A possessory estate, also called a present possessory estate, is a type of property ownership where the holder has the present or current right to possess the real property. Real property refers to land and all things attached to the land, such as buildings and underground resources.
The present right to hold a real property contrasts with the future rights to hold a real property. A future rights holder possesses the right to the real property after the present rights holder ceases to hold control over the property. See also: future estates.
There are two categories of present possessory interests: freehold estates and non-freehold estates.
- When the tenant holds the current right to the estate, it is a freehold estate.
- On the other hand, if the tenant does not own the current right to the estate, then it is a non-freehold estate.
- An example of non-freehold estates are rents and leases.
There are three types of freehold estates; a life estate, fee tail, and fee simple.
Life Estate
A life estate grants the holder use of the estate for the duration of a life, often that of the tenant. After that life ends, then the right to the land will transfer to the future estate holder, either by a reversion or a remainder.
The main example of words that grant a life estate is “to A for life.” Then, A will hold the life estate for the rest of A’s life. If there is no specification of who will receive the estate after A’s life, then the estate will return to the original grantor by default. The default rule here is a reversion, which happens when the original grantor of property takes back the life estate after the lifetime of the life estate holder.
Another example of a life estate is “to A for life, then to B.” Here, B gets the estate after the termination of A’s life. B here holds a future interest in land prior to A’s death. After A’s death, a remainder happens because a third party takes over the land after the life estate holder’s death. Finally, there is a life estate where the lifetime of a third party is the measurement of the duration of the possessory interest. For example, the grant could state, “to A for the lifetime of B.” Here, the measuring life of the estate is a complete third party independent of the grantor and the present possessory estate holder. Such a situation is a life estate pur autre vie (meaning “the life of another” in French).
Fee Tail
The fee tail estate ensures that land stays within a bloodline. A fee tail estate grants the holder the land for life but limits the holder from selling or giving away the right to land to another. Instead, the next lineal descendant of the fee tail holder automatically inherits the right to the land after their death. Almost all jurisdictions ban the fee tail since it is an outdated form of a freehold estate.
Fee Simple
A fee simple estate grants a complete right over land and is the most general form of a property right. There is the fee simple absolute and the fee simple defeasible.
- A fee simple absolute is an unlimited and unconditional right to land.
- The right cannot be revoked or transferred by others.
- In contrast, a fee simple defeasible is the right to land that can be revoked or transferred.
- If an event that is the condition of the grant happens, the event may trigger the transfer or revocation of the right to the estate.
There are three types of fee simple estates: a fee simple determinable, a fee simple subject to condition subsequent, and a fee simple subject to an executory limitation.
Fee Simple Determinable
A fee simple determinable is the automatic termination of the estate holder’s rights when the previously established condition occurs. A main example of fee simple determinable is “to A, as long as the property is used for religious purposes.” A is granted a fee simple determinable, and A will keep the rights to the land as long as A uses the land for religious purposes. However, as soon as A stops using the land for religious purposes, A will lose the right to land, and the land will return to the original grantor. The grantor’s right to repossess the land here is called the possibility of a reverter. The most notable characteristics of a fee simple determinable are the durational language and the automatic transfer of land to the original grantor.
Fee Simple Subject to Condition Subsequent
A fee simple subject to condition subsequent is a fee simple with a condition. If the stated event occurs, the estate holder may or may not lose the right to land. However, unlike the fee simple determinable, the transfer of right is not automatic. The original grantor can elect to take back the land, which is called the right of entry or the right of reentry. If the original grantor does not act upon the transfer after the stated condition is violated, then the land stays with the fee simple subject to the condition subsequent holder.
Fee Simple Subject to an Executory Limitation
A fee simple subject to an executory limitation is similar to a fee simple determinable in that the violated condition automatically transfers the right to land to another. The difference between a fee simple determinable and a fee simple subject to an executory limitation is that the transfer of right is to a third party in the latter case. The third-party receives the estate because they hold the future interest in the land. The transfer of the right of land is called the executory interest. Executory interests are non-vested interests that are subject to the rule against perpetuities.
[Last updated in January of 2024 by the Wex Definitions Team]
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