Property Law Rule Against Perpetuities Boston College Law School October 29, 2009

Rule Against Perpetuities Policy interests –Prevent “dead hand control” Restrictions on current use of property Ability to move property to more valued use –But enable some ability to control grants

Rule Against Perpetuities Rule –“No interest is good unless it must vest, if at all, no later than 21 years after the death of a life in being at the creation of the interest” Example –O to A, so long as used as a hospital, then to B –May vest more than 21 years after O, A & B dead

Rule Against Perpetuities Applies to: – Contingent third-party interests Executory interests (“O to A, so long as used for hospital, then to B”) Contingent remainders (“O to A for life, then to B if B graduates”) Vested remainders subject to open (“O to A for life, then to A’s children”) Options Does not apply to: –Vested interests Reversions (“O to A for life”) Vested remainders (“O to A for life, then to B”) Vested remainders subject to divestment (“O to A for life, then to B, but if...” –Contingent interests in the grantor Possibility of Reverter (“O to A, so long as used for a hospital”) Right of Re-entry (“O to A for use as hospital, but if not, then B has right …”

Rule Against Perpetuities Elements of rule –“must vest if at all” Invalid if any possibility that might vest outside time Does not matter if actually vests within time –“within 21 years of death of life in being at time of grant” Look to lives mentioned in the grant Corporations have no “life”

Rule Against Perpetuities Examples –“O to A, so long as used for hospital” –“O to A, so long as used for hospital, then B” –“O to A for life, then to B if B graduates” –“O to A for life, then to B, but if B marries C, then the property reverts back to O” –“O to A for life, then to the children of B” –“O to A for life, remainder to the first daughter of A to become president of the U.S.”

Rule Against Perpetuities Consequence: strike offending language Potentially different consequences –“O to A so long as used for residential purposes, then to B” Becomes “O to A so long as used for residential purposes” –“O to A, but if for non-residential purposes, then to B” Becomes “O to A”

Rule Against Perpetuities Modifications –Wait and See Approach Wait to see if interest actually vests w/in time period E.g. “O to A for use as hospital, then B” –Uniform Statutory Rule Against Perpetuities Like wait and see approach Except use 90-year period from grant –Statutory Cut-offs for Grantor Rights Possibility of reverter Right of re-entry –Marketable Title Acts

Next Assignment Next assignment –IV.C.2 – Rule Against Perpetuities –Through p. 553 Make up class –Friday, 2-3:05 p.m., EW115B –Wednesday students on call Practice exam –Wednesday, 11/4