2013 SPRING
BALLARD PROPERTY Property Outline Part 1 Professor: Megan Ballard 1. Estates & Future Interests a. Introduction i. Primary Themes: different rights in the same property, rights can be measured in chunks of time, different people having concurrent rights in property, want to keep land dispersed. ii. Policy: avoid feudalism, enhance marketability (alienate), keeping property dispersed iii. History 1. William the Conqueror takes over England 2. He consolidates power and demands services from Tenant in Chief in exchange for possessory rights 3. Chief subinfeudate to Mesne Lord 4. King demands incidents instead of services to get money instead of knights 5. Relief: an incident which a person pays to claim the inherited property 6. Lords would grant property to tenant and the tenants could give to heirs when they die 7. Tenants discovered ways of getting out of incidents or services by subinfeudating 8. Subinfeudation was tax evasion, and the only means of trading property 9. This led the King to pass “Quia emptores” in 1290 to solve the problem of subinfeudation 10. Quia emptores did not allow subinfeudation and allowed the tenant to rent to another without the King’s permission. a. Established the principle of free alienation of land. b. Middle layer began to disappear and the land was mostly held by the king. c. Escheat ­ If a tenant dies without heirs, the land returned to the lord from whom it was held. 11. 1540 Statute of Wills: allowed tenant to devise a will to a non heir b. Definitions i. Subinfeudation: allowing another user to possess the land if they provide the services/incidents that the king required ii. Primogeniture: the system of inheritance by the firstborn son iii. Incidents: a tenant’s fiscal duties owed to his lord. iv. Alienation: the ability to dispose of or transfer property Page 1 of 8 2013 SPRING
BALLARD PROPERTY v. Escheat: the property of a person without heirs goes back to their lord vi. Devise: to convey real property through a will vii. Easement: a person has an interest in using the property but no ownership interest viii. Freehold: there is no pre­established termination of the estate. ix. Fee: interest in land under feudalism x. Estate: the nature and extent of a person’s interest in real property xi. Extent: time, when ownership will end, estate label determines it, end point xii. Possessory Interests/Ownership: a right to property xiii. Present/Future Interests: when a person may enjoy ownership of property xiv. Interest: a possessory right xv. Ancestors: generation(s) above the person (who are alive) xvi. Collateral Kin: related by blood which is not an issue or descendant xvii.Heirs: technical term which means taker under the laws of intestacy which are established by the legislature. xviii. Issue: direct lineal descendants by blood or adoption xix. Descendants: direct lineal descendants by blood or adoption xx. Possessory Estate: the characterization of what the owner owns (merger of the interest name & estate) xxi. Non­Freehold: property that is leased for a defined period of time 1. Grew out of the peasant feudal class which worked for land but were subinfeudators xxii.Freehold Estates: there is no pre­established termination of property interest 1. Grew out of relationship between the lords and the tenants xxiii. Intestacy: when when a person dies without a will c. Estates i. Fee Simple Absolute: ownership ends when transferred, no inherent ending 1. Language: “O to A” ii. Fee Tail: lineal descendants inherit land with no right to alienate. 1. Language: “O to A & the heirs of his body” 2. Only Legal in Delaware, Maine, Rhode Island, Massachusetts iii. Life Estate 1. Language: “A to B for life” 2. Disadvantage: hands of the owner are tied, management is cumbersome 3. White v Brown: “A restraint on alienation is repugnant to the fee” a. Reasoning: i. Because it is unclear then it is a fee absolute ii. Because it is a fee absolute the non­alienation is repugnant iii. Because the non­alienation is repugnant then it is to be ignored 4. Restraints on Alienability a. Law favors the right to alienate land b. Repugnant to Fee Simple Absolute Page 2 of 8 2013 SPRING
BALLARD PROPERTY c. Restraints are unfavorable because they make property unmarketable, it harms economy d. Considerations for Unreasonable Restraints: i. Limits on the length of a restraint ii. Whether it is restraining a FSA or a Life Estate e. Types of Restraints: i. Disabling: eliminates the right to alienate completely ii. Forfeiture: if sale is attempted then the property is forfeited. iii. Promissory: the grantee promises not to transfer his interest 5. Waste: An abuse or destruction to a property by a party in rightful possession. a. Permissive: arises from a failure to act b. Affirmative: voluntary acts c. Ameliorative: change in the property that makes it more valuable 6. Trusts a. Grantor ­> Trustee ­> Beneficiaries b. Grantor decides purpose and limitations of the trust c. Trustee manages the trust for the beneficiaries