Fee Simple

The following question was e-mailed to me by a reader of the blog:

Sean,

I am having trouble identifying whether something is a fee simple subject to a condition subsequent, fee simple determinable or fee simple subject to an executory interest. I know the definitions but they all seem so similar. Can you explain this better?

Thanks

Response:

Future interests are probably the most cited area of difficulty in regards to Real Property. I think the best way to address this question is to first deal with the fee simple determinable and fee simple subject to condition subsequent, as there are important similarities and differences among them that must be known.

A fee simple determinable is a present possessory estate that terminates upon the happening of a stated event. Importantly, once that event occurs, the estate automatically reverts back to the grantor. For example, x conveys to y "Blackacre for so long as y uses the property for farming purposes." In that conveyance, the stated event is the failure to use the property for farming, and upon that stated event, Blackacre will revert right back to x without x having to take any action to retrieve it. Note that here x has an interest in the property because the property might revert back to him upon the happening of the stated event. It's a future interest, and it's called a possibility of reverter.

A fee simple subject to condition subsequent, however, does not automatically revert back to the grantor upon the happening of a stated event. It is, like the above, a present possessory estate that terminates upon the happening of a stated event. For example, x conveys to y "Blackacre but if y fails to use the property for farming purposes then x reserves the right to re-enter the property to retrieve it." The differences are significant here; though both grants speak of the same event (failure to use the property for farming), the difference lies in what will result should that event come to pass. If a fee simple determinable was granted to y, then, as stated above, the property would automatically revert back to x, but if a fee simple subject to condition subsequent was granted, then x is under an obligation to re-enter the property to retrieve it. If he does not, then the property will remain with y. The interest that x has here is a future interest known as a right of re-entry (sometimes called a right of termination).

A fee simple subject to an executory interest is similar to the two fee simples already mentioned above, in that the present estate will terminate upon the happening of a stated event. For example, x conveys to y "Blackacre for so long as y uses the property for farming purposes, and then to z." Notice the addition of z here. That additional party is what makes this estate different than those previously mentioned. With the previous two, the future interest was held by the grantor, whereas here the future interest is held by a third party (z). Similar to the fee simple determinable, upon the happening of that event, the interest will automatically pass to z without z being obligated to affirmatively retrieve it. The future interest held by z here is called an executory interest.

As an aside, as it's also a topic that causes confusion, remainders differ from the future interests mentioned above. Specifically, remainders do not become possessory until the natural termination of the preceding estate, whereas in the three examples above, the future interest would not become possessory upon the natural termination of the preceding estate, but rather would become possessory upon the happening of a stated event that would cut off the preceding estate.