Real Property#1, Freehold Estates, Future Estates

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Freehold estates

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give possession to land through some legal title or right to hold. measured by its duration (fee simple, fee tail, life estate)

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Categories of freehold estates

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1. Fee simple absolute
2. Fee simple determinable (with possibility of reverter)
3. Fee simple subject to a condition subsequent (with power of termination or right of reentry).
4. Fee simple subject to executory Interest
5. Fee tail
7. Life estate

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Nonfreehold estates

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give mere possession to land (leasehold estates)

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Future estate or future interest

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Interest left over when a grantor conveys away less than his entire estate. Generic term for remainders, executory interests, reversions, etc

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6 types of future interests

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vested remainders
contingent remainders
executory interest
reversion
possibility of reverter
rights of reentry--power of termination

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Words of limitation

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define the duration of the estate

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Words of purchase

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designate who is to take by will or grant

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Fee Simple

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An interest in land which is the broadest ownership property interest allowed by law. "Simple" means no restrictions on the estate with response to inheritance. Absolute means not possibility of defeasance or forfeiture.

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Fee Simple Absolute

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Most extensive interest in land potentially with infinite duration

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How to create fee simple absolute

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Traditional CL--words of inheritance requires "+ his heirs" Modern, no specific words of inheritence--"To B" courts will look to intent of the parties

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2 types of defeasible fees

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fee simple determinable
fee simple subject to condition subsequent

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Fee simple determinable

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A fee simple estate which will automatically revert to the grantor if some specified event happens

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How fee simple determinable is created

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Words like "so long as," "during," "while," "until." "To b + his heirs as long as property is used for charitable purposes"

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Possibility of reverter

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Interest in land retained by grantor in fee simple determinable estate

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Fee simple subject to condition subsequent

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A fee simple estate which MAY be terminated by grantor who has power to end the estate upon the happening or non-happening of a named event

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Power of termination or rights of reentry

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The future interest retained by the grantor in a fee simple subject to condition subsequent.

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How fee simple subject to condition subsequent is created

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words like "on condition that," subject to condition that," "but if"
Express right of reentry no essential--evidence of intent to resolve ambiguity is admissible.

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Fee simple subject to executory limitations

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Fee simple estate which passes to a grantee other than the grantor upon the happening or non-happening of a stated event.

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Fee Tail

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Estate that is inheritable only by specified descendants of the original grantee.

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How fee tail created

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O to A + the heirs of his body--today only a small # of states still recognize

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Life estate

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A life estate is a freehold estate where the duration is measures by the duration of a specified person's life

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Life estate pur autre view

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Life estate measured by the life of someone other than the grantee

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Rights + duties of life tenant

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1. entitled to the beneficial use of the land but may not act to impair the value of interests of others in the same land
2. NOT responsible for damage caused by others to the land--may recover damages from 3rd parties--limited to the interest of the life tenant
3. Does NOT have to insure the estate
4. DOES have duty to pay interest on indebtedness
5. DOES have to pay taxes as they accrue
6. SHARES costs of improvements which are apportioned between life tenant + future interest holders.

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dower

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interest wife takes in her husband's estate when he dies. CL rule in which wife gets 1/3 life estate interest in her husband's lands. ? of children not relevant.

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curtesy

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interest husband takes in his wife's estate when she dies. CL rule which gives him the right to ALL of the land she had when they were married as long as they had issue which were born alive capable of inheriting.

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Reversion

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the future interest in land remaining when a grantor transfer a lesser estate (fee tail, life estate, contingent remainder) than the grantor owned. A reversion occurs automatically upon the termination of the prior estate.

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Does owner of freehold estate generally have a reversion if there is an outstanding lease on property?

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Yes

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Possibility of reverter

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future interest retained by a grantor after conveying a fee simple determinable so that the grantee's estate terminates automatically and reverts to the grantor if the terminating event ever occurs.

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Is possibility of reverter alienable or transferable in a will?

