Affiliate Broker Tennessee (TN PSI) National Practice Exam `

What does the term "fee simple determinable" signify in real estate?

1. A type of leasehold estate

2. Ownership that can automatically revert upon a condition being met

3. A trust structure for property management

4. A method for shared property ownership

The correct answer is: Ownership that can automatically revert upon a condition being met

The term "fee simple determinable" refers specifically to a type of ownership in real estate that automatically reverts back to the original grantor if a certain condition is met or if a stipulated event occurs. This form of ownership is characterized by the inclusion of specific language in the deed that restricts how the property can be used. For example, a property conveyed "to the city as long as it is used for park purposes" creates a fee simple determinable; if the city stops using it as a park, ownership would revert to the original grantor or their heirs without the need for any legal action. This automatic reversion is what distinguishes fee simple determinable from other types of property interests, such as leases or shared ownership arrangements. While a leasehold estate involves tenant rights and responsibilities, a fee simple determinable grants full ownership subject to the specified condition. Additionally, trust structures don't relate directly to property ownership but instead involve management of that property. Shared property ownership typically relates to agreements between multiple parties, which does not apply to the concept of fee simple determinable. Thus, the correct answer highlights the unique nature of this type of property ownership and its conditions for reversion.