Ownership of real property - Defeasible fees

Learning Outcomes

This article explains defeasible fees in real property for MBE purposes, including:

• Distinguishing fee simple determinable, fee simple subject to condition subsequent, and fee simple subject to executory limitation, and articulating the key features of each estate.
• Matching each type of defeasible fee with the correct future interest—possibility of reverter, right of entry, or executory interest—and predicting what happens when the condition occurs.
• Classifying exam-style conveyances based on durational versus conditional language, with attention to common phrases such as “so long as,” “while,” “during,” “until,” “but if,” and “provided that.”
• Applying construction rules when language is ambiguous or poorly drafted, including the preference against forfeitures and courts’ tendency to preserve estates as fee simple absolute or as covenants.
• Analyzing the interaction between defeasible fees and the Rule Against Perpetuities, especially where shifting executory interests may be void for remoteness.
• Tracing the consequences when the stated event occurs, differentiating automatic termination from situations requiring the grantor to exercise a right of entry through appropriate legal action.
• Spotting and avoiding frequent exam traps involving mislabeled estates, missing or silent re-entry language, mixed durational and conditional phrasing, and confusion between defeasible fees and zoning, licensing, or contractual restrictions.
• Reinforcing precise use of terminology for present estates and future interests so that multiple-choice answer options using technical labels can be evaluated quickly and confidently.

MBE Syllabus

For the MBE, you are required to understand defeasible fees as present estates in land, with a focus on the following syllabus points:

• Recognizing the three types of defeasible fees
• Identifying the correct future interests: possibility of reverter, right of entry, and executory interest
• Interpreting durational versus conditional language in grants
• Distinguishing defeasible fees from fee simple absolute with mere statements of purpose or contract conditions
• Applying the rule that courts construe ambiguities against forfeitures
• Analyzing what happens when the stated event occurs (automatic termination versus optional termination)
• Spotting when the Rule Against Perpetuities applies to executory interests that follow defeasible fees

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which of the following phrases most likely creates a fee simple determinable?
   1. "To A and her heirs, but if alcohol is sold, O may re-enter."
   2. "To A and her heirs so long as the land is used for residential purposes."
   3. "To A and her heirs, provided that the land is not used for business."
   4. "To A and her heirs, then to B if A ever sells alcohol on the land."
2. What future interest does the grantor hold after conveying "to B and her heirs, but if the property ceases to be a park, O may re-enter and reclaim the land"?
   1. Possibility of reverter
   2. Right of entry (power of termination)
   3. Executory interest
   4. Reversion
3. Which of the following is true regarding a fee simple subject to an executory limitation?
   1. The future interest is always held by the grantor.
   2. The future interest is subject to the Rule Against Perpetuities.
   3. The estate automatically reverts to the grantor upon breach.
   4. The estate cannot be transferred during the holder’s lifetime.

Introduction

In the system of estates in land, a fee simple absolute is the basic, unrestricted form of ownership: it can last forever, and there is no condition that can cut it short. By contrast, defeasible fees are fee simple estates that are vulnerable to early termination if a particular event occurs.

Key Term: Defeasible Fee
A fee simple estate that may be cut short before its natural end upon the occurrence (or nonoccurrence) of a specified event or condition.

Defeasible fees are still present possessory estates—the grantee has the right to possess the land now—but that possession is not guaranteed to continue indefinitely. The estate is “defeasible” because the specified event can defeat the fee simple.

Defeasible fees show up frequently on the MBE because they require careful reading of the grant’s wording, correct labeling of the estate, and matching it with the correct future interest.

Types of Defeasible Fees

There are three main types of defeasible fees:

1. Fee Simple Determinable: Ends automatically upon the occurrence of a specified event.
2. Fee Simple Subject to Condition Subsequent: Continues until the grantor takes action to reclaim the property after a condition is breached.
3. Fee Simple Subject to Executory Limitation: Ends automatically upon a specified event, and the estate shifts to a third party (not back to the grantor).

Each type is distinguished by (1) the language of the grant and (2) who holds the future interest and how it becomes possessory.

Key Term: Future Interest
A nonpossessory property interest that may become possessory in the future upon the occurrence of a specified event or at the natural end of a prior estate.

Key Term: Reversion
A future interest held by the grantor that becomes possessory when a lesser estate (such as a life estate) naturally ends, without any condition needing to be violated.

With defeasible fees, the grantor often retains either a possibility of reverter or a right of entry, and sometimes a third party holds an executory interest.

Fee Simple Determinable

A fee simple determinable is a fee simple that automatically ends when a stated event occurs. The defining feature is automatic termination and automatic return to the grantor.

Key Term: Fee Simple Determinable
A fee simple estate that is limited by durational language and that ends automatically upon the happening of a specified event, at which point the property reverts to the grantor.

