Ownership of real property - Present estates

Learning Outcomes

This article examines present possessory estates in real property. It details the creation, characteristics, and limitations of fee simple absolute, the various defeasible fees (determinable, subject to condition subsequent, subject to executory limitation), and life estates, including the doctrine of waste. After reading this article, you will be able to differentiate these estates and identify the associated future interests, enabling you to analyze MBE fact patterns involving ownership rights and limitations.

MBE Syllabus

For the MBE, you are required to understand the fundamental present possessory estates in land. Your knowledge should include:

  • The nature of present possessory interests versus future interests.
  • Fee simple absolute: its characteristics and creation.
  • Defeasible fees: distinguishing fee simple determinable, fee simple subject to condition subsequent, and fee simple subject to executory limitation, including the language used to create them and the future interests retained by the grantor or granted to a third party.
  • Life estates: creation, duration (including pur autre vie), and the life tenant's rights and duties, particularly concerning the doctrine of waste.
  • The basic future interests associated with defeasible fees and life estates (possibility of reverter, right of entry, executory interest, reversion, remainder).

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. Grantor conveys Blackacre "to Grantee and her heirs so long as the premises are used for residential purposes." Grantee builds a factory on Blackacre. The estate held by Grantee immediately after building the factory is:
    1. Fee simple absolute.
    2. Fee simple subject to condition subsequent.
    3. None; the property automatically reverted to Grantor.
    4. Fee simple subject to executory limitation.
  2. Which of the following phrases most clearly creates a fee simple subject to condition subsequent?
    1. "To A for life, then to B."
    2. "To A and his heirs, but if A ceases to farm the land, Grantor may re-enter."
    3. "To A and his heirs until A graduates from law school."
    4. "To A and his heirs."
  3. A life tenant cuts down all the mature oak trees on the property to sell the timber, significantly reducing the property's value. This action most likely constitutes:
    1. Permissive waste.
    2. Ameliorative waste.
    3. Affirmative waste.
    4. No waste, as the life tenant has the right to use the property's resources.
  4. O conveys Whiteacre "to A for the life of B." A dies while B is still alive. What happens to Whiteacre?
    1. It reverts to O immediately.
    2. It passes to A's heirs or devisees until B dies.
    3. It passes to B for the rest of B's life.
    4. It passes to O's heirs immediately.

Introduction

An estate in land defines the extent and duration of a person's interest in real property. A present estate (or present possessory estate) gives the holder the immediate right to possess and use the land. This contrasts with a future interest, which grants a right to possess the property only at some point in the future. The MBE requires familiarity with the main types of present estates: the fee simple absolute, the defeasible fees, and the life estate.

Key Term: Present Estate An interest in land that includes the right to present possession.

Fee Simple Absolute

The fee simple absolute represents the most complete ownership interest recognized by law. It is the default estate presumed in a grant unless the grant explicitly contains words of limitation or condition creating a lesser estate.

Key Term: Fee Simple Absolute The largest possible estate in land, denoting absolute ownership of potentially infinite duration, with no limitations on its inheritability, and not subject to divestment or termination on the happening of any event.

Creation: At common law, the phrase "and his heirs" was required. Today, most jurisdictions presume a fee simple absolute is intended by a grant "to A" unless lesser language is used. Duration: Potentially infinite. Transferability: Freely alienable (sellable), devisable (transferable by will), and descendible (inheritable). Future Interest: None. The grantor conveys everything.

Defeasible Fees

Defeasible fees are estates of potentially infinite duration (like the fee simple absolute) but can be terminated or divested upon the happening of a specified event or condition. They are designed to control the use or ownership of the property after the initial grant.

Key Term: Defeasible Fee An estate that may last forever or may end upon the occurrence of some future event.

There are three types of defeasible fees:

Fee Simple Determinable

This estate automatically terminates upon the occurrence of a specified event, and the property reverts to the grantor (or the grantor's successors).

Creation: Requires clear durational language, such as "so long as," "while," "during," or "until." Example: O conveys Blackacre "to School Board so long as the premises are used for school purposes." Future Interest: The grantor retains a possibility of reverter, which becomes possessory automatically if the condition ceases to be met.

Key Term: Possibility of Reverter A future interest retained by the grantor when a fee simple determinable is conveyed. It becomes possessory automatically upon the termination of the determinable fee.

Fee Simple Subject to Condition Subsequent

This estate continues indefinitely until the specified event occurs, at which point the grantor (or the grantor's successors) has the power, but not the obligation, to terminate the estate by taking action (e.g., re-entering the property or bringing suit).

Creation: Requires clear conditional language coupled with language granting the right to re-enter upon breach, such as "upon express condition that," "provided that," "but if," "on condition that." Example: O conveys Blackacre "to Church, but if the premises are ever used for non-church purposes, Grantor or his heirs may re-enter and retake the premises." Future Interest: The grantor retains a right of entry (also called a power of termination). The estate does not end automatically; the holder of the right of entry must act.

Key Term: Right of Entry A future interest retained by the grantor when a fee simple subject to condition subsequent is conveyed. The holder must take affirmative steps to terminate the prior estate after the condition occurs.

Construction Preference: If the language is ambiguous, courts prefer to construe it as a fee simple subject to condition subsequent rather than a fee simple determinable because the former avoids automatic forfeiture.

