Estates in Real Property FAQ's
Title and Estates
Q: What is an estate in real property, and how is it different from title to real property?
A: Along with tenancy, the terms title and estate are often used interchangeably, and rightfully so, since they often have complex and overlapping definitions having to do with ownership of and interest in real property. Technically, title when used in real estate refers to ownership of real property, and also to evidence of that ownership by a deed. Another way to think about title is as the interest one holds in real property. The type, amount, degree, and extent of the interest one holds is known as an estate in real property (also known as estate in land). In order for an interest in real property to be an estate in real property, the interest must be possessory. In other words, one must have the right to possess the land, not merely to use it. An easement is an example of an interest in real property that is not possessory, and therefore not an estate.
Estates in real property differ between common law and civil law countries; this discussion is limited to estates that occur in common law countries, which includes the U.S., England, and most of Canada. Even though all states of the U.S. use the common law system, land laws, regulations, and even the methods used to physically survey land can be quite different from region to region, and even more so from state to state. Estates in real property can be divided into two general categories: freehold and leasehold (also known as less-than-freehold estates). An interest in a leasehold estate may be held in different ways, resulting in different types of tenancies, which is discussed in the Tenancies FAQ's. There are different types of both freehold and leasehold common law estates that represent the different types and quantities of possessory interest that can legally be held in real property.
Q: What does the term freehold mean?
A: In English feudal law, the term freehold signified an estate held by a free man - the highest form of land tenure available at the time to commoners, or those without royal blood. In contemporary common law countries, a freehold estate is one that is free of other interests and can best be described as full ownership, although certain conditions or limitations may apply. The two kinds of freehold estates are those with a right of inheritance, and those without it. Freehold estates with a right of inheritance include estates in fee simple absolute and estates in fee simple defeasible. Freehold estates without a right of inheritance include legal life estates, conventional life estates, and estates pur autre vie.
Freehold Estates with a Right of Inheritance
Q: What is fee simple absolute?
A: An estate in fee simple absolute (also known as fee simple, fee, estate of inheritance, or fee ownership) is the highest and most complete form of land ownership under the common law system. Fee simple estates are limited only by the governmental rights of taxation, eminent domain, escheat, and police power. Holders of fee simple estates may transfer, gift, sell, will, or otherwise dispose of real property in any way they wish, within the confines of the law. Fee simple estates may be held indefinitely; in legal parlance, they are said to run forever.
A discusssion of eminent domain, police power, and escheat, is available in the Title FAQ's, located in the Articles / FAQ's category on this site (or use the search option at the top of the page).
Q: What is fee simple defeasible?
A: An estate in fee simple defeasible is a less-than-absolute interest in real property and is subject to certain conditions or contingencies, such as the occurrence (or non-occurrence, as the case may be) of certain specified events. There are two types of fee simple defeasible estates: qualified fee conditional (or subject to condition subsequent) and qualified fee determinable. Defeasible estates allow for recovery of fee simple ownership of the property by a former owner (the grantor) if the new owner (the grantee) either commits certain acts (qualified fee conditional), or fails to comply with a special limitation (qualified fee determinable). Estates in fee simple defeasible are of unlimited duration, provided that the conditions or special limitations specified by the grantor are not violated or are continually met. An estate in fee simple defeasible differs from one in fee simple absolute in that it has a clearly defined potential endpoint.
Q: What is meant by an estate that is qualified fee conditional or qualified fee subject to condition subsequent?
A: An estate in qualified fee subject to condition subsequent is an estate in which the former owner in fee simple (the grantor) has specified that the new owners, as well as his or her heirs or assigns, cannot violate a stipulated condition. If they do, the grantor retains the right of re-entry, which allows him or her to re-enter the land to make sure the condition has not been violated. The right of re-entry is also the legal mechanism through which the current estate ends and the former owner can recover fee simple ownership (a process known as reversion). Generally, the right of re-entry can be exercised only if an action is performed that has specifically been prohibited. Whether or not to take legal action to recover fee ownership of the property is at the sole discretion of the grantor.
For example, Mr. Smith owns land in fee simple absolute, which he sells to Mr. Jones under the condition that the land not be used for industrial purposes, even though industrial land use is permissible according to local zoning regulations. If Mr. Jones constructs a factory on the property, or develops the land for any other industrial purpose, the estate ends and Mr. Smith (or his heirs) can regain ownership of the land. In order to recover the estate, Mr. Smith or his heirs must petition a court with jurisdiction over real estate matters.
Q: What is a qualified fee determinable estate?
A: An estate in qualified fee determinable is one that has been qualified with a special limitation. If the new owner (the grantee fails to comply with the special limitation, the former owner (the grantor has the right to recover ownership of the property if the special limitation is not met. The grantor of a qualified fee determinable estate retains the possibility of reverter, which allows for automatic reacquisition of ownership. In most cases, qualified fee determinable estates end if a special limitation is not complied with or met. Qualified fee determinable estates differ from those in qualified fee conditional in that reversion is automatic and no court action is required.
For example, assume that Mr. Smith from the example above decides to sell his land to Mr. Jones with the contingency that it can ONLY be used for industrial purposes. In this case, if Mr. Jones uses the land for any purpose other than industrial, Mr. Smith has the right to recover ownership.
Another example of an estate in qualified fee determinable is an age requirement before ownership may be assumed - if the grantor specifies that the grantee or his or her heirs must be 21 years old, and no such person exists, then reversion occurs and the grantor, or his or her heirs, can recover the former interest in the property - namely, an estate in fee simple absolute.
