BAR FLASHCARDS - PEFI 5
tHe ruLe aGaInst restraInts On aLIenatIOn
Generally, any restriction on the transferability of a legal (as opposed to equitable) interest is void.
tYPes OF restraInts On aLIenatIOn
DIsabling: Absolute ban on transfer (=void)
Forfeiture: Attempted transfer forfeits interest (=valid if reasonable/time limited).
Promissory: Attempted transfer breaches covenant (=valid if reasonable/time limited)
Discirmiantory: Based on race, religion, ethnicity (=void)
There are three types of restraints on alienation: (1) disabling restraints, under which attempted transfers are ineffective; (2) forfeiture restraints, under which an attempted transfer forfeits the interest; and (3) promissory restraints, under which an attempted transfer breaches a covenant. A disabling restraint on any legal interest is void. Forfeiture and promissory restraints may be valid, depending on the nature of the restraint and the interest involved.
restraInts On a Fee sIMPLe
As mentioned in Module 2, all absolute restraints on fee simple estates are void; thus, any such restriction falls away and the grantee may freely transfer the property. A partial restraint is one that purports to restrict the power to transfer to specific persons, or by
a specific method, or until a specific time. Forfeiture or promissory restraints on fee simple estates for a limited time and reasonable purpose may be upheld (for example, this might look like a restraint on transfer that’s limited to the joint lifetimes of co-owners, which could be seen as a reasonable way to ensure that neither co-owner would have to reside with a stranger).
discriminatory restraints
Judicial enforcement of restraints prohibiting the transfer or use of property to or by a person of a specified racial, religious, or ethnic group is discriminatory state action forbidden by the Fourteenth Amendment. Discriminatory restrictions may also violate the Fair Housing Act.
restraInts On a LIFe estate
Forfeiture and promissory restraints on life estates are valid, but disabling restraints are void.
restraInts On Future Interests
Restraints on vested future interests generally are valid to the extent that restraints on present interests of the same type are valid. For example, forfeiture and promissory restraints on vested remainders for life are valid, but disabling restraints on vested remainders for life are void.
OtHer VaLId restraInts On aLIenatIOn
The following are valid restraints on alienation:
• Reasonable restrictions in commercial transactions
• Reasonable options and rights of first refusal
• Restrictions on assignment and sublease of leaseholds (for exam- ple, requiring landlord’s consent)
