Ownership of real property - Present estates and future inte...

Learning Outcomes

This article clarifies the fundamental concepts of present possessory estates in land and their corresponding future interests. After reviewing this material, you will be able to differentiate between various freehold estates, including the fee simple absolute, defeasible fees, the fee tail, and life estates. You will also understand the characteristics of future interests such as reversions, possibilities of reverter, rights of entry, remainders (vested and contingent), and executory interests, preparing you to analyze MBE questions involving property ownership over time. Strictly 50-100 words MAX.

MBE Syllabus

For the MBE, your understanding of ownership of real property requires differentiating between present possessory interests and future interests. You should be prepared to:

• Identify and distinguish the types of present possessory freehold estates: fee simple absolute, fee simple defeasible (determinable, subject to condition subsequent, subject to executory limitation), fee tail, and life estate (including pur autre vie).
• Recognize the language used to create each type of present estate.
• Identify the future interests corresponding to each present estate: possibility of reverter, right of entry (power of termination), reversion, remainder (vested, contingent, subject to open, subject to complete defeasance), and executory interest (shifting and springing).
• Analyze the characteristics of each future interest, including transferability and when they become possessory.
• Understand the basic rules governing waste as they apply between present and future interest holders.
• Recognize common law rules like the Rule in Shelley's Case and the Doctrine of Worthier Title (though modernly abolished or modified, they may appear).

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 A for life, then to B and her heirs." B predeceases A. Upon A's death, who owns Blackacre?
   1. Grantor
   2. A's heirs
   3. B's heirs
   4. The state by escheat
2. Which future interest follows a fee simple determinable?
   1. Right of entry
   2. Possibility of reverter
   3. Reversion
   4. Contingent remainder
3. O conveys Greenacre "to my son S for life, then to S's children, but if S has no children living at his death, then to my daughter D." At the time of the conveyance, S has no children. What interest does D have?
   1. Vested remainder subject to divestment
   2. Contingent remainder
   3. Executory interest
   4. Reversion

Introduction

Ownership of land can be conceptualized as a bundle of rights, divisible over time. Present estates confer the right to possess the property currently, while future interests represent a right to possess the property at some point in the future. Understanding the specific types of present estates and the future interests they generate is fundamental to real property analysis on the MBE. This article focuses primarily on freehold estates – those involving ownership of uncertain duration – and the future interests associated with them.

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

Key Term: Future Interest
An interest in land that will or may become possessory at some future date. It is a present, legally protected right to future possession.

Freehold Estates

Freehold estates are interests in land characterized by uncertain duration and association with seisin (possession under claim of freehold). The principal freehold estates are the fee simple, the fee tail, and the life estate.

Fee Simple Estates

The fee simple is the most complete form of ownership, potentially lasting forever.

Fee Simple Absolute

This is the largest possible estate in land, representing potentially infinite duration. The holder possesses full rights of possession, use, and transfer (inter vivos, by will, or by intestacy). No future interest accompanies a fee simple absolute.

Key Term: Fee Simple Absolute
The most complete estate in land, potentially infinite in duration, with no associated future interest in a third party or the grantor.

Traditionally created by the phrase "to A and his heirs," modern law presumes a conveyance is a fee simple absolute unless lesser language is clearly used (e.g., "to A for life"). Words merely expressing hope or motive (precatory language) do not limit the estate.

Defeasible Fees

These are fee simple estates that can be terminated upon the happening of a stated event. They are still potentially infinite but carry the possibility of early termination. There are three main types:

1. Fee Simple Determinable: Automatically terminates upon the occurrence of a specified event. The future interest retained by the grantor is a possibility of reverter. Created by durational language like "so long as," "while," "during," or "until."

   Example: O conveys Blackacre "to School District so long as the land is used for school purposes." School District has a fee simple determinable. O retains a possibility of reverter. If the land ceases to be used for school purposes, title automatically reverts to O (or O's successors).

Key Term: Fee Simple Determinable
A fee simple estate that automatically ends when a specific condition occurs, at which point the property reverts to the grantor.

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

1. Fee Simple Subject to Condition Subsequent: Does not automatically terminate upon the condition's breach. The grantor retains a right of entry (or power of termination), which must be affirmatively exercised to terminate the estate. Created by conditional language like "provided that," "on condition that," "but if," coupled with an express reservation of the right to reenter.

   Example: O conveys Blackacre "to Railroad Company, but if the land ceases to be used for railroad purposes, O or O's heirs may re-enter and retake the premises." Railroad Company has a fee simple subject to condition subsequent. O retains a right of entry. If the condition is breached, the estate continues until O (or O's successors) exercises the right.

