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In common law and statutory law, a life estate (or life tenancy) is the ownership of immovable property for the duration of a person's life. In legal terms, it is an estate in real property that ends at death, when the property rights may revert to the original owner or to another person. The owner of a life estate is called a "life tenant". The person who will take over the rights upon death is said to have a "remainder" interest and is known as a "remainderman".
A life estate pur autre vie (Law French, "for the life of another") is held for the rest of the lifetime of a person who does not hold the estate, known as the cestui que vie (Law French, "the person who lives"). This form of life estate arises where a life tenant has disposed of the property, assuming such a disposal does not trigger any special forfeiture under the life interest instrument. It also arises where the grantor chooses to make the measuring life that of someone other than the life tenant's life. A life estate pur autre vie is most commonly created in one of two circumstances.
A clear distinction should be made with an leasehold estate, interpreted as lease or licence.
At death, assuming no mis-dealings to certain innocent purchasers, the property involved in a life estate falls into the ownership of the remainderman ( remaindermen) or reverts to its grantor (all of which confusingly can be called 'reversions' and 'reversioners'). There is a small market for reversions in real estate, which necessitates a buyer to carry out enhanced documentary due diligence and physical checks. Home Reversions and their place in the market Chris Prior. Mortgage Introducer 18 February 2014. Retrieved 2015-03-12
A land owner of an estate cannot give a "greater interest" in the estate than he or she owns. That is, a life estate owner cannot give complete and indefinite ownership (fee simple) to another person because the life tenant's ownership in the property ends when the person who is the measuring life dies. For instance, if Ashley conveyed to Bob for the life of Bob, and Bob conveys a life estate to another person, Charlie, for Charlie's life an, then Charlie's life estate interest would last only until Charlie or Bob dies. Charlie's life interest or pur autre vie interest (interest for the life of another, whichever has applied) and most often the remaining rights of ownership in the property (the 'reversionary interest') devolve to the persons under the terms of the will/rules of intestacy/declaration of trust/trust deed (UK) or will/rules of intestacy/'grant or deed of life interest' (or similar) (U.S.) in remainder or revert to the original grantee, depending on terms of Ashley. Such a life estate in the U.S. can also be conveyed for the life of the grantor, such as "A conveys X to B until A dies" and in the UK by trust transferring upon trust or assigning rather than conveying X.
If a life tenant purports to transfer the underlying 'reversionary' interest, which a life tenant never has, this constitutes an actionable breach of trust for damages and may constitute criminal fraud however may not entitle the ultimate reversioner (or substituted beneficiaries) to be able to obtain a court declaration that the property is their own if that property is in the hands of an innocent purchaser for value without notice (bona fide purchaser).
Financial and physical responsibility falls to the life tenant under the legal doctrine of waste, which prohibits life tenants from damaging or devaluing the asset. In short, as the life tenant's ownership is temporary, failing to maintain or reasonably protect the asset resulting in its diminution in value, or indeed, destruction constitutes a cause of action for the reversioner.
A further limitation is the rule against perpetuities in many states and countries which prohibits long-running pre-19th-century style successions of life tenancies and may result in the premature and compensation-entitling termination of such successive life interests. In England and Wales this is fixed at one lifetime, or 80 years whichever is longer.
Selling property while keeping a life estate is commonly known in France as " viager" where it is used more often than elsewhere, most famously in the case of Jeanne Calment, the longest lived human ever recorded.
In the combined jurisdiction of England and Wales since 1925 a freehold estate intended to be 'held' as a life interest takes effect only as an interest enjoyed in equity, specifically as an interest in possession trust. The other type of land ownership is leasehold and although most long leases are for a period of between 99 and 999 years 'leases for life' will be interpreted in often unpredictable ways as either as a licence or a lease.
The intestacy laws of certain American states, limit the surviving spouse's rights (inheritance) to the deceased spouse's real estate to a life estate. Louisiana, applying civil law, has a similar default provision in intestate successions called a usufruct, which is only over community property and ends with the earlier of death or remarriage.
Some American states allow for an enhanced life estate deed, in which the grantor retains the ability to transfer to property to a third party without the consent of the remainderman. If the enhanced life estate holder still owns the property at the time he or she dies, and the remaindermen survive the life estate holder, the property automatically passes to the remaindermen outside of probate. Enhanced life estate deeds are also sometimes referred to as Lady Bird Deeds.
