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81 Cards in this Set
- Front
- Back
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What is the alienability paradox?
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Power to transfer one’s entire interest implies power to transfer less than one’s entire interest
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What are the Rules Regulating the Creation of Estates in Land and Future Interests?
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1. No New Estates
2. The Rule Against Perpetuities 3. The Rule Against (Unreasonable) Restraints on Alienation 4. No Fees Tail 5. No Racial Restrictions 6. No unreasonable restraints on marriage |
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What is a present estate in land and what are the 2 types?
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1. The present right to exclusive possession of a particular parcel of land.
a. Freehold Estates (Owning) b. Non-Freehold Estates (Leasing) |
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What are the 4 freehold estates?, and are they inheritable?
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a. Fee simple (absolute and divisible)
i. Inheritable b. Fee tail i. Inheritable/ Not freely alienable c. Fee Simple Conditional i. Inheritable/ Not freely alienable d. Life estates i. Non-inheritable |
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What are the 3 Non-Freehold estates (leasing)?, and are they inheritable?
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a. Estate for years
i. Inheritable if the tenant dies during the term b. Periodic estates i. May not be inheritable c. Tenancy at will i. Non-inheritable/ Not freely alienable |
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What are the 2 present estates?
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Fee Simple Absolute
Fee Tail |
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What is a Fee Simple Absolute?
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i. “Largest bundle of sticks”
a) Inheritable - Conveyance b) Devisable - Devise to devisees c) Alienable - Can transfer all or part of estate (life) d. Classic form: “to A and his heirs” —this means fee simple absolute e. Constructional preference for fee simple. |
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What is a fee tail?
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a. Most states have legislation precluding fee tails
b. “A and the heirs of his body”—anywhere in America, this is a fee simple |
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What is a defeasible estate?
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1. Created by instruments containing language sufficient to create a fee simple, followed by a provision for defeasance (termination of the estate) when a specified state of affairs ceases or a specified even occurs.
2. Not a lesser estate than a fee simple. |
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Describe the transferrability of defeasible fees.
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a. Modern rule: defeasible fees are transferable AND inheritable in the same way as any other fee simple, but always remain subject to the limitation
b. note: the corresponding future interests are NOT transferable OR inheritable |
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What are the 2 types of Defeasible Fee Interests?
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a. Expiring Defeasible Fees – automatically expire on conditions. “as long as”, “until”
b. Divestible Defeasible Fees- "but if", "provided that", "on condition that" |
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What are the expiring defeasible fees?
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i. “as long as”, “until”
ii. Fee Simple determinable. iii. Fee Simple subject to executory limitation. |
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What are the divestible defeasible fees?
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i. "but if", "provided that", "on condition that"
ii. Fee Simple on Condition Subsequent iii. Fee Simple on Executory Limitation |
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What is a fee simple determinable?
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a. Creates Possibility of Reverter (Grantor)
b. Terminates “automatically” upon the happening of the designated terminative events—original grantor has to take no action. Fee “expires” |
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What is a possibility of reverter?
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a) Even though a conveyance does not expressly reserve an interest, possibility of reverter exists for the grantor as a matter of law because the entire state was not conveyed.
b) Creation 1) words of time: “only so long as”; “while”; “during”; “until” 2) must limit the duration of the fee a. “for the purpose of” and “to be used for” do NOT create defeasible fees 3) if language is ambiguous, most courts will construe estate as a fee simple subject to a condition subsequent in order to avoid automatic forfeiture c) fully alienable, devisable, and inheritable in most jurisdictions |
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What is a Fee Simple Subject to Condition Subsequent?
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a. When terminated, possession returns to the person who originally created the defeasible fee simple estate or his successors in interest
b. Creates Right of Entry (Grantor) – sometimes referred to as power of termination c. Does not terminate “automatically” upon the happening of the designated terminating event (breach of condition). When this event occurs, the person who created the defeasible estate has the power to terminate, but need not do so. Owner has to exercise right of re-entry |
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Upon re-entry, the defeasible fee simple is ______ or ___ ___
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Upon re-entry, the defeasible fee simple is “divested” or “cut-off”
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How is a Fee Simple Subject to Condition Subsequent created?
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i. Characterized by words of condition: “on condition that”; “but if”; “provided that”; “provided however”
ii. Drafter should expressly provide for re-entry and termination of the state granted upon breach of the stated condition to create a fee simple subject to a condition subsequent |
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How can Re-Entry be accomplished?
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Re-entry can be accomplished through formal notice or action to quiet title
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Until right of re-entry is effectively exercised, the statute of limitations applicable to actions for possession of land should ___ ___
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not run—this is an important contrast from fee simple determinable (wherein it starts automatically)
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What is a Fee Simple Subject to an Executory Limitation?
