Future Interests
Future Interests and their Control
Future interests in land are those which take effect and commence in the future. The interest may be vested in the sense that its extent and holder are ascertained, and will become enjoyed in possession in the future. Therefore, a person entitled to the freehold after the death of the existing life tenant, has a vested and ascertained interest in the freehold.
Future interest can themselves be transferred by will. This includes vested and contingent interests.
The law on future interests was one of the most difficult and complex areas of property law. The rules defined the extent to which estates and interests could be created to take effect at a future date. In effect, they defined the extent to which an owner might tie up land indefinitely. The principal aim of both common law and equity was to limit the extent to which rights could be created, to arise in the distant future.
The principal rule against perpetuities required in broad terms, that future interests must be ascertained or vested within the lifetime of persons in being at the time of the relevant deed or in the case of the will when it took effect, plus 21 years. By this means a minimum degree of certainty was defined.
Settlements
A settlement exists where there are successive owners, with present and future interests. The existence of future interests would require that the owners of all present and future interests would be otherwise necessary to sell the property concerned. Where any holder of such interests was unborn or unascertained, the land could not be sold. The Settled Land Act remedied this position, effectively freeing land for sale.
The Settled Land Acts, effectively allowed for the sale of land which is subject to a “settlement”. Where land is sold under the Settled Land Acts, the same interests and rights apply to the capital money received and to any substituted land purchased as applied under the settlement to the land concerned.
Vested and Contingent Interests
A future interest may not be vested, but may be contingent. Where, for example, an interest is granted to a child contingent on reaching 21 years of age, then until he reaches that age the future interest is contingent or conditional upon his reaching that stage.
Once he reaches that age it becomes vested in the sense that it is then unconditional. This does not necessarily mean that he will ever become entitled to enjoy it in possession, as it will not come into possession until the life estate owner dies.
A vested future interest may be a valuable proprietary interest. Although it is not to take effect into the future, it has a financial value discounted by reference to the probabilities and when it is to take effect. As such, it is potentially saleable.
An interest that is contingent may terminate. It has a probability value while contingent, but it may never come into possession / come to fruition. Where the holder of a contingent interest dies, the interest simply evaporates. In contrast, where the holder of a vested (non-contingent) interest dies before the interest comes into possession, that future interest passes to his successor.
Although a contingent interest is unvested, the contingent beneficiary has rights, express or implied under the trust or at common law. He may prevent the trustees from wasting the assets. He would generally be entitled to require the trustees to account for their dealing with the trust assets.
Former Common Law Rules
The pre-2009 rules on future interests were complex and arbitrary. They had developed over several hundred years. There were two layers of rules, so-called common law rules dealing with legal interests and the broader perpetuity rules, which applied to both legal and equitable interests.
The common law rules were particularly arbitrary. Matters of form could predominate over matters of substance. Any future interest, arising after a fee simple was not permissible. The fee simple was and remains the largest estate most extensive estate known.
A common law future interest had to be preceded by a prior freehold estate created by the same deed. A future freehold interest could not simply, “spring up” in future. The future interest had to follow from the natural termination of an earlier freehold. It could not pop into existence prematurely. If the prior estate was determinable in accordance with its terms, then it could end naturally, at which event a future interest at common law could thereupon commence.
A remainder after a fee simple is void. This rule reflected the fundamental notion that a fee simple is the “largest estate known to the law”. Once a grantor has assigned his fee simple, his powers are exhausted, and he can create no further estate.
A remainder must not cut short a prior freehold estate. The common law insisted that any prior freehold estate must be permitted to continue to its natural end, rather than being prematurely cut short by the operation of a remainder. It would not permit an arbitrary shifting of seisin from the holder of one freehold estate to another. A remainder had to be immediately expectant on the determination of
There had to be a prior “supporting” freehold interest. A future interest was required at law, to come into existence immediately after the end of the prior estate. There could be no gap in the ownership of freehold interest or “seisin”. It could not be arbitrarily shifted from one person to another.
Legal Executory Interests
The harshness of the above rules was avoided by rules developed by the courts of equity. The fundamental objection of there being no freehold ownership was satisfied where lands were vested in a trustee or its equivalent.
