Present estates and Future Interests

Fee Tail

"To A & the heirs of his body" Duration: Until A and his line die out Correlative Future Interest in Grantor: Reversion Correlative Future Interest in 3rd party: None (but remainder is possible)

accompanying Future Interest in Grantor—right of entry

As noted above, a right of entry (also called a power of termination) must be expressly reserved; in contrast with a possibility of reverter, it doesn't arise automatically. Most courts hold that rights of entry are not transferable inter vivos, but most states agree they are devisable by will, and all states agree they are descendible through intestacy.

unborn Widow or Widower

Because a person's widow (or widower) is not determined until their death, it may turn out to be someone who was not in being at the time of the disposition. eXaMPLe O conveys "to A for life, then to A's widow for life, then to A's surviving issue in fee." In the absence of a statute to the contrary, the gift to A's issue is invalid because A's widow might be a spouse who was not in being when the interest was created. COMPare A remainder "to A's children" would be valid because, unlike issue, they would be determined at A's death. Where necessary to sustain a gift, a few state statutes raise a presumption that any reference to a person's spouse, widow, or widower is to a person in being at the time of the transfer.

Right of Entry

Correlative Present Interest: Fee Simple Subject to Condition Subsequent Example: "To A on condition that if alcohol is used on the premises, O shall have the right to reenter and retake the premises" Rights of Grantor: Estate does not revert automatically; grantor must exercise his right of entry Alienability: Descendible and devisable, but some courts hold not transferable inter vivos

distinguishing Conditions subsequent and Precedent

It's important to know the difference between a condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to total divestment. To tell the difference, apply the Comma Rule. When conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder, the condition is a condition subsequent, and you have a vested remainder subject to complete defeasance.

absolute restraints on alienation are Void

Keep an eye out for conditions that purport to restrict the transferee's ability to transfer a fee simple. An absolute restraint on alienation is an absolute ban on the power to sell or transfer that is not linked to any reasonable time-limited purpose. Under the Rule Against Restraints on Alienation (discussed in Module 5), such absolute restraints on alienation of a fee simple are void.

application of rule against Perpetuities

The Rule Against Perpetuities applies to the equitable future interests of the beneficiaries in a private trust just as it does to "legal" future interests.

COnseQuenCes OF VIOLatInG ruLe- OFFensIVe Interest strICKen

Violation of the Rule destroys only the offending interest.

Fee Simple Absolute

"To A & his heirs" "To A" Duration: forever Correlative Future Interest in Grantor: none Correlative Future Interest in 3rd party: none

Fee Simple Subject to Condition Subsequent

"To A & his heirs, but if . . ." upon condition that . . ." provided that . . ." Duration: Until happening of named event and reentry by grantor Correlative Future Interest in Grantor: Right of Entry Correlative Future Interest in 3rd party: (See Fee Simple Subject to an Executory Interest, below)

eXaMPLes

1) T's will devises property to W for life, then to A's children. At the time the will is executed, A has two children, B and C. A then has another child, D. T dies. A has child E, then W dies. AfterW's death, A has another child, F. The class closed at W's death because it was time to make the distribution. Thus, B, C, D, and E share the property, and F is excluded. 2) T's will devises the residue of his estate "to those of A's children who attain age 21." If any of A's children is 21 at T's death, the class closes at that time. Otherwise it closes when one of A's children reaches age 21. But remember, if it had been a future gift (that is, "to A for life, then to such of A's children who attain age 21"), the class would remain open until the life tenant's death even if some of the class members had reached the stated age at T's death.

Fee Simple Subject to an Executory Interest

1. "To A & his heirs for so longas . . ., and ifnot . . ., to B" 2. "To A & his heirs, but if . . ., to B" Duration: 1. As long as condition is met, then to third party 2. Until happening of event Correlative Future Interest in Grantor: 1. (See Fee Simple Determinable, above) 2. (See Fee Simple Subject to Condition Subsequent, above) Correlative Future Interest in 3rd party: 1. Executory Interest 2. Executory Interest

Life Estate (may be defeasible)

1. "To A for life," or "To A for the life of B" 2. "To A for life, then to B" 3. "To A for life, but if . . ., to B" Duration: 1. Until the end of the measuring life 2. Until the end of the measuring life 3. Until the end of the measuring life or the happening of the named event Correlative Future Interest in Grantor: 1. reversion 2. none 3. reversion Correlative Future Interest in 3rd party: 1. none 2. remainder 3. executory interest

Class Gifts

A "class" is a group of persons having a common characteristic (for example, children, nephews). The share of each member is determined by the number of persons in the class. A class gift of a remainder may be vested subject to open (where at least one group member exists) or contingent (where all group members are unascertained).

Charitable trusts

A charitable trust must have a charitable purpose. The rules governing charitable trusts differ from those applicable to private trusts in three important ways: (1) a charitable trust must have indefinite beneficiaries; (2) it may be perpetual (that is, the Rule Against Perpetuities does not apply); and(3) the cypres doctrine, which allows a court to select an alternative charity when the purpose of the settlor becomes impracticable or impossible, applies. Charitable trusts may be enforced by an action of the attorney general of the state. Remember that the Rule Against Perpetuities does apply to a shift from a private to charitable use or a charitable to private use.