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A fee simple estate which, upon the happening of a designated event, will automatically pass to a designated 3rd party
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What does a Fee Simple Subject to an Executory Limitation create?
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Creates an Executory Interest (3rd Party)
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How does a Fee Simple Subject to an Executory Limitation terminate?
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Terminates “automatically” upon the happening of the designated terminative events—original grantor has to take no action
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How is a Fee Simple Subject to an Executory Limitation created?
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i. Words of time (expiring): until, so long as, while, during
ii. Words of condition (divestible): but if, provided, on the condition that, but in the event that iii. “to City, but if the land is not used as a park, then to Z and his heirs” |
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Reacquisition can be by _____ or _____ (This is for Fee simple SUBJECT to executory limitation)
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e. Reacquisition can be by the grantor or some other person
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Upon reacquisition, the defeasible fee simple is _______ or ___ ___
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Upon reacquisition, the defeasible fee simple is “divested” or “cut off”
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The terminating event specified is always one that is _______, or _______ to occur
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The terminating event specified is always one that is contingent, or uncertain to occur
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Define: Life Estate
What are the words of creation for a Life Estate |
a. Estates with a duration measured by the life of a designated person or the survivor of a group of persons; holder of a life estate is a “life tenant”.
b. "To B for life" |
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What is pur autre vie?
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i. pur autre vie—the grantee retains the estate as long as some other person lives—“to A for the life of B”
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What are the accompanying future interests of a life estate?
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i. By definition, whenever a life estate is created a future interest also arises. [Ex. If O, holding fee simple absolute in Greenacre, conveys “to A for life,” he has granted A less than the sum of his property rights. O’s resulting right to possession of Greenacre upon A’s death is a reversion. If O creates a future interest in a 3rd person (“to A for life, and then to B and his heirs”), he has created a remainder.]
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What are the rights of a Life Tenant?
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i. most important right is to exclusive possession of the land, which is protected by actions at law to recover possession and/or damages
ii. If the owner of a future estate in a particular parcel of land causes physical injury to that land, the life tenant is entitled to recover damages to the extent of his or her interest in the land—the difference between the value of the life estate before and its value after the injury was inflicted. iii. Principal privilege is that of making a beneficial use of the land. iv. Except as against the owners of future interests in the land, a life tenant’s privilege of beneficial use is the same as that of any other possessor of land. |
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What are the duties of a life tenant?
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v. Life tenant is subject to the common law of waste, which imposes a duty to use the land in such a way as not to injure the future estates
vi. Restricted right of transfer—cannot transfer more than what he has; technically can rent or lease, but this ends when the life estate ends. a) Sale is problematic—don’t know the worth because someone’s longevity is unpredictable vii. Normal life estates cannot be inherited or devised |
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Grantor has fee simple→to A for life
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Restatement says that A has an estate for his own life
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ii. Grantor has life estate→to A for life
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a) A has estate for life of grantor
b) Grantor in this case cannot convey a life estate longer than his life, but the question is whether the estate given to A will terminate upon the death of A if A precedes the grantor 1) Courts say go extrinsic |
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iii. Grantor→to A for the lives of A,B, and C
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a) Does A’s estate last for the life of the first to die or last to die?
1) Turns on intent—tendency toward last survivor |
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iv. Grantor→to A, and if A dies, then to B
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a) If the instrument contains additional language from which an intent to give A a fee simple can be inferred, courts have held that A acquires a fee simple subject to an executory limitation
b) Otherwise, A acquires only a life estate |
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What are the restraints on sale of defeasible estates?
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Courts disfavor restraints on alienability
a. Rule: Total restraint on the alienation of fee simple interests are void, regardless of whether they are promissory, disabling or forfeiture restraints b. Disabling restraints c. Forfeiture restraints d. Promissory restraints |
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What are disabling restraints?
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withholds from the grantee the power of transferring his interest
i. Disabling restraints limited as to duration or scope are universally held void ii. Disabling restraint on a life estate is most likely restraint to be voided by court |
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What are Forfeiture restraints?
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provides that if the grantee attempts to transfer his interest, it is forfeited to another person
i. “To A and his heirs, but if A attempts to transfer the property by any means whatsoever, then to B and his heirs” |
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What are Promissory restraints?
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grantee promises not to transfer his interest
i. “To A and his heirs, and A promises for himself, his heirs, and successors an interest that Blackacre will not be transferred by any means” |
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What is waste?
