Ownership of real property - Fees simple

Learning Outcomes

This article examines the fundamental present possessory estate, the fee simple, and its variations known as defeasible fees. After reading this article, you will be able to identify a fee simple absolute, distinguish between the different types of defeasible fees (fee simple determinable, fee simple subject to condition subsequent, and fee simple subject to executory limitation) based on the language used in a conveyance, and recognise the corresponding future interests associated with each type of estate. This understanding is essential for analysing property ownership questions on the MBE.

MBE Syllabus

For the MBE, you are required to understand the characteristics of present possessory freehold estates, particularly the fee simple and its defeasible forms. This involves analysing the language of conveyances to determine the type of estate created and the nature of any associated future interests. You should be prepared to:

  • Identify a conveyance creating a fee simple absolute.
  • Distinguish between a fee simple determinable and a fee simple subject to condition subsequent based on the specific language used (e.g., durational vs. conditional).
  • Recognise the future interests associated with defeasible fees retained by the grantor (possibility of reverter, right of entry).
  • Identify a fee simple subject to an executory limitation and the associated future interest in a third party (executory interest).
  • Understand the concept of automatic versus elective termination of defeasible fees.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. Oliver conveys Blackacre "to Anna and her heirs so long as the property is used for residential purposes." What interest does Anna possess?
    1. Fee simple absolute
    2. Fee simple determinable
    3. Fee simple subject to condition subsequent
    4. Life estate
  2. In the conveyance "to Anna and her heirs so long as the property is used for residential purposes," what future interest does Oliver retain?
    1. Reversion
    2. Remainder
    3. Possibility of reverter
    4. Right of entry
  3. Oliver conveys Whiteacre "to Ben and his heirs, but if Ben ever uses the property for commercial purposes, Oliver or his heirs may re-enter and re-take the premises." Ben opens a shop on Whiteacre. What must Oliver or his heirs do to regain possession?
    1. Nothing; possession automatically reverts to them.
    2. File a lawsuit for damages only.
    3. Take affirmative steps to exercise their right of entry.
    4. Obtain Ben's consent to terminate his estate.
  4. A conveyance "to Clara and her heirs, but if the property is ever used for non-residential purposes, then to Desmond and his heirs" creates what interest in Desmond?
    1. Possibility of reverter
    2. Right of entry
    3. Vested remainder
    4. Executory interest

Introduction

Real property ownership can be divided into various interests based on the duration and conditions of possession. The starting point for analysing ownership is the concept of present possessory estates – interests that give the holder the immediate right to possess the land. The most complete form of ownership is the fee simple absolute. However, ownership can also be granted subject to conditions or limitations, creating defeasible fees. These estates have the potential to last forever but may be cut short if a specified event occurs. Understanding the precise language used in a conveyance is critical to distinguishing these estates and their associated future interests.

Key Term: Present Possessory Estate An interest in land that gives the holder the right to current possession.

Fee Simple Absolute

The fee simple absolute is the largest possible estate in land, representing the maximum ownership allowed by law. It is potentially infinite in duration, meaning there is no fixed end point to the ownership. The holder of a fee simple absolute has full possessory rights now and in the future.

Historically, creating a fee simple absolute required specific language: "to A and his heirs." The phrase "and his heirs" signified the inheritable nature of the estate, not that the heirs received any present interest. Today, most jurisdictions have abolished the need for this technical language. A simple conveyance "to A" is presumed to transfer the grantor's entire estate, which is typically a fee simple absolute, unless the language clearly indicates intent to create a lesser estate.

A fee simple absolute has no corresponding future interest. Once granted, the grantor retains nothing, and no third party holds a future interest that could cut the estate short based on conditions within the grant itself.

Key Term: Fee Simple Absolute The largest estate in land recognised by law, potentially infinite in duration and without limitations or conditions within the grant itself.

Defeasible Fees

Defeasible fees are fee simple estates that can be terminated upon the happening of a stated event. They are "defeasible" because they are capable of being defeated or undone. While potentially infinite like a fee simple absolute, their duration is tied to a condition or limitation. There are three main types: fee simple determinable, fee simple subject to condition subsequent, and fee simple subject to executory limitation.

Fee Simple Determinable

A fee simple determinable is an estate that automatically terminates upon the occurrence of a specified event, reverting back to the grantor. The defining characteristic is the use of clear durational language in the conveyance.

  • Creation Language: Look for words indicating duration, such as "so long as," "while," "during," or "until." Example: "O conveys Blackacre to A and her heirs so long as the premises are used for school purposes."
  • Future Interest: The grantor automatically retains a possibility of reverter. This future interest becomes possessory immediately and automatically upon the occurrence of the stated event, without the grantor needing to take any action.
  • Transferability: The grantee can transfer the fee simple determinable, but the transferee takes it subject to the same condition. The possibility of reverter is also transferable in most modern jurisdictions.

Key Term: Fee Simple Determinable A fee simple estate that automatically terminates upon the happening of a stated event, at which point ownership reverts to the grantor.