When the Class Closes—the rule of Convenience

A class is closed when no others can join in. To figure out whether a given class has closed, we apply the rule of convenience. Under the rule of convenience, in the absence of express contrary intent, a class closes (that is, no one born after that time may share in the gift) when some member of the class can call for distribution of their share of the class gift. So, a class closes when any member of the class can demand possession.

subject to Condition Precedent

A condition is precedent if it must be satisfied before the remainderman has a right to possession. Look for the condition to appear before the language creating the remainder or for it to be woven into the grant to the remainderman. Think of it as a prerequisite to the remainderman's admission, that is, it's something they must do in order to succeed in taking possession. eXaMPLes 1) O conveys "to A for life, then to B and his heirs if B marries C." B's remainder is contingent because he must marry C before he can take possession. 2) O conveys "to A for life, then to B and his heirs if B marries C, otherwise to D and his heirs." B and D have alternative contingent remainders.

exam tip

A conveyance that contains both durational language and a power of termination will likely be construed as creating a fee simple subject to a condition subsequent, because the forfeiture is optional at the grantor's election rather than automatic. Policy disfavors forfeiture of estates.

How Created

A fee simple determinable is created by durational language, such as "to A for so long as...," "to A while...," "to A during...," or "to A until...."

Fee simple determinable (and Possibility of reverter)

A fee simple determinable terminates upon the happening of a stated event and automatically reverts to the grantor.

Fee simple subject to Condition subsequent (and right of entry)

A fee simple subject to a condition subsequent is an estate in which the grantor reserves the right to terminate the estate upon the happening of a stated event, meaning the estate doesn't automatically terminate—the grantor must take some action.

Future Interests

A future interest gives its holder the right or possibility of future possession of an estate. Despite the fact that posses- sion is in the future, a future interest is a present, legally protected right in property. There are six categories of future interests, and we classify them based on whether they are retained by the transferor/grantor or instead, by a transferee. If a future interest is held by a transferor, it must be (1) a possibility of reverter; (2) a right of entry; or (3) a reversion. If a future interest is held by someone other than the transferor, it must be (1) a contingent remainder; (2) a vested remainder (of which there are three types, discussed below); or (3) an executory interest (of which there are two types, discussed below).

administrative Contingency

A gift conditioned on an administrative contingency (for example, admission of will to probate) violates the Rule. eXaMPLe A gift "to my issue surviving at the distribution of my estate" is invalid because the estate might be administered beyond the period of the Rule. A few state reform statutes eliminate this problem by raising a presumption that the transferor intended that the contingency should occur, if at all, within 21 years.

Per Capita Gift exception

A gift of a fixed amount to each member of a class is not treated as a class gift under the Rule. eXaMPLe "$1,000 to each of my great-grandchildren, whether born before or after my death." This creates gifts to individuals, each of whom is judged separately under the Rule.

age Contingency Beyond age 21 in Open Class

A gift to an open class conditioned on members surviving beyond age 21 violates the Rule. eXaMPLe "To A for life, then to those of A's children who attain the age of 25." A is alive. She has one child, B, who is 30. The remainder in A's children violates the Rule and is void. Why? Because A is still alive. Thus, the class is still open. B could die tomorrow. A could die thereafter, without having had another child, or A could live, have another child, and die in labor or live. We won't know today, at the time of the grant's creation, whether A will have a child to reach 25 within 21 years of A's death. Thus, the gift is void. Some states have enacted perpetuities reform legislation that reduces such age contingencies to 21.

Life estate Pur Autre Vie (Life of another)

A life estate "pur autre vie" is measured by a life other than the grantee's (for example, "to A for the life of B"). A life estate pur autre vie also results when the life tenant conveys their life estate to another (for example, if A, the holder of a life estate, conveys their interest to B, B has a life estate for the life of A).

Life estate

A life estate is one measured by the life or lives of one or more persons.

natural resources

A life tenant depleting a property's natural resources could constitute voluntary waste. Thus, exploitation of natural resources (for example, minerals) by a life tenant is generally limited to situations when: (1) necessary for repair or maintenance of the land; (2) the land is suitable only for such use; or (3) it's expressly or impliedly permitted by the grantor. Under the open mines doctrine, if mining was done on the land prior to the life estate, the life tenant can continue mining—but they're limited to the mines already open.

