What does the term "reversion" refer to in real estate?

The term "reversion" in real estate refers to a future interest in property that occurs after a prior interest has ended. This typically involves a situation where property is conveyed to a person for a specific duration, after which the ownership or interest in that property automatically reverts back to the original owner or their heirs. For example, if a property owner grants a lease to a tenant for a certain number of years, the property owner retains a reversionary interest, meaning that once the lease term expires, possession of the property will revert to them without the need for any further action.

Understanding this concept is crucial in real estate because it defines the rights and expectations of both property owners and tenants. The reversionary interest can influence negotiations and decision-making in leasing situations and impacts how property rights are transferred or retained over time.