This type of property ownership is a type of freehold estate related to fee simple absolute, in that it conveys ownership of real property, not just possession. However, that ownership is conditional, meaning that not following the condition could undo ownership rights.
In spite of its limitations, fee simple defeasible is considered a powerful type of ownership. As long as the condition is met, ownership is perpetual and the owner controls all interests. Ownership is not shared, and the only limitations are those imposed by zoning or the government (e.g., taxation, police power, etc.). In many cases, the condition of ownership is intended to somehow preserve the original owner's vision of the integrity of the property.
Definition of fee simple defeasible in real estate
Ownership of a fee simple defeasible estate is conditional, and the condition must be clearly stipulated by the grantor in the conveyance document. Fee simple defeasible conditions can be structured two ways: Either the ownership is contingent upon an event happening or ownership ends when an event happens.
For example, if a grantor wants to make sure that a home will be historically preserved and turned into a private museum, they could create a fee simple defeasible estate with the conditions that the property must be maintained at a certain level and be listed on historic registers within X years. If it's already being used for that purpose, they can create a fee simple defeasible condition that says if the new owner changes the usage -- e.g., attempts to tear it down and build condos -- their action automatically undoes the ownership, even if it happens 30 years after the transfer of real property.
What are the consequences if a property owner violates fee simple defeasible terms?
If a property owner violates fee simple defeasible terms, then they are at serious risk of losing ownership. With a fee simple defeasible estate, if the condition is violated, the original owner has power of termination and must go to court to obtain their right of re-entry -- i.e., the power to take back ownership and control of the property.
What are the types of fee simple defeasible estates?
There are different types of fee simple defeasible ownership.
Fee simple determinable
With a fee simple determinable estate, the grantor need not even go to court. Once a condition is not met or is broken, the property ownership reverts back to them automatically. They also don't have any choice in the matter. Another name for fee simple determinable is fee simple qualified estate.
Fee simple condition subsequent
This form of fee simple defeasible estate is similar to fee simple determinable, except the grantor gets to choose whether ownership of the property will revert to them once the condition is violated. Their having a choice is where this differs from fee simple determinable.
Fee simple condition precedent
This is related to condition subsequent, except in this type of fee simple estate, ownership can't pass to the grantee until a condition is met.
Fee simple subject to executor limitation
This form of fee simple defeasible is set up so that when a specific condition is met or not met, then ownership automatically passes to a predetermined third party.
When is a fee simple subject to executor limitation created?
It could make sense to create a fee simple subject to executor limitation if the grantor has firm wishes about how the piece of property will be used in the long-term future. They may want to arrange for a third party to take over a piece of real property in due time if/when the original grantees can't fulfill their responsibilities to it. On the flip side, it may be that the grantor only wishes the second party to own and control the property until a specific condition is met, and the grantor and grantee mutually agree that at such time it will transfer to a third party.
What are future interests?
Future interests mean the people who have a potential ownership interest in a property in the future but not the present. Whenever parties have future interests, it creates potential murkiness around the title, and this is always the case in fee simple defeasible estates.
How to write up a fee simple defeasible conveyance of property
First off, most experts agree that this is a responsibility best suited to an attorney. The language needs to be very specific and make the grantor's intention for a defeasible estate very clear, but a statement of purpose is not enough. Depending on the type of fee simple defeasible, the words of conveyance need to be either conditional or durational (the words limit the duration of the estate).
Common reasons for fee simple defeasible
Some common reasons that people choose to transfer their property as a fee simple defeasible estate include:
- They want the land preserved in its natural state and not developed.
- They want a specific kind of development.
- They want to maintain the current kind of development.
- They want to make sure a certain activity does not take place on the land.
- They want to make sure that the land remains accessible to certain people for a specific purpose.
- They want to put time constraints onto the grantee's responsibility to perform a specific task related to the property.
Fee simple defeasible -- it works under certain circumstances
Neither investors nor courts prefer fee simple defeasible if fee simple absolute is a possibility -- but sometimes, a fee simple defeasible title is the only way the owner of a property will let it convey into someone else's hands. In that case, if the grantor and grantee are of like minds regarding the best use of the property, it can work. If, for example, property is being gifted from a private donor to a nonprofit or community, fee simple defeasible makes sense as a way to build in a long-term commitment.