RAP, Restraints on Alienation, & Conflicts of Law

Question 1

What is the Rule Against Perpetuities (RAP)?

Answer 1

The CL rule provides that “no interest is good unless it must vest, if at all, not after than 21 years after some life-in-being at the creation of the interest.

Question 2

Purpose of RAP?

Answer 2

• The law does not want land tied up forever with ridiculous contingencies that could go on in perpetuity.
• The rule attempts to place a limit on contingencies an ownership of land.

Question 3

Interests that are Excluded from the Rule Against Perpetuities

Answer 3

• Present possessory estates
• Charitable trusts
• Resulting trusts
• Interests that are fully vested at the time of creation (grantor’s interests & completely vested remainders)

Question 4

Interests that are Subject to Rules Against Perpetuities

Answer 4

• Options to purchase land not incident to a lease
• Powers of appointment
• Rights of first refusal
• Interests that are not fully vested at time of creation (remainders subject to open, contingent remainders, and executory interests)

Question 5

Steps for Determining if the Rule Against Perpetuities is Violated

Answer 5

1) Identify the interests subject to the Rule
2) Identify the life or lives in being, express or implied by the instrument creating interests.
3) Determine whether the interest will vest or fail within 21 years of the life or lives
4) Treat the part of the gift that violated the Rule Against Perpetuities as void

Question 6

Life/Lives in Being

Answer 6

In order to serve as a measuring life, a life-in-being must in some way be connected to the vesting of the interest scrutiny.

Question 7

Express Life in Being

Answer 7

A person named in the document that creates the interests under scrutiny. E.g. “O conveys to A for life” both O and A are express lives in being

Question 8

Implied Life in Being

Answer 8

A person who is not named in, but may be implied from, the document that creates the interests under scrutiny. E.g. in the devise “to my grandchildren” the testator’s children are implied lives in being.

Question 9

Classes as Lives in Being

Answer 9

A class cannot be used as lives in being unless the class is closed at time of creation

Question 10

Determining Whether the Interest Will Vest More than 21 Years After a Life-in-Being (Might Have Been Rule)

Answer 10

Under the might have been rule, an interest violates the RAP if there is any chance, however remote, that the interest might vest more than 21 years after a life-in-being. Interests are scrutinized at time of creation.

Question 11

The Time of Creation

Answer 11

The date that the creating instrument takes effect.

• Deed- the time of creation is the date the deed is delivered.
• Will- the time of creation is the date of the testator’s death.

Question 12

Power of Appointment

Answer 12

Includes the general power of appointment and the special power of appointment. Both implicate the RAP.

Question 13

General Power of Appointment

Answer 13

• Gives the holder of the power the right to appoint the property to anyone, including the holder of the power (considered to be equivalent to ownership).
• To be valid under RAP, a general power of appointment must be exercisable, during the RAP period.

Question 14

Special Power of Appointment

Answer 14

Gives the holder the right to appoint the property to a limited class of persons. To be valid under the RAP, it must be exercised in a manner that causes the interest in property created to vest within the RAP period.

Question 15

RAP: Charity-to-Charity Exception

Answer 15

There is a charity-to-charity exception for the RAP.

Question 16

Restraints on Alienation

Answer 16

Can include total restraints and partial restraints.

Question 17

Total Restraint

Answer 17

E.g. “A to B for life, but if B tries to sell his interest, then to C.”

• On a fee- this will generally not be valid
• On less than a fee- this will be upheld if reasonable

Question 18

Partial Restraint

Answer 18

Include purchase options and right of first refusal. Both are valid if they are reasonable.

Question 19

Restraints on Alienation of Inheritable Future Interests

Answer 19

Remember that a restraint against alienation of an inheritable future interest is void where the restraint may continue in effect after the future interest becomes possessory.

Question 20

Purchase Option

Answer 20

E.g.- “A to B and her heirs, but A reserves the right to buy back the property at any time during A’s life.”

Question 21

Right of First Refusal

Answer 21

E.g.- “A to B and her heirs, but if B ever attempts to sell during A’s life, B must first offer the property to A at the same price.”

Question 22

Factors for Determining if a Restraint is Reasonable

Answer 22

Include:

• whether the restraint is limited in scope or time
• the purpose of the restraint
• the legitimate interest of the party
• whether the restraint is supported by consideration in assessing its reasonableness

Question 23

Resolving Conflicts of Law Related to Real Property

Answer 23

The law of situs (where the property is situated) governs all rights in land and other immovables (an interest closely connected with land).

Question 24

Conflicts of Law: Validity and Effect of a Conveyance (Form of Deed or Capacity of Grantor)

Answer 24

Are governed by the law of the situs.

Question 25

Conflict of Laws: Mortgages (Creation, Validity, and Foreclosure)

Answer 25

Are governed by the law of situs.

Question 26

Conflict of Laws: The Underlying K or Note

Answer 26

Is governed by the law of its making

Question 27

Conflict of Laws: Liens

Answer 27

Are governed by the law of the situs.