Property: Future Interests

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Fee Simple Absolute

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"To A and his heirs" Potentially lasts foever. Must be fully alienable, no direct restraints on transfer of ownership. Any restraint on alienation is void (ignore language of restriction). Conditions, may be imposed on the exercise of a fee simple, but any attempt to limit the right to transfer is void. Modern Exception: Right to first refusal considered valid restraint on alienation. Courts assume fee simple.

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Fee tail

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"To A and the heirs of her body" Almost all states have eliminated or changed. Designed to lock property into grantee's family. Today language will be construed as a fee simple.

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Life Estate

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Granted expressly or through implication. Never measured by time - only measured by life.

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Life estate Pur Autre Vie

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If the life tenant dies before the measuring life dies, the life estate passes to the estate of the deceaseed life tenant and continues in place until the measuring life dies.

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Life Estates and Restraints on Alienation

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The modern rules allow a provision that terminates the life estate if the life tenant attempts to convey away the life estate.

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Law of Waste

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The life tenant maintains the estate. Key word = maintain, which expresses both the maximum and the minimum that the life estate can do on the land.

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Voluntary Waste

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Voluntary waste is any action beyond the right of maintenance that causes harm to the premises. Maintain means life tenant continues the normal use of the land.

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Depletion of natural resources

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Constitutes waste UNLESS consumption of such resources constitutes the normal use of the land as in the case of a life estate in a cole mine.

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Permissive Waste

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Involves the failure to maintain. The life tenant must do the following to avoid liability for permissive waste. 1) Repairs 2) Taxes 3) Mortgage Debt 4) Insurance

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Permissive Waste: Repairs

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Life tenant has obligation to make ordinary repairs but not replacement. Repair obligation is limited to the amount of rents and profits received from the land. If there are no rents and profits then the repair obligation is limited to reasonable rental value of land if the life tenant is using the land. No repair obligation if receiving no income from or not using the property.

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Permissive Waste: Taxes

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Tenant must pay all taxes on property. Obligation is subject to same limitations as repairs. The holder of the future interest must be sure that the taxes are paid other a tax sale can eliminate future interest.

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Permissive Waste: Mortgage Debt

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Life tenant must pay interest on any mortgage indebtedness on the property but is not required to make any principal payments. The holder of the future interest generally must pay the principal. This interest obligation is subject to the same limitation as repairs.

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Permissive Waste: Insurance

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Life tenant does not have to insure the property. Life tenant does have an insurable interest.

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Ameliorative Waste

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occurs when the life tenant alters the property substantially but the life tenant activity actually increases the value of the land. (If changed conditions make the property worthless than LT can alter property w/o incurring liability to future interest

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Seisin

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The holder of seisin in the taxpayer. Each and every time a conveyance takes effect, property law wants to know who has seisin at all times. NO GAPS

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Three future interests in the grantor

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Reversion, Possibility of Reverter, Right of Re-entry

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Reversion

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A reversion arises whenever grantor conveys away less than the full durational estate that the Grantor had.

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Possibility of Reverter

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Magic Words: So long as, While; During; until. Whenever Grantor conveys a Fee Simple Determinable, the Grantor automatically retains a Possibility of Reverter. The FSD will end automatically on the occurence of the stated event.

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Right of Re-Entry

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Magic Words: Provided However, but if, on condition that. Title stays in the Grantee until Grantor exercises the right. Often works in Fee Simple on Condition Subsequent. Grantor keeps the right of entry.

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Transferability of future interests in the grantor

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Al future interests in Grantor are vested, and therefore not subject to the Rule Against Perpetuities. All are transferable at deat and inter vivos except the right of entry, which cannot be transferred inter vivos.

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Future interests in Grantees

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Remainders and Executory Interests

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Remainder

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Future interest in a 3rd party that comes NATURALLY and IMMEDIATELY on the termination of the preceding estate. Either vested or contingent.Only vest, if at all, after the natural expiration of the preceding estate (never affects the prior estate).

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Vested remainder

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A remainder is vested when nothing stands in the way of its becoming possessory on the natural expiration of the preceding estate (taker is ascertainable and no conditions to taking).

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Contingent Remainder

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Arises where there is a condition that the grantee must satisfy before his interest will become possessory.

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Class Gift and Vested Remainders Subject to Open

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A gift to a group of unnamed persons who answer the class description (Children of A). It is subject to open because class is not yet closed (could have more kids.

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Time for vesting of Class Gifts and the Rule of Convenience

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The class closes for a class gift whenever any class member is entitled to a distribution. Rule of Convenience is a rule of construction, not a rule of law. Members of a class who predecease the testator are eliminated. Their gift lapses - unless they were in gestation at time of testator's death.

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Executory Interests

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Operates to cut short the estate that comes before it. If a future interest is not a remainder, then it must be an Executory Interest. Look to see if a contingency is made part of the first estate given to a grantee or has it been made part of the gift over following some earlier estate.

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Future Interest and Standing for the law of waste

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Holders of Executory Interests do not have standing to sue for waste, whereas the holder of the remainder does have standing to sue for waste.

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Rule against Perpetuities

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No interest will be valid unless it must vest, if at all, within 21 years after the death of some life in being who was alive at the moment the conveyance was made.

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When RAP applies

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Executory interests AND contingent remainders AND vested remainders subject to open.

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What to ask on a RAP issue

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Could this future interest POSSIBLY vest in the grantee outside the time period of the rule. If the answer is yes, then the interest is void, which means you cross out language of the conveyance that violates the rule.

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When interest is determined in a RAP problem

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Validity of an interest under RAP is determined at the time the conveyance is made, at the time the interest is created. If transfer is made by will - apply RAP as of the time of Testator's death. If by Deed, apply RAP when the deed takes effect.

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Use of a perpetuities savings clause

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This language is included in order to save a grant from violating the rule against perpetutities by making sure that vesting must occur within the time period of the rule.

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Right of first refusal and RAP

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Contingent interests in property, such as options and rights of first refusal, violate RAP IF the could possibly become exerciseable outside the time period of the rule.

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Charity to Charity exception

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saves the gift over to a charity where the gift would otherwise violate RAP because it is entirely possible that the gift over might vest outside the time frame of the rule. For this exception to operate, both transferees must be charities.

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Age Contingency beyond 21 years in open class & RAP

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Whenever language used in the grants puts the age of contingency beyond 21, the conveyance loses its link to a life in being.

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Fertile Octogenarian Rule & RAP

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The fertile octogenarian rule conclusively presumes that Grantor might have another child, regardless of age or medical condition. If one class member