By creating a trust, or more correctly its precursor a use, an future interest could spring up into existence under the terms of the use or trust. Wills were interpreted as taking effect in equity so that an interest could spring into existence or shift could be created, without a formal trust.
The Statute of Use was enacted in the 16th century (later in Ireland) in order to prevent the avoidance of feudal dues, effectively taxes to the Crown. It executed the interest under the use / trust, thereby converting the equitable interest above into a legal interest. The interests under a use or trust in this context, were accordingly referred to as legal executory interests.
Wait and See Rules
A legal executory interest was capable of taking effect immediately on the termination of the prior estate. It was, however, necessary to wait and see if it did in fact take effect. The notorious rule in Purefoy v. Rogers provided that no limitation could take effect as a legal executory interest if it was capable of taking effect as a common law remainder.
This “wait and see” principle applied both to legal executory interests and to interests under wills. It compelled “wait and see” in relation to whether future interest might be capable of taking effect immediately after a prior interest. A further effect was that where there was an interest in favour of a class, the class could close arbitrarily early, leaving some class members arbitrarily excluded.
In this case, the use/trust device did not necessarily validate the future interest. This created the absurdity that the more flexible rule was not available if the interest was capable of taking effect immediately on termination of a prior common law interest. The common law “wait and see” principle could be avoided by providing for a gap so that it could not take effect, in which case the more flexible rules were available once more.
The Contingent Remainders Act 1877 abolished the above rule in Purefoy v Rogers but did so in an awkward and unclear manner.
Rule Against Perpetuities
The rule against perpetuities was the second and more prominent rule that applied to and limited future interests, prior to the 2009 Act. These rules applied to equitable interests and interests which were saved from the common law rules, by the Statute of Uses, legal executory interests.
The principal rule against perpetuities provided that a contingent interest in property was valid only if it vested, if at all, within the period of lives in being plus 21 years after the date of the instrument or, in the case of a will, after it takes effect (on death). The life in being had to be mentioned in the instrument or will expressly or by implication. If there is no reference to life or person, then the period would simply be 21 years.
Unlike the above common law wait and see rules, a gift was either valid at inception or not at all. If there was the slightest theoretical possibility, that it would not vest within the perpetuity period, it would be void from the outset.
Perpetuity Period
Vesting in the sense, meant the vesting of the interest, with the condition or contingency ceasing. It does not require that the interest be vested in possession within the perpetuity period.
The lives in question had to be human lives. The lives may be parties mentioned in the instrument, but this need not be so. It was possible to designate a person or category of persons who were not relevant to the gift concerned.
Commonly reference was made to royal lives, typically the descendants at the relevant date of a deceased monarch. This had the advantage there was typically by that date, an ascertainable category of numerous persons, who could be identified by peerage record. This was commonly referred to as a royal lives clause.
An aspect of the rule which was criticised severely was that it implied the theoretical possibility that a person might have a child at any age. The Irish courts departed from this absurdity and allowed for the possibility of evidence being given that a person could not give birth to a child at a particular age.
Exceptions
The interests arising after a determinable fee simple or fee simple subject to a condition were not separate to the rule against perpetuities. The rule did not apply to gifts over to charities on the failure of an initial gift.
All rights under wills take effect as equitable interests since 1959. Prior to that, freehold unregistered estates could vest directly in the heir/beneficiary. Therefore the legal estate is initially held by the personal representative in trust for the persons entitled.
Where assets are given in a will to a person on attaining a certain age, and the gift over is made if he does not attain the age, the primary gift is interpreted as being vested and not contingent. It is liable to being divested if the person dies before the relevant age.
Gifts which arise after determinable and conditional fee interests, were permissible at common law, notwithstanding the rule against perpetuities.
Reforms
The rules against perpetuities have been reformed in many jurisdictions. In the United States, England, Wales and Northern Ireland similar, relatively modest reforms took place. In most cases, provision was made for an alternative period, 80 years in the United Kingdom.
The Contingent Remainder Act 1877 abolished the above rule in Purefoy v Rogers but did so in an awkward and unclear manner.
