TEXAS REAL PROPERTY DISTINCTIONS PROFESSOR ZACHARY KRAMER ARIZONA STATE UNIVERSITY COLLEGE OF LAW CHAPTER 1: OWNERSHIP (PRESENT ESTATES AND CONCURRENT OWNERSHIP) The primary goal of this lesson is to highlight the key differences between real property law in general and real property law in Texas. The secondary goal of this lesson is to reinforce your understanding of some of the core concepts of property law. We start with the forms of ownership, which consists of three interrelated topics: • Present Estates • Concurrent Estates • Future Interests Keep in mind that real property is alienable, which means it can be _______________________. Common methods of transfer are sale, gift, devise, and ________________________________. In a transfer of real property, the seller/donor is called ______________________________ and the buyer/recipient is called the _________________________________. A. Present Estates A present estate gives the owner the ________________________________ to currently _____________________________ the property. Note 1: An owner need not actually use or occupy the property. The important point is that the owner has the right to possess the property. 1. Fee Simple Absolute The fee simple absolute is the _________________________________ ownership interest recognized by law and therefore, not surprisingly, the most common form of ownership of real property. o Alienable—Freely alienable, which means the owner can easily transfer the property o Duration—Has an infinite duration, which means it’s capable of lasting _____________________________ o Creation—At common law, a grantor needed to use particular words of limitation to create a fee simple absolute: “and his/her heirs.” . Texas Distinction: In Texas, conveyances that are ambiguous are considered a fee simple unless 1) the conveyance is ________________________________________ or a _____________________________________ is created. Example 1: O conveys Blackacre “to A.” At common law, this would not have created a fee simple absolute. Under Texas law, however, a fee simple is created. Example 2: O conveys Blackacre “to A for life.” This would not create a fee simple absolute under Texas law because the words of limitation (“for life”) create a lesser estate. o Future Interest—No future interest associated with a fee simple absolute. 2. Defeasible Fees A fee simple can also be made to be defeasible, which means it may be ____________________________________ by the occurrence of an event. o Fee Simple Determinable—A fee simple that is limited by specific ___________________________________ language. Classic examples of duration are “so long as,” “while,” “during,” “until,” etc. The future interest associated with a fee simple determinable is a possibility of reverter. This future interest is held by the ___________________________ and it vests _______________________________________ once the durational period ends. Example 3: O conveys Blackacre “to A and her heirs so long as the land is farmed.” A acquires a fee simple determinable and O retains a possibility of reverter. If A or her heirs ever stops farming the land, title will vest automatically in O or O’s heirs. o Fee Simple Subject to Condition Subsequent—A fee simple that is limited by specific ______________________________________ language. Classic examples include “provided that,” “on the condition that,” “but if,” etc. The future interest associated with a fee simple subject to a condition subsequent is a right of entry. This future interest is held by the ___________________________ and it does not vest automatically. A grantor must exercise her right to re-enter the property. Example 4: O conveys Blackacre “to A and her heirs, but if the land isn’t used as a farm, O may re-enter and re-take. A acquires a fee simple subject to condition subsequent and O retains a right of entry. If A stops farming the land, O must exercise the right to re- take in order to take possession of Blackacre. o Fee simple Subject to Executory Interest—A fee simple that will end upon the happening of an event and the future interest will vest in ________________________________________, i.e. someone other than the grantor or the grantee. 2 | © 2017 Themis Bar Review, LLC | TX Real Property Distinctions . The future interest associated with this fee simple is an executory interest. An executory interest vests automatically. Example 5: O conveys Blackacre “to A and her heirs, but if liquor is served on the premises, then to C and her heirs. A has a fee simple subject to executory limitation and C has an executory interest. 