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
- 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.
- 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
### What does reversionary interest refer to in property law?
- [ ] The present interest in a property
- [x] The future interest in a property upon the termination of the preceding estate
- [ ] The interest held by a tenant in a lease
- [ ] The outright ownership of property
> **Explanation:** Reversionary interest is the future interest in a property that reverts back to the original grantor or their heirs upon the termination of a preceding estate.
### Who typically holds a reversionary interest?
- [ ] Tenant
- [x] Original grantor or their heirs
- [ ] Remainderman
- [ ] Property management company
> **Explanation:** The original grantor or their heirs typically hold the reversionary interest in a property.
### Is it possible for a reversionary interest to be transferred?
- [x] Yes
- [ ] No
- [ ] Only if the reversioner agrees to certain conditions
- [ ] Only upon court approval
> **Explanation:** A reversionary interest can indeed be sold or transferred by the reversioner to another party.
### What happens to a property with a life estate once the life tenant passes away?
- [ ] It goes to the government
- [ ] It belongs to the life tenant's heirs
- [ ] It remains unoccupied
- [x] It reverts to the reversioner or their heirs
> **Explanation:** Upon the death of the life tenant, the property reverts to the reversioner or their heirs, per the terms set forth when the life estate was established.
### Which of the following best describes the difference between a reversionary interest and a remainder interest?
- [x] Reversionary interest is held by the original grantor, while remainder interest is held by a third party.
- [ ] Reversionary interest can never be transferred, whereas remainder interest can be.
- [ ] Reversionary interest only exists in leasehold estates, while remainder interest applies to life estates.
- [ ] There is no difference; both terms are interchangeable.
> **Explanation:** A reversionary interest is held by the original grantor or their heirs, whereas a remainder interest is held by a third party known as the remainderman.
### What is necessary for a property to qualify for a reversionary interest?
- [ ] The property must be commercial
- [ ] There must be a pending court case
- [x] The property must have a preceding estate (e.g., life estate or lease)
- [ ] It must be owned by a corporation
> **Explanation:** For a reversionary interest to exist, the property must have a preceding estate such as a life estate or lease that eventually terminates, returning the interest to the reversioner.
### Which of the following types of property can have a reversionary interest?
- [x] Both real property and personal property
- [ ] Only real property
- [ ] Only personal property
- [ ] Only government-owned properties
> **Explanation:** A reversionary interest can exist in both real property (like land and buildings) and personal property.
### In a leasehold estate, when does a reversionary interest take effect?
- [ ] Immediately on contract signing
- [ ] After the tenant extends the lease
- [x] Upon the expiration of the lease period
- [ ] When the tenant makes the final rent payment
> **Explanation:** In a leasehold estate, the reversionary interest takes effect upon the expiration of the lease period, at which point the property reverts to the original owner.
### What determines the rights of a reversioner during the life of the preceding estate?
- [ ] The total value of the property
- [ ] The geographic location of the property
- [x] The terms set forth in the original deed or will
- [ ] State property tax laws
> **Explanation:** The rights of a reversioner during the life of the preceding estate are determined by the terms set forth in the original deed or will establishing the estate.
### Why might a reversionary interest be subject to legal disputes?
- [ ] Due to undefined tax implications
- [ ] Because it cannot be transferred
- [x] Due to disagreements over the timing, conditions, and rights associated with its activation
- [ ] Because it typically involves adverse possession claims
> **Explanation:** Reversionary interests might be subject to legal disputes due to disagreements over the timing, conditions, and specific rights that activate when the preceding estate ends.
Thank you for embarking on this journey through our comprehensive property law lexicon and tackling our challenging reversionary interest quiz questions. Keep striving for excellence in your legal knowledge!
