Defeasible Fees in US Property Law: Types, Clauses, and Case...

Introduction

In US property law, “defeasible” describes an estate in land that can end or be undone if a stated event occurs or if a condition is broken after the grant. Put simply, the owner’s title is conditional rather than absolute. These conditions often appear in deeds gifting land for a specific use—like a park, school, or wildlife preserve—or when a seller wants to control future uses of the property.

This guide explains what defeasible estates are, how to read the clauses that create them, how courts treat them, and what buyers, owners, lenders, and lawyers should do in practice.

What You’ll Learn

• What a defeasible estate is and how it differs from fee simple absolute
• The three main types: fee simple determinable, fee simple subject to condition subsequent, and fee simple subject to executory limitation
• Common deed language that creates each type and why wording matters
• Who holds the follow-up interest (possibility of reverter, right of entry/power of termination, or an executory interest)
• How termination works: automatic vs. only if the grantor acts
• Real-world effects on value, financing, and risk
• Practical drafting tips and due-diligence steps
• How courts address ambiguous clauses, public policy limits, and state-law time limits

Core Concepts

Types of Defeasible Estates

1. Fee Simple Determinable (FSD)

   • What it is: A fee that ends automatically when a stated event happens.
   • Typical words: “so long as,” “while,” “during,” “until.”
   • Future interest: The grantor (or grantor’s successors) holds a possibility of reverter.
   • Termination: Automatic. Title snaps back the moment the condition is broken.
   • Example clause: “To City, so long as the land is used as a public park.”

2. Fee Simple Subject to Condition Subsequent (FSSCS)

   • What it is: A fee that does not end automatically; instead, the grantor has the option to retake the property after a breach.
   • Typical words: “but if,” “provided that,” “on condition that,” often paired with a reentry clause.
   • Future interest: The grantor holds a right of entry (also called a power of termination).
   • Termination: Not automatic. The grantor must act—usually by giving notice and filing a lawsuit to recover possession or quiet title.
   • Example clause: “To A, but if the property is used for commercial purposes, the grantor may reenter and retake.”

3. Fee Simple Subject to Executory Limitation (FSSEL)

   • What it is: A fee that shifts to a third party (not back to the grantor) if a condition occurs.
   • Typical words: A conditional phrase followed by “then to [third party].”
   • Future interest: The third party holds a shifting executory interest.
   • Termination: Automatic shift to the named third party on breach or event.
   • Example clause: “To University, so long as it operates a research center; then to Charity.”

Note: Courts often read unclear language in favor of avoiding automatic forfeiture. If wording can be read either way, many courts treat it as a condition subsequent instead of a determinable fee.

Language Cues and Drafting Basics

Wording is everything with defeasible estates:

• Durational words (“so long as,” “until”) point to an automatic end (FSD).
• Conditional words tied to reentry (“but if,” “provided that,” “on condition that”) point to an optional end if enforced by the grantor (FSSCS).
• If a third party is named to take the property upon the event, it’s an FSSEL.

Draft for clarity:

• State the exact use limits or triggering event.
• Identify who holds the follow-up interest (grantor or a named third party).
• For condition subsequent, include a clear reentry clause and procedure.
• Consider notice and cure provisions to reduce disputes.
• Avoid vague phrases like “for the purpose of” without more; courts may treat them as expressions of motive rather than enforceable conditions.
• Check state law on time limits, recording requirements, and public policy rules before you draft.

Future Interests, Enforcement, and Limits

• Possibility of reverter (FSD): Held by the grantor; title ends automatically upon breach. No action is required to end the grantee’s estate, but recording a confirming document may be wise to clear the record.
• Right of entry/power of termination (FSSCS): Held by the grantor; the grantor must act to retake—typically by notice plus ejectment or a quiet title action. Delay can lead to waiver, laches, or a statute of limitations defense.
• Executory interest (FSSEL): Held by a third party; the estate shifts automatically to that third party on the event.

Public policy and statutory limits:

• Illegal or discriminatory conditions are void.
• Absolute restraints on alienation of a fee simple are usually void; reasonable use restrictions may be enforceable.
• Rule Against Perpetuities typically does not apply to a grantor’s possibility of reverter or right of entry but often applies to executory interests in third parties. Check your state’s version of the rule.
• Many states have Marketable Title Acts or special statutes that can cut off old possibilities of reverter or rights of entry unless timely preserved by recording. Always confirm current state law.