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a. Waste is defined as any act or omission of duty be a tenant of land which does a lasting injury to the freehold, tends to the permanent loss of the owner of the fee, or to destroy or lessen the value of the inheritance, or to destroy the identity of the property, or impair the evidence of the title
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b. The law of waste is the principal mechanism for resolving land use disputes where property rights are divided ________________
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b. The law of waste is the principal mechanism for resolving land use disputes where property rights are divided between persons holding present estates and future interests in the same land
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What is voluntary/ affirmative waste?
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a. Occurs when the voluntary acts of the present estate owner significantly reduce the value of the property.
b. Hinges on “reasonable use” |
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What is voluntary/ affirmative waste with respect to:
Buildings, Mining, and Timber. |
f. Buildings: Wanton destruction of valuable buildings is waste.
g. Mining: If an open mine existed on the lad when the present estate owner took possession, its operation may continue until the resource is totally depleted; however, a new mine cannot be opened unless all affected future interest owners agree h. Timber: If the original owner engaged in commercial tree harvesting, the so can the life tenant. American courts also allow cutting to the extent consistent with good husbandry |
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What is permissive waste?
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a. Stems from inaction: the failure of the possessor to exercise reasonable care to protect the estate [repairs, taxes, etc.]
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What is ameliorating waste?
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a. Occurs when the principal use of the land is substantially changed, but the change increases the value of the property
i. only called waste because it is inconsistent with the grantor’s intent ii. probably not actionable |
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What are the remedies for waste?
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a. Court ordered sale of the property
i. traditional: where all owners are (1) adults, (2) competent, AND (3) ascertainable, the court will not intervene just because they cannot agree on the best usage ii. modern: the court will intervene and order an equitable sale where sale would be (1) in the best interest of the parties, (2) in the best interest of preserving the property for future generations, AND (3) economic waste is avoided |
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Define: Future Interests
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a future interest is a present non-possessory interest capable of becoming possessory in the future
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What are the Grantor's future interests (not subject to R.A.P)?
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1. Reversion
2. Possibility of Reverter 3. Right of Entry |
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What are the Grantee's future interests (subject to R.A.P)?
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1. Remainder
2. Vested Remainder 3. Vested Remainder subject to Divestment 4. Vested Remainder subject to Open 5. Contingent Remainder 6. Executory Interests 7. Following a Life Estate. |
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What is a reversion?
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a) Retained by grantor to follow a particular estate when it expires
b) When an owner conveys an estate smaller than the estate he holds, he retains a reversion without any action.---No reversion if whole estate is conveyed d) It does not matter if the reversion is contingent upon future events—it is still a reversion 1) To A for life and then to B if B graduates from law school—O has a reversion because A will die and B may not graduate law school e) Transferable and inheritable |
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What is a possibility of reverter?
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ii. Possibility of reverter
a) A future interest that arises when a grantor carves out of his estate a determinable estate of the same quantum b) Retained by transferor c) Created when there is a fee simple determinable 1) “to T for so long as the property is used as an orphanage” d) Reserved as a matter of law if not expressly reserved e) transferable and inheritable |
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What is a right of entry?
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a) retained by transferor
b) retained when a fee simple subject to a condition subsequent is created c) requires affirmative action to end offending estate d) transferable and inheritable |
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What is a remainder?
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a) A future interest created in someone other than the grantor to follow immediately after the expiration of a particular estate (e.g. life estate or term of years)
b) Cannot follow a fee simple—has to be something less than a fee simple! c) DOES NOT DIVEST the preceding estate but follows on the natural termination of it d) Creation 1) “to B for life, remainder to C and her heirs” 2) No special words, e.g. “remainder,” are necessary, only that the grantor create an interest that fits the definition of a remainder 3) Must have an express grant to the third-party remainderman cannot arise by operation of law (as can a reversion) |
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What is a vested remainder?
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a) The remainderman’s right to immediate possession is without pre-conditions (other than expiration of the prior estate) such that he is certain acquire the possessory estate in the future and will be entitled to retain it permanently thereafter
b) The remainderman must be born and ascertained and no stated event need occur before possession c) Wording 1) “to A for life, remainder to B and his heirs” 2) “to B for life, then to C and her heirs” 3) “to B for 10 years, then to C and his heirs” 4) “to B for life, then to C’s eldest child, Nancy, and her heirs” d) NOT SUBJECT TO RULE AGAINST PERPETUITIES |
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What is a vested remainder subject to divestment?
