Definition of executory interest
executory interest (plural executory interests)
- (law) An third party interest in an estate in land created by the conditions of a grant wherein the grantor gives the land to a second party, but with said land going to a third party upon the occurrence of a condition; an interest created subject to a fee simple subject to executory interest.
Example: Joe gives land "to Mike, but if Harry graduates from law school, to Harry". Harry has an executory interest which he can realize by graduating from law school; Mike owns the land subject to Harry's executory interest.
An executory interest is a future interest, held by a third party transferee (i.e. someone other than the grantee), which either cuts off another's interest or begins after the natural termination of a preceding estate. An executory interest vests upon any condition subsequent except the natural termination of the original grantee's rights. In other words, an executory interest is any future interest held by a third party that isn't a remainder.
Executory interests usually arise when a grantor gives property to one person, provided that they use it a certain way. If the person fails to use it properly, the property transfers to a third party. There are two different types of executory interests: shifting and springing. Executory limitations transferring ownership from the grantor to a third party are called springing executory interests, and those that transfer from the grantee to a third party are called shifting executory interests.
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