Fee Simple Subject to Executory Limitation (or Interest)

This estate automatically terminates upon the occurrence of a specified event, but the property then passes to a third party rather than reverting to the grantor.

Creation: Uses the same durational or conditional language as the other defeasible fees, but provides that the property goes to a third party upon the happening of the event. Example: O conveys Blackacre "to A and his heirs, but if A ever allows alcohol to be consumed on the premises, then to B and her heirs." Future Interest: The third party holds an executory interest.

Key Term: Executory Interest A future interest created in a third party (transferee) that is not a remainder and which takes effect by either cutting short some interest in another person (“shifting”) or in the grantor or his heirs (“springing”).

Worked Example 1.1

Grantor conveys Greenacre "to the City for use as a public park, provided that if it ceases to be used as a park, Grantor shall have the right to repossess the property." The City later builds a municipal waste facility on Greenacre. What interest does Grantor hold, and what must Grantor do?

Answer: The City held a fee simple subject to condition subsequent. Grantor retained a right of entry (power of termination). Upon breach of the condition (cessation of park use), the City's estate does not automatically end. Grantor must take affirmative steps, such as bringing an ejectment action or physically re-entering, to terminate the City's estate and regain possession.

Life Estate

A life estate is an estate whose duration is measured by the lifetime of a specified person (the "measuring life"). It can also be measured by the life of someone other than the life tenant (an estate pur autre vie).

Key Term: Life Estate An estate in land whose duration is measured by the life or lives of one or more individuals.

Creation: Typically created by explicit language, such as "to A for life." Duration: Ends upon the death of the person whose life measures the estate (the measuring life). Transferability: The life tenant can transfer their interest during their lifetime, but the transferee receives only what the life tenant had—an estate measured by the original measuring life (pur autre vie). A life estate cannot be devised or inherited because it ends at the measuring life's death. Future Interest: When a life estate ends, the property reverts to the grantor (or the grantor's successors) holding a reversion, or passes to a third party designated in the grant holding a remainder.

Doctrine of Waste

A life tenant has the right to possess and use the property but is limited by the doctrine of waste, which prohibits the life tenant from unreasonably impairing the value of the property for future interest holders (remaindermen or reversioners).

Key Term: Waste Conduct by the possessor of land that diminishes the value of the land or the interest of one who has a future interest in the land.

Types of Waste:

  1. Affirmative (Voluntary) Waste: Occurs when the life tenant actively causes permanent injury (e.g., destroying buildings, exploiting natural resources not previously exploited unless necessary for repair/maintenance, permitted by the grant, or the land is suitable only for such use - the "open mines" doctrine allows continued exploitation of mines already open).
  2. Permissive Waste: Occurs from neglect when the life tenant fails to take reasonable steps to protect the property from damage (e.g., failing to make ordinary repairs, pay property taxes, or pay interest on a mortgage). The life tenant's obligation is generally limited to the income or reasonable rental value derived from the land.
  3. Ameliorative Waste: Occurs when the life tenant makes substantial changes that increase the property's value. At common law, this was actionable waste. Modernly, a life tenant can make such changes if market value is not impaired AND either the remaindermen consent OR there is a substantial and permanent change in neighborhood conditions justifying the change.

Worked Example 1.2

O grants Blackacre "to A for life." A discovers oil on Blackacre and begins drilling operations. Blackacre had never been used for oil extraction before. A's actions constitute what?

Answer: A's actions constitute affirmative waste. A life tenant generally cannot exploit natural resources like oil unless the land was already used for that purpose before the life estate began (open mines doctrine) or other exceptions apply. Since Blackacre was not previously used for oil extraction, A's drilling likely impairs the interest of the future interest holder (O's reversion).

Worked Example 1.3

O grants Whiteacre "to my son, S, for life, then to my daughter, D." S fails to pay the annual property taxes, resulting in a tax lien on the property. Has S committed waste?

Answer: Yes, S has committed permissive waste. A life tenant has a duty to pay ordinary property taxes, up to the amount of income or reasonable rental value generated by the property. Failure to do so can result in forfeiture or liability to the future interest holder (D) who pays the taxes.

Revision Tip

Carefully distinguish the language creating defeasible fees. "So long as," "while," "until" typically create a fee simple determinable (automatic end). "But if," "provided that," "on condition that" usually create a fee simple subject to condition subsequent (requires grantor action). If the property goes to a third party, it's a fee simple subject to executory limitation.

Key Point Checklist

This article has covered the following key knowledge points:

  • Present estates grant immediate possession.
  • Fee simple absolute is complete ownership with indefinite duration.
  • Defeasible fees (determinable, subject to condition subsequent, subject to executory limitation) are fee simple estates that can terminate upon a specified event.
  • Fee simple determinable ends automatically (grantor has possibility of reverter).
  • Fee simple subject to condition subsequent requires grantor action to terminate (grantor has right of entry).
  • Fee simple subject to executory limitation passes to a third party upon condition (third party has executory interest).
  • Life estates are measured by a person's life.
  • A life estate pur autre vie is measured by the life of someone other than the tenant.
  • Life tenants must avoid waste (affirmative, permissive, ameliorative).

Key Terms and Concepts

  • Present Estate
  • Fee Simple Absolute
  • Defeasible Fee
  • Possibility of Reverter
  • Right of Entry
  • Executory Interest
  • Life Estate
  • Waste
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