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a) A vested remainder than can be divested if a stated event/condition subsequent occurs or by an inherent limitation in the grant (e.g. successive life estates)
b) The condition subsequent will cut off a right of possession that is ready to take effect or already in effect c) Key wording: “[grant], but if” LOOK FOR COMMA between grant and condition 1) “to A for life, remainder to B and his heirs, but if B drops out of law school, then to C and his heirs” B has a remainder that is vested but is also subject to divestment if he drops out of school and C has a divesting executory interest – O would have a reversion if A dies before B graduates 2) “to A for life, then to B for life, then to C and his heirs” B has a vested remainder for life subject to divestment since he could die before A and C has an indefeasibly vested remainder in fee simple d) NOT SUBJECT TO RULE AGAINST PERPETUITIES |
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What is a vested remainder subject to open?
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a) A vested remainder to a class of recipients, at least one of whom is born and ascertained and to which other members may be added later
b) “to B for life, remainder to B’s children and their heirs” NOT contingent if B has at least one child ascertainable at the time of the grant BUT if B does not yet have any children at the time of the grant, it is contingent c) SUBJECT TO THE RULE AGAINST PERPETUITES |
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What is a Contingent Remainder?
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a) A remainder limited to an unascertained persons or subject to a condition precedent
1) The condition precedent must occur before the grantee has a right to immediate possession 2) If the condition precedent occurs or the contingent remainderman becomes born/ascertained, the contingent remainder becomes a vested remainder 3) Whenever the grantor creates a contingent remainder, the grantor has a reversion 4) Construction in favor of a vested remainder is preferred 5) Fully transferable in most states 6) SUBJECT TO THE RULE AGAINST PERPETUITIES |
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What are the types of contingencies?
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1) Stated event: “to A for life, remainder to B and his heirs if B marries C”
2) Unascertained persons: “…remainder to B’s first child to reach age 21, and his or her heirs” 3) Unborn persons: “…remainder to B’s next born child and his or her heirs” |
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c) Wording: “if” or implied “if” NO COMMA between grant and contingency
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1) “to B for life, then to C’s heirs” C has nothing so it is contingent on C having heirs
2) “to B for life and then, if C survives B, to C and his heirs” if C dies first, C’s heirs have nothing and reversion in O 3) “to my wife, Sarah, for life, then to my first grandchild” the remainderman is unborn |
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d) Destructibility of Contingent Remainders...
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1) A contingent remainder may be destroyed if the condition precedent has not occurred before the estate expires and therefore reverts to the grantor
2) Abolished in many states |
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What is an executory interest?
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a) A future interest in someone other than the grantor that divests a fee simple (“to A and his heirs, but if A dies without issue surviving him, to B and her heirs”) or directly follows possession by the grantor
b) If a conveyance does not dispose of all the grantor’s rights for all of perpetuity, the grantor must still have whatever was not transferred 1) A grantor cannot create a remainder, but can create an executory interest if he creates no intervening estates 2) Also called springing interests c) Fee simple on executory limitation – a fee simple that has an executory interest in a third party d) SUBJECT TO RULE AGAINST PERPETUITIES e.g. “to A for life, remainder to B and his heirs, but if the Red Sox win the World Series, then to C and his heirs” C’s executory interest is invalid |
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Following a life estate...
If the first future interest created is a contingent remainder in fee simple______ If the first future interest created is a vested remainder in fee simple____________ |
a) RULE: If the first future interest created is a contingent remainder in fee simple, the second future interest in a transferee will also be a contingent remainder and a reversion also exists. (“to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs”)
b) RULE: If the first future interest created is a vested remainder in fee simple, the second future interest in a transferee will be a divesting executory interest (“to A for life, then to B and her heirs, but if B does not survive A to C and his heirs”) |
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Give all the words used in trust terminology...
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1. Settlor- Person who establishes the trust – puts the money or assets into the trust
2. Beneficiary-- Person who benefits from the trust 3. Corpus-- Assets that are in the trust 4. Trustee-- Manage the trust. Get a fee for managing the assets, etc 5. Legal interest-- Person who has legal title to the assets, but the transferability of the assets is limited by the instrument of the trust 6. Equitable interest- Beneficiary has equitable interest in the trust 7. Fiduciary duties- Describe the duties that the trustee owes to the beneficiaries in managing the trust |
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Define the Rule Against Perpetiuties...
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1. No interest is good unless it must vest, if at all, no later than twenty-one years after some life in being at the creation of the interest.
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What Interests Subject to the Rule against Rerpetuities?
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a. Executory Interests
b. Contingent remainders c. Vested remainders subject to open d. Option for purchase of property e. Rights of first refusal/preemptive rights |
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Are interests subject to the RAP void?
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Not necessarily.
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What Future Interests are Not Subject to the Rule Against Perpetuities?
