Tuesday, August 22, 2017

A Page of History is Worth a Volume of Logic

The famous Massachusetts and United States Supreme Court justice Oliver Wendell Holmes Jr once wrote in a decision, “. . .on this point, a page of history is worth a volume of logic.” He was then discussing the estate tax, but his observation equally applies to real estate law. Without understanding the historic background of real property law, it doesn’t make much sense.

The basics of Massachusetts real estate law developed in medieval England. Back then, the king owned all the land, but he would grant portions of the land to favored subjects to use and manage in return for them providing him with soldiers and food. When the person died, the land would revert back to the king. Gradually, the king allowed the nobles to keep the land, sometimes for as long as they had a male heir, sometimes longer.

That is how estates in land came to be measure in terms of time. When the English first came to America, there were many different types of estates. Fee simple absolute was ownership for potentially infinite duration. Fee simple determinable was ownership that terminated or “determined” upon the occurrence of a certain event (“I grant you this property for as long as it is used as a church.”). Along with a fee simple determinable came something called a future interest which directs who is to own the property when the contingency occurs. If the deed creating the determinable fee is silent on that, ownership would revert back to the grantor or his estate.

Over time, almost all of these types of ownership that are less than fee simple were eliminated legislatively because public policy preferred the free transferability of land rather than these convoluted genealogical formulas or contingencies. So today, almost every conveyance is in fee simple.

There are at least two estates less than fee simple that remain popular today. One is a lease for a term of years. If I lease you my house for one year, your ownership estate is one year in duration. At the end of that year, the property reverts back to me. The other example is a life estate which is ownership measured in terms of someone’s life. If I grant my house to my heirs but reserve for myself a life estate, I own the property for as long as I am alive, but immediately upon my death, my heirs own it. At the time of the conveyance, the heirs receive an ownership interest, but it only becomes a possessory interest at some time in the future, hence the term future interest.

Other than lease and life estate, it is rare for these deed variations to make an appearance these days, but understanding what they were and how they operated makes understanding current real estate law much simpler.  

No comments: