The Fee Simple Determinable & The Possibility of Reverter

This article written by Dave Phillips, November 26, 2007.

A continuation of the estates in land. This article will focus on The Fee Simple Determinable and The Possibility of Reverter.

At the end of the previous article regarding the life estate and the reversion, I asked the reader to consider the fee simple absolute as the mother ship of all our estates. The fee simple absolute is the purest form of land ownership. I will restate the definition of the fee simple absolute, as this is necessary for our current discussion: The fee is synonymous with holding or ownership. Simple refers to an estate that is inheritable. Absolute discloses that there are no apparent impediments to the title. We also learned that whenever a piece of the fee simple absolute is carved out, there is a creation of new estates. All the estates, when added together, must add up to a fee simple absolute, thereby satisfying the calculus of estates.

Now let me twist the knife a little. There are situations in which a fee simple estate will not be absolute. In other words, the fee simple will be conditioned or impeded. When a fee simple is conditioned or impeded, we call this a defeasible fee simple. There are 3 ways in which a fee simple may be made defeasible: (1) by the creation of a fee simple determinable, (2) by the creation of a fee simple upon condition subsequent, and (3) by the creation of a fee simple subject to executory limitation. This article will examine the first of these; the fee simple determinable. I will also discuss its counterpart, the possibility of reverter.

First off, what is a fee simple determinable? A fee simple determinable is a fee simple estate that is made defeasible by a condition attached to the conveyance, which condition, if violated, triggers an automatic reversion to its original grantor.

Let's say that Bill Smith is the owner of Blackacre in fee simple absolute. Bill Smith then conveys Blackacre to Shirley Thomas, so long as the land is used for residential purposes, and if the land ever ceases to be so used, the property shall automatically revert back to Bill Smith and his heirs, in fee simple absolute. Don't panic! Let me discuss this conveyance as it is written. Bill conveyed a fee simple estate to Shirley. However, this fee simple estate is not considered absolute because there is a condition on the title. The condition is found in the language 'so long as the land is used for residential purposes'. This condition destroys the fee simple absolute. The additional language 'and if the land ever ceases to be so used, the property shall automatically revert back to Bill Smith and his heirs, in fee simple absolute' discloses that the current possessory estate is a fee simple determinable. Explain this Dave!

If the condition in our example is ever broken, the property will automatically revert back to Bill Smith. It is this automatic reversion that defines the fee simple determinable. To complete our example, let's say that Shirley constructs a restaurant on the subject property after she acquired title from Bill. The construction of the restaurant is a violation of the condition that the property be used only for residential purposes. The property would automatically revert back to Bill and Shirley's interest would be destroyed.

What happens if the condition is never broken? If the condition is never broken, the property will continue to descend through Shirley's family tree. A fee simple determinable creates a condition, which condition may or may not be broken; only time will tell. If the condition is not broken, the fee simple determinable functions much like a fee simple absolute. The reader should also understand that the fee simple determinable can be very harsh on its grantee. If Shirley violates the condition, Bill has an automatic present right to possess the property and to dispossess Shirley of her interest; no court proceedings are necessary.

A fee simple determinable is not a fee simple absolute. As a result, there must be an interest following the fee simple determinable. As you probably surmised by the title of this article, this interest is the possibility of reverter. The possibility of reverter is a future interest and therefore falls within the jurisdiction of future interest law. This future interest is a present right to future possession.

In our example, we created a current possessory interest of a fee simple determinable in favor of Shirley. We call Bill's retained interest a possibility of reverter. The name says it all. There is a possibility of reverter in favor of Bill. The property will not revert back to Bill unless the condition attached to the fee simple determinable is violated. Compare this to my last article in which I discussed the life estate and the reversion. There, the reversion was certain to take effect upon the death of the current life estate holder. In our current example of a fee simple determinable, the reversion is not certain to vest in Bill, therefore Bill's interest is classified as a possibility of reverter. So you see, when a fee simple absolute owner creates a fee simple determinable estate, the original owner, Bill, is not certain to regain any current possessory interest in Blackacre.

Summary, I have discussed two additional estates in this article: (1) the fee simple determinable, and (2) the possibility of reverter. Both of these estates are created by carving a piece out of the fee simple absolute. The fee simple determinable represents the current possessory interest, while the possibility of reverter represents the possible future possessory interest. For this future interest to become possessory, the condition attached to the fee simple determinable must be violated.

See you next week.
dave