3. Life Estate o A life estate is a present estate that is limited to ___________________________ duration. The lifetime can be measured against the grantee’s lifetime or a third-party’s lifetime. Example 6: O conveys Blackacre “to A for life.” This life estate will end at A’s death. Example 7: O conveys Blackacre “to A for B’s life.” A has the life estate, which is measured against B’s life. This is known as a life estate pur autre vie. o Creation—Most life estates are created with the words of limitation “for life.” Example 8: O conveys Blackacre “to A for life.” A has a life estate. Texas Distinction: No ___________________________________________________ to create a life estate. Example 9: O conveys Blackacre “to A until her death.” In Texas, this will create a life estate in A. o Future Interest—The future interests associated with the life estate are the ___________________________ and the __________________________________. o Waste—Although a life tenant has the right to occupy and use the property, the life tenant cannot use the property in such a way as to cause a decrease in the value of the property. The future interest holders can enter the property to inspect for waste, or bring suit to obtain damages or an injunction to prevent such waste. B. Concurrent Estates A concurrent estate is ownership or possession of real property by two or more persons _______________________________________. 1. Tenancy in Common—The _______________________ concurrent interest. o Tenants in common have equal rights to posses or use the property. o No ________________________________________________ exists. This means that each tenant can transfer her interest individually, even at death. o Presumption that a conveyance to two or more people creates a tenancy in common. TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 3 2. Joint Tenancy—A concurrent estate where two or more individuals own property with the ___________________________________________________ o Four Unities (“PITT”)—There are four unities necessary to have a joint tenancy: . Possession: Each joint tenant must have an equal right to possess or use the property. Interest: Each joint tenant must have an equal interest. Time: Each joint tenant must acquire their interest at the same time. Title: Each joint tenant must acquire their interest in the same instrument. Note: If any unity is broken, then joint tenancy is severed and becomes a _________________________________________. o Texas Distinction: Unlike most states, a joint tenancy in Texas does not automatically include a right of survivorship. Instead, joint tenants can create a right of survivorship by __________________________________ agreeing to allow their interests to pass under a right of survivorship. 3. Tenancy by the Entirety—A joint tenancy between _______________________________ persons. Includes a right of survivorship o Texas Distinction: Because it is a _____________________________________________ jurisdiction, Texas does not recognize the tenancy by the entirety. CHAPTER 2: FUTURE INTERESTS • Future Interest: An interest in property that gives the owner the right to possess the property in the future. • A couple key features: o Present vs. Future—Though it concerns the future, a future interest is a presently-existing right. o Possession—Like with present estates, future interests are concerned with the owner’s right to ________________________________ the property. A. Grantor Interests • Reversion—Future interest held by the _______________________________ after the grantor conveys a life estate or an estate for years but does not convey the balance to a third party. Note that the reversion is not subject to the Rule Against Perpetuities. Example 10: O conveys Blackacre “to A for five years.” A has a term of years; O retains a reversion. • Possibility of Reverter—Future interest held by the ________________________________ following a fee simple determinable. 4 | © 2017 Themis Bar Review, LLC | TX Real Property Distinctions Example 11: O conveys Blackacre “to A so long as the property is used for commercial purposes.” O retains a possibility of reverter. o Texas Distinction: Texas does not have a statute that limits the duration of the possibility of reverter. Note also that the possibility of reverter is not subject to the Rule Against Perpetuities. • Right of Entry—Future interest held by the _______________________________ following a fee simple subject to condition subsequent. Example 12: O conveys Blackacre “to A and her heirs, but if liquor is served on the premises, O can re-enter and re-take. O retains a right of entry. Texas Distinction: Texas does not have a statute that limits the duration of the right of entry. Note also that the right of reentry is not subject to the Rule Against Perpetuities. B. Grantee Interests • Remainder—A future interest held by a ______________________________ that is capable of becoming possessory upon the natural expiration of a prior possessory estate. o Vested Remainder—An interest that is: 1. Given to an ___________________________________________________ grantee, and 2. That is not subject to a ____________________________________________________. Example 13: O conveys Blackacre “to A for life, then to B and her heirs.” B has a vested remainder. B is ascertained and B does not have to satisfy any condition in order to take the interest. Vested Subject to Open—An interest given to a class of grantees and at least one member of the class has ______________________________________________. Example 14: O conveys Blackacre “to A for life, then to A’s children who reach 21.” A has three kids—B is 25, C is 18, and D is 15.