28.2 Rule Against Perpetuities, Restraints on Alienation, Fair Housing & Conflicts of Law

28.2 Rule Against Perpetuities, Restraints on Alienation, Fair Housing & Conflicts of Law

NCBE's outline groups several rules that limit ownership interests: the Rule Against Perpetuities, restraints on alienation, fair housing, and conflicts of law. The first two protect the free transfer of land; fair housing laws protect access to housing; and conflicts rules decide which state's property law applies.

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The Rule Against Perpetuities (RAP)

The Rule Against Perpetuities (RAP) is the common law's primary mechanism for curbing "dead-hand control" over real property. By preventing testators and grantors from tying up land across distant generations, the rule ensures that real estate remains freely alienable and economically productive.

The Common Law Formula

The classical statement of the Rule Against Perpetuities, formulated by John Chipman Gray, governs the MBE:

"No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest."

Core Analytical Principles

1. Certainty at Inception: The validity of an interest is tested strictly at the moment the instrument takes effect (the date of deed delivery for inter vivos transfers; the date of the testator's death for wills). If there is any conceivable scenario—no matter how improbable or biologically unrealistic—under which the interest could vest more than 21 years after all lives in being have died, the interest is void from the outset.
2. What "Vesting" Means:
   • Remainders: Vest when the taker becomes ascertained and all conditions precedent are satisfied.
   • Class Gifts: Under the All-or-Nothing Rule, a class gift does not vest under RAP until the class is closed and every single class member's interest has satisfied all conditions precedent. If the gift might fail as to any potential future member, it is void as to all members.
   • Executory Interests: Vest when the condition occurs and the interest becomes possessory.

Four-Step RAP Method

To solve any RAP question on the MBE, execute this four-step sequence:

┌────────────────────────────────────────────────────────────────────────────┐
│                     STEP 1: Identify the Future Interest                   │
│  Is it a Contingent Remainder, Executory Interest, or Vested Subject to    │
│  Open? If NO (e.g., Grantor interest or Indefeasibly Vested), RAP EXEMPT.  │
└─────────────────────────────────────┬──────────────────────────────────────┘
                                      │ YES
                                      ▼
┌────────────────────────────────────────────────────────────────────────────┐
│                     STEP 2: Identify the Vesting Event                     │
│  What specific condition precedent or class closing must occur for the     │
│  interest to vest?                                                         │
└─────────────────────────────────────┬──────────────────────────────────────┘
                                      │
                                      ▼
┌────────────────────────────────────────────────────────────────────────────┐
│                     STEP 3: Identify the Measuring Lives                   │
│  Who are the human beings alive at the creation of the interest whose      │
│  lives or deaths affect the vesting condition?                             │
└─────────────────────────────────────┬──────────────────────────────────────┘
                                      │
                                      ▼
┌────────────────────────────────────────────────────────────────────────────┐
│                     STEP 4: Determine Absolute Certainty                   │
│  Will the interest definitely vest or fail within 21 years of the death of │
│  all measuring lives? If ANY possibility of late vesting exists, STRIKE IT.│
└────────────────────────────────────────────────────────────────────────────┘

Interests Subject to vs. Exempt from RAP

MBE Tip — The Charity-to-Charity Exception: The only exception where an executory interest is exempt from RAP is when property shifts from one recognized charity to another charity (e.g., "O to Red Cross so long as used for medical services, but if not, then to the Salvation Army"). If either the first taker or the second taker is non-charitable, the exception does not apply and RAP strikes the gift.

Classic MBE Perpetuities Traps

1. The Fertile Octogenarian: At common law, the law irrebuttably presumes that any living human being, regardless of age, gender, or medical impossibility, is capable of having children. (e.g., "O to A for life, then to A's children for life, then to A's grandchildren" where A is 85; void as to grandchildren).
2. The Unborn Widow: A person's future surviving spouse cannot be identified until death. That surviving spouse might be someone not yet born when the conveyance took effect. (e.g., "O to A for life, then to A's widow for life, remainder to A's surviving children"; remainder to children is void).
3. The Administrative Contingency: Gifts conditioned upon events that seem imminent in practice, but lack an absolute legal deadline, violate RAP. (e.g., "to A when O's estate is fully settled by probate"; void).
4. Age Contingency Beyond 21 for an Open Class: Whenever a class gift to children or grandchildren is conditioned on reaching an age greater than 21, and the parent is alive, the gift violates RAP under the All-or-Nothing Rule. (e.g., "to A for life, then to such of A's children as reach age 25"; void).

