased renting any apartments in the building to below-median-income families, his estate automatically terminated and full title to the building (i.e., a title free of Frank’s interest) automatically returned to Wanda as the devisee of Oscar’s retained interest.
After February 1, 2021, who owns the apartment building? Explain.
Frank’s interest in the apartment building automatically terminated on February 1, 2021, when he ceased renting any of the apartments to below-median-income families. Title to the building free and clear of Frank’s interest automatically reverted to Wanda on that date.
Fee simple determinable
The essential character of a fee simple determinable (or fee simple defeasible, in Restatement (Third) terminology) is that the estate automatically terminates upon the happening of the limitation specified in the words granting the estate. Here, the grant specified that Frank’s estate would continue only so long as at least four apartments in the building were rented to below-median-income families. On February 1, 2021, Frank ceased renting any of the apartments to below-median-income families. Thus, on that date Frank’s interest in the building automatically terminated.
Upon termination of Frank’s interest, title to the building free and clear of Frank’s interest reverted to Wanda, who had inherited the possibility of reverter from Oscar. Thus, after February 1, 2021 (when Frank stopped renting to low-income tenants), Wanda owns the building in fee simple or fee simple absolute.
Upon Oscar’s death, what if any interest does Wanda have in the apartment building, and is that interest valid?
Oscar’s retained reversionary interest in the apartment building passed to Wanda under the residuary clause of Oscar’s will. It is valid under both the common law and Statutory Rule against Perpetuities.
Application
Oscar’s reversionary interest in the apartment building was devisable. Thus, when Oscar died, his interest passed to Wanda under the residuary clause of his will. See Sheldon F. Kurtz, Herbert Hovenkamp & Thomas P. Gallanis, The Law of Property: An Introductory Survey 44–51, 139–141 (6th ed. 2014).
The interest passing to Wanda under the residuary clause of Oscar’s will retains the same characterization as it had in Oscar’s hands. In other words, it is a possibility of reverter or, under the Restatement (Third) of Property, a reversion. As such, it is valid under both the common law and Statutory Rule against Perpetuities. Thus, following Oscar’s death, Wanda had a valid reversionary interest in the apartment building.
[NOTE: As noted in the analysis, the Restatement (Third) of Property uses different terminology from the common law but retains the same basic principles: Frank’s interest in the apartment building would automatically terminate upon the happening of the event stated in the will, and Oscar’s reversionary interest is immediately vested and devisable. No distinction should be made between answers based on whether they use the common law or Restatement (Third) terminology.
Point Three requires examinees to characterize Wanda’s interest and to conclude whether it is valid or invalid.]
