MBE Fast Fact: Future Interests

In the many years I've taught the bar exam, it would be tough for me to think of a topic that students dislike more than future interests. Certainly, there is more to know about future interests than that contained in this post, but the following are three types of future interest retained by the grantor that all students should understand well when preparing for the exam:

Reversions: A reversion is a future retained by the grantor who conveys less than he owns. For example, let's say that X, the grantor, owns property in fee simple, and he conveys that property to Y, the grantee, for life. X has only conveyed a life estate (a present possessory estate) even though X owned the property for an infinite duration. When Y dies, the property will not die along with him. Rather, the property will revert back to X.

Rights of Entry: Similar to a reversion, a right of entry is a future interest reserved by the grantor. However, the right of entry is reserved when the grantor grants to another a fee simple subject to condition subsequent (a present possessory estate). A fee simple subject to condition subsequent has the potential to last indefinitely, so it's not certain, as it is with a reversion, that the grantor will ever regain an interest in the property. For example, let's say that X grants property to Y but if the property is not used for farming purposes then X may reenter and retake the property. The future interest in X is not certain to vest; it will only vest if Y fails to use the property for farming purposes. At that point, X will use his right of entry to reenter and retake the property. In other words, a right of entry is always contingent.

Possibilities of Reverter: A possibility of reverter, like in the two previous examples, is a future interest reserved by the grantor. Unlike with the right of entry, the grantor here need not take any affirmative action by reentering the property in order to retake the property. For example, X grants property to Y for as long as Y uses the property for farming purposes. At that moment, Y has a fee simple determinable (a present possessory estate). Y is subject to the same obligation as in our previous example; namely, to use the property for farming purposes. But if Y fails to do so, X has no obligation to reenter the property; rather, the possibility of reverter will kick in, and the property will automatically revert back to X.