Duties of the Life Tenant

A life tenant is obligated to: --Preserve the land and structures in a reasonable state of repair --Pay ordinary taxes on the land. Note that the duty to pay taxes is limited to the extent of the total income or profits generated from the land since the life tenant acquired ownership (or, if the life tenant is in possession of the land herself, to the extent of the greater of the income or profits and the reasonable rental value of the land). If there's no income or profit, the life tenant is required to pay all ordinary taxes only to the extent of the premises' fair rental value. What that means is that when no income or profits are coming in from the land, the life tenant's tax liability for the parcel will be computed not on the basis of Blackacre's fair market value but instead on the basis of its mere fair rental value (a considerably lesser sum). --Pay interest on mortgages (not principal) AND --Pay special assessments for public improvements of short duration (improvements of long duration are apportioned between the life tenant and future interest holder) Note that a life tenant is not obligated to insure the premises for the benefit of remaindermen and is not responsible for damages caused by a third-party tortfeasor.

Present Possessory Estates

A present possessory estate is an interest that gives the holder the right to present possession. We're concerned here with three categories of present possessory freehold estates: --Fee simple absolute --Defeasible fee (of which there are three types) --Life estate Note: Additional present estates, such as concurrent and leasehold estates, are considered in the Multistate Real Property materials. The examiners will expect you to know three things with respect to each of these estates: --What language will create the estate? --Once identified, what are the estate's distinguishing char- acteristics? In other words, is the estate devisable, mean- ing, can it pass by will? Is the estate descendible, meaning, will it pass by the statutes of intestacy if its holder dies intestate (without a will)? Is the estate alienable, meaning, is it transferable inter vivos, or during the holder's lifetime? --Which future interests, if any, is the estate capable of?

unborn or unascertained Persons

A remainder created in unborn or unascertained persons is contingent because until the remainderman is ascertained, no one is ready to take possession if the preceding estate ends. eXaMPLes 1) O conveys "to A for life, then to B's first child." A is alive. B, as yet, has no children. 2) O conveys "to A for life, then to B's heirs." A is alive. B is alive. Because a living person has no heirs, while B is alive, his heirs are unknown. Thus, the remainder is contingent. 3) O conveys "to A for life, then to those children of B who sur- vive A." A is alive, as is B. But we don't yet know which, if any, of B's children will survive A. Thus, the remainder in B's children is contingent.

Future Interests In tranferees— remaInders

A remainder is a future interest in a third person that can become possessory on the natural expiration of the preceding estate. It cannot divest a prior estate, and it cannot follow a time gap after the preceding estate. A remainder must be expressly created in the instrument creating the preceding possessory estate. Remainders are either vested or contingent. eXaMPLes 1) O conveys "to A for life, then to B and his heirs." B has a remainder. 2) O conveys "to A for life, then to B and his heirs one day after A's death." B does not have a remainder (because there is a gap).

Contingent remainder

A remainder is contingent if: (1) it's created in unborn or unascertained persons, or (2) it's subject to a condition precedent, or both. In other words, a remainder may be contingent as to person or as to event.

reversions

A reversion is the estate left in a grantor who conveys less than they own (for example, O conveys "to A for life"; O has a reversion). Whenever a grantor transfers an estate of lesser duration than what they started with-other than instances giving rise to a possibility of reverter or a right of entry-the future interest that arises is a reversion. The reversion arises by operation of law; it does not have to be expressly reserved. A reversion is transferable, devisable by will, and inheritable. Its holder can sue for waste and for tortious damage to the reversionary interest.

shifting executory Interest

A shifting executory interest always follows a defeasible fee and cuts short someone other than the grantor.

springing executory Interest

A springing executory interest cuts short the interest of O, the grantor. eXaMPLes 1) In a grant from O "to A and his heirs when A marries B" (A has not yet married B), A has a springing executory interest because if and when she marries B she will divest O, the grantor. 2) In a grant from O "to A for life, then to B and his heirs; but if B predeceases A, then to C and his heirs" (A is alive; B is alive), C has a shifting executory interest because if B predeceases A, C will take, thereby divesting B's estate of B's interest.

Creation of trusts

A trust can be created by will (testamentary trust), inter vivos transfer of the trust res, or inter vivos declaration that the settlor is holding property in trust. All trusts of real property must be in writing. Note that a settlor may bequeath (by will) property to a trust created during their lifetime—that is, they may "pour it over" into the trust.

trusts

A trust is a fiduciary relationship with respect to specific property (res) wherein the trustee holds legal title to the property subject to enforceable equitable rights in a beneficiary. The creator of a trust is the settlor, who must own the property at the time of trust creation and must have had the intent to create the trust.

Vested remainders

A vested remainder is one created in an existing and ascertained person, and not subject to a condition precedent. There are three types of vested remainders: (1) the indefeasibly vested remainder; (2) the vested remainder subject to total divestment (also known as the vested remainder subject to complete defeasance); and (3) the vested remainder subject to open.

