reversion

Definition of reversion

Etymology

From Old French reversion (modern réversion), from Latin reversio, from revertere.

Pronunciation

• IPA: /rɪˈvɜː�'ən/
• (US) IPA: /ɹɨˈvɚ�'n̩/
• Rhymes: -ɜː(r)�'ən

Noun

reversion (countable and uncountable; plural reversions)

1. The action of reverting something.
2. The action of returning to a former condition or practice; reversal.
3. The fact of being turned the reverse way.
4. The action of turning something the reverse way.
5. (law) The return of an estate to the donor or grantor after expiry of the grant.
6. (law) An estate which has been returned in this manner.
7. (law) The right of succeeding to an estate, or to another possession.
8. The right of succeeding to an office after the death or retirement of the holder.
9. The return of a genetic characteristic after a period of suppression.
10. A sum payable on a person's death.

Further reading

A reversion is a type of "remainder" interest created when incomplete ownership in property is alienated subject to a condition subsequent. Upon the fulfillment of the condition subsequent, the incomplete possessory rights cease to exist and exclusive ownership returns to the holder of the reversion interest by operation of law (or automatically).

A reversion interest is logically similar, but not legally identical, to the rights retained by someone who lends his property to another for a limited time. Although the bailee would have the right to possess the property during the limited duration, these rights are neither permanent nor exclusive. When the time comes, the property rights of possession will terminate and return to the holder of the reversion.

Reversions are commonly created in real property transactions, particularly during lease arrangements as well as devise (the transfer of real property through a will). In the context of a will, a testator may devise a simple life estate to a devisee. The testator may retain the reversion in the estate or give it to another individual. The owner of the life estate will retain ownership of the property during the devisee's life, and may freely alienate this interest. However, upon the death of the devisee the life estate will terminate and ownership of the real-property will fully vest in the holder of the reversion.

A tenancy for years is a simple illustration of a reversion interest in the context of leasing arrangements. An owner of real-property becomes a lessor by transferring a bundle of rights - including, but not limited to, a right of entry - to the leasee for a certain period of time. The lessor typically retains a reversion interest in the property which will mature after the lease expires. A common example of this transaction is the leasing of an apartment to a tenant for a one-year period. When the lease expires, the rights of the leasee are terminated and exclusive ownership of the property returns to the lessor.

Reversions are analogous to the finance concept of a derivative in which the underlying asset is a piece of property.

Reversion interests are freely alienable in all American jurisdictions, and therefore may be bought and sold.