The intestacy laws of England and Wales from 1 October 2014 provide for £250,000 (or the whole non-joint estate if less) and 50% of any excess to the spouse, remainder to adult children. This abolished the remaining 50% being enjoyed as a life interest which had applied from the 1920s. "Family Finances: Wills and inheritance: how changes to the intestacy rules affect you" Jill Papworth and Patrick Collinson. Retrieved 2015-03-12.
The surviving spouse (and rarely, others) benefit from survivorship of any joint property.
The arrangement in the first paragraph would in the UK be interpreted as an interest in possession trust and is usually avoided as for inheritance tax is considered 'reservation of benefit' requiring fully backdated sums of annual income tax on whatever market rent ought to have been paid to the legal owner, in England and Wales for continued enjoyment of the asset.
Formally, where a system is derived from English law, the law divides into common law and equitable law. A claim under equitable law cannot usually defeat a claim to title from a bona fide purchaser for value without notice, as such a person has reasonably researched the ownership position based upon the legal title (common law) position. The owner of a legal interest can create from a life estate further embedded or legal interests consistent with the form of ownership.
Accordingly, due to their potential versatility and complexity in the U.S., common law seldom recognizes a life estate in personal property (tangible items and livestock other than land including buildings) but such interests are recognized at equity where of adequate form — statutes and regulations impose formalities on the creation of lifetime interests in personalty.
Life tenants are never recorded as proprietors at the Land Registry as they are temporary, equitable owners and are not entitled to have the a transfer of the land effected. If the proprietor has died, executors of the will, administrators or beneficiaries all have the right to apply for the standard form A restriction and are encouraged by the official guidance to do so. Practice Guide 24, published 13 October 2003. Land Registry. Retrieved 2015-03-12
If a lease is for more than seven years, the lease must be registered. Most long leases are for a period of between 99 and 999 years, and 'leases for life' will be interpreted either as a licence or a lease. "Wagstaff and the definition of settled property for CGT purposes" 27 March 2014. Fiona Graham and William Hadley. Private Client Advisor. Retrieved 2015-03-12.
A holder of a life estate can alienate his rights, but they will still expire on his death, regardless of whom he alienates it to. At that point, that buyer will have to forfeit the land.
From the late Middle Ages onwards, such life estates were primarily granted towards Widow of the nobility, especially Queen dowager. The life estate was typically agreed upon during marriage negotiations and granted with the intention of providing for the maintenance of a widow until their death. In such cases, a distinction between a life estate and a Dower was not always made. Life estates granted to queen dowagers played an important political role in Scandinavia during the 14th and 15th centuries, as they were used to secure the power of the monarchy.
Like in Scandinavia, life estates were also granted to noble women as a form of dower. Typically, an estate would be designated for the wife to maintain if she were widowed which her husband was legally prevented from selling without her consent. Ownership of the life estate was to be returned to the remainderman only upon her death, at which point none of her heirs or beneficiaries could make a legal claim to it.
Torrens title jurisdictions
In most Torrens title a life tenant has, like in United Kingdom and US, the right to possession and enjoyment of the real estate, but once the tenant dies the property will return to the remainderman.Edgeworth et al., Sackville and Neave's Property Law Cases and Materials, 8th edition, Lexis Nexis, 2008, pp. 200-205. The main difference is that, the life estate will be registered by the Registrar general of that jurisdiction, and will appear on the registered title. This has the effect of making them Estate Planning and Trusts. one of the 9 types of recognised interest in land, and one of the four that confirm possession. The registration process in Torrens title systems usually confers indefeasibility on the life estate.see Frazer v Walker 1967 AC 569.see Bogdanovic v Koteff (1988) 12 NSWLR 472.
Life tenancy investments
It is becoming increasingly popular for private investors to place funds into a life tenancy investment. This type of investment is being offered as an alternative to traditional buy to let and is becoming increasingly popular in the United Kingdom with over £30 million worth of Life Tenancies being delivered in 2018.
History
Scandinavia
In Denmark, Norway, and Sweden life estates ( livgeding; ) were historically Fief under the crown, which the holder had the authority to administer and tax during their lifetime, before reverting to the monarchy upon their death.
Germany
In the late Holy Roman Empire, a leibgedinge (or ) was a legal obligation to provide for the maintenance of an individual until their death. In particular, this applied to the provision of deeds to agricultural land whereby the owner of a farm retained residential rights, a share of the farm's yield, and/or a monetary stipend from the heir to their property. Currently in the Federal Republic of Germany, the term leibgedinge is still used in some regions to refer to state pensions, however the term is not legally defined.
See also
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