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Chapter 2 Land Interests: Present and Future. Estates in Land 2 Leasehold Freehold = uncertain or unlimited in duration Fee Simple Absolute Life Estate.

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Presentation on theme: "Chapter 2 Land Interests: Present and Future. Estates in Land 2 Leasehold Freehold = uncertain or unlimited in duration Fee Simple Absolute Life Estate."— Presentation transcript:

1 Chapter 2 Land Interests: Present and Future

2 Estates in Land 2 Leasehold Freehold = uncertain or unlimited in duration Fee Simple Absolute Life Estate Fee Tail (like Fee Simple Absolute but only for lineal descendants. Many states have banned this.) Fee Simple Defeasible Determinable/Subject to a Condition Precedent

3 Fee Simple Absolute “Fee simple” or “fee” Greatest estate possible Not subject to limitations (other than government zoning, tort law, environmental law, etc.) Most states assume a fee simple is created when land is transferred unless the intent is clear to transfer something less. “To A and his heirs” “To A” 3

4 Fee Tail “To Johnson and the heirs of his body” Fee tail: Can be inherited only by lineal descendants (Children, grandchildren, etc. Fee tail male: Can be inherited only my male lineal descendants (The Jane Austen land interest) Most states prohibit fee tails Those that allow often limit them – If testator left a life estate to his wife and then a fee tail to his son, Arkansas law would convert it to a life estate for the son and then the remainder to the son’s heirs.

5 Life Estate Possession. Life estate gives undisturbed possession. No Waste. Tenant cannot commit waste or destroy the property. Maintenance. Tenant must maintain property, but only a proportion share of special assessments. Transfer Interest. A tenant can transfer an interest but the life estate remains tied to the original tenant. Life Estate Pur Autre Vie. “To A for the life of B” 5

6 Fee Simple Defeasible If the fee simple can be lost then it’s a fee simple defeasible Two types Fee simple (defeasible) Fee simple determinable “To A so long as the premises are used for school purposes” Grantors (heirs) have title at moment clause is violated – Fee simple subject to a condition subsequent Right of entry “To A provided that liquor is never sold on the premises” Grantor (heirs) have right to claim title when clause is violated 6

7 Example: Fee Simple Determinable versus Fee Simple Subject to a Condition Subsequent Gift of Land. T is an environmentalist and she wishes to give land to a wildlife sanctuary. Fee Simple. “To wildlife sanctuary.” Concern Over Future Use. T is concerned that the wildlife sanctuary may desire to sell the land in the future or discontinue its use as a sanctuary. – Fee Simple Determinable. “To the Wildlife Sanctuary and its successors and assigns so long as the property is used as a wildlife sanctuary” – Fee Simple Subject to a Condition Subsequent. “To the Wildlife Sanctuary and its successors and assigns forever on the condition that the land is used as a wildlife preserve, but if the land is used for any other purposes, T and her heirs shall have the right to reentry and repossession.” 7

8 More Examples Fee Simple Defeasible End of Chapter Q5 “This transfer is made with the full understanding that should the property fail to be used for the Church of God, it is to be null and void and property to revert to W.E. Collins or heirs. What is this? End of Chapter Q3: Clause required Kansas to maintain a lake of 150 acres on park land donated. Thirty-six years later, the reverter owners brought a claim because the state had not maintained the 150 acre lake.

9 Example Fee Simple Defeasible 9 Consider 2.1 Fee Simple Defeasible – Determinable or Condition Precedent? Original Conveyance. In 1926 Stumbo, Sr. executed a deed to convey a track of land for $500 with the following key language. Key Language. “It is further agreed that said Board of Education …fail to…maintain a public school on said property they will convey the property back to J.M. Stumbo for the some…consideration as above mentioned.” [$500] 1998 School Closed. The county closed the school in 1998 (52 years later) and the heirs of Stumbo wrote a check for $500 and asked for the property back. Uniform Simplification of Land Transfers Act. Every possibility of reverter and right of entry created prior to July 1, 1960, shall cease to be valid or enforceable at the expiration of thirty (30) years after the effective date of the instrument creating it, unless before July 1, 1965, a declaration of intention to preserve it is filed for record with the county clerk of the county in which the real property is located. Start here on tuesday