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Traditional CL, no.
Modern approach, yes.

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Can the owner of a possibility of reverter share in a condemnation award?

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Generally, no.

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Power of termination or right of entry

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Future interest retained by grantor after conveying a fee simple subject to a condition subsequent so that the grantee's estate terminates upon breach of the condition only if the grantor exercises the right to retake it. Eg. O to A + his heirs but if the land is not farmed, then O may reenter and claim the land.

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To recover the land through power of termination. is a legal action required?

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Yes, usually.

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What does the grantor have to do to get the property back when condition in fee simple subject to condition subsequent is broken?

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1. Elect to terminate the grantee's estate +
2. CL enter the prop--Modern Law, undertake some "affirmative act" like bringing an action in enjectment) to indicate termination.

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If power of termination is contained in a lease, who may enforce it?

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The party who acquires the reversion.

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Can the owner of a power of termination share in a condemnation award?

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No, not usually.

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Is the power of termination alienable or transferable by will?

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Traditional CL, no, so could only be inherited by grantor's heirs. Modernly, the majority allow the transfer by devise or inheritance but it is STILL NOT ALIENABLE INTERVIVOS.

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Rule re: intervivos transfer of power of termination (standing alone) w/o reversion

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CL + most states: powers of termination w/o reversions not alienable inter vivos. When such an attempt is made, it has not effect + power stays w/ the grantor (or in some states cancels the right of termination).

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Remainder

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future interest created in a 3rd person (other than grantor) that is intended to take AFTER THE NATURAL TERMINATION of life estate, fee tail or (modern) term of years. O to A for life, then to B + his heirs.O to A for life, then if B survives A, to B + his heirs.

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Elements of remainder

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1. future interest
2. other than grantor
3. to become possessory (PRESENT) interest
4. on the NATURAL termination of the
5. preceeding estate
6. created in the SAME INSTRUMENT

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2 types of remainders

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1. vested remainder
2. contingent remainder

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Can remainder follow a leasehold estate?

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CL: No--only a life estate or fee tail
Modern--yes a remainder can follow a non-freehold estate for years.

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Vested remainder

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1. created in an ascertained, existing person
2. not subject to any express condition precedent except the normal termination of the preceding estate.
3. Not subject to RAP
4. Remainderman has right against prior estate owner (e.g. life tenant) for waste
5. Remainderman has right to compel prior estate owner to pay taxes + interest on encumbrances.

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3 types of vested remainders

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1. absolutely vested
2. remainders subject to partial divestment (subject to open)
3. remainders vested subject to complete divestment.

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Why are reversions always vested?

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1. holder is ascertainable
2. estate has no condition precedent--i.e. when the grantee's estate terminates, the grantor AUTOMATICALLY regains possession

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Remainder is absolutely vested when

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1. limited to ascertained person (s)
2. w/o words of conditions, no subject to divestment or being cut short

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Remainder is vested subject to partial divestment when

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remainderman is in existence and ascertained but the amount of estate is subject to diminution in favor of other members of a class.

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O: To A for life, then to B for life, then to C & his heirs. What interest does B have?

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A remainder for life, because it's a future interest in a transferee to take possession on the natural expiration of the preceding estates created in the same doc. B takes on the natural expiration of A's life.

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Vested remainder subject to complete divestment is when

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remainderman is ascertained and interest is not subject to a condition precedent, but her right to possession or enjoyment on expiration of the prior interests is subject to termination by reason of an executory interest, power of appointment or right of entry. e.g. A to B for life, then to C + her heirs, but if C dies leaving no surviving children then to D + his heirs. C has a remainder vested subject to complete divestment on the death of C w/o kids. D's interest is not a remainder but an executive interest.

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Contingent remainder

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Any remainder that is
1. not vested
2. subject to condition precedent
3. created in favor of an unborn person OR created in favor of an existing but unascertained person.
4. Subject to RAP
5. Remainderman has no right against prior estate owner (e.g. life tenant) for waste.
6. Remainderman CANNOT compel estate owner to pay taxes or interest on encumbrances.