Fertile Octogenarian

A woman is conclusively presumed to be capable of bearing children, regardless of her age or medical condition. A few states have enacted perpetuities reform statutes that raise a presumption that women over a certain age (for example, 55) cannot bear children. Also, medical testimony regarding a woman's childbearing capacity is admissible in these states.

exam tip

All reversionary interests are vested and, thus, not subject to the Rule Against Perpetuities (discussed later).

ameliorative Waste

Ameliorative waste is a change that benefits the property economically. The life tenant can't engage in acts that will enhance the property's value, unless all future interest holders are known and consent. Why? Property law honors the future interest holders' reasonable expectations and sentimental value. Notwithstanding the common law's recognition of ameliorative waste, note that today a life tenant may alter or even demolish existing buildings if: (1) The market value of the future interests is not diminished; and either (2) The remaindermen do not object; or (3) A substantial and permanent change in the neighbor- hood conditions (for example, change from residential to 90% industrial) has deprived the property in its current form of reasonable productivity or usefulness.

Bright Line rule-executory Interest With no time Limit Violates the rule

An executory interest that follows a defeasible fee, with no limit on the time within which it must vest (for example, "to A for so long as no liquor is consumed on the premises, then to B"), violates the Rule Against Perpetuities, and the executory interest is stricken. (An executory interest following a defeasible fee is valid only if the condition is specific to the fee holder or expressly limited to the perpetuities period.)

Indefeasibly Vested remainder

An indefeasibly vested remainder is a vested remainder that is not subject to divestment or diminution. The holder of this remainder is certain to acquire an estate in the future, with no strings or conditions attached.

"Must Vest"

An interest vests for purposes of the Rule when it becomes: (1) possessory, or (2) an indefeasibly vested remainder or a vested remainder subject to total divestment. In analyzing Rule Against Perpetuities problems, keep in mind that the key is when the interest could possibly vest—not when it's likely to vest or even when it did. You must examine the grant as of the time of its creation and be sure that if the interest vests it will be within the period of the Rule (that is, life in being plus 21 years). If there's any possibility that it could vest beyond the period, it's void.

Options and rights of First refusal

An option is a contract, supported by consideration, that creates in the optionee a right to purchase the property on terms provided in the option. Under a right of first refusal, if a seller receives a third party's offer to purchase the property, the right of first refusal gives its holder the right to purchase the property, usually on the same terms as that offer.

restraInts On a Fee sIMPLe

As mentioned in Module 2, all absolute restraints on fee simple estates are void; thus, any such restriction falls away and the grantee may freely transfer the property. A partial restraint is one that purports to restrict the power to transfer to specific persons, or by a specific method, or until a specific time. Forfeiture or promissory restraints on fee simple estates for a limited time and reasonable purpose may be upheld (for example, this might look like a restraint on transfer that's limited to the joint lifetimes of co-owners, which could be seen as a reasonable way to ensure that neither co-owner would have to reside with a stranger).

destructibility of Contingent remainders

At common law, a contingent remainder was destroyed if it failed to vest before or upon the termination of the preceding freehold estate. eXaMPLe O conveys "to A for life, then to B if she reaches age 21." If A dies before B reaches age 21, B's remainder is destroyed. Most states have abolished the destructibility rule. In those states, B's interest in the above example would be converted to an executory interest upon A's death because it will divest O's reversionary estate when B turns 21.

Rule in shelley's Case (rule against remainders in Grantee's Heirs)

At common law, if the same instrument created a life estate in A and gave the remainder only to A's heirs, the remainder was not recognized, and A took the life estate and the remainder. eXaMPLe O conveys "to A for life, then to B for life, then to the heirs of A." The Rule transforms the remainder in A's heirs into a remainder in A. (No merger, however, because the remainder for life in B is vested.) The Rule in Shelley's Case has been abolished in most states. Since most jurisdictions have abolished the Rule in Shelley's Case, you will most likely encounter it on the MBE as a wrong answer choice that can be quickly eliminated.

Conditions and Limitations Violating Public Policy are Void

Conditions or limitations that violate public policy generally are struck down, and the grantee takes free of the restraint. If the purpose of the condition is to penalize marriage or encourage divorce, it likely will be struck down. However, if the purpose is to give support until marriage or in the event of divorce, it likely will be upheld.

Possibility of Reverter

Correlative Present Interest: Fee Simple Determinable Example: "To A so long as alcohol is not used on the premises" Rights of Grantor: Estate automatically reverts to grantor upon occurrence of stated event Alienability: Transferable, descendible, and devisable

deFeasIBLe Fees

Defeasible fees are fee simple estates (that is, they are of uncertain or potentially infinite duration) that can be terminated upon the happening of a stated event. You can think of the defeasible fees as three types of fee simple ("to A") with a catch (a condition attached) that renders the estate subject to the risk of forfeiture. In other words, to be defeasible means to be capable of forfeiture.

aPPLICatIOn OF tHe ruLe tO CLass GIFts-- "Gift to subclass" exception

Each gift to a subclass may be treated as a separate gift under the Rule. eXaMPLe "Income to A for life, then to A's children for their lives. Upon the death of each of A's children, the corpus is to be distributed to that child's issue, per stirpes." The gifts to each of A's children's issue are considered separately. Thus, the gifts to issue of A's children living at the time of the disposition are good, but the gifts to the issue of after born children of A violate the Rule and are void.

