Property Law Outline - Restraints on Alienation and the Rule Against Perpetuities

1. Rule Against Perpetuities (p.171)
1. Purpose: To free up land from the dead hand requirement.  Grants are limited to about two generations.
2. Rule: "No interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest."
3. Strategy:
1. DOES THE RAP APPLY?
1. Applies only to:
1. Executory interests,
2. Vested remainders subject to open, and
3. Contingent remainders.
2. Does not apply to: reversions, possibility of reverter, power of termination/right of entry.
2. WHO ARE THE VALIDATING LIVES?
1. Life in being: Someone who is alive at the time the interest was created.
1. If it is a contract/grant, the interest is created at the time of the grant.
2. If it is a will, the interest is created at the time of death.
2. A life in being is someone named in the conveyance (or their heirs).
3. KILL OFF THE LIVES IN BEING
4. WHAT IS THE FIRST POINT AT WHICH THE FUTURE INTEREST MUST VEST?
1. Interest must vest when the person entitled to possession under the future interest are ascertained AND
2. There is no other condition that must be met before the interest can become possessory.
5. WILL THE INTEREST VEST WITHIN 21 YEARS? or  WILL IT NEVER VEST?
1. If the interest must vest within 21 years OR will definitely never vest, RAP is not violated.
2. NOTE: Courts do not care whether it is highly unlikely or even scientifically impossible for an event, such as the birth of another child, to occur. Ex: Jee v. Audley (75 y.o. woman, for the purposes of the RAP, still has the potential to have another child).
6. COMMON LAW OR STATUTE?
1. If common law, if a clause is found invalid, it is struck from the grant.
2. If statute, most take the "wait and see" approach to a RAP violation.
1. This means that the state waits to see if the RAP is violated.
2. If RAP is not violated, even if it could have been, then the grant is valid.
3. Problem with this approach is that grantees have to wait a long time to ascertain the validity of their interests.
4. Example Problems:
1. G grants FSA "to A for life, then to A's children for life, and upon the death of the last survivor, to A's surviving grandchildren." A currently has C1 and C2 children.
1. Grant to A's children:
1. Type: Vested remainder subject to open because A could have more children.  RAP Applies.
2. Validating lives: A, C1 and C2.
3. Future interest must vest upon A's death, because A cannot have any more children and the identities of all the children will be known.
4. Therefore, this interest is valid, because the time of vesting is well within the death of A (life in being).
2. Grant to A's grandchildren:
1. Type: Contingent remainder because the identity of grandchildren are unknown.  RAP applies.
2. Validating lives: Same as above.
3. If A, C1 and C2 died, but A had had another child (C3) after the time of the grant and C3 lived for more than 21 years, the condition would be violated because the A's grandchildren's interest would not vest until more than 21 years after the death of the lives in being.
4. Therefore, this interest is invalid.
5. Practice of Disclaimer
1. A potential recipient may refuse property through disclaimer.
2. Disclaimer must show clear and unequivocal expression.
1. Potential recipient cannot take advantage of any benefits of the property or they must take the property.
2. Disclaimers are usually written.
6. Trusts
1. Trusts are a relatively recent development.
1. Reason for this is that land was the primary and most important source of wealth in the past.
2. Purpose: to separate the burdens of property management from the benefits of ownership.
1. Also created because the settlor doesn't want the beneficiary to have actual control of the property.
2. Trusts also are beneficial for tax reasons (avoid probate).
3. Three Parties involved:
1. Settlor- person who created the trust.
2. Trustee- person managing the property.
1. Has a fiduciary duty to manage property in the best interest of the class of beneficiaries.
2. Has legal title to the trust.
3. Beneficiary- person reaping the benefits of the property.
4. Types of Trusts:
1. Revocable
2. Irrevocable

 

