Property Post-Midterm Multiple Choice

Present Interest

The right to possess the property now

• may be created by sale, lease, will, or trust

Future Interest

The right to take possession of property in the future under specified circumstances

4 Rules — Present Estates and Future Interests

1. One cannot grant more than one has. 

2. Unless the grant contains limiting language, the grantor will be presumed to have given away all of the transferred interest. 

3. Whatever is not granted remains with the grantor. 

4. Future interests generally pass on death just like other property unless otherwise specified.

Fee Simple

Owner can choose who will own the property after their death

Life Estate

Owner has no right to determine who owns the property on her death since ownership automatically shifts to the reversioner or remainder holder

Reversion

The property reverts back to the grantor when the present interest holder dies

Remainder

The grantor designates a 3rd party to obtain ownership when the present interest holder dies

Fee Simple Absolute

No one owns a future interest so the owner can do what she wants with the property

Defeasible Fees

Present interests that terminate upon the happening of some events other than the death of the current owner 

• 3 Types: fee simple determinable, fee simple subject to a condition subsequent, and fee simple subject to executory limitation

Fee Simple Determinable

The future interest automatically reverts back to the grantor on the happening of the stated event

Fee Simple Subject to a Condition Subsequent

The grantor may choose to retain for herself or her heirs to the right to decide whether to retake the property, at the time a condition is violated

Fee Simple Subject to Executory Limitation

When the future interest belongs to someone other than the grantor 

Types of Remainder’s

Contingent and Vested 

3 Types of Vested: absolutely vested remainder, vested remainder subject to open, vested remainder subject to divestment

Contingent Remainder

(1) if the remainder will take effect only upon the happening of an event that is not certain to happen or (2) if the remainder will go to a person who cannot be ascertained at the time of the conveyance

Vested Remainder

A remainder when you are certain to come into possession

Absolutely Vested Remainder

A remainder that is not subject to change

Vested Remainder Subject to Open

A remainder that is vested in some individuals but may be divided with others who join the class in the future (think class gifts)

Vested Remainder Subject to Divestment

A remainder that may be lost due to an event that occurs after the original conveyance

Destruction of Contingent Remainders

Destroyed if (1) they do not vest before the preceding life estate ended and/or (2) if the same person comes to hold both the life estate and remainder

Trust

A grantor convey property to a trustee to manage the trust for the beneficiary 

• a trust is created so long as the grantor sufficiently designates (1) a trust property, (2) a beneficiary, and (3) the intent to have the property be used by another to benefit the beneficiary

Doctrine of Cy Pres

applying the trust to other purposes that seem consistent with the grantor’s intent if the purpose selected by the settlor is no longer possible or reasonable to achieve

Interpreting Ambiguous Conveyances

(1) courts are looking to effectuate the grantor’s intent and (2) if the intent is unclear there is a presumption against forfeiture 

• the plain language of a deed must provide clear words of limitation for it to be enforceable

Doctrine of Waste

A life tenant is entitled to the full use and enjoyment of the property if in such use he or she exercises the ordinary care of a prudent person for its preservation and protection and commits no acts which would permanently injure the remainder interest.

• Remedies: injunction of damages

Voluntary Waste

the result of deliberate acts by the possessory tenant, such as destruction or removal of structure or resources on the property

Permissive Waste

a matter of omission rather than commission (e.g., failing to make ordinary repairs)

Ameliorative Waste

The life tenant’s actions change the character of the property but increase its value or utility 

• majority — approve if justified in light of changed circumstances and is consistent with what a fee simple owner would do and the intent of the parties 

• minority — prohibit

Rule Against Creating New Estates

Prohibits owners from creating ownership packages that do not fit within one of the established estates

Rule Against Perpetuities

A future interest is valid if it is certain to vest with 21 years after the after death of some life in being at the creation of the interest

RAP Applies To:

• executory interests 

  • exception — present interest and future interest in charities

• contingent remainders 

• vested remainders subject to open 

  • Class Gifts

Class Gifts

majority – Class Closing Rule 

• Rule of Convenience: the class closes when any member of the class becomes entitled to immediate possession

minority — if the class doesn’t close, RAP problems arise 

• children/grandchildren are VRSO 

• All or Nothing: If a gift is made to a class, and it is void for one member, it is void for all members

• Split the Difference: The valid interests are saved

How to Apply RAP

1. Identify the Future Interest

2. Apply RAP

• Creation of Interest: a future interest is created by conveyance at the moment of the conveyance 

• Life in Being: a person alive at the creation of the interest who may have something to do with it vesting

3. If the future interest violates RAP, strike the offending language or check to see if possible to save by applying cy pres

Wait and See (RAP)

The court will not hold that a future interest that violates the rule until the perpetuities period has passed and they are certain that the future interest has not vested within that period

Cy Pres (RAP)

modifying a grant to validate it if it appears consistent with the intent of the grantor

Uniform Statutory RAP

validates future interests otherwise invalid under the traditional rule if the interest vests at any time within 90 years of the date of creation

Relativity of Title

Issue is not who has title (both parties do) but who has better title 

• selling the same property 2x is fraud but we have to figure out who gets the property

Recording Acts

provides for a central registry at each locality where holders of real property interests can submit copies of deeds, mortgages, leases, and the likes

Race Statute

the 1st person to records their interest wins 

• encourages people to record but also encourages bad behavior 

• minority rule

Notice Statute

subsequent purchases only win if they did not have notice of the 1st purchase 

• if a prior buyer has recorded, there is constructive notice 

• ½ states follow this rule 

Race-Notice Statute

subsequent purchaser prevails if (1) they had no notice of prior conveyance at the time they acquired their interest and (2) they record before the prior instrument is recorded

Grantor-Grantee Index

all deeds registered in the county 

• organized alphabetically

• describes land and what is conveyed 

• gives date recorded and a page number for the document 

• limits on how far back you have to go — you want to be thorough

Wild Deed

a deed recorded outside the chain of title 

• a purchaser has notice only of recorded instruments that are within the change of title, a deed must be properly recorded

Shelter Doctrine

allows a bona fide purchaser to convey property to a 3rd person even if the 3rd party is on notice of an earlier conveyance