Reversionary Interest

Reversionary interest refers to the interest a person holds in a property upon the termination of the preceding estate. This future interest in the property typically arises when the preceding estate, such as a life estate, comes to an end.
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Definition

Reversionary Interest is a legal term in property law referring to the interest a person (the reversioner) has in a property upon the termination of a preceding estate (such as a life estate or lease). The property ownership reverts to the original grantor or their heirs upon the conclusion of the preceding estate.

Examples

  1. Life Estate Scenario: John grants a life estate to Mary for her lifetime. Upon Mary’s death, the property reverts to John (if he is alive) or to John’s heirs. Here, John’s interest in the property during Mary’s life is a reversionary interest.
  2. Leasehold Scenario: A property owner leases their land to a tenant for a period of 20 years. After the lease period ends, the possession of the land reverts back to the property owner. The property owner’s interest in the property during the lease period is a reversionary interest.

Frequently Asked Questions (FAQs)

Q1: Can a reversionary interest be sold or transferred? A: Yes, a reversionary interest can be sold or transferred. The reversioner can convey their interest to another party, who will then hold the reversionary interest.

Q2: How is a reversionary interest different from a remainder interest? A: A reversionary interest returns to the original grantor or their heirs, while a remainder interest is granted to a third party (the remainderman) after the termination of the preceding estate.

Q3: Can a reversionary interest exist in both real and personal property? A: Yes, a reversionary interest can exist in both real property (land and buildings) and personal property.

Q4: Is reversionary interest subject to legal disputes? A: Yes, reversionary interests can be subject to legal disputes, particularly regarding the timing and conditions under which the interest reverts and the rights of the reversioner.

Q5: What is the difference between reversionary interest and fee simple? A: A reversionary interest is a future interest that activates upon the termination of a preceding estate, whereas fee simple is the most extensive interest in property, where the owner has unlimited duration and rights.

  • Remainder: A future interest in property that is created in someone (the remainderman) other than the original grantor, and that takes effect upon the termination of a previous estate.
  • Remainderperson: The person who holds the remainder interest in a property; also known as a remainderman.
  • Life Estate: An interest in property that lasts for the duration of an individual’s life, after which the property reverts to the grantor or a designated remainderman.
  • Fee Simple: The most complete ownership interest one can have in property, with indefinite duration and freedom to dispose of the property.

Online References

Suggested Books for Further Studies

  • “Property Law: Rules, Policies, and Practices” by Joseph William Singer
  • “Understanding Property Law” by John G. Sprankling
  • “Real Property in a Nutshell” by Roger Bernhardt
  • “Estates in Land and Future Interests: Problems and Answers” by John Makdisi and Brooke Bowman

Fundamentals of Reversionary Interest: Real Estate Basics Quiz

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