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Destructibility of contingent remainders

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Traditional CL, a contingent remainder had to vest prior to termination of the preceding freehold estate or it was destroyed.--Modernly abolished in most states

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Destructibility of contingent remainders by merger or Doctrine of Merger

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Whenever successive estates are owned by the same person, the smaller of the two will be absorbed by the larger.

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Modern characteristics of remainders

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1. alienable
2. not subject to creditors
3, cannot take effect in derogation of the prior estate--only when the prior estate comes to an end naturally
4. ARE SUBJECT to RAP

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Executory interest

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Future contingent interest created in favor of a grantee in the form of springing or shifting use which on the happening of the contingency described will be executed into a legal estate. An executory interest either cuts off another's interest or begins after the natural termination of a preceding estate. Any future interest created in a 3rd person that is not a remainder.

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Essential elements of an executory interest

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1. Always in favor of 3rd person (not grantor)
2. always contingent + can never be vested, because when it vests it is no longer an executory interest.
3. It must take effect either before in derogation of the preceding estate or after natural termination

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Shifting executory interests

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when the right to possession shifts from one grantee to another grantee by cutting off interest of previous grantee. O to A + his heirs as long as the land is farmed, then to B and his heirs.

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Springing executory interest

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Estate in land where the right to possession springs from the grantor to the grantee. It cuts short a reversion held by the grantor. O to A for life, and one year later, to B + his heirs. O to A + his heirs upon A's marriage.

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Difference between executory divise and executory interest

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Same except executory interests are created by grant or deed. Executory devise created by will.

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Rule in Shelley's Case

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If in a single grant a freehold estate is given to a person + remainder given to that person's heirs, the remainder belongs to the person not the heirs so person has a fee simple. Most states have abolished.

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Doctrine of Worthier Title

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INTERVIVOS GIFT of a REMAINDER to the HEIRS OF THE GRANTOR is VOID. A grantor cannot create a remainder in his own heirs if the heirs would have taken the same estate by descent. because a remainder does not go the heirs until the owner's death. Doctrine favors a grantor's intent by construing a reversion in the grantor rather than a remainder in the grantee's heirs

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O: To my son for life then to my heirs. What interest does O have?

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A reversion in fee simple due to the Doctrine of Worthier Title

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RAP

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No interest is good unless ir must vest if at all not later than 21 yrs after some life in being at the creation of the interest

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RAP--no interest is good

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means any contingent interest not conforming to the rule is void

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must vest--RAP

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means the contingent interest must become a vested interest (of fail) w/i the period of the rule

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RAP--"if at all"

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if the contingent interest is absolutely certain either to vest or fail w/in period of the rule, it is valid

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RAP--"not later than 21 yrs after some life in being"

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includes w/in the period
(1) lives in being
(2) + 21 yrs
(3) + such actual periods of gestation as come w/in the proper purpose of the rule.

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RAP--"at the creation of the interest"

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period begins when instrument takes effect. (will--testator's death; deed--delivery)

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Purpose of RAP

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directed towards remoteness in vesting--prevents clogging of title beyond reasonable time limits

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Interests subject to RAP

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1. contingent remainders
2. executory interests
3. options to purchase land not incident to a lease
4. powers of appointment
5. rights of 1st refusal
6. class gifts

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Interests not subject to RAP

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1. present interests in possession
2. reversions
3. vested remainders
4. possibility of reverter
5. powers of termination
6. charitable gifts
7. resulting trusts

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"measuring life" RAP

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1. human'
2. precede, cannot follow the 21 yrs.
3. every human is conclusively presumed capable of having children

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Class gift

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A gift to a group of persons uncertain in # at time of the gift but to be ascertained at a future time

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What is charity to charity exception to RAP?

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A gift to a charity that may be shifted to another charity OUTSIDE the perpetuitites period is VALID even though it violates RAP.

