FEE SIMPLE DEFEASIBLE: Definition and How It Works In Real Estate

fee simple defeasible

Fee simple defeasible is a sort of freehold estate similar to fee simple absolute in that it provides ownership of real property rather than mere possession. However, that ownership is conditional. This means that failure to comply with the condition may result in the loss of ownership rights.
Despite its restrictions, fee simple defeasible is regarded as a powerful form of ownership. Ownership is permanent as long as the requirement is met, and the owner controls all interests. The only constraints are those imposed by zoning or the government, and ownership is not shared (e.g., taxation, police power, etc.). In many circumstances, the condition of ownership is meant to maintain the original owner’s vision of the property’s integrity.

What is Fee Simple Defeasible?

Fee simple defeasible property ownership is a legal phrase and kind of property ownership in which ownership is contingent on certain circumstances. If the grantor’s or a specified third party’s ownership criteria are breached, the property may be returned to the grantor or a specified third party. Contracts must include the language of conveyance in order to accurately express the parties’ intent. These are legal expressions used to demonstrate intent to transfer property.

Fee Simple Defeasible Real Estate Definition

Ownership of a fee simple defeasible estate is conditional, and the grantor must expressly declare this condition in the conveyance instrument. Fee simple defeasible conditions can be structured in two ways; ownership is dependent on an event occurring or ownership ends when an event occurs.

For example, if a grantor wishes to ensure that a home is historically preserved and converted into a private museum, they could create a fee simple defeasible estate with the stipulations that the property be maintained at a specific level and placed on historic registers within X years. If it’s already being used for that purpose, they can include a fee simple defeasible condition. The condition will state that if the new owner changes the usage — for example, attempting to tear it down and build condos — their action automatically nullifies ownership, even if it occurs 30 years after the transfer of real property.

Types of Fee Simple Defeasible

Fee simple defeasible comes in three varieties. The first two provide the person donating the property with future property rights. The future interest in the other type is transferred to a specified third party.

#1. Fee Simple Determinable

When a condition is violated or not met, a fee simple determinable instantly terminates the interest in the property. The person who grants the property interest retains a “possibility of reverted,”. This means that if the condition is violated, the property will automatically revert to the grantor without further action.

The words of conveyance must be durational in order to create a fee simple determinable (e.g., as long as, so long as, during, while, or until). A simple determinable fee would be A to B as long as the land is operated as a school. So long as the property is used as a school, B will have a fee simple interest in it. However, if the property is no longer used as a school, it will immediately revert to A.

#2. Fee Simple Subject To Condition Subsequent

A fee simple subject to a subsequent condition is very similar to a fee simple determinable, except that if the condition is violated, the original owner has the opportunity to reclaim the property. As a result, the property does not instantly pass back to the original owner. Instead, if the condition is violated, the original owner has the opportunity to reclaim ownership of the item. This is known as a “right of reentry.”

To pass a fee simple subject to condition subsequent, the words of conveyance must declare that the original owner has the right to seize the property if the condition is breached. A fee simple subject to condition subsequent would be; A to B, but if the property is used for commercial reasons, A has a right of reentry. Again, as long as the property is not used for commercial purposes, B has a fee simple interest in it. If, on the other hand, the property is used for commercial reasons, A may regain it.

#3. Fee Simple Is Subject To Executory Restriction

A fee simple subject to executory restriction is similar to a fee simple defeasible, with the exception that it confers a future property interest in a third party rather than the original owner.

To form a fee simple subject to executory limitation, the original owner would utilize durational or conditional phrases that establish a condition and a third person to whom the property would pass if the condition is not met or violated. The property, like a fee simple determinable, moves immediately and does not necessitate any action on the side of the third party. A “remainder” is a third-party interest.

A fee simple subject to executory limitation would be as follows; A to B only if the property is used as a place of habitation; otherwise, to C. As a result, B owns the property in fee simple. If, on the other hand, the land is used for something other than a residence, the property will immediately change to C. It’s vital to remember that A, the grantor, no longer owns the land.