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a. Reversions
b. Possibilities of reverter c. Rights of entry |
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It must be logically provable that within a specified period (equal to ________), a covered interest will either _____ or ______. If there is any possibility—however remote—that a covered interest might ________ after this perpetuities period expires, the interest is _____. [dynamite analogy]. It must be logically proven at the _______W.
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It must be logically provable that within a specified period (equal to the length of one life plus 21 years), a covered interest will either vest (change from a contingent interest to a vested interest or possessory estate) or forever fail to vest (never vest after the period ends). If there is any possibility—however remote—that a covered interest might remain contingent after this perpetuities period expires, the interest is void. [dynamite analogy]. It must be logically proven at the BEGINNING.
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With regards to the RAP, when does the creation of the interest occur?
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i. RAP applies to future interests. Interests are created when:
a) In the case of an inter vivos transfer, when the deed or other instrument conveying ownership is signed and delivered (whenever ownership is conveyed) b) In the case of a will, at the testator’s death |
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With regards to the RAP, when does the interest vest?
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i. within the Perpetuities Period (LIB +21)
ii. “Vesting” means vesting in interest a) Vesting in possession is not required b) If an interest is contingent, then it is subject to a condition precedent or is given to someone unascertained |
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With regards to the RAP, what is a life in being?
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i. Applying the Rule: “Is there any chance the interest might vest more than 21 years after the death of everyone alive at the time of creation of the interest?”
ii. Put another way, can we identify a validating life? (I.e., someone alive at the time of the creation of the interest but within whose lifetime plus 21 years the interest is certain to vest or fail). iii. If we can identify a validating life, the interest is good; otherwise not. iv. Corporations do not count as lives in being |
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With regard to the RAP, what is the Perpetuities Period?
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i. The time within which an interest must vest (or fail) if it is to survive the RAP
ii. The period begins at the creation of the interest and ends 21 years after the death of every person alive at the creation of the interest iii. 21 years after the death of some life in being at the creation of the interest |
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In most cases, the perpetuities period starts to run when ________. But where that interest is subject to a power in any person to create an absolute beneficial interest in himself, the perpetuities period starts to run _______.
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In most cases, the perpetuities period starts to run when the contingent future interest is created. But where that interest is subject to a power in any person to create an absolute beneficial interest in himself, the perpetuities period starts to run only upon the expiration of such power.
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What is the 5-Step Approach to Applying the RAP?
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a. Determine if the Rule applies to the future interest at issue
b. Decide when the perpetuities period begins c. Determine what must happen for the interest to vest or forever fail to vest d. Identify the persons who can affect vesting i. The relevant life must be persons who are alive at the time the interest becomes effective (or a child in gestation) ii. Each relevant life is tested to see if the interest will necessarily vest or forever fail to vest during a period equal to that person’s life plus years iii. There is no wait-and-see→the facts available then are used e. Test each relevant life to determine if any one validates the interest |
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With regards to the RAP, when does a vesting contingent remainder vest?
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iii. Vesting Contingent Remainder
a) Subject to condition precedent or unascertained recipient b) A remainder will become vested when these problems are eliminated 1) Note the remainder may vest without becoming possessory iv. Vesting of Executory Interest a) Vest at the moment when the condition attached to them is fulfilled 1) When the contingency occurs 2) They vest in interest and in possession at the same time. |
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5-Step Approach to Applying the Rule
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aDetermine if the Rule applies to the future interest at issue
Decide when the perpetuities period begins Determine what must happen for the interest to vest or forever fail to vest Identify the persons who can affect vesting Test each relevant life to determine if any one validates the interest |
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A future interest may become vested for purposes of the rule, even through the holder is not yet entitled to _______. The rule concerns the time of _____, not necessarily the time of possession.
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e. A future interest may become vested for purposes of the rule, even through the holder is not yet entitled to possession of the land. The rule concerns the time of vesting, not necessarily the time of possession. [O to A for life, then to B if B graduates from law school; B’s interest is vested upon graduation as a remainder in fee simple, even though he does not gain possession until A dies] check this
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Class Closing Rule
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i. When a remainder is given to a class that can increase in size, the courts will close the class when any member becomes entitled to distribution or possession (rule of convenience)
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“Saving” Clauses
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a. “Notwithstanding any other provision in this instrument, this trust shall terminate, if it has not previously terminated, 21 years after the death of the survivor of A and A’s issue living at my death. In the case of such termination, the then remaining principal and undistributed income of the trust shall be distributed to A’s issue then living per stirpes, or, if no issue of A is then living, to the American Red Cross.”
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What is Per Stirpes
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system of inheritance under which children take among them the share which their parent would have taken had he survived the decedent. Thus the children are said to claim their shares by representing their parent.
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