Key Term: Durational Language
Language in a grant that limits the duration of an estate using words such as “so long as,” “while,” “during,” or “until,” signaling that the estate will automatically end when the event occurs.

Typical durational phrases include:

• “so long as the land is used as a farm”
• “while used for school purposes”
• “during its use as a public park”
• “until it is no longer used as a church”

If the stated event happens, the estate ends by operation of law—the grantor does not need to do anything.

The grantor’s future interest is called a possibility of reverter.

Key Term: Possibility of Reverter
The future interest retained by a grantor following a fee simple determinable, which becomes possessory automatically when the stated condition is violated or the limiting event occurs.

The possibility of reverter arises automatically when the determinable fee is created. In most modern jurisdictions, both the determinable fee and the possibility of reverter are transferable by sale, will, or intestate succession.

Exam angle: If the future interest following a determinable fee is held by a third party (not the grantor), that future interest is not a possibility of reverter. It is an executory interest, and the present estate is a fee simple subject to executory limitation, not a fee simple determinable in the strict technical sense.

Worked Example 1.1

O conveys Blackacre "to A and her heirs so long as the land is used for farming." Five years later, A builds a shopping center on the land.

Answer:
A held a fee simple determinable. By ceasing to use the land for farming, the condition was breached, and Blackacre automatically reverted to O (or O’s heirs) by operation of the possibility of reverter. A’s estate ended at the moment farming stopped; no further action by O was required.

Distinguishing Determinable Fees from Mere Purpose Language

Some grants mention the purpose of the transfer without actually imposing a legal condition.

Example: “O conveys to Church for the purpose of erecting a church building thereon.”

This is generally construed as a fee simple absolute, not a defeasible fee, because there is no clear durational or conditional language.

Courts disfavor forfeitures; unless the language clearly creates a determinable fee, they will often treat statements of purpose as precatory (expressing a wish) rather than as binding conditions.

Fee Simple Subject to Condition Subsequent

A fee simple subject to condition subsequent (FSSCS) is similar to a determinable fee in that a specified event may cut short the estate. The key difference is that the estate does not end automatically when the condition occurs. Instead, the grantor has the option to terminate the estate by exercising a right of entry.

Key Term: Fee Simple Subject to Condition Subsequent
A fee simple estate that does not end automatically upon breach of a stated condition but may be cut short at the grantor’s election if the condition occurs.

Key Term: Conditional Language
Language in a grant that imposes a condition using words such as “but if,” “provided that,” or “on condition that,” often accompanied by an express right of reentry in the grantor.

The typical structure is:

• Conditional phrase: “but if,” “provided that,” “on condition that,” etc.
• Explicit grant of power to the grantor: “O may re-enter and retake” or “O reserves the right to re-enter.”

The future interest retained by the grantor is a right of entry, also known as a power of termination.

Key Term: Right of Entry
The future interest held by a grantor following a fee simple subject to condition subsequent, which allows (but does not require) the grantor to retake possession if the stated condition occurs.

Key Term: Power of Termination
Another name for a right of entry: the grantor’s power to terminate a fee simple subject to condition subsequent when the condition is violated.

Unlike a possibility of reverter, a right of entry does not become possessory automatically. The grantor must take affirmative steps (e.g., filing an ejectment or quiet title action) to reclaim the land.

At common law, a right of entry could not be transferred inter vivos, but it could pass by will or intestate succession. Many modern jurisdictions now permit transfer by sale as well; the MBE often does not test heavily on this detail, but if tested, the modern (more permissive) view is typically assumed.

Worked Example 1.2

O conveys Greenacre "to B and her heirs, but if alcohol is ever sold on the premises, O may re-enter and reclaim the land." Ten years later, B opens a bar.

Answer:
B holds a fee simple subject to condition subsequent. When B sells alcohol, the condition is breached, giving O a right of entry. However, B’s estate does not end until O affirmatively exercises that right. Until O acts, B retains possession and legal title.

Delay and Waiver

On the MBE, you may see fact patterns where the grantor learns of a breach but does nothing for a long period. Issues like waiver, laches, or statutes of limitation may arise, but black-letter MBE rules are:

• The estate does not automatically terminate upon breach; the grantee remains in possession until the grantor acts.
• A very long delay could support an argument that the grantor waived the right of entry, especially if combined with other conduct (e.g., accepting rent after breach). The exam may ask you to identify the right (right of entry) more than to resolve subtle waiver issues.

Fee Simple Subject to Executory Limitation

A fee simple subject to executory limitation (or fee simple subject to an executory interest) is a fee simple that will automatically end upon a specified event, but instead of returning to the grantor, it shifts to a third party.

