I. Forms of Ownership
A. Estates and Future Interests
1. General
i. Estate -> property right that measures a person’s interest in terms of duration.
a. Provides menu of possibilities when dividing property over time.
ii. Heirs do not exist until one dies
iii. Words of purchases vs. words of limitation
a. Words of purchase define who receives the interest
b. Words of limitation define what type of estate
c. Ex., to A for life
Purchase limitation
iv. Possessory vs. Nonpossessory
a. Interest in possession vs. interest granting right to use
b. Easement (right to use) -> nonpossessory
v. Freehold vs. Non-freehold estate
a. Formality.
b. Historically connected to military service.
c. Now it’s whether it has been recorded in the county.
vi. Limitation vs. Condition
a. Limitation -> something changes automatically
(1) As long as , until, while, during, unless
(2) Fee simple determinable
b. Condition -> need to assert
(1) Provided that, on condition that, but if
(2) Fee simple subject to condition subsequent
2. Present Possessory Interests
i. Possession now.
ii. Fee simple absolute
a. Indefinite in time or no natural end.
b. No limitations -> can’t be cut short.
c. O grants B to A.
iii. Life estate
a. Natural end arrives with death of grantee.
(1) To A for life, then to B.
b. Alienable by gift or sale, but not by will.
c. Purchaser will receive life estate pur autre vie
(1) According to original grantee’s life, not new grantee
1. Interest lost upon original grantee’s death
(2) O to A for life of B.
d. Can be defeasible: determinable, subjection to condition subsequent, subject to executory limitation.
(1) O to A for life as long as A remains unmarried.
1. Determinable life estate.
(2) O to A for life, but if A does not use the land for agricultural purposes, O retains right to reenter.
1. Life estate subject to condition subsequent.
(3) O to A for life, but if B marries during A’s lifetime, to B.
1. Life estate subject to executory limitation.
e. Can be transferred, but limited to what one has.
(1) Thus, only transfer life estate that ends with one’s life.
f. Fee tail -> indefinite life estate with future interests as long as there are issues.
(1) Reverts back to grantor at end of bloodline.
(2) Lesser interest than fee simple absolute because of possibility of reversion to grantor.
iv. Defeasible fees
a. Similar to fee simple but interest may end on occurrence of some event
b. Fee Simple Determinable
(1) Estate ends automatically upon occurrence of named event.
(2) Future interest is possibility of reverter.
(3) Key words: as long as, while, during, until
1. Words cannot only state motive or purpose, but must limit the duration of the estate.
(4) May be transferred as long as stated event has not happened.
(5) O grants A to B as long as it is used as a library, then to O.
c. Fee Simple Subject to Condition Subsequent
(1) Interest does not end automatically upon occurrence of condition.
1. Estate continues in grantee until grantor exercises right of entry.
(2) Future interest is right of entry/power of termination.
(3) May be transferred until grantor exercises right of entry.
(4) Key words: but if, on condition that, provided that, provided however, if
(5) O grants A to B, but if it is not used as a library, then O has right to reenter and take the premises.
d. Fee Simple Subject to Executory Limitation
(1) Interest goes to third party upon occurrence of condition.
(2) Third party has executory interest.
(3) O grants A to B as long as it is used as a library, then to C.
1. Alternatively, O grants A to B, but if it not used as a library, then to C.
3. Future Interests
i. Possibly possession in the future.
a. Interest upon occurrence of future event.
b. No present enjoyment.
ii. Future interest is the “something left”.
iii. Reversion
a. Follows natural end of life estate.
b. Reverts back to grantor.
iv. Remainder
a. Follows life estate.
b. Interest created in third party, not grantor.
c. Contingent
(1) Condition precedent -> satisfied before vested.
(2) Uncertainty remains
1. As to identity as class of takers
2. Occurrence of condition precedent.
(3) Vests in interest when uncertainty resolved.
1. Can vest in interest and not yet in possession.
(4) Implies reversion to grantor, although rare.
(5) O grants A to B for life, then to C if he graduates from high school by age 19.
1. Uncertain whether C will graduate by age 19.
2. Becomes reversion indefeasibly vested if C reaches age 19 without graduating -> no condition can cut grantor’s interest short.
d. Vested
(1) Two requirements:
1. Not uncertain as to class of persons.
2. Not subject to condition precedent.
(2) Indefeasibly Vested
1. Identity of takers known and no other condition need to be met other than termination of preceding interest -> no other condition can cut interest off.
2. O grants A to B for life, then to C and D.
(3) Vested Subject to Complete Defeasance
1. Occurrence of event can shift interest.
2. Condition subsequent -> interest vests but can be cut short for reasons other than natural end of interest (condition satisfied).
3. O grants A to B for life, then to C, but if he does not graduate from high school by age 19, then to D.
4. O to A for life, then to B for life, then to C and his heirs.
a. Vested remainder subject to complete defeasement if B does not survive A.
(4) Vested Subject to Partial Defeasance/Subject to Open
1. Uncertainty can divest some of the interest.
a. Doesn’t lose interest completely, but interest can be decreased.
2. Vested in class of persons,
Disclaimer is defeated when there is acceptance of any of its benefits.
4. Successful disclaimer treated as if never having owner disclaimed interest.
5. Why disclaim?
i. May want to go to next taker, but want to avoid double taxation.
ii. Avoid probate.
iii. May prevent disclaimant’s creditors from reaching property.
D. Flexibility of Estate System
1. Flexibility important to facilitate estate planning.
2. Trusts
i. Legal title of assets to trustee (legal owner) in fee simple.
ii. Earning to beneficiaries (equitable owner).
3. Wills can avoid intestacy statutes (default when there are no will or “heirs”).
i. Heirs take in intestate (will lacking or incomplete), not in will.
ii. Usually goes to spouse and issues (lineal descedents).
iii. Generally speaking, also to closer blood relatives based on degrees on consanguinity and if necessary to collateral.
E. Numerus Clausus
1. Menu of forms of ownership is fixed, finite, and closed.
i. Not freely customizable, like contracts, but standardized.
ii. Used to be there was crazy situation of tying up property made it difficult to sell
a. Poor explanation because owner would not engage in acts that make it less attractive -> few potential buyers
b. Loss of property value for owner
c. Prospective buyers have additional property costs
iii. A form of pigeon-holing.
a. Only certain number of boxes; can’t create new ones.
b. Force into whichever hole is closest.
iv. Standardization creates externalities.
a. Information sharing costs -> identifying what exact property right one has.
b. Original parties
c. Potential successors in interest
d. Other market participants
v. Standardization imposes frustration costs.
a. Better to have to standardization even if it comes with frustration costs.
(1) Will come with good and bad.
vi. System not perfectly fixed; sometimes legislatures, not courts, act.
vii. Market creates the optimal level.
a. Otherwise, system would be pressured and people would complain to legislatures.
b. Lack of complaints is indicative that is it working.
2. Why standardize/have numerus clausus?
i. Costs to having overly specific estates
