Defeasible Estates / Fees

A defeasible estate is created when a grantor transfers land conditionally. Upon the happening of the event or condition stated by the grantor, the transfer may be void or at least subject to annulment (i.e. the estate terminates prior to its natural end point). An estate not subject to such conditions is called an indefeasible estate. Defeasible estates can be used for land use control (in which case, their violation may result in forfeiture of ownerssip) or to control grantee s behavior. Historically, the common law has frowned on the use of defeasible estates as it interferes with the owners' enjoyment of their property and as such has made it difficult to create a valid future interest. Unless a defeasible estate is clearly intended, modern courts will construe the language against this type of estate. NOTE: - Because a defeasible estate always grants less than a full fee simple, a defeasible estate will always create one or more future interests. - Also, every defeasible estate inherently has a forfeiture restraint. Most common types are listed below. (In 3rd Restatement, the 3 type distinction is gone; just fee simple defeasible defined as present interest that terminates upon the happening of a stated event that might or might not occur.

Fee simple determinable (FSD aka fee simple on a special limitation )

A fee simple determinable is an estate that will end automatically if the stated condition occurs. The interest will revert to the grantor or the heirs of the grantor. A possibility of reverter follows a fee simple determinable (retained by the transferor or his heirs). The transferor is transferring less than his entire interest w/ a FSD. FSD is: Alienable during life sell it, gift it Devisable by will Inheritable after you die via intestate succession subject to the stated limitation Note: Some jurisdictions in the U.S. abolished this reversion interest. For example, Kentucky & California abolished the fee simple determinable and possibility of reverter by statute. An attempt to create such an interest is construed as a fee simple subject to condition subsequent (see below), and a person who would have possibility of reverter at common law will instead have a right of entry. Language: Durational language "to A as long as the property is used for a park" to school board, so long as the premises are used for school purposes . . . while used for school purposes . . . during the continuance of said school . . . until the Board no longer uses the land for a school . . . during such time as NOT . . . to the school board for school purposes (this gives fee simple absolute) Notes (possibility of reverter): - may be retained only by transferor or his heirs. - may not be created in a transferee. - is inheritable by heirs and devisable by will. - transfer inter vivos:

C/L: It is not transferable during life except to the owner of the possessory fee (called release / disclaimer) o Modern trend (most states): transferable during life SoL for AdPos starts running as soon as determinable fee ends. o

Fee simple subject to condition subsequent (FSSCS)

A fee simple subject to a condition subsequent is a fee simple that may be cut short or divested at the transferor s election when a stated condition happens. It is created when the words of a grant support the conclusion that the grantor intends to convey a fee simple absolute but has attached a condition to the grant so that if a specified future event happens the grantor will get its fee simple absolute back, provided that the grantor exercises his right of entry (or power of termination). Thus, a fee simple subject to condition subsequent does not end automatically upon the happening of the condition. The future interest is called a "right of reentry" or "right of entry," and the property only reverts back to the original grantor if he exercises this right. Unless and until entry is made, the fee simple continues. The right of entry is not automatic, but rather must be exercised to terminate the fee simple subject to condition subsequent. To exercise right of entry, the holder must take substantial steps to recover possession and title, for example, by filing a lawsuit. Physical entry is not required, but the holder must do more than just proclaim an intent to take back. FSSSCS is: Alienable during life sell it, gift it Devisable by will Inheritable after you die via intestate succession subject to the condition subsequent Language: "to A, but if A sells alcohol on the land, then grantor has the right of entry (or power of termination)." to the school board, its successors and assigns, but if the premises are not used for school purposes, the grantor has a right to re-enter and retake the premises. "may" "but if" "however" "provided that..." that when the premises on condition that if the premises Notes (right of entry): - may be retained only by transferor or his heirs. - may not be created in a transferee. - is inheritable by heirs and devisable by will. - transfer inter vivos: o C/L: It is not transferable during life except to the owner of the possessory fee (called release / disclaimer) o Modern trend (most states): transferable during life o A few states use C/L o A couple states say attempt to transfer inter vivos destroys it - SoL for AdPos: o C/L: starts at exercise of right of reentry (need to be aware and enter) o Many states: starts running as soon as condition occurs.

Some states: right of entry has to be exercised w/in reasonable time , which in turn is defined as SoL.

Subtlety: to A and his heirs, provided always, and upon this condition, that the aforesaid premises shall not be used for a tavern could be construed as: a fee simple subject to condition subsequent (enforceable by forfeiture grantor forfeiting grantee s estate) OR a covenant imposed to benefit the grantor s retained land (enforceable by injunction or damages) Always expressly include right of entry for FSSCS!!

Fee simple subject to Executory limitation (or interest) (FSSEL)

A fee simple subject to an executory limitation is either an estate that ends when a specific condition is met and then transfers to a third party. The interest will not revert to the grantor. If the condition is met, the grantee loses the interest and the third party gains it automatically. The future interest in the third party is called an executory interest. FSSSEL is: Alienable during life sell it, gift it Devisable by will Inheritable after you die via intestate succession subject to executory limitation Language: to the school board, but if it ceases to use the land as a school, to the library. (school board has a FSSEL, and library has an executory interest). to A but in the event of . . . to C Notes (executor interest): - may be retained only by a 3rd party (other than grantor) Example: O grants Blackacre to A and A's heir; but if A ever accepts a candy bar from C, then to B and B's heirs. Here, O is the original owner. She grants A a fee simple subject to the subsequent condition that he doesn't accept a candy bar from C. But unlike a fee simple subject to a condition subsequent, Blackacre goes to a third party (B) instead of the grantor (O) if the condition is met. Also unlike a fee simple subject to a condition subsequent, B then automatically gains the interest in Blackacre and does not only have a mere right to sue for re-entry. What would happen if the property were conveyed? Let's say A sold Blackacre to D. If A afterwards accepted an offer for a candy bar from C, Blackacre automatically goes to B. But if A died without ever accepting a candy bar from C, the condition could not possibly be met. D would then have a fee simple absolute.

Condemnation/Valuation
City takes parcel of land owned in FSD (e.g. only to be used as a park Ink case) w/ future reversionary interest under eminent domain. Who gets the $? y Majority: All goes to holder of fee none to holder of reversionary interest

Restatement: If fee would probably not end w/in a reasonably short period of time, goes to fee owner.

You can have a condemnation clause in a deed. Valuation for FSD: Value of land as public park * (1 probability of cessation of park use) speculative negligible prob. Valuation for Poss. of Rev.: Full market value of land * (1 probability that reverter will never become possessory) high prob.

Palm Springs v. Living Desert Reserve CA FSSCS: we will breach and make this a golf course and you can t do anything b/c your power of termination is worthless RULE: When the condemnor owns the current possessory interest in the land, action of condemnation itself makes violation of the condition imminent value of Power of Termination = full market value of land

Life estate defeasible upon marriage: invalid if purpose is to prevent marriage (pulic policy). OK if purpose is to provide support until marriage w/o desire to hinder marriage.