Key Term: Fee Simple Subject to Executory Limitation
A fee simple estate that ends automatically upon the occurrence of a stated event, with the future interest held by a third party (not the grantor).

The future interest held by the third party is an executory interest.

Key Term: Executory Interest
A future interest in a transferee (someone other than the grantor) that becomes possessory by cutting short a preceding estate or by divesting the grantor or the grantor’s heirs.

Executory interests come in two forms:

• Shifting executory interest: Divests a transferee (e.g., takes from A and gives to B).
• Springing executory interest: Divests the grantor or the grantor’s estate (e.g., becomes possessory in the future, taking from the grantor).

Key Term: Shifting Executory Interest
An executory interest that cuts short a prior interest in another transferee.

Key Term: Springing Executory Interest
An executory interest that divests the grantor or the grantor’s estate, becoming possessory at some future time.

In the defeasible fee context, the executory interest is almost always a shifting executory interest because it shifts the estate from one transferee to another upon a breach of the condition.

Worked Example 1.3

O conveys Blueacre "to C and her heirs, but if the property is not used as a park, then to D and her heirs." C later builds a house on the property.

Answer:
C holds a fee simple subject to executory limitation. When C stops using the property as a park, C’s estate ends automatically, and the land passes to D (or D’s heirs) under D’s shifting executory interest. O retains no future interest.

Worked Example 1.4

O conveys Blackacre "to A and her heirs so long as the land is used for school purposes, then to B and her heirs."

Answer:
A holds a fee simple subject to executory limitation. The grant uses durational language (“so long as”) but directs the land to B, a third party, upon breach. B holds a shifting executory interest. O retains no possibility of reverter because the future interest is in B, not O.

Worked Example 1.5

O conveys Greenacre "to A and her heirs, but if liquor is ever served on the premises, then to B and her heirs."

Answer:
A holds a fee simple subject to executory limitation; B holds a shifting executory interest. If liquor is ever served, A’s estate ends automatically and B’s interest becomes possessory. Because B’s interest is an executory interest, it is subject to the Rule Against Perpetuities; however, if the condition must be satisfied, if at all, within a life in being plus 21 years (as is typical when the condition is tied to A’s lifetime), it will be valid.

Language and Construction

Classification of a defeasible fee on the MBE is largely a matter of following a systematic approach:

1. Identify durational or conditional language.

   • Durational (so long as, while, during, until) → suggests fee simple determinable.
   • Conditional (but if, provided that, on condition that) → suggests fee simple subject to condition subsequent.

2. Ask who holds the future interest.

   • If the future interest is in the grantor, the estate is either:
     • Fee simple determinable (grantor has a possibility of reverter), or
     • Fee simple subject to condition subsequent (grantor has a right of entry).
   • If the future interest is in a third party, it is a fee simple subject to executory limitation, and the third party holds an executory interest.

3. Look for explicit reservation of a right of entry.

   • “O may re-enter,” “O reserves the right to re-enter,” or “O can retake” strongly signals fee simple subject to condition subsequent.
   • Without such language and with clear durational words, courts often construe the estate as a fee simple determinable.

4. Apply the rule against forfeitures.

   • Courts prefer to avoid forfeiture and will often interpret ambiguous language as:
     • A fee simple subject to condition subsequent (which requires grantor action), rather than a determinable fee; or
     • A fee simple absolute with a mere covenant or a precatory statement of purpose, rather than any defeasible fee.

Key Term: Condition Subsequent
A condition that does not prevent an estate from vesting but may cut it short if it occurs, giving the grantor the option (right of entry) to terminate the estate.

Key Term: Construction Against Forfeiture
The interpretive principle that, when grant language is ambiguous, courts prefer readings that avoid automatic loss of the grantee’s estate.

Worked Example 1.6

O conveys Redacre "to A and her heirs so long as the land is used as a park, but if it is not so used, O may re-enter and reclaim the land."

Answer:
The conveyance contains both durational language (“so long as”) and an express right of re-entry. Courts are split on classification, but the modern tendency—consistent with the policy of avoiding forfeiture—is to treat this as a fee simple subject to condition subsequent, with O holding a right of entry. On the MBE, when both types of language appear and the grantor reserves a right of entry, it is safest to classify the estate as a fee simple subject to condition subsequent.

Distinguishing Defeasible Fees from Mere Contract Obligations

Sometimes the deed’s language imposes obligations but does not clearly create a defeasible fee. For example:

• “to Buyer, subject to the understanding that Buyer will build and operate a public health center on the premises.”

This suggests a contractual promise or a covenant, not a defeasible fee, because there is no clear durational or conditional language that makes ownership end if the event does not occur.

On the MBE, when language is vague (“subject to the understanding,” “for the purpose of”), assume fee simple absolute unless there is clear durational/conditional wording.

