Real Estate Terminology

A form of future interest in land that arises when a person grants a fee simple interest in land to another subject to a contingent event that, if it occurs, would automatically return the fee to the grantor or his heirs. "A possibility of reverter is the future estate left in creator or in his successors in interest upon simultaneous creation of estate that will terminate automatically within a period of time defined by occurrence of a specified event." United Methodist Church in W. Sand Lake v. Kunz, 78 Misc.2d 565, 357 NYS.2d 637, 640 (1974). The creation of a determinable fee effectively grants the entire fee estate, subject only to the possibility that it may return to the grantor without further action if the given event occurs—the ‘possibility’ of a reverter (2 Bl Comm 109; Helvering v. Hallock, 309 US 106, 60 S Ct 444, 84 L Ed 604, 612 n. 6 (1939)). In that respect, it may be compared with a conditional fee by which the grantor retains a right of re–entry that needs to be exercised before the estate returns; although the interest that is held by that right may sometimes be called a possibility of reverter. However, a conditional fee is not a ‘reversion’ because the grantor has conveyed an estate in fee simple to another. "A possibility of reverter, as distinguished from a reversion arises on a grant so limited that it may last forever or may terminate on a contingency; it is the possibility of having the fee again which exists in the grantor after the grant of a determinable or qualified fee." 31 C.J.S., Estates, § 105(b). For example, if A grants land "to B until he marries Y" or "to Z so long as the land is used for school purposes", then in either case, A has the possibility of the land reverting to him, which it will do if B marries Y, or if the land is no longer used for a school. A possibility of a reverter is a type of future interest that can be sold; although strictly it is not an estate in land but merely the possibility of acquiring an estate (H.W. Challis, Law of Real Property (3rd ed. 1911, reprinted 1963), p. 63; North v. Graham, 235 Ill 178, 85 NE 267, 268–9 (1908), cf. Purvis v. McElveen, 106 SE.2d 913, 916 (SC 1959)). Thus, at common law, it is not subject to the rule against perpetuity (North Finn v. Cook, 825 F Supp 278, 281 (D Wyo 1993)). However, in English law, the rule has been made applicable to such interests (Perpetuities and Accumulations Act 1964, s. 12). In the US, several states have statutes that limit or prevent the enforcement of conditions that create a ‘possibility of a reverter’ (Anno: 87 ALR3d 1011: Statute Canceling Possibility of Reverter). See also fee simple defeasible^(US).

Terms in bold are defined elsewhere in the hard copy of the Encyclopedia.