Rule against perpetuities
The rule against perpetuities is a legal rule in the Anglo-American common law that prevents people from using legal instruments to exert control over the ownership of private property for a time long beyond the lives of people living at the time the instrument was written. Specifically, the rule forbids a person from creating future interests in property that would vest beyond 21 years after the lifetimes of those living at the time of creation of the interest. In essence, the rule prevents a person from putting qualifications and criteria in a deed or a will that would continue to affect the ownership of property long after he or she has died, a concept often referred to as control by the "dead hand" or "mortmain".
The basic elements of the rule against perpetuities originated in England in the 17th century and were "crystallized" into a single rule in the 19th century. The rule's classic formulation was given in 1886 by the American legal scholar John Chipman Gray:
The rule against perpetuities serves a number of purposes. First, English courts have long recognized that allowing owners to attach long-lasting contingencies to their property harms the ability of future generations to freely buy and sell the property, since few people would be willing to buy property that had unresolved issues regarding its ownership hanging over it. Second, judges often had concerns about the dead being able to impose excessive limitations on the ownership and use of property by those still living. For this reason, the rule only allows testators to put contingencies on ownership upon the following generation plus 21 years. Lastly, the rule against perpetuities was sometimes used to prevent very large, possibly aristocratic estates from being kept in one family for more than one or two generations at a time.
The rule against perpetuities is famous as one of the most difficult topics encountered by law school students. It is notoriously difficult to apply properly: in 1961, the Supreme Court of California ruled that it was not legal malpractice for an attorney to draft a will that inadvertently violated the rule. Therefore, in the United States it has been abolished by statute in Alaska, Idaho, New Jersey, Pennsylvania, Kentucky, Rhode Island and South Dakota. The Uniform Statutory Rule Against Perpetuities validates non-vested interests that would otherwise be void as violating the common law rule if that interest actually vests within 90 years of its creation; it has been enacted in 29 states, the District of Columbia, and the U.S. Virgin Islands, and as of 2015 is under consideration in New York. Other jurisdictions apply the "wait and see" or "cy-près doctrine" that validates contingent remainders and executory interests that would be void under the traditional rule in certain circumstances. These doctrines have also been codified in the United Kingdom by the 1964 statute.
Historical background
The rule has its origin in the Duke of Norfolk's Case of 1682. That case concerned Henry, 22nd Earl of Arundel, who had tried to create a shifting executory limitation so that some of his property would pass to his eldest son and then to his second son, and other property would pass to his second son, but then to his fourth son. The estate plan also included provisions for shifting property many generations later if certain conditions should occur.When his second son, Henry, succeeded to his elder brother's property, he did not want to pass the other property to his younger brother, Charles. Charles sued to enforce his interest, and the court held that such a shifting condition could not exist indefinitely. The judges believed that tying up property too long beyond the lives of people living at the time was wrong, although the exact period was not determined until another case, Cadell v. Palmer, 150 years later.
The rule against perpetuities is closely related to another doctrine in the common law of property, the rule against unreasonable restraints on alienation. Both stem from an underlying principle or reference in the common law disapproving of restraints on property rights. However, while a violation of the rule against perpetuities is also a violation of the rule against unreasonable restraints on alienation, the reciprocal is not true. As one has stated, "The rule against perpetuities is an ancient, but still vital, rule of property law intended to enhance marketability of property interests by limiting remoteness of vesting." For this reason, another court has declared that the provisions of the rule are predicated upon "public policy" and thus "constitute non-waivable, legal prohibitions.
Common law
Black's Law Dictionary defines the rule against perpetuities as "he common-law rule prohibiting a grant of an estate unless the interest must vest, if at all, no later than 21 years after the death of some person alive when the interest was created."At common law, the length of time was fixed at 21 years after the death of an identifiable person alive at the time the interest was created. This is often expressed as "lives in being plus twenty-one years." Under the common-law rule, one does not look to whether an interest actually will vest more than 21 years after the lives in being. Instead, if there exists any possibility at the time of the grant, however unlikely or remote, that an interest will vest outside of the perpetuities period, the interest is void and is stricken from the grant.
The rule does not apply to interests in the grantor himself. For example, the grant "For A so long as alcohol is not sold on the premises, then to B" would violate the rule as to B. However, the conveyance to B would be stricken, leaving "To A so long as alcohol is not sold on the premises." This would create a fee simple determinable in A, with a possibility of reverter in the grantor. The grant to B would be void as it is possible alcohol would be sold on the premises more than 21 years after the deaths of A, B, and the grantor. However, as the rule does not apply to grantors, the possibility of reverter in the grantor would be valid.
Statutory modification
Many jurisdictions have statutes that either cancel out the rule entirely or clarify it as to the period of time and persons affected.- In the United Kingdom, dispositions of property subject to the rule before 14 July 1964 remain subject to the rule. The Perpetuities and Accumulations Act 1964 provides for the effect of the rule of interests created thereafter. This act codifies the "wait and see" doctrine developed by courts.
- In the Republic of Ireland, the rule was abolished as of 1 December 2009.
- The states of the United States have differing approaches.
- * Some states follow the "wait-and-see approach", or "second look doctrine", and/or apply the "cy près doctrine". Under the wait-and-see approach, the validity of a suspect future interest is determined on the basis of facts as they now exist at the end of the measuring life, and not at the time the interest was created. Under the cy près doctrine, if the interest does violate the rule against perpetuities, the court may reform the grant in a way that does not violate the rule and reduce any offensive age contingency to 21 years.
- * Other states have adopted the Uniform Statutory Rule Against Perpetuities which extends the waiting period typically to 90 years after creation of the interest.
- * At least six states have repealed the rule in its entirety, and many have extended the vesting period of the wait-and-see approach for an extremely long period of time.
- In Australia, each of the states has followed the UK approach to perpetuities, with statutory modification. In NSW for example, the Perpetuities Act 1984 limits perpetuities for 80 years, but also adopts the United States' "wait and see" methodology.
Applications
Charity-to-charity exception
The rule never applies to conditions placed on a conveyance to a charity that, if violated, would convey the property to another charity. For example, a conveyance "to the Red Cross, so long as it operates an office on the property, but if it does not, then to the World Wildlife Fund" would be valid under the rule, because both parties are charities. Even though the interest of the fund might not vest for hundreds of years, the conveyance would nonetheless be held valid. The exception, however, does not apply if the conveyance, upon violation of the condition, is not from one charity to another charity. Thus, a devise "to John Smith, so long as no one operates a liquor store on the premises, but if someone does operate a liquor store on the premises, then to the Roman Catholic Church" would violate the rule. The exception would not apply to the transfer from John Smith to the Roman Catholic Church because John Smith is not a charity. Also, if the original conveyance was "to John Smith and his heirs for as long as John Smith or his heirs do not use the premises to sell liquor, but if he does, then to the Red Cross" this would violate the rule because it could be more than 21 years before the interest in Red Cross would vest, and therefore, their interest is void. Thus leaving John with a fee simple determinable and the grantor a possibility of reverter.A famous actual example of this exception applies to Harvard's Widener Library. Eleanor Elkins Widener, the library's benefactor, stipulated that no “additions or alterations” could be made to the façade of the building. If the university ever changes the façade, it loses the building to the Boston Public Library. Because both Harvard and the Boston Public Library are charities, the restriction can apply indefinitely.