Q: Can fee simple defeasible estates (qualified fee determinable and qualified fee conditional) be sold or transferred?
A: In most cases, yes. All subsequent owners must abide by the conditions or special limitations stipulated by the grantor in order to avoid the possibility of reversion.
Freehold Estates without a Right of Inheritance
Q: What is a life estate?
A: A life estate is a freehold estate in which the interest in the property is held until the death of the owner or some other person specified by the grantor of the estate. Unlike other freehold estates, life estates cannot be inherited by the grantee's heirs. Transfer of property ownership following the end of a life estate occurs according to the provisions stipulated by the grantor. There are three types of life estates: legal life estates, conventional life estates, and estates pur autre vie (technically a type of conventional life estate).
Q: What is a legal life estate?
A: A legal life estate is involuntarily created through operation of law following the occurrence of certain events. In some states a property owner must file a notice that a qualifying event has occurred in order for a legal life estate to be created. This is usually the only action necessary on the part of the owner to form a legal life estate. In other states, no action is necessary and the estate is created automatically. The three types of legal life estates are homestead, dower, and curtesy.
Q: What is a homestead?
A: A homestead, also known as a homestead exemption, is a legal life estate that is created when a family (or single person) occupies a home that they own. It is intended to protect the home (or in some states its equity) from creditors and judgments. Usually the entire home, or at least a portion of it, is protected. The purpose of a homestead exemption is to provide a place to live for the life of the owner(s) even if he or she incurs large debts or court judgments. In reality, most homes may be sold to satisfy debts or judgments, even if the owner has a homestead exemption. The exemption reserves a certain amount of money from the sale of the property for the owner, and the debts and judgments must be satisfied with the remaining funds from the sale. The amount of the exemption differs by state.
A homestead ends when the owner dies or transfers interest in the property to another. A homestead estate does not exempt one from real estate taxes, mortgages, or any other charge or lien which is secured by the real property itself. Not all states allow homestead exemptions, and they differ in their filing requirements. A homeowner may have only one homestead at a time, even though he or she may own multiple homes.
Q: What are dower and curtesy?
A: Dower and curtesy are legal life estates that are created upon the death of a spouse who owned real estate. Dower is the life estate that a wife acquires in the real property of her deceased husband, while curtesy is the estate a husband holds in real property owned by his wife following her death. Dower and curtesy entitle the surviving spouse to a portion (usually one-third to one-half) of the interest in the real property owned by the deceased spouse, even if that property was willed to someone else. Dower and curtesy are forms of tenancy by the entirety, and are only used in states that practice that system of common law. Tenancy by the entirety is contrasted with another common law system used by other states, known as community property.
Q: What is tenancy by the entirety?
A: Tenancy by the entirety is a form of property ownership reserved for a married couple. It essentially means that the husband and wife together are viewed as one legal person, with each possessing an equal, undivided interest in the property. Generally, property owned in this manner cannot be divided, and neither spouse can sell a portion of the property interest - it is "all or nothing" under this system of common law. Upon the death of one spouse, the other takes sole ownership and possession of the real property. Tenancy by the entirety is not allowed in all states, and is never used in community property states.
Q: What is a conventional life estate?
A: A conventional life estate is a legal life estate that is intentionally and voluntarily created by an owner of real estate (the grantor, either by deed if the owner is alive or through a will if he or she is deceased. The estate is conveyed to a life tenant, who holds the estate until his or her death. During the life of the life tenant, he or she enjoys all the rights and privileges of property ownership, except that he or she is prohibited from laying or committing waste to or upon the property (damaging the property or causing its value to diminish). A conventional life estate ends upon the death of the life tenant. Ownership of the property passes to another or reverts to the original owner or his heirs, depending on the provisions of the life estate.
If the conventional life estate is also an estate pur autre vie, the estate is held for the duration of the life of some other specified person rather than the life tenant.
Q: What is an estate pur autre vie?
A: Pur autre vie is a French legal phrase that literally means "for another's life". An estate pur autre vie is essentially the same as a conventional life estate, except that the duration of the estate is not measured against the life of the life tenant, but against the life of someone else. An estate pur autre vie is the only life estate that has limited rights of inheritance: during the life of this other person against whose lifespan the duration of the estate depends, the life tenant's heirs may inherit the property. Once the "other person" is deceased, this right of inheritance ends.
Q: What happens when a conventional life estate or an estate pur autre vie ends?
A: Creation of either a conventional life estate or an estate pur autre vie always results in the automatic creation of an additional estate. Depending on the wishes of the grantor, this second estate may be reversionary, or it may consist of a remainder. The process of reversion occurs if the grantor has designated that ownership reverts to the grantor (or his or her heirs) upon the death of the life tenant, or the death of the other specified person in the case of an estate pur autre vie. If ownership passes to another following the end of the life estate, then the second estate consists of a remainder. The person who receives this interest in the property is known as a remainderman, even if she is a woman. Successive life estates may be created by a grantor, as when a husband creates a life estate for his wife, with the remainder to his daughter, the remainder after his daughter's death to her children, and so on.
Rights of reversion are known as future interests, because if the former owner (the grantor) has occasion to exercise these rights and chooses to do so, it will be at some time in the future. An interesting point about rights of reversion, including the possibility of reverter and the right of re-entry that accompany fee simple defeasible estates, is that these rights are considered property in and of themselves, and may be sold, transferred, or disposed of just like physical property. Rights and interests that exist legally but not physically are known as incorporeal or intangible property.
FAQ's: Real Estate
Added: Wed May 28 2008
Last Modified: Sat Jul 05 2008