Remainders and Reversions

Question 1

o Reversion:

Answer 1

When an owner conveys a vested estate smaller than the estate he owns, he retains a future interest called a reversion. For instance, if O holds fee simple absolute, but conveys merely a life estate to A, O retains a reversion. Freely transferable.

Indefeasible reversion – reversion that will vest for someone

Defeasible reversion – may not return to the grantor

Question 2

o Possibility of Reverter:

Answer 2

When a transferor creates a fee simple determinable, the future interest retained is a possibility of reverter. For example, if O conveys land “to L for so long as used as an orphanage,” O retains a possibility of reverter.

Question 3

o Right of Entry:

Answer 3

(AKA power of termination) arises when a transferor creates a fee simple subject to a condition subsequent (e.g., O conveys “to L, but if L fails to use the property as an orphanage, then O may enter and retake possession”).
o Before transferor’s interest becomes possessory, his rights are limited. May bring suit for waste. May, in some states, share in eminent domain proceeds.
o Many states now restrict the possibility of reverter and right of entry by statute. For example, in some jurisdictions such an interest will lapse within 20 or 30 years of creation unless the holder files a notice of intent to preserve it.

Question 4

• Contingent remainder –

Answer 4

this is when remainder is subject to some condition that is not yet vested
o Future interests are created at time of the transaction
o Contingent remainders can be sold or devised in the same manner as vested remainders
o Condition precedent – condition expressly stated in document creating the remainder which must be satisfied before the remainder interest can become possessory
o Recall distinction between heir and heir apparent (can only know heir @ time of death)
o Alternate contingent remainder – Ex: O to A for life, then, if B has graduated from law school, to B and her heirs, otherwise C and her heirs. B and C have alternate contingent remainders in FSA
o Usually in control of remaindermen–>Graduating law school in control of B (See Condition Subsequent)

Question 5

• Vested remainders

Answer 5

o Vested automatically unless one of two things is present:
 1. Condition precedent (supra)
 2. Cannot identify the remainderman specifically (someone holds the interest but cannot identify them)
• Ex: O to A for life, then to A’s eldest daughter then living – we don’t know who A’s eldest daughter living will be when A dies, thus the remainder cannot be vested in anyone
• O to A for life, then to A’s heir also falls here b/c cannot determine heir until A’s death, not at time that the deed is devised
o Simply outliving the person who has an interest before you is not a condition precedent

Question 6

o Vested remainder subject to open:

Answer 6

Occurs in context of class gift – transfer to a group of people who are defined by sharing a common characteristic 
• Ex: O to A for life, then to the nephews of B (add’l nephews could arise; class is not closed)

Question 7

o Vested remainder subject to divestment:

Answer 7

Here, remainder has vested, but can be divested by some later event
• Contingent remainder – something a person has to do (e.g. “If B graduates law school”)
• Subject to divestment – condition usually has nothing to do with the remainder holder
 Ex: “to B for life, then to C, but if C ever smokes a cigar, then to D” C has vested remainder subject to divestment
• Must always have EITHER reversion in fee simple or vested remainder in fee simple
• When “or” = alternate contingent remainder; “and then” = sequential remainder