Interests eXeMPt FrOM ruLe

Except for vested remainders subject to open, the Rule Against Perpetuities does not apply to vested interests. Thus, other vested remainders, reversions, possibilities of reverter, and rights of entry are not subject to the Rule. Moreover, there is a charity-to-charity exception to the Rule (that is, the Rule does not apply to any disposition from one charity to another), and an exception for options to purchase held by a current tenant.

Future Interests In transferees— Executory Interests

Executory interests are future interests in third parties that either divest a transferee's preceding freehold estate ("shifting interests"), or follow a gap in possession or cut short a grantor's estate ("springing interests"). While both remainders and executory interests are created in transferees, you can distinguish executory interests by remembering they must take effect by cutting short some interest - either in another person (shifting) or in the grantor or the grantor's heirs (springing).

How Created

For Life of Grantee: The life estate is an estate that must be measured in explicit lifetime terms, and never in terms of years. Think of the life estate as the romantic estate. The usual life estate is measured by the life of the grantee. eXaMPLe "To A for life." A has a life estate and is known as a life tenant. COMPare 1) "To A for 50 years, if she lives that long."2) "To A for life, but in no event more than 10 years." Both of these examples create the term of years (a leasehold interest), and not a life estate. Remember that a life estate must be measured in explicit lifetime terms.

extension to Heirs and assigns Violates the rule

For exam purposes, options or rights of first refusal that are not personal to the holder (that is, which are extended to the holder's heirs and assigns) will violate the Rule because they might be exercised later than the end of the perpetuities period. Note: The Rule Against Perpetuities does not apply to options to purchase held by the current lessee. Watch for a fact pattern on the exam where a tenant has an option to purchase beyond the perpetuities period. Remember that the Rule does not apply to such an option held by a current tenant or his assignee, but it does apply to a former tenant and to any party to whom the current tenant might transfer the option separately from the lease (in jurisdictions permitting such a transfer).

restraInts On a LIFe estate

Forfeiture and promissory restraints on life estates are valid, but disabling restraints are void. Remember that the Rule Against Restraints on Alienation applies only to legal interests. Restraints on the alienation of equitable interests (for exam- ple, spendthrift clauses in trust instruments) are valid.

exam tip

Generally, when the instrument creating a gift of a future interest in an open class becomes effective, existing class members have a vested remainder subject to open. But watch for a condition precedent, which will prevent the remainder from vesting. For example, "to A for life, remainder to those of B's children who survive A" creates a contingent remainder in B's children even if they are in existence—and even if B is dead—because the remainder is contingent on B's children surviving A.

Fee Simple Absolute

How Created: "To A" or "To A and his heirs." Today, a fee simple is presumed in the absence of express contrary intent (that is, the common law words "and his heirs" are not necessary). Thus, "to A" is sufficient to create the fee simple absolute. Distinguishing Characteristics: A fee simple absolute is absolute ownership of indefinite or potentially infinite duration. It's freely transferable, devisable by will, and descendible through intestacy.

Fee simple subject to an executory Interest

If a fee simple estate terminates upon the happening of a stated event (because it is determinable or subject to a condition subsequent) and then passes to a third party rather than reverting to the grantor or giving the grantor a right to terminate, the third party has an executory interest.

Future Interests In transferees OVerVIeW

If a future interest is held by someone other than the grantor, it has to be either: A contingent remainder, OR A vested remainder (of which there are three types): (1) the indefeasibly vested remainder, (2) the vested remainder subject to complete defeasance (also known as the vested remainder subject to total divestment), and (3) the vested remainder subject to open, OR An executory interest (of which there are two types: (1) the shifting executory interest, and (2) the springing executory interest).

renunciation of Life estate

If a life tenant who receives the estate by will or intestacy renounces their interest, the future interest following the life estate is generally accelerated so that it becomes immediately possessory.

accompanying Future Interest

If the future interest is held by O, it is called a reversion. If held by a third party, it is called a remainder.

"Bad-as-to-One, Bad-as-to-all" rule

If the interest of any class member may vest too remotely, the whole class gift fails. For the class gift to vest, the class must be closed and all conditions precedent must be satisfied for every member.

Compare—Worthless Property

If the land is practically worthless in its present state, the life tenant may seek a partition sale, the proceeds of which are put in trust with income paid to the life tenant.

discriminatory restraints

Judicial enforcement of restraints prohibiting the transfer or use of property to or by a person of a specified racial, religious, or ethnic group is discriminatory state action forbidden by the Fourteenth Amendment. Discriminatory restrictions may also violate the Fair Housing Act.

Words of desire, Hope, or Intention do not Create a defeasible Fee

Keep in mind that words of mere desire, hope, aspiration, expectation, or motivation are insufficient to render an estate a defeasible fee. Such language is merely an expression of motive rather than a limit on duration, so it's not construed as imposing a condition on the grant. Courts disfavor restrictions on free land use and won't find a defeasible fee unless clear, durational language is used. eXaMPLes In each of these instances, A is vested with a fee simple absolute, and not a defeasible fee: 1) "To A for the purpose of constructing a day care center." 2) "To A with the hope that he becomes a lawyer." 3) "To A with the expectation that the premises will be used as a hardware store."