d. Beneficiaries receive the benefits of the trust e. Many trusts have a life estate imbedded in them f. Equitable Life Estate / Life Estate in Trust: when life estate is given within a trust. (e.g. “O to T to manage the property for the benefit of A for A's life”) iv. Defeasible 1. Fee simple determinable (or life estate determinable)­ fee simple will automatically end when a stated event or limitation happens. a. Example: “O to A so long as the property is used as a church.” b. Language: words of duration that indicate a time limit, “ so long,” “while,” “during,” until,” “as long as” c. Future Interest: Possibility of Reverter d. The original owner is the only person who can hold a Possibility of Reverter but the owner may give the interest in a will. 2. Fee simple subject to condition subsequent: (Or life estate subject to condition subsequent) when stated event happens, grantor has right to re­enter. a. Example: “O to A provided that A uses the property for a church, and if A uses it for another purpose, O has a right to reenter and retake the property.” b. : Words of condition. “but if” “provided, that...” “on the condition that...” c. Future Interest: Right of (Re)entry Page 3 of 8 2013 SPRING
BALLARD PROPERTY d. The point A turns this into a nightclub, hostility is not as easy to see, and we’ll talk about this later. 3. Fee simple subject to executory limitation; (Or life estate subject to executory limitation) estate ends when a limitation or condition is violated or occurs AND the future interest belongs to anyone except the original owner. a. Example: “O to A on the condition that A uses the property for a church, but to B if A ceases to use it as a church” b. Language: You can create this with words of duration OR condition. c. Future Interest: Executory interest v. Future Interests 1. Grantor a. Reversion i. Estate it Follows: Life Estate ii. Possession: automatic upon termination of Life Estate iii. Language: “O to A for life” b. Possibility of Reverter i. Estate it Follows: Determinable ii. Possession: automatic when the stated event happens. iii. Language: “O to A as long as the property is used for a library.” c. Right of Entry i. Estate it Follows: Subject to Condition Subsequent ii. Possession: when the condition is satisfied O must enter the property to retake possession iii. Language: “but if A ceases to use the property for a library, O has the right to enter and retake the premises” 2. Grantee a. Remainder: future interest owned by a grantee that can become a present interest (but might not) at the end of all other prior interests that were created at the same time Language: “O to A for life, and then to B” i. Vested: to persons ascertained at the time of the conveyance AND no conditions must occur before they will have the right to control the property. ●
Absolutely Vested: certain to become possessory in the future and will not be divested. Language: “O to A for life, then to B” ●
Vesed Subject to Open:t to a class of persons with at least one existing member and other persons not yet ascertained may be added to the class until the class closes. Page 4 of 8 2013 SPRING
BALLARD PROPERTY Language: “O to A for life, then to the grandchildren of B (assume that B has children and one living grandchild)” ●
Vested Subject to Complete Divestment: may be terminated by an event that occurs after the original conveyance. Limitations are a separate clause Language: “O to A for life, then to B, so long as B survives A” ●
Contingent: A remainder that is created in an unascertained person OR it is subject to a condition precedent. The natural termination of the preceding estate is not a condition precedent. Limitations are written in the same clause. Language: “O to A for life, then to B so long as B survives A” ●
Alternate Contingent: it is an alternate contingent because it is a second contingent interest in the same possessory estate. Language: “O to A for life, then to B so long as B survives A, if not then to C.” ●
Executory Interests: future interest owned by a transferee that is not a remainder and can become possessory only by divesting the previous estate. Language: O to A for life, then to B if A. Shifting: Divests or cuts short some interest in another transferee. Shifts from a transferee, not from the transferor 1. O to A for life, then to B, but if B declares bankruptcy, then to C a. C has a future executory interest b. C’s interest will cut off B’s interest if B declares bankruptcy B. Springing: Divests the transferor in the future. Springs from a transferor’s estate, not from a transferee 1. O to A when A turns 21 a. A’s future interest is an executory interest b. It will cut off A’s fee simple 2. Test Language A. ESTATES 1. Fee Simple Absolute: __’s estate is in fee simple absolute because of the language, ‘__,’ and because there is no language limiting the nature or extent of the estate. 2. Fee Tail: __’s estate is in Fee Tail because the words “and heirs of his body” create an estate interest in __’s lineal descendants with no right to alienate. 3. Life Estate: __ owns a possessory interest in life estate, because of the words ‘for life.’ a. Per Autre Vie: It is Per Autre Vie because the estate/interest is held during the lifetime of a person who is not the holder of the estate. 4. Determinable: __’s estate is in Fee Simple Determinable because the words of duration, “___,” indicate that if the specified event occurs, the estate ends and Page 5 of 8 2013 SPRING
