What type of legal interest do you have in YOUR property? (Part 1 in a series on real estate ownership and transfer)

Real Estate is a complex and consuming area of practice for an attorney, especially for the attorneys here at McAvoy & Murphy Law Firm. From helping plan short sales and the drafting of WB-11’s, to the more-complex negotiation of RMA’s and litigating adverse possession claims, the breadth of this area of law is wide and ever-expanding. Whether you are looking to prevent (or create)  litigation down the road, trying to determine how to transfer ownership in property you own, or simply issue spotting for a family dispute, knowing your legal interest that you have in your property is a good starting point to determine your precise needs and concerns when determining if legal action is necessary.

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In a general sense, interests in property are either possessory or non-possessory in nature. Possessory interests are a person’s rights and responsibilities to exercise control or possession of a given property. A present possessory interest in land carries a present right to exclusive possession. In addition, possessory interests can be present or future interests, allowing enforceability. A future possessory interest in land may become possessory, but is not currently possessory and is a “segment of ownership measuring in terms of time.”

Possessory interests are further broken down into freehold and non-freehold interests. For example, a lease is a non-freehold “estate.” Since the subject of this post pertains to ownership of property, we shall pass on a discussion of non-freehold interests and save the explanation for a later article.

This brings us to the main subject of this segment of our series on property interests: What exactly are freehold interests? Types of freehold interests are usually broken down by duration: 1) fee simple and 2) life estates. In turn, there are three common types of freehold present interest: 1) fee simple absolute, 2) defeasible fee simple, and 3) life estate.

First, what is a fee simple absolute? A fee simple absolute is highest or largest interest that anyone can own in property.

index1This type of freehold interests is alienable in nature; for example, “Person X can convey the entire fee simple to another person (such as Person Y).” Furthermore, a fee simple absolute is devisable. For example, Person X can convey the property in an estate planning document, such as  in a will. If person X has no will, the land will end up passing through state statutory intestate provisions in a typical situation. In a document, a fee simple absolute can be identified by its absolute nature and lack of restrictions.Example language conveying a fee simple absolute:  “123 Down Rd., Waukesha, WI to Person A (and her heirs).”

The other freehold interest we shall discuss in this article is the defeasible fee simple (also known as a conveyance in fee simple).  These interests are further broken down into fee simple determinable, fee simple subject to condition precedent, and fee simple subject to executory limitation.

Fee simple determinable is a conveyance that creates a fee simple BUT also contains a limitation providing that the fee SHALL AUTOMATICALLY EXPIRE upon the occurrence of a stated event For example, Person A gives person B land until B uses imagesunlawful drugs. In this situation, Person A  has a future interest of the possibility of reverter (aka they may get the property back if B uses unlawful drugs. B has a fee simple determinable interest (highlighted by use of the word “until”) in this example; If (or once, depending on how you look at it factually)  B violates the determinable clause, the interest in the property will automatically go back to Person A. Key words to identify a fee simple determinable in a document transferring ownership of property include “while,” “during,” “until,” and “for so long as.”
In part 2 of our series on property interests, we will touch base on the other kinds of defeasible fee simple interests, and move into a discussion on future interests and life estates. Keep in mind, real estate is a complex and consuming area of law. If you are unsure of how to proceed in a real estate matter, or need guidance on how to proceed in a legal matter, this information will never replace the guidance of a real estate attorney. These articles are only offered for informational and educational purposes. If you wish to guest-author an article on The Startup Stream, contact us at info@mcavoyandmurphylaw.com.

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