Compare—Leasehold tenant

Leasehold tenants remain liable for ameliorative waste even if the neighborhood has changed and the market value of the premises was increased.

How Created

Look for a third party who will take upon forfeiture of a fee simple estate—for example, "to A, but if X event occurs, then to B." Notice that in such a grant, B takes if the condition occurs and cuts short A's fee simple estate.

How Created

Look for two main ingredients: (1) the use of conditional words, such as "upon condition that," "provided that," "but if," and "if it happens that," and (2) an explicit statement of the grantor's right to re-enter. Thus, a grant such as "to A, but if X event occurs, grantor reserves the right to re-enter and retake" creates a fee simple subject to a condition subsequent in A and a right of entry in the grantor. We have conditional words ("but if...") as well as an explicit statement of the grantor's right to re-enter ("grantor reserves the right to re-enter and retake").

Compare

O conveys "to A for life, then to B and his heirs; but if B marries C, then to D and his heirs." B has a vested remainder (because there's no condition precedent) subject to divestment by D's executory interest.

Permissive Waste (neglect)

Permissive waste occurs when a life tenant fails to comply with their duties, such as by allowing land to fall into disrepair or by failing to reasonably protect the land. You can think of permissive waste as synonymous with neglect.

accompanying Future Interest in Grantor—Possibility of reverter

Recall that one of the distinguishing characteristics of a fee simple determinable is that the estate automatically reverts back to the grantor upon the happening of the stated event. That reversionary future interest in the grantor is called a possibility of reverter. Whenever a grantor conveys a fee simple determinable, they automatically retain a possibility of reverter. A possibility of reverter is transferable, devisable by will, and descendible by intestacy.

exam tip

Remember that statements of motive or purpose do not create a determinable fee. To create a fee simple determinable, words limiting the duration of the estate must be used. Watch for grants such as "for the purpose of" and "to be used for"; they are merely expres- sions of motive.

restraInts On Future Interests

Restraints on vested future interests generally are valid to the extent that restraints on present interests of the same type are valid. For example, forfeiture and promissory restraints on vested remainders for life are valid, but disabling restraints on vested remainders for life are void.

Cy Pres Doctrine ("as near as Possible")

Some reform measures allow a court to reform invalid interests. If a given disposition violates the rule, a court may reform it in a way that most closely matches the grantor's intent, while still complying with the RAP.

survival

Survival of a class member to the time of closing is usually unnecessary to share in a future gift—unless survival was made an express condition (for example, "to A for life and then to her surviving children"). However, certain terms are construed to create implied survivorship conditions (for example, widow, issue, heirs, next of kin). Note that under some anti-lapse statutes, a gift will be saved for the party's descendants even if there's an express survival contingency (discussed further in the Multistate Real Property materials ("Conveyance by Gift and Will")).

tHe ruLe aGaInst PerPetuItIes

The Rule Against Perpetuities ("RAP") provides that certain kinds of future interests are void if there is any possibility, however remote, that the interest might vest more than 21 years after a person alive at the time of the grant has died. Think of this Rule as one against perpetual uncertainty. We're trying to strike a balance between, on the one hand, letting landowners exert control over who'll take their land after they've died and, on the other, knowing for sure who'll take a piece of land in the future. So we allow any uncertainty about future ownership to persist only for a particular period of time: the perpetuities period. Remember that the Rule Against Perpetuities applies only to contingent remainders, executory interests, vested remainders subject to open, options to purchase, and rights of first refusal. The grant- or's interests (reversions, possibilities of reverter, rights of entry) are safe from the Rule; you don't need to consider them.

distinguishing Characteristics

The fee simple determinable, like all of the defeasible fees, is transferable, devisable by will, and descendible through intestacy, but always subject to the attached condition. Thus, a fee simple determinable can be conveyed, but the grantee takes subject to the estate's being terminated by the specified event. Remember, if the stated condition is violated, forfeiture is automatic.

Fee tail

The fee tail is an estate where inheritability is limited to lineal heirs. It's created by the words "to A and the heirs of his body." Most jurisdictions have abolished the fee tail, and an attempt to create one results in a fee simple.

OtHer VaLId restraInts On aLIenatIOn

The following are valid restraints on alienation: --Reasonable restrictions in commercial transactions --Reasonable options and rights of first refusal --Restrictions on assignment and sublease of leaseholds (for example, requiring landlord's consent)

distinguishing Characteristics—doctrine of Waste

The life tenant is entitled to all ordinary uses and profits from the land. The life tenant must not commit waste. There are three types of waste: • Voluntary • Permissive • Ameliorative A life tenant thus can't do anything that injures the interests of a remainderman or holder of the reversion. A future interest holder may sue for damages or to enjoin such acts, and if they spend money to perform the life tenant's obligations (see b., infra), they are entitled to reimbursement.

accompanying Future Interest

The shifting executory interest (discussed below) accompanies the fee simple subject to an executory interest. eXaMPLes 1) "To A and his heirs for so long as liquor is not sold on the premises; in that event, to B." B has an executory interest. 2) "Blackacre to XYZ Church, but if it is used for anything other than church purposes, then to B." B has an executory interest.

