FORMS OF OWNERSHIP

Present interests - Fee simple, life estates, defeasible fees

1. See Chart.

   1. Rationales for allowing different kinds of interests: ensure marketability, encourage transfer

2. FSA: O conveys Greenacre “to A” (used to need “to A and his heirs”)

   1. “A’s heirs” have no interest until A’s death: A can bequeath/devise property to B in will instead of to A’s heirs apparent

3. Life Estate (LE): O conveys Greenacre “to A for life”

   1. Reversion to O (at A’s death, O’s interest becomes possessory FSA)

   2. If A sells to C, C has life estate for the life of A (life estate pur autre vie)

   3. Remainder to B: “O conveys Greenacre to A for life, then to B”: A has life estate, B has remainder

   4. Owner of life estate has restricted right to transfer only for the duration of life estate. (pur autre vie). But the value of a life estate is uncertain and speculative.

   5. Waste – future interest holder may seek damages or injunctive relief when the life tenant commits waste

      1. Permissive waste occurs when life tenant fails to take reasonable steps to preserve or protect property (repairs, paying financial obligations)

      2. Affirmative waste means intentional or negligent exploitation of resources, destruction of existing buildings, or activities that cause permanent injury to or devaluation of land.

      3. Ameliorative waste means alterations to structures on property that enhance market value of property yet change the essential character of the property.

         1. Utilitarian: allow amelioration

         2. Personhood: do not allow amelioration.

      4. Partition: remainder holder can seek to sell entire fee simple and split the proceeds

4. Fee Simple Determinable (FSD): Grant contains express condition, violation of which AUTOMATICALLY leads to forfeiture to the grantor

   1. O retains “possibility of reverter”

   2. To A so long as condition holds

5. Fee Simple Subject to a Condition Subsequent (FSSCS)

   1. O retains a “right of entry” (only effectuated if O affirmatively exercises it)

   2. Express condition, violation of which MAY lead to forfeiture to the grantor

   3. Statute of limitations starts running only when O exercises right to reenter (O can lose by adverse possession – statutory-defined limit in time)

6. Fee Simple Subject to an Executory Limitation (FSSEL)

   1. B receives an “executory interest”

   2. Grant contains an express condition, violation of which AUTOMATICALLY terminates present interest

   3. Future interest – held by 3rd party transferee; called executory interest or executory limitation

7. Rules of construction:

   1. Precatory language that denotes only request or desire is not enforceable.

      1. Example: “To the City, with the hope that the property will be used as Veteran’s Home”

   2. Ambiguous language is construed as a covenant rather than a condition

      1. FSSCS without express right of entry is treated as a covenant

      2. Remedy: Damages or injunction, not forfeiture

   3. Where a grant contains language that suggests FSD and FSSCS, courts prefer FSSCS (forfeiture does not occur automatically)

      1. Rationale:

         1. Utilitarian – favor somebody taking a proactive stance to establish that they will actually make good use of it.

         2. Non-automatic is more informative to the marketplace, more visible to the marketplace

         3. Avoid AP

         4. O may not want the property back

         5. Interpreting the language against the drafter (or, effectuate the grantor’s intent, or construe it to maximize social well-being)

Future interest

1. Possibility of reverter: transferable

2. Right of entry: not transferable

3. Contingent Remainder – remainder is contingent if either:

   1. The identity of the remainderman is unknown (e.g., unborn children); or

   2. The remainder is subject to a condition precedent (express condition that must occur before potential interest can take possession of the property).

4. Vested Remainders – remainders that are not contingent (see above)

   1. Indefeasibly Vested Remainder – a vested remainder not subject to any condition or limitation.

   2. Vested Remainder Subject to Complete Defeasance – contains condition subsequent that could divest remainderman of entire interest

   3. Vested Remainder Subject to Partial Defeasance – involves grants to class that can potentially expand in number

      1. “To A for life, then to A’s children.” At time of grant, A has one child, C1. At time of grant:

         1. A has life estate

         2. C1 has vested remainder subject to partial defeasance in FSA (there could be more children after the grant)

         3. A’s unborn children have contingent remainders in FSA (capable of taking possession at termination of life estate of A)

5. Executory interest

   1. Shifting executory interest: one that divests another transferee

   2. Springing executory interest: one that divests the grantor following a gap in time during which no other transferee has the right to possession.

      1. E.g. to C and her heirs, if C returns from France. C has a springing executory interest.

RAP and Rule against restraints on alienation

1. Steps

   1. Is the type of future interest subject to RAP?

      1. Executory interests

      2. Contingent remainders

      3. Vested remainder subject to partial defeasance

   2. Determine RAP period

      1. Who is alive at creation of interest

      2. Lives end, then add 21 years

   3. Determine vesting under grant, and compare to RAP period

   4. If invalid, is it held by 2nd charity (after 1st charity)?

   5. Determine effect of invalidity (strike out offending clause and enforce the rest)

2. “Wait and See”

   1. What DID happen (not what MIGHT happen), after common law period (lives-in-being + 21 years) or 90 years from creation of interest

   2. Administrative ease

      1. If vested, it is valid

      2. If not vested, but could, then it is not valid

   3. Impact on property rights

      1. Maintains more interests as valid than under common law (one that hypothetically could vest later than RAP time period but do not)

      2. Preserves more grantor dead-hand control (preserves more future interests) than common law RAP

3. Rationale:

   1. Prevent lingering interest from clouding the tilte

      1. However, RAP does not apply to interests of the grantor, so possibility of reverter/ right of entry could cloud the title and affect...

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