Future interests reversion

Future interests and reversions, and how an estate is divided by time rather than by physical partition.

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Question 1

An owner holds a freehold plot outright and has done since he bought it eleven years ago with the proceeds of a business sale. Nothing has ever been carved out of it — no lease, no life interest, no option, nothing at all. He has been told by a colleague who is halfway through the same course that every freeholder holds a reversionary interest as well as a present one, and he has begun to draft his will on that footing.

Consider the following statements.

(i) He holds a present interest in the plot.
(ii) He holds a reversionary interest in the plot.
(iii) A reversion arises only where a lesser interest has been carved out.
(iv) He holds a future interest which falls in on his death.

A. (i) and (iii)
B. (i), (ii) and (iii) only
C. (ii), (iii) and (iv) only
D. (i), (ii), (iii) and (iv)

Show the answer and full explanation

Answer: A

The rule. Reversionary, future and remainder interests exist only where a lesser interest — a lease or a life estate — has been carved out of the freehold. An unencumbered freehold is a present interest and nothing else.

Why A is correct. (i) and (iii) are right. Nothing has been carved out of this plot, so (ii) is false, and (iv) is false because his death does not convert an interest he does not hold.

The other options.

B carries the false (ii).
C carries both false statements and drops the true (i).
D accepts every statement, which is the position the colleague in the stem is arguing for.

Exam note. No lease, no life estate, no future interest. Check for the carve-out before reaching for the vocabulary, because the vocabulary is what the question is baiting you with.

An unencumbered freehold is a present interest and nothing else →

Question 2

A landlord granted a three-year tenancy over a shop unit in a suburban row and then sold the property in the second year of the term, without telling the tenant anything about it until the transfer had already gone through. The tenant, who has spent a good deal on shopfitting and has fourteen months still to run, has since asked his own lawyer whether he must move out and whether he has any claim for the money he has laid out.

Which statement is correct?

A. The landlord had nothing to sell, the tenant holding the whole interest.
B. The landlord sold the reversion, and the purchaser takes subject to it.
C. The landlord sold the freehold free of the tenancy, which ends on sale.
D. The landlord sold the reversion, and the tenancy ends on registration.

Show the answer and full explanation

Answer: B

The rule. A landlord who grants a lease keeps the reversion for the whole of the term. It is the reversion that he sells, and the purchaser takes subject to the tenancy.

Why B is correct. He sold the reversion, and the tenancy binds the purchaser.

The other options.

A says he had nothing to sell.
C and D both end the tenancy — C on the sale and D on registration. D is the more attractive of the two because registration genuinely is the operative step for many things in this subject; it is not a way of extinguishing a lease.

Exam note. Selling during a term is ordinary. What changes is the identity of the landlord, not the existence of the lease.

A landlord who grants a lease keeps the reversion for the whole of the term →

Practise it under exam conditions

Single questions test whether you know a rule. The paper tests whether you can find it in a scenario, at speed, with three plausible alternatives in the way. Start with the free 20-question half-paper.

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