WHen PerPetuItIes PerIOd BeGIns tO run

The time the interest is created and the perpetuities period begins to run depends on the instrument and the interest created. For interests granted by will, it runs from the date of the testator's death; for deeds, it is the date of delivery. The period runs on an irrevocable trust from the date it is created; it runs on a revocable trust from the date it becomes irrevocable.

technical rules of the Common Law

There are a few technical rules under common law that address specific situations involving remainders. Be aware that these rules exist, but as they've been abolished in most jurisdictions, you're unlikely to be asked to apply them.

Future Interests In transfer Or— reversionary Interests

There are only three future interests capable of creation in the grantor: the possibility of reverter, the right of entry, and the reversion.

tYPes OF restraInts On aLIenatIOn

There are three types of restraints on alienation: (1) disabling restraints, under which attempted transfers are ineffective; (2) forfeiture restraints, under which an attempted transfer forfeits the interest; and (3) promissory restraints, under which an attempted transfer breaches a covenant. A disabling restraint on any legal interest is void. Forfeiture and promissory restraints may be valid, depending on the nature of the restraint and the interest involved.

Possibilities of reverter and rights of entry

These interests were discussed in Module 2 in connection with defeasible fees. Remember that the possibility of reverter accompanies the fee simple determinable and the right of entry (also known as the power of termination) accompanies the fee simple subject to condition subsequent.

The Uniform Statutory Rule Against Perpetuities (USRAP)

This codifies the common law RAP and, in addition, provides for an alternative 90-year vesting period.

distinguishing Characteristics

This estate is just like the fee simple determinable, only now, if the condition occurs, the estate is automatically forfeited in favor of someone other than the grantor.

Vested remainder subject to Open

This is a vested remainder created in a class of persons (for example, "children") that is certain to become possessory, but is subject to diminution—for example, by the birth of additional persons who will share in the remainder as a class. In other words, we have a group of persons, at least one of whom is qualified to take possession, but each group member's share could get smaller because additional takers, not yet ascertained, may still join the class.

Vested remainder subject to total divestment

This is a vested remainder that is subject to a condition subsequent. It is also known as a vested remainder subject to complete defeasance. Here, the remainderman exists. His taking is not subject to any condition precedent. However, his right to possession could be cut short because of a condition subsequent. eXaMPLe O conveys "to A for life, then to B and his heirs; but if B dies un- married, then to C and his heirs." B is alive and unmarried. B has a vested remainder subject to total divestment by C's executory interest.

Fee Simple Determinable

To A & his heirs for so long as . . ." until . . ."while . . ." during . . ." Duration: As long as condition is met, then automatically to grantor Correlative Future Interest in Grantor: Possibility of Reverter Correlative Future Interest in 3rd party: (See Fee Simple Subject to an Executory Interest, below)

exam tip

To remember the remainder, think of it as: • Sociable. Remainders never travel alone. In other words, remainders always accompany a preceding estate of known, fixed duration (such as a life estate or term of years). • Patient and polite. A remainder never cuts short or divests the prior taker. Instead, it patiently waits its turn and won't take until the present life estate or term of years comes to its conclusion. Because a remainder cannot "cut short" a preceding estate, it can never follow a fee simple estate, which is of potentially infinite duration. (Executory interests are the future interests that cut short preceding estates or follow a gap after them.)

Modern trend-apply rule against restraints on alienation

Under modern authorities, the Rule Against Restraints on Alienation is applied to options and rights of first refusal rather than the Rule Against Perpetuities. An option or right of first refusal will thus be valid if it does not impose an unreasonable restraint on alienation. A significant minority of courts will also construe an option or right of first refusal as lasting only for a reasonable time to avoid invalidating the interest.

doctrine of Worthier title (rule against remainders in Grantor's Heirs)

Under the Doctrine of Worthier Title ("DOWT"), a remainder in the grantor's heirs is invalid and becomes a reversion in the grantor. eXaMPLe O grants Blackacre "to A for life, then to the heirs of O." Under DOWT, A has a life estate, and O has a reversion. DOWT is generally treated as a rule of construction (that is, it does not apply if an intent to create a remainder in heirs has been clearly manifested). DOWT applies only to inter vivos transfers (not wills), and only if the word "heirs" is used.

"Wait and see" or "second Look" doctrine

Under this majority reform effort, the validity of any suspect future interest is determined on the basis of the facts as they exist at the conclusion of our measuring life.