10 Land Interests Landlord Tenant Greatest Rights Can be lost “To A so long as the premises are used for school purposes.” “To A on the condition that the land is used as a school and if the land is ever not used as a school, the grantor may re-enter and repossess the land.” Difference Between – Determinable and Subject to a Condition Subsequent. Determinable the interest is lost automatically if term violated. If A no longer uses as a school it “reverts” to grantor. Determinable If A no longer uses as a school it “right of entry” to grantor. Condition Subsequent Future interest that is not a remainder and is not created by the grantor

11 Rogers v U.S. (X) Does takings clause apply to possibility of reverter ? 11 Trails Act. Stops the abandonment of rails so they can be turned into recreational trails. Conveyance of land to railroad included: “Grantor does hereby …. If at any time thereafter the said Seaboard Air Line Railway shall abandon said land for railroad purposes then the above described [land] shall revert to and again become the property of the undersigned, his heirs, administrators and assigns. Taking?

12 Life Estate Examples 12 Consider Life Estate – Right to Oil? “My …including fee, surface, mineral, royalties, and mixed …to my beloved husband… a life estate… to enjoy the use and benefits of said properties, including income derived from said properties, said income to become his separate property as paid. As stated, my said husband is to enjoy the use and benefits of said properties and to do with as he sees fit for the rest of his life, with reversion of the corpus of said properties upon his death as follows:” Reversionary interest holders argued that the income was “corpus” and not available to life estate holder. Definitional argument over “income.” Life Estate Case – Building Burns Down Bridges held a life estate in a building worth $10,000 that was destroyed by fire. Bridges maintained insurance on the building and did not rebuild. The remainder owner sued for the building to be rebuilt or for the $10,000 to be invested with the interest to the life estate owner and the principal to the remainder.

13 13 Consider 2.2 What types of future and present interests are created? “To A so long as the premises are used for church purposes.” “To A and his heirs provided that the premises never be used for commercial purposes.” “To Cal Trans so long as the land is used for the construction of an off-ramp for access to Harrah’s Club Casino.” “To Wyndam Development so long as the property is never used for the construction or operation of a Wal-Mart store.” Consider 2.3 Life Estate – Right to Sell Property? Dr. James Hammons left his property to: “My said wife during her lifetime shall have the right to sell any property received by her under the terms of this item and invest and reinvest the proceeds thereof in other property, real or personal, in her absolute discretion.” He then left the money to his two daughters (not biological daughters of his wife). Lawsuit to stop sale of property without an accounting.

14 Reversion (to grantor) Remainder to someone else Vested: - Given to someone identified at time of grant and alive. “To A for life, then to B.” Vested subject to partial divestment: - B could have more children causing child’s share to dilute. “To A for life, then to B’s children.” (B is alive) Vested subject to complete divestment: - Could lose it all. “To A for life, then if B is married to B, but if B is not married, to C.” Contingent: It’s not vested because B might not have children. “To A for life, remainder to the children of B” Distinction between “vested subject to complete divestiture” and contingent” is very nuanced and has to do with whether the condition follows the grant to the person (vested) or precedes the grant (contingent).

15 Examples 15 Consider 2.4 – Terminology Examples “To A for life, then to B” – A = life estate, B = vested remainder “To A for life, then to B and her heirs” A = life estate B = vested remainder “and his heirs just represents fee simple absolute language. “To B for life, then if A is married, to A” A = life estate, B = contingent remainder “To A for life, then to B’s heirs” (B is alive). A = life estate. B = contingent remainder since B’s heirs cannot be determined until B dies. “To A for life, then to B, but if B does not survive A, to C” A= life estate, B = vested remainder subject to complete divestment. Vested: - Given to someone identified at time of grant and alive. Vested subject to partial divestment: - B could have more children causing child’s share to dilute. Vested subject to complete divestment: - Could lose it all. Contingent: It’s not vested because B might not have children. If the condition follows the grant to the person (vested) or precedes the grant (contingent).