When Does a Fee Simple Subject to Executor Limitation Become Effective?

If the grantor has strong feelings about how the property will be utilized in the long run, it may make sense to create a fee simple subject to executor limitation. They may wish to arrange for a third party to take over a piece of real estate in the event that the original grantees are unable to fulfill their obligations to it. On the other hand, the grantor may only want the second party to own and control the property until a specified condition is met, at which point the grantor and grantee both agree that it will pass to a third party.

How to Draft a Fee Simple Defeasible Property Conveyance

To begin with, most experts agree that this is a job best suited for an attorney. The language must be highly explicit and make the grantor’s intention for a defeasible estate very obvious. However, a statement of purpose alone is insufficient. The words of conveyance must be conditional or durational, depending on the form of fee simple defeasible (the words limit the duration of the estate).

Reasons for Fee Simple Defeasible

Some of the most typical reasons why people opt to transfer their property as a fee simple defeasible estate are as follows:

  • They want the property to remain in its natural state and not be developed.
  • They are looking for a specific type of growth.
  • To keep the current pace of development.
  • To ensure that a specific activity does not take place on the property.
  • They want to ensure that certain people can continue to use the land for a specified purpose.
  • They wish to impose time limitations on the grantee’s responsibilities to complete a specified property-related task.

Example of a Fee Simple Defeasible

The three types of fee simple defeasible are illustrated here. Roy is not only selling a business building to Chuks, but he is also the financier.

Chuks has control of the property under a fee simple determinable contract as long as he pays monthly payments to Roy. If Chuks fails to make his monthly payments, the property is automatically returned to Roy.

In the fee subject to condition subsequent example, if Chuks fails to make monthly payments, the property is not instantly returned to Roy. Roy, on the other hand, has the option of reclaiming the land.

Using the identical scenario as before, Roy has identified his ex-wife as the third party in fee simple subject to executory limitation. If Chuks does not make his monthly payments, the property will be immediately handed to Roy’s ex-wife.

What happens if a property owner violates fee simple defeasible terms?

If a property owner violates fee simple defeasible terms, they face substantial consequences. If the condition is breached in a fee simple defeasible estate, the original owner has the power of termination and must go to court to regain their right of “re-entry”. This is, the power to reclaim ownership and control of the property.

Do I Require the Services of a Lawyer?

When preparing any legal instrument, you should consult with an estate or property lawyer. Because of the complexities of fee simple defeasible estates, in particular, consulting with an attorney will substantially aid you in structuring a transfer that meets your interests.

Conclusion

If fee simple absolute is an option, neither investors nor courts favor fee simple defeasible. However, sometimes a fee simple defeasible title is the only way the owner of a property will allow it to transmit into someone else’s hands. In that situation, if the grantor and grantee agree on the best use of the property, it may work. If, for example, the property is being gifted to a nonprofit or community by a private donor, a fee simple defeasible makes sense as a mechanism to build in a long-term commitment.

Fee Simple Defeasible FAQs

What are the three types of defeasible fee simple estates?

The fee simple determinable estate, the fee simple subject to an executory limitation or interest, and the fee simple subject to a condition following are the three forms of defeasible estates.

What is an example of a fee simple?

When you buy a house, you usually do so fee simple. This implies you own the property and all rights to use it, and you are allowed to develop the land and buildings on it subject to municipal rules. The title deeds are in your name.

What's defeasible fee?

A defeasible fee is merely a fee simple interest in land that can be taken away from the holder if a stated event occurs or does not occur. The fee simple determinable and the fee simple subject to a future condition are the two defeasible fees.

What is a defeasible easement?

A Determinable Easement is an easement that will expire if a certain event or scenario occurs.

What is a reversionary estate?

In the context of real estate or wills and estates, a reversionary interest is a reservation placed in a real estate transfer that the property will revert back to the original owner upon the occurrence of a specific event.

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