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Will shifting executive interest from charity to charity be valid under RAP

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Yes, for public policy reasons

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heir

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one entitled to inherit property via the laws of intestate succession. Heirs can only be conclusively determined at the time of death.

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What are issue?

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lineal descents more remote than children

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Class gift--RAP

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Entire class gift void if interest of one member might possibly violate rule.

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Uniform Statutory RAP

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Nonvested interest in real or personal prop invalid unless:
1. satisfies CL RAP
2. vests or terminates w/in 90 yrs of creation (wait & see test)

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Wait and see doctrine re: RAP

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Under RAP any interest must vest if at all not later than 21 yrs. after some life in being at the creation of the interest. The "wait + see" doctrine takes care of those interests that MAY vest w/in the perpetuities period to see if they do.

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Whaat does the "cy pres" doctrine do to the RAP?

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It validates interests that would otherwise be void under RAP by reconstructing them to conform w/ RAP & still follow settlor's intent as clearly as possible.

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Class Closing Rule

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A class is closed when no one born after that date can share in a class gift.

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2 ways class gift is closed

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1. physiologically
2. under the Rule of Convenience

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When does a class close physiologically?

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when the parent of the class dies.

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Class closing under Rule of Convenience

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Whenever any member of the class is entitled to distribution of his share, the class closes. Thru this, gifts can often be saved from violating the RAP.

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Rule of convenience when there are no members of the class at time when grantor dies

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the class does not close but remains open as long as people can join it

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RAP--when does the perpetuides period begin for irrevocable trusts

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when created

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RAP, when does the perpetuides period begin for wills?

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when testator dies

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RAP, when does the perpetuides period begin for intervivos conveyances?

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when the conveyance is made (deed is delivered)

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Power of Appointment

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power conferred on a donee by will or deed to select + nominate one or more recipients of the donor's estate

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2 types of power of appointment

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general
special or limited

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General power of appointment

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gives donee the power to dispose of the donor's property in favor of anyone the donee wants. considered the equivalent of ownership of property.

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General power of appointment & RAP

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power must be exercisable (not necessarily exercised) during the period allowed by rule.

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special or limited power of appointment

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must either be exercised in limited way or in favor of a limited class of persons. not the equivalent of property ownership, because of the limitations.

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RAP--special power of appointment

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To be valid under RAP, it must be required to be exercised so that the interest in property created will vest w/in the period of the rule. Power void if it is possible to exercise a special power of appointment later than a life in being + 21 yrs.

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Restraints on alienation

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provisions in deeds, wills & mortgages that restrict the grantee's power to covey property.

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Validity of restraints on alienation of fee simple interests--also called disabling restrains

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generally invalid

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validity of restraints on concurrent estates

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restraints on power to seek partititon usually upheld

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Validity of restrains on nonfreehold estates

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commonly upheld--e.g. non-assignment clause in a lease

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Disabling restraint

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w/holds power of alienation--"shall not transfer"--always void

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forfeiture restraints

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Grantor says he will terminate the estate if a conveyance is made (condition subsequent)--automatically invalid only where a fee in involved--upheld for lesser estates. may be valid if for limited time.

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promissory restraints

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Grantees promise not to alienate.--may or may not be upheld depending on other variables. valid on life estates void on fee simple estates

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restraints prohibiting conveyence to certain persons (e.g. racial minorities)

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When used to discriminate, held invalid under the 14th Amend,

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O: To B for life but if B ever smokes pot on premises, O shall have power to retake. What interest does O have?

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Reversion + Power of Termination
O have reversion since he conveyed a life estate so prop will automatically revert to O at end of B's life.
O also has power of termination because he conveyed an estate subject to a condition subsequent.

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Can person create a power of appointment in himself w/ respect to his property?

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Yes, the donor of a power of apointment can also be the donee--this is "reserved" power.

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Presently exercisable power of appointment

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is one the donee can exerciseduring his lifetime or in his will