Ii. Estates in Land

Rights

II. ESTATES IN LAND

An estate in land refers to the quality, quantity, nature and extent of the ownership interest that a person holds in real property, not to the physical quantity of land one may own. Not all interests in property are estates. In order for an interest to be an estate, there must be a present or future right to possess (occupy) the property. An easement, for example, is an interest in the land but not an estate because it is simply a right to use but not possess. A mortgage lien is an interest but not an estate.

If a person has the present right to occupy the property, he/she is said to have a possessory estate. A non-possessory estate is one in which the right to occupy is a future right. It will become possessory when a preceding possessory estate, such as a life estate, is terminated. Therefore, one estate may exist simultaneously with another estate.

Estates In Land

Possessory NonPossessory Absolute

Remainder Fee Simple Determinable

Reversionary Condition Freehold Subsequent Legal Life Estate Conventional Ordinary Life Estate Life Estate Dower Life Estate Pur Autre Vie Leasehold Estate for Years Curtesy

Estate from Homestead Period-Period Protection

Estate at Will

Estate at Sufferance

Figure 2-3 • Estates In Land

A. FREEHOLD ESTATES.

Freehold estates are estates that will last for an indefinite period of time. These include fee estates that have the potential of lasting indefinitely (and therefore are inheritable) and life estates that will last for a lifetime. Fee estates are distinguished by the fact that they can be inherited. The fee estates include:

1. FEE SIMPLE ABSOLUTE (ALSO CALLED FEE SIMPLE, OR FEE).

A fee simple absolute estate is one in which the owner possesses the entire bundle of rights. It is the most complete ownership of rights in land that one can hold. The owner’s rights to possess, control, enjoy and dispose of the property are limited only by the inherent powers of government and by the rights of other individuals who might have a legal interest in the land. There are no conditions to satisfy in order to retain ownership. This estate is freely inheritable. It can be passed on to the heirs named in a will, or if there is no will, passed on by state law of descent.

2. CONDITIONAL FEE.

There are other types of fee estates that do not represent complete rights of ownership because they have “strings attached.” Ownership is conditioned on the occurrence or on the non-occurrence of a certain event. These conditional fees (also called qualified or defeasible fees) are classified as either fee simple determinable or fee simple on condition subsequent.

a. Fee simple determinable.

The ownership of a fee simple determinable is subject to a certain limitation based on time. Conditional words and phrases such as “for so long as,” “during” or “until” are used in a deed to create this type of estate. For example, Johnson (the grantor) conveys ten acres of land to the city of Atlanta “so long as” the land is used as a park. Should the city use the land for anything else, its ownership is terminated. The estate would automatically go back (revert) to Johnson or to Johnson’s heirs or would go to someone else (the remainderman) if one has been named. This provision in the deed is called a reverter clause and, while the city owns the land, Johnson has a future right called a reversionary interest. Note that Johnson would have had no control over how the land was used if he had conveyed it in fee simple.

b. Fee simple on condition subsequent.

Ownership of a fee simple on condition subsequent is also subject to a condition but there is no automatic reversion when the condition is no longer being met. The estate can only be recovered through legal action. The deed creating a fee simple on condition subsequent might contain conditional phrases such as “provided that” or “on the express condition.” There is no time fuse on these phrases. For example, Smith conveys ten acres to the New Way Church “on the express condition” that the land be used only for church-related purposes. In the event the church uses the land for some other purpose, Smith or his heirs might have a right to terminate the estate by going to court and suing for possession within a reasonable time after the condition is violated or the right might be lost.

3. LIFE ESTATES.

Life estates are also freehold estates because the duration of a life estate is going to be measured by a person’s lifetime and no one knows exactly how long that might be. We do know, however, that it is not going to last forever and, since it ends when the life ends, the life estate cannot be passed to heirs.

a. Ordinary life estates.

A conventional life estate is one created by a conveyance, usually through the use of a deed, a will or a trust. The person who receives this estate is called the life tenant.

The life tenant, as owner of the estate, is entitled to possess and use the land for the duration of the lifetime. During that possession, the tenant is entitled to all profits, rent and other income that might be derived from the property and may sell, mortgage, lease or give away the estate. What the life tenant can dispose of, however, is not a fee estate. Anyone acquiring an interest from a life tenant should understand that their interest ends when that life ends. Most people would not choose to lend to or buy from a life tenant who might be hit by a truck tomorrow.

When a life estate is created, a future (non-possessory) estate is created at the same time. It must be specified whether, at the end of the lifetime, the estate will go back (revert) to the original grantor or whether it will go to someone else (a remainderman).

EXAMPLE: Aging Sarah Jenkins wants to give her home to her son, Kevin, but would like to remain in the home until she passes away. Sarah (grantor) conveys her home to her son, Kevin (grantee), but reserves a life estate for herself. Sarah, as the life tenant, has a life estate and Kevin has the reversionary interest in the property. When Sarah dies, Kevin receives the property with fee simple interest.

b. Life estate pur autre vie.

When the “lifetime” of a life estate is measured by the life of an individual other than the grantee, the estate is called a life estate pur autre vie.

EXAMPLE: Shane Jackson has a nephew, Bill, who has many problems finding and keeping housing. Shane’s brother asks, as a favor, that Bill be allowed to occupy one of Shane’s many houses. Shane is skeptical, but grants Bill a life estate pur autre vie based on Bill’s father’s life. Bill is able to live in the home until his father passes away. Shane figures that he’s doing his brother a favor, and at the end of the life estate, Bill will have to make his own way.

