Introduction
The Law on Present and Future Interests in Land provides some of the basic building blocks for conveyancing and estate planning.
Its concepts enable estate planners to provide clients with estate planning choices to clients and to prepare documents that represent the client’s wishes. Its concepts also enable dispute resolution lawyers to assist clients in the management of disputes pertaining to interests in land, whether through litigation or through the various alternative dispute resolution mechanisms available for use.
An understanding of its core concepts even at a basic level would therefore be necessary, if not crucial, to anyone intending to acquire, own, transact or even bequeath property rights.
The Concept
The starting point is that the law separates the idea of “ownership” from the “property” owned, the proposition being that one owns an “interest” in land, rather than the soil itself.
Second, the law allows one to divide the interest that he/she has in land into different interests and to give it to different people with the difference being when, or as from what point, the beneficiaries would have the right to use the land.
The division of the time from which a beneficiary(ies) would be able to use the land creates two broad categories of interests: present interests and future interests.
The Distinctions
Present interests in land include interests such as fee simple absolute, defeasible fee simple, fee tail, and life interests.
Future interests include interests such as reversionary interests which are held by the grantor, and executory interests and remainders which are usually held by a grantee.
These different types of present interests have different characteristics, as do the different types of future interests.
A fee simple absolute is the largest, most complete, interest in property. If Mr. A owns a fee simple absolute interest in land, his interest extends forward in time forever, unless he transfers it while still alive.
If he dies while still owner of the land, his interest in it does not terminate on his death, it devolves to his beneficiaries either through a Will or through intestacy.
His beneficiaries would get the same interest that he had in the property – a fee simple absolute interest extending forwards in time forever, unless through a Will he divides his interest and bequeaths a different kind of interest to his beneficiaries.
To illustrate, Mr. A can through his Will bequeath to his son Mr. B the right to use the land for the duration of Mr. B’s lifetime, and to his grand-daughter Ms. C the right to use the land after Mr. B’s death.
In doing so, Mr. A’s Will would have created both a present and a future interest in land. Upon Mr. A’s death, Mr. B would have the right to use the land for the duration of his lifetime and would therefore have a present interest in the land. Ms. C’s right to use the land would remain in abeyance and would arise at a future point upon Mr. B’s death. For that reason, she would have a future interest in the land.
Mr. B’s present interest would be different from the present interest that Mr. A had, since Mr. B’s is timebound; it lasts for the duration of his lifetime and devolves not to his estate but to someone else – Ms. C.
Upon Mr. B’s death, Ms. C’s interest in the property is converted from a future interest into a present interest at which instance she would have the right to possess the property. The type of present interest that Ms. C would now have is the same as the one that Mr. A had, a fee simple absolute.
Defeasible fee simple estates / interests are interests in land that can go on forever, but which can be lost by the grantee to the grantor or to a third party if a condition or limitation set out in the granting instrument materializes. To illustrate, Mr. A can give land to Mr. B “for so long as Mr. B uses the land for farming”. In such a scenario, if Mr. B can keep the land forever, so long as he uses it for farming, but can lose it if he ceases to use the land for farming”.
Life estates / interests on the other hand are interests that last for the life of the grantee. They end upon the death of the grantee and at that point either revert to the grantor or divert to a third-party (remainderman) if the grantor had appointed one. To illustrate, Mr. A can give land to Mr. B “for as long as he lives”. In such a scenario, the interest would revert to Mr. A upon Mr. B’s demise. It cannot be bequeathed or transmitted to Mr. B’s estate.
Future interests. A future interest is not a thing that someone will own in the future. It is an interest in property that someone has in the present, but one which can only be enjoyed in the future.
Future interests, just like present interests, are created by the grantor. What would be important to note, is that in creating future interests a grantor can chose to allocate that interest to himself in which case he creates what is known as a reversionary interest, or to allocate that interest to a third party in which case he creates what is known as a “remainder”.
Conclusion
An understanding of the law on present and future interests in land would be of immense value to anyone seeking to transfer or bequeath interest in their land, create trusts pertaining to their property, or resolve disputes involving present and/or future interests in land.
This article is intended to provide a basic guide on the concepts related. Specialist legal advice should be sought, tailored to your special circumstances.