The 2009 Irish land law reforms abolished the rules entirely. Legal contingent interests may not be created to vest at remote times in the future. They may take effect under a trust.
There is provision for an application to the court to vary the trust. This is the alternative protection against unreasonable tying up of land, which the rule was intended to avoid.
2009 Act Reforms
The 2009 land law reforms have abolished all the common law future interests rules retrospectively. The only freehold legal interest that can exist is a fee simple in interest in possession. In this context possession, refers to the interest being vested.
All other rights must exist under a trust, express or implied by law, as equitable interests. Where they exist or are created, there is deemed to be a trust. In many cases, the rights are expressly constituted under a trust.
The advantage of the interests subsisting under a trust, rather than as a legal interest, is that there is a trustee / legal owner who has the power to deal with land. including powers of sale. The 2009 legislation seeks to facilitate and simplify the process of the sale of a property.
Rules Abolished
The 2009 act abolished both common law rules in relation to future interests and the rules against perpetuities, which applied to executory interests (equitable interests converted under the Statute of Uses). The rules were abolished retrospectively.
The abolition does not apply, if before the commencement of the legislation, in reliance on an interest being invalid by virtue of any of the abolished rules, the property has been distributed or otherwise dealt with, or a person has done anything or omitted to do something which materially altered that person’s position to his detriment after the legislation commenced.
The retrospective abolition of the requirements may be problematical in certain, albeit more unlikely and remote circumstances. The retrospective abolition of the rules might have some arbitrary and surprising effects. The new legislation gives effect to settlements and interests, even if they would have been void under the older rules.
A further common law rule provided that if a future legal interest was given to an unborn person, any further grants to his issue, however, described were void. This was the so-called old rule against perpetuity. The rule was abolished by the 2009 reform.
Inalienability
Formerly a rule existed, that limited accumulation of income under a trust, for a period of life from being plus 21 years. This did not apply to charities. It was unclear if the rules ever applied to Ireland, although this was intended. The 2009 land law reform revoked this rule.
The modern rules maintain the long-standing principles that land should be capable of being transferred. Provisions which purports to make the legal estate non-transferable are void, subject to the provisions of the legislation.
A trust fund is subject to the rules on inalienability A trust which tied up funds for more than the perpetuity period is invalid in so far as such an obligation purports to exist. In this context, the rules applied to vested interest. They prevent the accumulation of income without distribution for undue periods of time.
Exceptions to Alienability
Trustees of charities are not subject to the rules.
Trusts for the permanent upkeep of buildings are likely to be invalid where the interest is not charitable. The courts attempt to interpret such gifts or instruments in a manner that saves them. They may interpret them as gifts to the members of the institution, at the date of the gift so as to avoid an interpretation that suggests that it is perpetual.
There was a special provision in the Charities Act regarding gifts for the upkeep of tombs. Gifts may be created for more than 21 years but are limited to certain monetary amounts per year or by way of capital.
References and Sources
Primary Texts
Wylie on Irish Land Law Wylie 6th Edition 2020
Land Law In Ireland -Lyall 4th Edition 2018
Principles Of Irish Property Law de Londras 2nd Edition 2011
Equity and the Law of Trusts in Ireland- Keane 3rd Edition
Land Law Kenna & Murphy 2019
Land Law Pearce & Mee 3rd Edition 2011
Other Irish Sources
The Land and Conveyancing Law Reform Act 2009: Annotations and Commentary -Wylie 2nd Edition 2017
Property Legislation 2009 2011 Cannon, Clancy, Kenna 2012
Irish Land Law – A Casebook: Adanan Maddox 2020
A Casebook on Equity and Trusts in Ireland – Wylie
Shorter Guides
Land Law Nutshell Cannon 2020
UK Textbooks
Land law C. Bevan 2nd ed.2020
Land Law: Text, Cases and Materials B McFarlane, N Hopkins and S Nield, (4th ed. OUP 2018)
Property Law R Smith(10th ed., Pearson, 2020)
Cheshire and Burn’s Modern Law of Real Property by Burn, E. H. 2011
Modern Land Law Dixon 2018
Elements of Land Law Gray, 2009
Property law: cases and materials Smith 2015
Land law Cooke 2015