Texas Deeds And Conditions Subsequent | The Other Reversionary Interest

• Jurisdiction: Texas,United States
• Law Firm: Freeman Law
• Subject Matter: Employment and HR, Real Estate and Construction, Contract of Employment, Employee Benefits & Compensation, Construction & Planning
• Author: Cory Halliburton
• Published date: 05 May 2023

Assume that Owner A deeds to Buyer B real property in Texas via a special warranty deed that contains the following provision:

The property shall be used exclusively for XYZ purposes. In the event said property should cease to be used for such XYZ purposes, said property shall become the property of Organization ABC and Organization ABC shall have the right to use and hold said property and dispose of same as Organization ABC may determine.

What happens if Buyer uses the property for other than XYZ purposes?

Can Owner A enforce the use requirement? If so, what process is used to enforce?

If Buyer B sells the property to a third party, can Buyer B's successor-in-interest use the property for other than XYZ purposes?

Can Organization ABC enforce the provision in the deed if Buyer B or Buyer B's successor-in-interest use the property for other than XYZ purposes?

So many questions. But, in Texas-a state having over 171 million acres of real property and a 175-plus year history-these types of legal issues and questions are not uncommon.

The hypothetical deed provision noted above is, more likely than not, a type of reversionary interest. Reversionary interests are generally referred to as a "possibility of reverter" or "right of entry"-the latter also known as a "power of termination." The distinction between the two types of reversionary interests is that a possibility of reverter is said to transfer possession of the property automatically to the holder of the reversionary interest upon satisfaction of a condition, while a right of entry requires some action on behalf of the holder of the interest to take possession of the property after the condition is broken.

Enforcement of a right-of-entry reversionary interest is not always clear-cut. In general, if a party cannot show that a restriction both exists and is intended to inure to its benefit, then that party may lack standing to enforce the restriction. The courts may require that the deed provision "run with the land" in order for the provision to be enforceable against successors-in-interest to title. A deed provision or covenant runs with the land if (1) it touches and concerns the land, (2) it relates to a thing in existence or specifically binds the parties and their assigns, (3) it is intended by the original parties to run with the land, and (4) the successor to the burden has notice. Covenants that run with the land bind the heirs and assigns of the covenanting parties, while personal covenants...