Ownership of real property - Possibilities of reverter, powers of termination

Learning Outcomes

After reading this article, you will be able to identify and distinguish the key future interests associated with defeasible fees: the possibility of reverter and the power of termination (right of entry). You will understand how these interests arise, their transferability, and how they operate in MBE-style questions. You will also be able to apply these principles to fact patterns and avoid common exam mistakes.

MBE Syllabus

For MBE, you are required to understand the rules governing defeasible fees and their associated future interests. This article focuses your revision on:

• Recognizing the creation and operation of fee simple determinable and fee simple subject to condition subsequent.
• Identifying the possibility of reverter and the power of termination (right of entry).
• Understanding who holds these interests and how they are transferred.
• Applying the rules to exam scenarios, including the effect of ambiguous language and statutory limitations.

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. Which future interest follows a fee simple determinable?
   1. Right of entry
   2. Possibility of reverter
   3. Executory interest
   4. Contingent remainder
2. A grant "to A and her heirs, but if the land is not used as a park, O may re-enter and reclaim the land." What future interest does O hold?
   1. Possibility of reverter
   2. Right of entry (power of termination)
   3. Contingent remainder
   4. Executory interest
3. Which of the following is TRUE regarding the transferability of a right of entry?
   1. It is always freely transferable inter vivos.
   2. It is never inheritable.
   3. It is not transferable inter vivos in most states, but is inheritable and devisable.
   4. It is only transferable to a third party by will.

Introduction

Defeasible fees are present estates that may end early upon the occurrence of a specified event. When a defeasible fee is created, a future interest is also created—either a possibility of reverter or a power of termination (right of entry). Understanding these interests is essential for MBE questions on real property.

Types of Defeasible Fees

There are two main types of defeasible fees tested on the MBE:

1. Fee Simple Determinable: Ends automatically when a stated event occurs.
2. Fee Simple Subject to Condition Subsequent: Continues until the grantor takes action to reclaim the property after a stated event occurs.

Key Term: Fee Simple Determinable An estate that automatically ends and reverts to the grantor upon the happening of a specified event, typically created by durational language such as "so long as," "while," or "until."

Key Term: Fee Simple Subject to Condition Subsequent An estate that does not automatically end but gives the grantor the right to terminate the estate if a specified condition occurs, typically created by conditional language such as "but if," "provided that," or "on condition that."

Future Interests: Possibility of Reverter and Power of Termination

When a fee simple determinable is created, the grantor retains a possibility of reverter. When a fee simple subject to condition subsequent is created, the grantor retains a power of termination (also called a right of entry).

Key Term: Possibility of Reverter A future interest retained by the grantor following a fee simple determinable, allowing the grantor to automatically retake possession if the stated event occurs.

Key Term: Power of Termination (Right of Entry) A future interest retained by the grantor following a fee simple subject to condition subsequent, giving the grantor the right (but not the obligation) to reclaim the property if the condition occurs.

Creation and Language

• Fee Simple Determinable: Look for durational language ("so long as," "while," "during," "until").
• Fee Simple Subject to Condition Subsequent: Look for conditional language ("but if," "provided that," "on condition that") and an explicit grant of a right to re-enter.

Exam Warning If the language is ambiguous, courts prefer to interpret the grant as a fee simple subject to condition subsequent (with a right of entry), not a fee simple determinable (with a possibility of reverter), to avoid automatic forfeiture.

Transferability

• Possibility of Reverter: Freely transferable inter vivos and by will in most states.
• Power of Termination: Not transferable inter vivos in most states, but is inheritable and devisable.

Statutory Limitations

Some states limit the duration of possibilities of reverter and rights of entry (e.g., 30 years), or require periodic rerecording to maintain them.

Worked Example 1.1

O conveys Blackacre "to the City so long as it is used as a library." Ten years later, the City closes the library and uses Blackacre as a parking lot. Who owns Blackacre?

Answer: O holds a possibility of reverter. Because the grant was a fee simple determinable, the estate ended automatically when the property stopped being used as a library. Title reverts to O or O's successors.

Worked Example 1.2

O conveys Greenacre "to A and her heirs, but if alcohol is ever sold on the premises, O may re-enter and reclaim the land." Five years later, A opens a bar. O does nothing for 20 years. Who owns Greenacre?

Answer: A holds Greenacre until O exercises the right of entry. The estate does not end automatically. O must take action to reclaim the property. If O does nothing, A (or A's successors) continues to own Greenacre.

Revision Tip

Always identify whether the grantor's future interest arises automatically (possibility of reverter) or requires action (right of entry). The language used in the grant is critical.

Summary

• Fee simple determinable creates a possibility of reverter in the grantor; estate ends automatically.
• Fee simple subject to condition subsequent creates a power of termination (right of entry); grantor must act to reclaim.
• Possibilities of reverter are usually transferable; rights of entry are not transferable inter vivos in most states.
• Statutory limits may restrict the duration or enforceability of these interests.

Key Point Checklist

This article has covered the following key knowledge points:

• Defeasible fees are present estates that may end upon a stated event.
• Fee simple determinable ends automatically and is followed by a possibility of reverter.
• Fee simple subject to condition subsequent ends only if the grantor acts, and is followed by a power of termination (right of entry).
• Possibilities of reverter are generally transferable; rights of entry are not transferable inter vivos in most states.
• Ambiguous language is construed in favor of a right of entry, not automatic forfeiture.
• Some states limit the duration or require rerecording of these future interests.

Key Terms and Concepts

• Fee Simple Determinable
• Fee Simple Subject to Condition Subsequent
• Possibility of Reverter
• Power of Termination (Right of Entry)