Property Law Outline - Present Interests in Freehold Estates
Fee Simple Absolute (FSA) (no future interests associated)
Total right/absolute(ish) ownership.
FSAs are devisable, inheritable, and alienable.
No future interests are associated with the property that can cut short ownership.
Created by a grant "to A" or "to A and his heirs."
Court infers the "and his heirs" part if it's not included.
Life Estate (LE) (future interest can be reversion or remainder)
Exists for the life of the grantee, who has the right to possess and use the land.
However, the grantee can only grant what he owns. Therefore, he only has the right to alienate the life estate.
Therefore, if A, the grantee, sells his life estate to B, B's right terminates upon the on A's death.
LEs can be created in two ways:
A grant "to A for life."
In this case, the original grantor has a future interest called a reversion.
Original grantor's interest becomes a present interest (FSA) upon A's death.
A grant "to A for life, remainder to B."
Here, B has a future interest called a remainder.
B's interest becomes a present interest (FSA) upon A's death.
Doctrine of Waste
Future interest holder can seek damages or injunctive relief when the life tenant commits waste by interfering with the future interest.
Rule: LE holder cannot commit waste.
CL broke waste into permissive and affirmative waste.
Permissive waste- occurs when the life tenant fails to take reasonable steps to preserve or protect the property.
Repairs, taxes, etc. are the responsibility of the LE holder.
Mortgage costs are shared between LE holder (pays interest) and remainderman (pays principle).
Future interest holder can pay for repairs, taxes or mortgage interest and obtain a lien on the property.
Then, he can eventually foreclose on the lien if the life tenant doesn't pay.
Affirmative waste- occurs when the life tenant intentionally or negligently makes or wants to make permanent changes to the land that devalues the future interest or changes the essential character of the property.
Courts usually hold that the LE holder can make substantial alterations or destroy a structure when:
The surrounding conditions have deprived the property of its value and usefulness AND
The tenant is not required under the grant to "restore the property to the same condition in which he received it."
In Ex. Brokaw v. Fairchild (p.143), the Court held that mere economic efficiency is not enough to justify permanent alterations to the essential character of the property. (ameliorative waste)
Brokaw had LE and wanted to remake mansion into apartments. He was losing money off of it. Economic efficiency argument.
Fairchild had remaindermen interest. Argued personhood theory saying that the essential characteristic would be altered.
Court holds for Farichild, but at some point this becomes unworkable and substantial changes must be allowed. That point has not been reached here (full loss of property value because of changed circumstances). Inefficiencies must be extreme in order to overcome waste.
Court can order an injunction to enjoin the LE holder from making the major changes.
Court can order a partition. This means the property is sold and proceeds are divided amongst the remaindermen and the LE holder.
However, partition must be in the best interest of all the parties.
Fee Simple Determinable (FSD) (future interest = possibility of reverter; automatic to grantor)
A FSD is a defeasible interest in property. This means it is subject to a condition and can be forfeited if that condition is violated.
The future interest associated with a FSD is the possibility of reverter.
This means that the future interest reverts to a present interest upon breach of a condition.
The grantor does not even have to know about the breach of the condition and does not have to take any action. The interest reverts automatically.
Intent to create a FSD is shown by the language used in the grant:
A grant "to A so long as the property is not used as a commercial establishment."
Must use words showing duration such as "so long as" or "until."
Fee Simple Subject to a Condition Subsequent (FSSCS) (future interest = right of entry/power of termination; not automatic)
A FSSCS is also a defeasible interest that is subject to a condition.
However, here the future interest associated with the FSSCS is called power of termination or right of entry. No automatic reversion.
The future interest holder must exercise this power or right in order to make his future interest a present interest.
The possessor (current owner) has ownership until the future interest holder asserts his right.
At CL, no time limit for future interest holder to exercise power.
However, some legislatures have fixed a number of years in which power must be used after a breach or after the future interest holder learns of the breach.
Intent to create a FSSCS is revealed through language of grant:
Grant "to A on condition that A not use alcohol," for example.
Words showing condition include: "on condition that," "provided that," "but if," etc.
If unclear, courts prefer FSSCS, not FSD, because it requires action by the future interest holder to get the property back.
Difference between FSSCS and FSD:
In FSD, the interest ends automatically and reverts to the grantor upon the happening of the specified event.
In FSSCS, the interest reverts to the grantor only if the grantor takes some action terminating the grantee's interest (exercises power of termination or right of entry).
Fee Simple Subject to Executory Limitation (FSSEL) (future interest = executory interest, automatic to 3rd party, grantor has no interest)
Hybrid FSD/FSSCS, except 3rd party automatically receives the present interest when the condition occurs, not the original grantor.
Rules of Construction
Restrict defeasance by giving the courts more discretion.
Policy Issue: Tension between trying to give meaning to the original transaction and the actual/efficient use of the property.
First, court inquires whether the language is "precatory," or denotes only a wish or desire. This is legally unenforceable. ("to be used as")
Second, court asks whether it is clearly a condition. If not, court construes the language as a covenant because this allows more room for the court to shape equitable relief. This is because PP does not want to tie up land for inefficient use.
A covenant is a legally enforceable promise to do or refrain from doing something with some land ("the parties agree", etc.).
Ex. Fitzgerald v. Modoc County (p.153) P conveyed property to the County "to be used as and for a county high school." County sold land to a private party instead.
Court held that these types of conditions were not favored by courts.
Therefore, because grant language did not explicitly express that this was a condition, it is considered to be, at the most, a covenant.
Merely indicating a purpose for the conveyance is not enough. The actual intent must be expressed clearly in the deed.
Ex of when the rules of construction are applied harshly against the grantor.
Remedy for breach of covenant is damages or injunction. (Liability Remedy).
Damages are usually nominal and equitable defenses apply.
Violation of a condition, on the other hand, results in forfeiture. (Property Remedy).
Finally, courts express preference for FSSCS over FSD because it requires action by future interest holder to get property back, it doesn't just automatically force forfeiture.