Fee Simple Subject to Executory Limitation

A fee simple subject to executory limitation is a defeasible fee that, upon the happening of a stated event, is automatically divested in favor of a third party rather than reverting to the grantor. The future interest held by the third party is called an executory interest -- specifically, a shifting executory interest because it shifts the estate from one grantee to another. This estate type became possible only after the Statute of Uses (1536), which recognized executory interests that had not been enforceable at common law.

The key distinction from other defeasible fees is the identity of the holder of the future interest. When the future interest is in the grantor, the estate is either a fee simple determinable (with a possibility of reverter) or a fee simple subject to condition subsequent (with a right of entry). When the future interest is in a third party, the estate is a fee simple subject to executory limitation. The divesting event operates automatically, like a fee simple determinable, without any action required by the holder of the executory interest.

Because executory interests are held by third parties rather than grantors, they are subject to the Rule Against Perpetuities. This means the executory interest must vest, if at all, within a life in being plus twenty-one years. If the executory interest violates the Rule, it is void, and the estate typically becomes a fee simple absolute in the grantee. This is a critical analytical step that students must not overlook when classifying estates.