4. REMAINDER ESTATES.

A remainder estate is created when the owner of a fee simple estate grants a lesser estate to someone and, at the same time, names a person other than himself/herself (the remainderman) who will receive the fee simple estate when the lesser estate ends. Lesser estates include life estates, fee simple determinable, fee simple on condition subsequent, and leaseholds. In effect the grantor divides the fee simple estate into two parts; the lesser estate, that is possessory, and the remainder estate, that is a future right.

EXAMPLE: Frank has a sister, Jane, who is several years his elder. Frank grants his sister a life estate. Jane is able to live in the home until she passes away. Frank’s wife, Carol, will be the remainderman. If Carol passes away before Jane, the remainderman will become Carol’s heirs.

A contingent remainder estate is created when the grantor makes the “future rights” dependent on both the termination of a lesser estate and on the fulfillment of a condition. The deed might read “Tomy sister, Jane, for her life, and the remainder to the children of my sister, Jennifer.” If Jennifer has no children when Jane dies, the estate will revert to the grantor or the grantor’s heirs. This estate is also inheritable.

EXAMPLE: Jack (grantor) conveys a property to his sister, Samantha, for her life. The remainder estate is to go to Samantha’s children. If Samantha has no children, the estate reverts back to Jack or his heirs.

5. REVERSIONARY ESTATES.

A reversionary estate is created when a lesser estate is conveyed but the future rights are reserved for the grantor or heirs of the grantor. For example, a landlord or his/her heirs will typically regain possession of a leased property when the lease term ends.

All leasehold estates and any freehold estate, except for a fee simple absolute, may be created with either a remainder or a reversionary interest. When a fee simple determinable ends because the condition is no longer being met, the reversion is automatic. However, with a fee simple on condition subsequent, the grantor will have to take legal action to regain the fee, if the condition is not being met.

If no remainderman is named when creating a lesser estate, the estate is assumed to be reversionary.

Since there are future interests involved, the life tenant is legally bound not to commit waste. This legal duty obligates the tenant to pay the property taxes and mortgage payments and not substantially alter the property from its intended use or allow it to deteriorate in value by failing to make reasonable repairs.

6. LEGAL LIFE ESTATES.

Legal life estates are created by state law. They are non-possessory and consist of dower and curtesy, which are future rights that only become possessory upon the death of a spouse. Dower and curtsey rights cannot be defeated by will and are intended to provide a means of support for the surviving spouse. These ancient common law rights are now considered to be somewhat irrelevant and have been eliminated or replaced by statute in most states. Georgia no longer recognizes dower or curtesy.

a. Dower.

Dower is typically a wife’s right to a one-third to one-half interest in any property her husband owns, transferable at the time of his death, assuming she doesn’t pre-decease him. While the husband lives, this is a future right called inchoate dower. Once he dies it becomes consummate dower.

Because of this right, if a husband owns property in his own name, he has to have his wife’s signature to sell it to a buyer so her dower interest will be released.

b. Curtesy.

Curtesy is a husband’s right to a one-third life estate in his wife’s property that she owns at the time of her death. In some states, curtesy exists only if there are children and is defeated if the husband deserts his wife.

c. Homestead protection.

Homestead protection is a right that protects a primary residence from a forced sale to satisfy debts and judgments. Nearly every state has laws to protect owner occupants from losing their home to creditors but the amount of protection varies from state to state. Some debts such as a mortgage, taxes, alimony, child support, criminal fines, and awards for fraud, libel and slander would be exempt. Homestead protection may also protect a family residence from a sale to satisfy the debts of a deceased breadwinner.

Do not confuse this with the “homestead exemption” that is a property tax benefit granted to owners for their principal residence.

B. LEASEHOLD ESTATES.

Unlike freehold estates, a leasehold estate is not an estate of ownership. It consists of a tenant’s (lessee’s) rights, granted by a lease. In a lease, the landlord (lessor) conveys the exclusive right of possession to the tenant for a specified period of time in exchange for a payment called rent. During the term of the lease, the landlord is still the fee simple owner and retains a leased fee estate which is also reversionary. This entitles the owner to

recover possession when the lease period ends. Leasehold estates, that will be discussed in greater detail in a later chapter, are classified as either an estate for years, an estate from period-to-period, an estate at will or an estate at sufferance.

1. ESTATE FOR YEARS.

An estate for years exists when there is a lease agreement that gives the tenant exclusive possession of a property for a specified period of time. The name is misleading. It suggests that the period be “for years,” but this term applies to any contractual agreement that has a definite end, whether it is for one hundred days, three months, two years, or whatever. When the lease period expires, the landlord automatically recovers possession without the need for notice from either party unless the lease requires notice. The obligations created in an estate for years do not end with the death of the landlord (unless the landlord was a life tenant) or the death of the tenant.

2. ESTATE FROM PERIOD-TO-PERIOD.

In a period-to-period estate, the tenant’s right to occupy the property is for the term covered by the first rent payment and, each time another payment is made, the right is automatically renewed for another period of equal length. It is often called a month-to-month tenancy but can be for any period of time.

In most states notice is required when the tenant wants to end this lease or by the landlord when the landlord seeks to regain possession. The lease will continue for an uncertain time until proper notice is given.

3. ESTATE AT WILL.

A tenancy at will is usually a temporary arrangement in which the tenant can occupy the property for an unspecified period of time as long as the landlord gives permission. This estate is not assignable. It does, in most states, require the necessary notice by either party to terminate the possession. However, this estate ends with the death of either party or with the sale of the property.

4. ESTATE AT SUFFERANCE.

A tenancy at sufferance arises when a tenant, who is legally renting the property, continues to remain in possession after the term of the lease expires. This tenant, also called a holdover tenant, can become a period- to-period tenant if the landlord accepts another rent check. Otherwise, the landlord can take steps to regain possession. The holdover tenant only differs from a trespasser in that the right to occupy was legal at one time.