Key Term: Fee Simple Subject to Condition Subsequent
A fee simple estate that may be terminated at the grantor's election when a specific condition occurs. The grantor must exercise the right of entry.

Key Term: Right of Entry
The future interest retained by a grantor who conveys a fee simple subject to condition subsequent. It gives the grantor the power, but not the automatic right, to terminate the estate upon breach of the condition.

1. Fee Simple Subject to Executory Limitation (Interest): Automatically terminates upon a stated event, but the property then passes to a third party rather than reverting to the grantor. The third party holds an executory interest.

   Example: O conveys Blackacre "to A and his heirs, but if A becomes a lawyer, then to B and her heirs." A has a fee simple subject to an executory limitation. B has an executory interest. If A becomes a lawyer, the estate automatically shifts to B.

Key Term: Fee Simple Subject to Executory Limitation
A fee simple estate that automatically terminates upon a stated condition, with the property then passing to a third party.

Key Term: Executory Interest
A future interest in a third party that cuts short a prior estate (shifting executory interest) or follows a gap after the prior estate (springing executory interest). It is not a remainder.

Worked Example 1.1

Grantor conveys Whiteacre "to the City Library, provided that the premises are used solely for library purposes, and upon breach of this condition, Grantor shall have the power to terminate the estate." The City subsequently opens a coffee shop within the library building. What interests do the parties hold?

Answer:
The City Library holds a fee simple subject to condition subsequent. The language "provided that" and the express reservation of the power to terminate indicate this estate. Grantor holds a right of entry (power of termination). The estate does not automatically end upon the breach (opening the coffee shop); Grantor must take action to terminate the Library's estate.

Fee Tail

Historically, this estate limited inheritance to the grantee's lineal descendants ("heirs of the body"). If the line died out, the property reverted to the grantor or passed to a designated remainderman. Most jurisdictions have abolished the fee tail, converting attempted creations into fee simple absolutes. It is highly unlikely to be tested as a valid, ongoing estate on the MBE.

Life Estate

A life estate's duration is measured by the lifetime of a specified person (the "measuring life").

Creation and Types

• For Life of Grantee: The most common form, e.g., "to A for life." The measuring life is the grantee (A).
• Pur Autre Vie: Measured by the life of someone other than the grantee, e.g., "to A for the life of B." A's estate ends when B dies. This also arises if a life tenant transfers their interest; the transferee holds an estate measured by the original life tenant's life.

Key Term: Life Estate
An estate whose duration is measured by the lifetime of one or more specified individuals.

Key Term: Life Estate Pur Autre Vie
A life estate measured by the life of someone other than the life tenant.

Future Interests Following a Life Estate

• Reversion: If the property returns to the grantor (or the grantor's successors) upon the life tenant's death, the grantor holds a reversion. Example: "O to A for life." O has a reversion.
• Remainder: If the property passes to a third party upon the life tenant's death, that third party holds a remainder. Example: "O to A for life, then to B." B has a remainder.

Key Term: Reversion
The future interest retained by a grantor when they convey a lesser estate than they owned (e.g., conveying a life estate when owning a fee simple).

Key Term: Remainder
A future interest created in a third party that is capable of becoming possessory immediately upon the natural termination of a preceding life estate.

Rights and Duties of Life Tenant: Waste

A life tenant has the right to possess and use the property but cannot commit waste – acts that unreasonably impair the value of the property for future interest holders.

• Affirmative (Voluntary) Waste: Actively causing harm (e.g., demolishing valuable structures, exploiting natural resources unless permitted by specific exceptions like the 'open mines' doctrine or prior use).
• Permissive Waste: Failing to take reasonable steps to protect the property (neglect). This includes failure to make ordinary repairs (not improvements) and failure to pay carrying charges like property taxes and mortgage interest (up to the income/profits generated by the land or its fair rental value).
• Ameliorative Waste: Substantially changing the property, even if it increases value. Traditionally forbidden, modernly allowed if market value is not impaired AND either remaindermen consent OR neighborhood changes make the alteration justifiable.

Worked Example 1.2

O conveys Greenacre "to A for life, remainder to B." The property includes a coal mine that O actively operated before the conveyance. A continues mining operations, significantly depleting the coal reserves. B sues A for waste. Will B likely succeed?

Answer:
No. A, the life tenant, is generally not permitted to exploit natural resources. However, under the "open mines doctrine," if exploitation (mining) was occurring before the life estate was created, the life tenant may usually continue operations. Since O operated the mine before conveying the life estate to A, A's continued mining likely falls under this exception, and B's waste claim will probably fail.