Key Term: Possibility of Reverter The future interest retained by a grantor who conveys a fee simple determinable. It automatically becomes possessory if the stated condition occurs.

Fee Simple Subject to Condition Subsequent

A fee simple subject to condition subsequent is an estate that may be terminated by the grantor upon the happening of a specified event. Unlike the fee simple determinable, termination is not automatic; the grantor must take action to exercise their right.

  • Creation Language: Look for clear conditional language, such as "upon condition that," "provided that," "but if," or "if it happens that," PLUS language granting the grantor the right to re-enter or terminate upon the event's occurrence. Example: "O conveys Blackacre to A and his heirs, but if intoxicating liquors are ever sold on the premises, O or O's heirs may re-enter and retake the premises."
  • Future Interest: The grantor explicitly retains a right of entry (also known as a power of termination). The estate continues, even after the condition is broken, until the grantor affirmatively exercises this right (e.g., by bringing an ejectment action).
  • Construction Preference: If the language is ambiguous and could be interpreted as either determinable or subject to condition subsequent, courts prefer the condition subsequent construction because it avoids automatic forfeiture.
  • Transferability: The grantee can transfer the estate subject to the condition. The right of entry was traditionally not transferable inter vivos but was descendible and often devisable. Modern statutes vary regarding its transferability.

Key Term: Fee Simple Subject to Condition Subsequent A fee simple estate that the grantor may choose to terminate upon the happening of a stated event by exercising a right of entry.

Key Term: Right of Entry The future interest retained by a grantor who conveys a fee simple subject to condition subsequent, giving the grantor the power (but not the automatic right) to terminate the estate if the condition occurs.

Worked Example 1.1

Grantor conveys Greenacre "to the City Library for so long as the premises are used for library purposes." Ten years later, the City Library moves its operations to a new building and converts Greenacre into administrative offices. Who owns Greenacre?

Answer: Grantor (or Grantor's successors) owns Greenacre in fee simple absolute. The conveyance used clear durational language ("for so long as"), creating a fee simple determinable in the City Library and retaining a possibility of reverter in Grantor. When the City ceased using Greenacre for library purposes, the condition occurred, and the estate automatically terminated and reverted to Grantor (or their successors).

Worked Example 1.2

Grantor conveys Redacre "to University, provided that if the land is ever used for non-educational purposes, Grantor shall have the right to re-enter and reclaim the land." University builds a research facility initially, but 20 years later converts half of the facility into a commercial biotech incubator leased to private companies. Grantor learns of this and wants the land back. Does Grantor automatically own Redacre?

Answer: No. The conveyance used conditional language ("provided that if") coupled with an express right of re-entry, creating a fee simple subject to condition subsequent in University and retaining a right of entry in Grantor. Even though the condition (non-educational use) occurred, University's estate continues until Grantor takes affirmative steps to exercise the right of entry, such as bringing an action for ejectment. Ownership does not automatically revert.

Fee Simple Subject to Executory Limitation

A fee simple subject to executory limitation is an estate that automatically terminates upon the happening of a stated event, but ownership then passes to a third party rather than reverting to the grantor.

  • Creation Language: Can use either durational language ("so long as," "until") or conditional language ("but if," "provided that"). The key difference from the other defeasible fees is that the future interest is held by a transferee (third party), not the grantor. Example 1: "O conveys Blackacre to A and her heirs, but if A dies without issue surviving her, then to B and his heirs." Example 2: "O conveys Blackacre to A and her heirs for so long as the property is used residentially, then to B and his heirs."
  • Future Interest: The future interest in the third-party transferee is called an executory interest. It cuts short (divests) the prior fee simple estate automatically upon the happening of the specified event.

Key Term: Fee Simple Subject to Executory Limitation A fee simple estate that automatically terminates upon the happening of a stated event, at which point ownership passes to a third-party transferee.

Key Term: Executory Interest A future interest held by a third-party transferee that cuts short a prior vested interest (either in the grantor or another grantee) upon the occurrence of a stated event.

Key Point Checklist

This article has covered the following key knowledge points:

  • Fee simple absolute is the largest estate, potentially infinite, with no associated future interest.
  • Defeasible fees are fee simple estates that can end upon a specified event.
  • Fee simple determinable uses durational language ("so long as," "while") and automatically reverts to the grantor via a possibility of reverter.
  • Fee simple subject to condition subsequent uses conditional language ("but if," "provided that") plus an express right of entry, requiring grantor action to terminate.
  • Courts prefer the condition subsequent construction over the determinable one if language is ambiguous.
  • Fee simple subject to executory limitation involves a future interest passing automatically to a third party (an executory interest) upon a stated event.

Key Terms and Concepts

  • Present Possessory Estate
  • Fee Simple Absolute
  • Fee Simple Determinable
  • Possibility of Reverter
  • Fee Simple Subject to Condition Subsequent
  • Right of Entry
  • Fee Simple Subject to Executory Limitation
  • Executory Interest
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