16 Present and Future Interests in Land 1. None 2. Executory interest/Reversion 3. Possibility of Reverter 4. Right of Entry (Re-Entry)/Power of termination 5. Reversion or Remainder or Executory interest 1. Fee simple 2. Fee tail 3. Fee simple determinable 4. Fee simple subject to a condition subsequent 5. Life estate

17 Executory Interests Not A Remainder. A future interest that is not a remainder. Not A Reversion. Also – different than a reversion or right of reentry because the interest does not go back to the grantor. Example. “To A, so long as the premises are never used for commercial purposes and if the are so used to B.” Arises in Three Circumstances. – Grant to Two People At Same Time. – A gap after the life estate. “To A for life, then one year after A’s death to B.” – Future Interest. “To A in 10 years.” 17 End-of-Chapter #7 Warranty deed: “In the event that the said premises are no longer used to house a fire department, then and in that event the land and building erected thereon is to revert to Richard L Long and Mary Long, or their heirs and assigns.

18 Consider 2.5 a. “To A for life” b. “To A and his heirs” c. “To A” d. “To A and B” e. “To A and his female bodily heirs” f. “To A provided the premises are never used for the sale of liquor” g. “To A on the condition that the premises are never used for a dance hall” H.To A so long as the premises are used for church purposes” i. “To my husband, Ralph, for life” j. “To the trustee for First County Church so long as the premises are never used for the playing of bingo” k. “To my granddaughter, Alfreda, and all of Alfreda’s female issue” l. “To my daughter, Sara, for the life of my brother, Sam” m.“To my granddaughter so long as the premises are used for a library for Whitman College” n. “To my son, John, and his bodily heirs” o. “To Jess S. Long, and the children of his body begotten, and their heirs and assigns forever” p. “To A for the period the land is used for a golf course”

19 The Rules for Future Interests 1. Rule in Shelley’s Case (RISC): Merge life estate in grantee with remainder in grantee’s heirs 2. Doctrine of Worthier Title (DOWT) Grantor who gives reminder to his heirs has a reversion 3. Rule Against Perpetuities (RAP): Interest must vest within lives and being plus 21 years

20 Texaco Refining and Marketing V. Samowitz, (#2) Rule against perpetuities 20 1.Lease Agreement. 15 year lease term. “…to purchase… at any term during the term of this lease or an extension or renewal thereof, from and after the 14 th year of the initial term for the sum of $125, Is rule violated? Is the lease three separate documents/agreements given each renewal or should it be considered one document/deal extending beyond 21 years. 3.Should rule apply? 1.Why or why not?

21 Rule Against Perpetuities Rule to limit the ability of a grantor to control property beyond for too long. Ownership must vest within 21 years after the death of the last individual who is part of the group of measuring lives for the grant. The measuring life is the lifetime of the individuals named in the grant. 21 Consider 2.6 – Rule Against Perpetuities “To my children for life, remainder to any an all of my grandchildren who reach age 21.” Consider 2.6 – Rule Against Perpetuities “To my children for life, remainder to any an all of my grandchildren who reach age 21.”

22 Rule in Shelley’s Case “To A for life, remainder to the heirs of A” Merge life estate in grantee with remainder in grantee’s heirs 22

23 Lusk v. Broyles 694 So2d 4 (Al Civ. App 1997) (#1) Parents Gave Land to Child. Andy and Mary Lusk gave 130 acres to Howard Lusk. Life Estate. “…to Howard Lusk for and during his natural life and at his death to the heirs of his body per stirpes.” Howard Changed to Joint Tenancy with His Wife. Howard changed the deed to a joint tenancy with his wife. Remainder Interests (his kids) Sued. Rule of Shelly’s Case Alabama Law. 23


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