Future Interests Outline

1. FUTURE INTERESTS

• Steps to identify future interest:

  • (1) Classify the present estate (determinable? Subject to condition subsequent? Life estate?)

  • (2) Identify who has the future interest (grantor? Third party?)

  • (3) Identify conditions for the interest to become possessory.

  • (4) Identify the type of estate in which it will be held.

  • (5) Identify whether the interest is vested or contingent.

  • (6) Apply the relevant rules (Destructibility of Contingent Remainders, Rule in Shelley’s Case, Doctrine of Worthier Title, and RAP)

• A future interest is a non-possessory estate which is capable of becoming possessory.

• Like possessory estates, future interests fall into a limited number of categories. (Numerus clausus).

  1. Reversion

• A reversion is a future interest in the grantor, which follows after the grantor conveys a vested estate of a lesser quantum than he has.

• Reversions follow life estates and leaseholds.

• Reversions are considered vested even though they will not necessarily become possessory.

• Reversions are not subject to the RAP.

• Reversions have always been fully transferrable inter vivos.

  1. Possibility of Reverter

• A POR is created in the grantor and follows a determinable estate.

• A POR automatically returns title to the grantor.

• A POR was not transferrable at common law (except by descent), but is generally transferrable today.

• A POR need not be expressly retained to be created. It is implied provided that the estate returns to the grantor upon the expiration of a stated condition.

  1. Right of Entry

• A ROE is created in the grantor and follows an estate subject to condition subsequent.

• A ROE creates an option in the grantor to retake the premises if he chooses, once a stated condition is met.

• A ROE was inalienable at common law (except by descent), but today it is alienable in some jurisdictions.

  • The ROE could always be released by the holder.

  • A particularly harsh minority rule destroys the ROE if the holder attempts to convey it.

• At common law, the ROE survived forever and was not subject to the RAP. This is the

  1. Remainder

• A remainder is a future interest in a grantee which cannot divest the prior estates. It waits patiently for the preceding estate to expire. A remainder can only become possessory on the natural expiration of the prior estate.

• A remainder only exists when there is a preceding freehold estate and when it is expressly created in the original grant. A remainder can only follow a fee tail, life estate, or term of years.

• A remainder never divests a fee simple. If an interest divests a fee simple, it is an executory interest.

• Remainders are either vested or contingent. A vested remainder is one which is not subject to any condition precedent which must be satisfied before it becomes possessory. A contingent remainder only becomes possessory if a condition precedent is satisfied.

  1. Vested Remainder

• A remainder is vested when it is created in an ascertained person and is not subject to a condition precedent.

• A condition precedent is an express condition attached to the remainder.

• There are three subtypes of vested remainder:

  • Indefeasibly Vested: The remainder is certain to become possessory by X or his heirs.

  • Vested Subject to Open: The remainder is vested in a class, at least one of whom is already entitled to take possession, but which may gain new members diluting the shares of the others before it becomes possessory.

  • Vested Subject to Divestment: The remainder is vested but may be divested by a condition subsequent, or else the remainder contains an inherent limitation. (e.g.: To A for life, then to B, then to C. If B does not outlive A, her remainder is inherently limited and is subject to divestment).

• Vested remainders are alienable inter vivos and devisable, and descends to heirs upon death, unless the grant makes it divest upon death.

• A vested remainder in fee simple never creates a reversion in O.

• The law prefers vested remainders where the grant is ambiguous.

  1. Contingent Remainder

• A remainder is contingent if it is limited to an unascertained person or if it is subject to a condition precedent.

• An “unascertained person” is not yet born or cannot be determined until some event happens.

  • (e.g.: To A for life, then to B’s heirs. A living person has no heirs; so B’s heirs are unascertained until B dies).

• A remainder is subject to a condition precedent when it is subject to an express condition in the grant.

  • (e.g.: To A for life, then to B if B marries C).

  • Termination of the preceding estate is not considered a condition precedent. Any such language is surplusage.

• If survivorship is not an express condition of the grant, it is implied that the remainderman’s interest will survive even if the remainderman does not survive the holder of the prior estate.

  • (e.g.: To A for life, then to A’s issue, and if A dies without issue, to B and her heirs. If B dies before A, and A subsequently dies without issue, B’s heirs take the estate).

• A contingent remainder in fee simple always gives rise to a reversion in O.

• An alternative contingent remainder is created when a contingent remainder is subject to the condition precedent that another contingent remainder fails.

  • (e.g.: To A for life, then to B if B survives A, but if B does not survive A, to C.)

• Unlike vested remainders, contingent remainders were not alienable inter vivos at common law and were only devisable when they were not destroyed upon the death of the holder. Under modern law, contingent remainders are freely alienable provided they are not subject to survivorship and provided that they are held by an ascertained person (majority).

  1. Executory Interests

• An executory interest is a future interest in a grantee which must divest or cut short the prior estate, or else spring out of the grantor.

• Shifting executory interests divest a prior estate in another grantee.

• Springing executory interests divest the grantor at some future time.

• At common law, a grantor could not create...

Buy the full version of these notes or essay plans and more in our Property Outlines.