Worked Example 1.7

Grantor conveys "to Church for the purpose of operating a soup kitchen."

Answer:
Church holds a fee simple absolute. “For the purpose of” expresses a motive or expectation, not a legally enforceable condition that can cut short the estate. There is no durational language and no right of entry or limitation over to a third party.

Future Interests and RAP

The future interests associated with defeasible fees are tested alongside the Rule Against Perpetuities (RAP).

• Possibility of Reverter (following a fee simple determinable)
• Right of Entry / Power of Termination (following a fee simple subject to condition subsequent)
• Executory Interest (following a fee simple subject to executory limitation)

As a rule:

• A possibility of reverter and a right of entry are future interests in the grantor.
  • They are not subject to RAP.
• An executory interest is a future interest in a transferee.
  • It is subject to RAP. If there is any possibility that it might vest more than 21 years after some life in being, it is void.

Key Term: Rule Against Perpetuities (RAP)
A rule that invalidates certain future interests (in transferees) if there is any possibility they might vest later than 21 years after the death of a life in being at the creation of the interest.

If an executory interest is void under RAP, the preceding estate is usually left unlimited by that condition. For example:

• “To A, but if the land is ever used as a commercial farm, then to B.”
  • If B’s executory interest violates RAP and is void, A typically takes a fee simple absolute.

Worked Example 1.8

O conveys Whiteacre "to A, but if A ever allows the property to be used for industrial purposes, then to B and her heirs."

Answer:
A holds a fee simple subject to executory limitation. B holds a shifting executory interest. Because the condition could in theory occur far in the future, B’s executory interest is subject to RAP. On MBE-style questions, you must check whether the conveyance is part of a will or inter vivos transfer and whether there is a validating life that ensures the condition must occur (or fail) within the perpetuities period. If the interest is deemed too remote, B’s interest is void and A holds a fee simple absolute.

Exam Warning

On the MBE, small changes in wording can flip the classification and the outcome:

• Always identify:
  • The triggering language (durational vs. conditional).
  • Who holds the future interest (grantor vs. third party).
  • Whether termination is automatic or depends on the grantor’s action.
• If the future interest is in a third party, think immediately: executory interest → RAP might apply.
• Watch out for:
  • Purpose language (“for the purpose of,” “in the hope that”) → likely a fee simple absolute.
  • Grants that mention a condition but omit any re-entry language → often a fee simple determinable if durational; potentially a covenant if very vague.
  • Mixed language (“so long as … but if … may re-enter”) → likely fee simple subject to condition subsequent, given the expressed right of entry and the preference against automatic forfeiture.

Revision Tip

• When analyzing a conveyance, proceed in this order:
  • Identify the present estate (fee simple absolute vs. defeasible fee).
  • Determine the type of defeasible fee based on the wording and who holds the future interest.
  • Name the future interest correctly (possibility of reverter, right of entry, executory interest).
  • Consider whether RAP applies (only to executory interests and other future interests in transferees).

Key Point Checklist

This article has covered the following key knowledge points:

• Defeasible fees are fee simple estates that may end early upon the occurrence of a specified event.
• There are three types of defeasible fees:
  • Fee simple determinable (automatic termination on breach; future interest is a possibility of reverter in the grantor).
  • Fee simple subject to condition subsequent (no automatic termination; grantor may end the estate by exercising a right of entry).
  • Fee simple subject to executory limitation (automatic termination on breach; estate shifts to a third party holding an executory interest).
• Durational language (“so long as,” “while,” “during,” “until”) signals a determinable estate; conditional language plus an express right of entry (“but if,” “provided that,” “on condition that … O may re-enter”) signals a condition subsequent.
• If the future interest is in a third party, the estate is a fee simple subject to executory limitation and the future interest is an executory interest (usually shifting).
• Possibility of reverter and right of entry are future interests in the grantor and are not subject to the Rule Against Perpetuities; executory interests are future interests in transferees and are subject to RAP.
• Courts construe ambiguous language against forfeiture, often preferring a fee simple subject to condition subsequent over a fee simple determinable, or even a fee simple absolute with a covenant or purpose statement.
• On MBE questions, careful attention to language and the identity of the future-interest holder is important for classifying the estate and determining whether the estate terminates automatically or only if the grantor acts.

Key Terms and Concepts

• Defeasible Fee
• Fee Simple Determinable
• Possibility of Reverter
• Fee Simple Subject to Condition Subsequent
• Right of Entry
• Power of Termination
• Fee Simple Subject to Executory Limitation
• Executory Interest
• Shifting Executory Interest
• Springing Executory Interest
• Durational Language
• Conditional Language
• Future Interest
• Reversion
• Condition Subsequent
• Construction Against Forfeiture
• Rule Against Perpetuities