Striking the Offending Clause: FSD vs. FSSCS

When an executory interest violates RAP, the invalid clause is excised:

• Durational Language (FSD): "O to A so long as used for residential purposes, then to B." Strike "then to B." A holds a Fee Simple Determinable, and O retains a Possibility of Reverter (exempt from RAP).
• Conditional Language (FSSCS): "O to A, but if used for commercial purposes, then to B." Strike "but if used for commercial purposes, then to B." A holds a Fee Simple Absolute.

Modern Statutory Reforms & Restraints on Alienation

• Wait-and-See Doctrine: Courts wait until the end of measuring lives to determine if the interest actually vests within 21 years.
• Uniform Statutory Rule Against Perpetuities (USRAP): Validates an interest if it satisfies common law RAP or actually vests or terminates within 90 years.
• Cy Pres: Courts reform an invalid condition (e.g., reducing age from 25 to 21) to effectuate grantor intent.
• Restraints on Alienation: Total restraints on a fee simple are void as against public policy; partial restraints reasonable in duration and purpose are valid; forfeiture restraints on life estates are valid.

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Restraints on Alienation in More Detail

• Reasonable restraints: Rights of first refusal at a fair price, occupancy approvals in cooperatives and condominiums, and restrictions tied to affordable-housing programs are commonly upheld as reasonable.
• Options and first-refusal rights: Because they can tie up land, options in gross (and, in many states, rights of first refusal) are subject to the Rule Against Perpetuities. Options held by a tenant and exercisable during the lease are exempt.

Fair Housing

The Fair Housing Act

• Protected characteristics: Race, color, religion, sex, familial status (households with children under 18 and pregnant persons), national origin, and disability ("handicap" in the statute).
• Prohibited conduct (42 U.S.C. § 3604): Refusing to sell or rent or otherwise making housing unavailable; discriminating in the terms or conditions of sale or rental; representing falsely that housing is unavailable; "blockbusting"; and making, printing, or publishing any notice, statement, or advertisement indicating a discriminatory preference (§ 3604(c)).
• Disability: Housing providers must make reasonable accommodations in rules, policies, and services (such as allowing an assistance animal despite a no-pets rule) and permit reasonable modifications of the premises at the resident's expense; newer multifamily buildings must meet accessibility design requirements.
• Exemptions (§ 3603(b)): (1) The sale or rental of a single-family house by an owner who owns no more than three such houses, without using a broker and without discriminatory advertising; and (2) the "Mrs. Murphy" exemption for rooms or units in a dwelling with living quarters for no more than four families if the owner lives in one of them. Neither exemption permits discriminatory advertising under § 3604(c). Separate exemptions cover religious organizations and private clubs in limited circumstances and qualifying housing for older persons (as to familial status).
• Disparate impact: Plaintiffs may challenge policies with an unjustified discriminatory effect, even without proof of intent, if they show a robust causal connection between the policy and the disparity (Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., 2015).

42 U.S.C. § 1982

Section 1982 gives all citizens the same right as white citizens to inherit, purchase, lease, sell, hold, and convey property. It reaches purely private race discrimination (Jones v. Alfred H. Mayer Co., 1968) and has none of the Fair Housing Act's exemptions. Courts will not enforce racially restrictive covenants (Shelley v. Kraemer, 1948), and such covenants are also unlawful under the Fair Housing Act.

Conflict of Laws

• Situs rule: The law of the state where land is located generally governs the validity and effect of conveyances, the nature of the interests created, adverse possession, recording, and the formal validity of wills disposing of the land.
• Contracts and mortgages: A contract to convey land, or the personal obligation secured by a mortgage, may be governed by the law chosen by ordinary contract choice-of-law principles, but the effect of the transfer or lien on the land itself is determined by situs law.
• Contrast personal property: Succession to movable personal property on death is generally governed by the law of the decedent's domicile.