"LIVes In BeInG"

Unless other measuring lives are specified, one connected with the vesting of the interest is used. You are looking for a person alive at the date of the conveyance whose life and/or death is relevant to the prescribed condition's occurrence.

distinguishing Characteristics

Unlike the fee simple determinable, the fee simple subject to condition subsequent is not automatically terminated if the stated condition occurs. The occurrence of the condition gives the grantor the right to cut the estate short at their prerogative. So, to distinguish the fee simple subject to condition subsequent on the exam, remember: "it's my prerogative." The grantor may choose to terminate—or not—if the condition occurs.

transferability OF reMaInders and eXeCutOrY Interests

Vested remainders are fully transferable, descendible by intestacy, and devisable by will. At common law, contingent remainders and executory interests were not transferable inter vivos, but most courts today hold that they are freely transferable. Contingent remainders and executory interests are descendible and devisable, provided survival is not a condition to the interest's taking. Any future interest that is transferable is subject to involuntary transfer; that is, it is reachable by creditors.

affirmative (Voluntary) Waste

Voluntary, or affirmative, waste is actual, overt conduct that causes a drop in value.

exam tip

When a void interest is stricken, the interests are classified as if the void interest were never there. For example, if O conveys "to A for as long as no liquor is consumed on the premises, then to B," B's interest would be stricken, A would have a fee simple determinable, and O would have a possibility of reverter. In contrast, if O conveys "to A, but if liquor is ever consumed on the premises, then to B," B's interest and the condition are stricken, and A has a fee simple absolute. That's because now, once the offensive future interest is stricken ("then to B"), the conveyance is no longer grammatically sound. Hence, the entire language of condition is stricken, leaving us with "to A." A has a fee simple absolute.

exam tip

Where language is ambiguous, the preference is for vested remainders subject to divestment rather than contingent remainders or executory interests.

Vested Remainder Subject to Total Divestment

example: "To A for life, and on A's death, to B; but if B predeceases A, then to C." (B has a vested remainder subject to total divestment.) alienability: Transferable, descendible, and devisable subject to rule against perpetuities: No

Shifting Executory Interest

example: "To A for life, remainder to B and her heirs; but if B predeceases A, then to C and his heirs." (C has a shifting executory interest.) alienability: Transferable in most states (not at common law), descendible, and devisable subject to rule against perpetuities: Yes

Vested Remainder Subject to Open

example: "To A for life, then to A's children in equal shares." alienability: Transferable, descendible, and devisable subject to rule against perpetuities: Yes—as long as the class remains open

Contingent Remainder

example: "To A for life, then to B if B marries C." OR "To A for life, then to A's surviving children." alienability: Transferable in most states (not at common law), descendible, and devisable subject to rule against perpetuities: Yes

Indefeasibly Vested Remainder

example: "To A for life, then to B." alienability: Transferable, descendible, and devisable subject to rule against perpetuities: No

Springing Executory Interest

example: "To A when and if he becomes a doctor." OR "To A for life, then two years after A's death, to B." alienability: Transferable in most states (not at common law), descendible, and devisable subject to rule against perpetuities: yes

Rule in Shelley's Case

rule: A remainder in a life tenant-grantee's heirs is deemed to be in the life tenant herself. example: "To A for life, then to A's heirs." result: A has a fee simple. modern status: Abolished in most jurisdictions. modern result: A's heirs have a contingent remainder.

Doctrine of Worthier Title

rule: A remainder in the grantor's heirs is ineffective, so grantor has a reversion. example: "To A for life, then to my heirs at law." result: A has a life estate; grantor has a reversion. modern status: Generally treated as rule of construction only. modern result: Grantor's heirs have a contingent remainder.

Destructibility of Contingent Remainders

rule: Contingent remainders are destroyed if not vested at time of termination of preceding estate. example: "To A for life, remainder to A's children who reach 21." result: If A has no children who are at least 21 at time of her death, property reverts to grantor. modern status: Abolished in most jurisdictions. modern result: Property reverts to grantor; A's children have a springing executory interest.

FOur steP teCHnIQue FOr assessInG POtentIaL ruLe aGaInst PerPetuItIes PrOBLeMs

step 1 - determine the Interests First, determine which future interests have been created by the conveyance and whether the Rule could apply to that interest. Remember, the Rule potentially applies only to contingent remainders, executory interests, and certain vested remainders subject to open. The Rule does not apply to any of the three future interests capable of creation in the grantor (the possibility of reverter, the right of entry, and the reversion), indefeasibly vested remainders, or vested remainders subject to total divestment. step 2 - How does the Future Interest Holder take?Second, determine what has to happen for the future interest holder to take. Does the holder of a previous estate need to die? Does a previous holder need to have had children? Does a certain condition need to be met? step 3 - Find the Measuring Life Third, look for the people alive at the date of the conveyance whose lives and/or deaths are relevant to what has to happen for the future interest holder to take. step 4-When Will We Know If the Future Interest Holder Can take?Fourth, determine whether we'll know for sure within 21 years of the death of a measuring life if the future interest holder(s) can take. If so, the conveyance is good. By contrast, if we won't know for sure within 21 years of the death of a measuring life whether the future interest holder can take, the future interest is void.