7. Valid Example	Why Valid	Invalid Example	Why Invalid
   "To A for life, then to A's children for life, then to B."	B's remainder is vested on creation.	"To A for life, then to A's children for life, then to A's grandchildren."	A may have a child after the interest is crated and so may have grandchildren beyond the perpetuities period.
   "To B for life, remainder to those of B's siblings who reach age 21."	B's parents can be used as measuring lives.	"To B for life, then to such of B's children who become lawyers."	B may have a child born after the disposition who becomes a lawyer more than 21 years after B's death.
   "To A for life, then to his wife W for life, then to A's surviving children."	No unborn widow problem because to W, a life in being.	"To A for life, then to his widow (NOT NAMED) for life, then to A's surviving children."	Unborn widow problem - A's wife might die, might remarry someone not yet born, thus not life in being.
   "To X for life, then to Y, but if at her death, Y is not survived by children, then to Z."	Y is the measuring life.	"To M for life, then to M's children for their lives, then to M's grandchildren." (M is 80 years old and has had a hysterectomy.)	Fertile octogenarian problem.

 

2. Rule Against Restraints on Alienation
1. Conditions or covenants in grants that restrain the grantee's right to alienate his interest are void under certain circumstances.
1. Statutes often void conditions restraining alienation if "repugnant to the interest created."
1. Courts usually interpret this as meaning that "unreasonable" restraints are void.
2. Reasons for the Rule:
1. Efficiency- Courts want land put to the most productive use.
2. Autonomy- Courts want people to be able to do what they want with their property.
3. White v. Brown (Supp) (VT):
1. Will said: "I wish Evelyn White to have my home to live in and not to be sold."
2. Ds claimed this was a LE grant (they were heirs).  White (P) wanted FSA.
3. Court held that because there were no subsequent provisions dictating what should occur at the end of White's life, it should be construed as a FSA.
1. Also held that the fact that "not to be sold" was a restraint on alienation did not overcome the presumption in favor of construction as a FSA.
2. Restraint on alienation is void for PP, so White can sell home if desired.
4. Shows that courts always prefer the construction to be FSA, not LE.
5. Example of the will of the testatrix being defeated in favor of efficiency.
4. Riste v. Easter WA Bible Camp (p.184)(WA):
1. EWBC subdivided land and sold it only to people who agreed to follow Assembly of God tenets.  P got lot from parents and wanted to sell it. However, K had restrictions:
1. Restriction 6: No residents shall conduct themselves in a manner in conflict with general practices and principles of church.
2. Restriction 8: Property shall not be resold without written approval by Seller.
2. P wanted to remove restrictions because they were restraints on alienability.
3. Court says WA rule is that both restrictions are invalid.
1. Res. 6 is invalid because it restricts residence to a certain creed. This goes against anti-discrimination statute.
2. Res. 8 is invalid because it is a direct restraint on alienation.  WA has rule against this, with exceptions for reasonable restraints justified by legitimate interests.  This does not qualify for exception.
4. Court also says that the fact that P knew about the restrictions when property was purchased (doctrine of estoppel) does not apply because there is a presumption of invalidity for clauses such as these.
5. Ds should not have granted FS deed if they wanted these restrictions to be upheld.
6. Conflict here between efficiency and autonomy.

 

2. Partial Restraints
1. Can be partial as to:
1. Time
2. Persons, OR
3. Use
2. When the number of potential grantees is small, partial restraints are often held invalid.
3. They are also invalid if they restrict use to people within protected categories (age, sex, race, etc.).
4. More likely to be upheld if they are related to USE of the land, rather than persons.

3. Chart:

   	Disabling Restraint (prohibition on alienation) "To A, and A may not transfer the land"	Forfeiture Restraint (attempted alienation is a condition that permits grantor to exercise power of termination or results in reversion) "To A, but if A attempts to transfer land, title reverts to grantor"	Promissory Restraint (attempted alienation is a breach of covenant, so covenantor is liable for the breach) "To A, and A promises not to transfer land"
   Fee Simple	VOID	VOID	VOID
   Fee Simple (limited in time)	Void in most states	Void in most states	Void in most states
   Fee Simple (partial as to use/size)	Void if # of potential grantees is small	Void if # of potential grantees is small	Void if # of potential grantees is small
   Restricting Protected Categories (sex, race, age, etc.)	VOID	VOID	VOID
   Life Estate	VOID	Valid	Valid
   Leasehold	Valid in most states	Valid in most states	Valid in most states