Rights in real property - Nature and type

Learning Outcomes

After reading this article, you will be able to identify and distinguish the main types of rights in real property, including present possessory estates, future interests, and the differences between freehold and non-freehold estates. You will understand the legal significance of each type, the terminology used, and how these concepts are tested on the MBE.

MBE Syllabus

For the MBE, you are required to understand the legal nature and classification of rights in real property. This article covers the following syllabus points:

• Recognize and differentiate between present possessory estates (fee simple, life estate, leasehold) and future interests (reversion, remainder, executory interest).
• Distinguish freehold estates from non-freehold (leasehold) estates.
• Identify the characteristics and legal consequences of each estate type.
• Understand the legal terminology and key distinctions relevant to property ownership and transfer.
• Apply these concepts to MBE-style questions involving classification and consequences of property rights.

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 of the following is a present possessory freehold estate?
   1. Fee simple absolute
   2. Reversion
   3. Contingent remainder
   4. Leasehold for years
2. A grant "to B for life, then to C if C survives B" creates which future interests?
   1. Reversion in the grantor and contingent remainder in C
   2. Vested remainder in C only
   3. Executory interest in C and reversion in the grantor
   4. Contingent remainder in C and reversion in the grantor
3. Which of the following best describes a leasehold estate?
   1. Freehold estate with indefinite duration
   2. Non-freehold estate with a fixed or periodic duration
   3. Present possessory estate with a right of survivorship
   4. Future interest following a life estate
4. Which statement about a fee simple determinable is correct?
   1. It automatically ends upon a specified event and reverts to the grantor.
   2. It is not inheritable.
   3. It requires the grantor to take action to end the estate.
   4. It cannot be transferred during the holder’s lifetime.

Introduction

Understanding the nature and type of rights in real property is fundamental for the MBE. Real property law classifies interests in land by their duration, the right to possession, and the future interests they create. These classifications determine what rights a person has, how those rights can be transferred, and what happens when a particular event occurs. This article explains the main categories of property rights, focusing on present estates, future interests, and the distinction between freehold and non-freehold estates.

Types of Estates in Land

Estates in land are divided into present possessory estates and future interests. The main distinction is whether the holder has the immediate right to possess the property or a right that may arise in the future.

Present Possessory Estates

A present possessory estate gives the holder the current right to possess and use the land. The most important types are:

• Fee simple absolute: The largest estate, potentially infinite in duration, fully transferable, inheritable, and not subject to any conditions.
• Life estate: Lasts for the life of a specified person (the life tenant). Upon that person's death, the estate ends.
• Leasehold estate: Also called a non-freehold estate, this is the right to possess land for a fixed term or period, such as a tenancy for years or periodic tenancy.

Key Term: Fee Simple Absolute
The broadest estate in land, giving the holder full possessory rights now and in the future, with no conditions or limitations.

Key Term: Life Estate
An estate measured by the life of a specified individual, ending automatically at that person's death.

Key Term: Leasehold Estate
A non-freehold estate granting possession for a set term or period, with no ownership interest in the land.

Freehold vs. Non-Freehold Estates

• Freehold estates: Include fee simple and life estates. The holder has both possession and a form of ownership.
• Non-freehold estates: Include leaseholds. The holder has possession but not ownership.

Future Interests

A future interest is a right to possess the property in the future, after the termination of a present estate. The main types are:

• Reversion: The interest left in the grantor when a lesser estate is created (e.g., after a life estate).
• Remainder: A future interest created in a third party that becomes possessory upon the natural expiration of the prior estate.
• Executory interest: A future interest that cuts short a prior estate or follows a gap in possession.

Key Term: Reversion
The interest retained by a grantor who transfers a lesser estate than they own, which becomes possessory upon expiration of the lesser estate.

Key Term: Remainder
A future interest in a third party that becomes possessory when a prior estate ends naturally.

Key Term: Executory Interest
A future interest that divests or cuts short a prior estate or follows a gap in possession.

Classification by Duration

Estates are also classified by how long they last:

• Fee simple absolute: Potentially infinite.
• Fee simple defeasible: May end upon the occurrence of a specified event (e.g., "so long as," "until").
• Life estate: Lasts for a person's life.
• Leasehold: Lasts for a fixed term or period.

Key Term: Fee Simple Defeasible
An estate that may terminate upon the happening of a specified event, reverting to the grantor or a third party.

Worked Example 1.1

A conveys Blackacre "to B for life, then to C." What interests are created?

Answer: B has a life estate (present possessory). C has a vested remainder (future interest) that becomes possessory upon B's death. If C dies before B, C's heirs take the remainder. A retains no interest.

Worked Example 1.2

O conveys land "to D for 10 years." What type of estate does D hold, and what interest does O retain?

Answer: D holds a leasehold estate (tenancy for years), a non-freehold present possessory estate. O retains a reversion, which becomes possessory when the 10-year term ends.

Worked Example 1.3

Grant: "to E and her heirs, but if alcohol is ever sold on the land, then to F." What interests are created?

Answer: E holds a fee simple subject to an executory interest (a type of defeasible fee). F holds an executory interest that will divest E if alcohol is sold. The estate automatically shifts to F upon the triggering event.

Exam Warning

On the MBE, be careful to distinguish between a remainder (which follows the natural end of a prior estate) and an executory interest (which divests or cuts short a prior estate). Mislabeling these can lead to incorrect answers.

Revision Tip

When analyzing a property grant, always identify: (1) the present estate, (2) any future interests, and (3) who holds each interest. Look for words of duration ("for life," "for years") and conditions ("so long as," "but if").

Key Point Checklist

This article has covered the following key knowledge points:

• Estates in land are classified as present possessory estates or future interests.
• Freehold estates (fee simple, life estate) involve ownership; non-freehold estates (leaseholds) involve possession only.
• Fee simple absolute is the broadest estate, with no conditions or limitations.
• Life estates last for the life of a specified person; leaseholds last for a set term or period.
• Future interests include reversion (in the grantor), remainder (in a third party), and executory interest (divesting or following a gap).
• Defeasible fees may end automatically or upon the grantor's action, depending on the language used.
• Correct classification of estates and interests is essential for MBE success.

Key Terms and Concepts

• Fee Simple Absolute
• Life Estate
• Leasehold Estate
• Reversion
• Remainder
• Executory Interest
• Fee Simple Defeasible