BALLARD PROPERTY automatically reverts back to ___, who is the grantor. 5. Subject to Condition Subsequent: __’s estate is in Fee Simple Subject to a Condition Subsequent because the words of condition, “___,” indicate that if the specified event occurs, the estate continues in the grantee until the grantor exercises the Right of Entry and terminates the estate. 6. Subject to Executory Limitation: __’s estate is in Fee Simple Subject to Executory Limitation because the words “___,” indicate that if the specified event occurs, the estate automatically divests in favor of __ , a third person. 7. Nonfreehold: __’s estate is a nonfreehold estate because of the words of duration, “__,” creates a possessory estate interest that is to be held for a specified period of time. B. FUTURE INTERESTS 1. Grantor a. Reversion: __ retains a Reversion because the Rule of Reversion states that the grantor always has a reversion unless he has transferred a possessory estate in fee simple or a vested remainder in fee simple. Here, the possessory estate is a __, and there is no vested remainder. b. Possibility of Reverter: __ retains a Possibility of Reverter because __’s interest follows a fee simple determinable unless the grantor transfers the property to a third party upon the occurrence of the specified event. Because there was no such transfer, __ automatically becomes possessor of the estate at the time of the occurrence. c. Right of Entry: __ retains a Right of Entry because __ interest follows an estate subject to conditions subsequent that will revert back to (owner) if the condition subsequent, __, occurs.” 2. Non­Grantor a. Remainders: It is a remainder because it waits patiently to become possessory until the natural termination of the prior estate. i. Contingent: It is contingent because a condition precedent, __, must be satisfied (or a party must be ascertained) prior to becoming vested. 1. Alternate Contingent: It is an alternate contingent because it is a second contingent interest in the same possessory estate. ii. Vested: It is vested because the party is ascertained and no condition precedent that must be satisfied. 1. Absolutely Vested: It is absolutely vested because it is certain to become a present interest and will not be divested. 2. Vested Subject to Open: It is subject to open because it may become partially divested by unascertained class members until the class closes. 3. Vested Subject to Complete Divestment: It is subject to Page 6 of 8 2013 SPRING
BALLARD PROPERTY complete divestment because it may become completely divested if a condition subsequent, __, occurs. b. Executory Interest: It is an executory interest because it is capable of divesting __’s interest or estate if the condition subsequent, __, occurs. i. Shifting: It is shifting because it divests the estate of __, who is not the grantor. ii. Springing: It is springing because it divests the estate of the grantor, __. C. Rule 1. Applicability: “the Rule Against Perpetuities is applicable because this is an irrevocable transfer of real property in the form of a ‘subject interest.’” a. Irrevocable Conveyance i. Deed – when delivered ii. Trusts – when become irrevocable iii. Wills – when person dies b. Real and personal property only c. Only “suspect” future interests i. Contingent remainders ii. Executory Interests iii. Vested remainders subject to open 2. Mystery identification a. The mystery is what... 3. Look for validating life a. Test the person closest to the “mystery” to see if the mystery MUST be solved within their life plus 21 years. b. To be a validating life, the person must be alive at the time the conveyance becomes irrevocable. 4. Test each “suspect” future interest 5. RAP Does not apply to interests held by non­profits D. USRAP: if the common law rule is not satisfied and the interest has not vested in 90 years, the court will exercise “cy pres” power. 1. The 90 years begins at time of conveyance 2. Cy pres­ court determines what the intent of the grantor was and attempts to conform to that intent. Power of equity. E. Washington: 150 years for trusts but the common law RAP for wills and F. Savings Clause 1. “This trust shall terminate, if it has not previously terminated, 21 years after the death of the survivor of Aisha or Betty and living at my death. In case of such termination, the then remaining principal and undistributed income of the trust shall be distributed to Betty’s issue then living per stirpes, or, if no issue of Betty Page 7 of 8 2013 SPRING
BALLARD PROPERTY is then living, to Page 8 of 8