Future Interests: Remainders and Executory Interests

Future interests in transferees (third parties) following life estates or defeasible fees are either remainders or executory interests.

Remainders

A remainder must follow the natural termination of a preceding estate (typically a life estate) and cannot cut short a prior interest.

• Vested Remainder: Held by an ascertained person AND not subject to any condition precedent (other than the natural termination of the preceding estate).
  • Indefeasibly Vested: Certain to become possessory and cannot be diminished. Ex: "to A for life, then to B." B has an indefeasibly vested remainder.
  • Vested Subject to Open (Partial Divestment): Held by a class of persons where at least one member is ascertained and vested, but more members may later join the class. Ex: "to A for life, then to A's children." If A has one child, C, C has a vested remainder subject to open for later-born children.
  • Vested Subject to Complete Divestment: Vested, but subject to a condition subsequent that could terminate the interest. Ex: "to A for life, then to B, but if B predeceases A, then to C." B has a vested remainder subject to complete divestment by C's executory interest.

Key Term: Vested Remainder
A remainder created in an ascertained person that is not subject to any condition precedent other than the natural termination of the prior estate.

• Contingent Remainder: Either created in an unascertained person OR subject to a condition precedent (something must happen before the remainder can become possessory, beyond the natural end of the prior estate).
  • Unascertained Person: Ex: "to A for life, then to B's heirs." B's heirs are unascertained until B dies.
  • Condition Precedent: Ex: "to A for life, then to B if B graduates from law school." B's graduation is a condition precedent. If A dies before B graduates, the remainder fails (at common law, it was destroyed; modernly, it often converts to an executory interest or the property reverts to Grantor).

Key Term: Contingent Remainder
A remainder that is either created in an unascertained person or is subject to a condition precedent.

Executory Interests

An executory interest cuts short ("divests") a prior estate or follows a gap after it. It does not wait patiently for the natural termination of a life estate.

• Shifting Executory Interest: Divests a prior interest held by another transferee. Ex: "to A, but if B returns from Rome, then to B." B's interest shifts possession from A.
• Springing Executory Interest: Divests the grantor's interest or follows a gap in possession. Ex: "to A, if A marries B." O (grantor) holds the fee until A marries B, at which point A's interest springs from the grantor. Ex: "to A for life, then one year after A's death, to B." B's interest springs after a gap following A's life estate.

Exam Warning

Distinguishing between vested remainders subject to divestment and contingent remainders subject to a condition subsequent can be tricky. Pay close attention to the phrasing. "To A for life, then to B, but if B dies unmarried, then to C" creates a vested remainder in B subject to divestment. "To A for life, then to B if B is married" creates a contingent remainder in B. The condition's placement matters.

Common Law Doctrines Affecting Remainders

While often abolished or modified, be aware of these:

• Destructibility of Contingent Remainders: At common law, a contingent remainder was destroyed if it failed to vest before or upon the termination of the preceding freehold estate. Modern law generally abolishes this rule, often converting the remainder into an executory interest.
• Rule in Shelley's Case: At common law, if the same instrument created a life estate in A and gave the remainder to A's heirs, the remainder passed to A, not A's heirs, often merging into a fee simple for A. Largely abolished.
• Doctrine of Worthier Title: At common law, a remainder in the grantor's heirs was void; the grantor retained a reversion instead. Still applied in some states, often as a rule of construction (presumption) rather than a rule of law.

Key Point Checklist

This article has covered the following key knowledge points:

• Property ownership involves present estates (current possession) and future interests (future possession).
• Freehold estates include fee simple (absolute, determinable, subject to condition subsequent, subject to executory limitation), fee tail (mostly abolished), and life estate (pur autre vie possible).
• Defeasible fees are fee simples that can terminate early upon a stated event.
• Grantors retain possibilities of reverter (after fee simple determinable) or rights of entry (after fee simple subject to condition subsequent).
• Life estates are measured by a life; future interests following them are reversions (if back to grantor) or remainders (if to a third party).
• Waste doctrine limits life tenant actions harming future interests (affirmative, permissive, ameliorative).
• Remainders follow life estates; they are vested (ascertained person, no condition precedent) or contingent (unascertained person OR condition precedent).
• Executory interests divest prior estates (shifting) or spring from the grantor (springing).

Key Terms and Concepts

• Present Estate
• Future Interest
• 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
• Life Estate
• Life Estate Pur Autre Vie
• Reversion
• Remainder
• Vested Remainder
• Contingent Remainder