Title, Financing, and Valuation

Defeasible clauses affect marketability and price:

• Buyers discount property with use restrictions or reversion risk.
• Lenders are cautious; many require a release, an amendment, or title insurance endorsements before closing.
• Title insurance may list reverter or reentry rights as exceptions. Expect underwriting questions about current use and past compliance.
• Municipal and nonprofit grantees should track compliance carefully; changes in mission or use can trigger disputes.

Key Examples or Case Studies

Legal Examples

Example 1: Fee Simple Determinable

• Facts: Owner deeds land to a local charity “so long as the land is used for educational purposes.”
• Result: If the land stops being used for education, title automatically reverts to the original grantor or the grantor’s heirs (possibility of reverter).
• Takeaway: Durational language creates an automatic end.

Example 2: Fee Simple Subject to Condition Subsequent

• Facts: Owner deeds land to a relative “on the condition that no commercial development occurs,” and reserves the right to reenter.
• Result: If the relative allows commercial use, title does not end automatically. The original owner must take steps to reclaim the property using the right of entry.
• Takeaway: Conditional language plus reentry language gives the grantor the option to retake.

Case Studies

Johnson v. City of Salem (Public Park Deed)

• Background: A city received land “to be used as a public park,” with a clause stating that if used for another purpose, the property would revert to the grantor’s heirs.
• Event: The city moved to build a commercial facility on the parkland.
• Outcome: The grantor’s heirs prevailed and the land reverted.
• Takeaway: Clear durational language tied to public use can create an automatic reverter if the use changes.

Smith v. Jones (Wildlife Sanctuary Condition)

• Background: A deed required the grantee to maintain the land as a wildlife sanctuary, with a condition subsequent allowing the grantor to reclaim the property if violated.
• Event: The grantee began residential development.
• Outcome: The court enforced the reentry clause after finding a breach of the condition.
• Takeaway: With a condition subsequent, the grantor must act to enforce reentry.

Note: Courts also look closely at ambiguous phrases like “for school purposes.” In many jurisdictions, that wording has been treated as durational language indicating a fee simple determinable, though results vary by state and case law.

Practical Applications

For drafters (grantors and attorneys)

• Pick the form that matches your goal (automatic end vs. optional reentry vs. shift to a third party).
• Use clear, tested words for the type you want.
• Name who holds the follow-up interest and spell out any reentry steps.
• Add notice and cure periods to reduce litigation risk.
• Consider time limits (sunset dates) and record preservation filings if your state requires them.
• Confirm the condition does not violate public policy or restraints on alienation rules.
• Coordinate with zoning and any planned restrictions (CC&Rs) to avoid conflicts.

For current owners (grantees)

• Keep written policies and records showing compliance with the condition.
• If use will change, negotiate a release, amendment, or waiver before action is taken.
• Calendar any reporting or operational milestones tied to the gift.
• If a breach is alleged, review notice, cure, and enforcement language immediately.

For buyers, lenders, and title professionals

• Read the deed and the full chain of title; do not rely on summaries.
• Verify actual, on-the-ground use matches the stated condition.
• Ask for estoppel letters, releases, or amendments from the holder of the reverter or right of entry.
• Expect title exceptions and underwriting conditions; plan for endorsements or curative documents.
• Check state statutes for time limits that may have extinguished (or preserved) the grantor’s rights.

For municipalities and nonprofits

• Adopt internal compliance tracking for use-restricted gifts.
• If circumstances change, seek donor consent or a court order as needed; charitable trust rules may apply.
• Communicate with stakeholders before repurposing property that was gifted for a stated use.

For litigators

• Identify the estate type and the correct remedy (automatic reverter vs. right of entry).
• Check statutes of limitation, laches, and waiver.
• Use quiet title or ejectment as appropriate and record any judgment to clear title.

Summary Checklist

• Confirm which defeasible form applies: FSD, FSSCS, or FSSEL
• Match the deed’s words to the legal effect (automatic vs. optional termination)
• Identify who holds any future interest (grantor or third party)
• Review public policy limits and state statutes that may cut off or preserve reverter/reentry rights
• For condition subsequent, act promptly if you plan to enforce reentry
• For buyers and lenders, verify current use and secure releases or amendments when needed
• Record any required preservation notices under state Marketable Title Acts
• Keep clear records of compliance and communicate early if use may change

Quick Reference