Rule Against Restraints on Alienation

Question 1

Types of restraints on alienation

Answer 1

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

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.

Question 2

Restraints on fee simple

Answer 2

An absolute restraint on fee simple estates are void. Thus, any such restraint 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 specific method, or until specific time. Forfeiture or promissory restraints on fee simple estates for a limited time and reasonable purpose may be upheld.

Question 3

Restraints on fee simple - discriminatory restraints

Answer 3

Judicial enforcement of a strange prohibiting, the transfer or use of property to or buy a person of a specified racial, religious, or ethnic group is discriminatory state action forbidden by the 14th amendment. Discriminatory restrictions may also violate the fair housing act.

Question 4

Restraints on life estate

Answer 4

Forfeiture and promissory restraints on life estates are valid, but disabling restraints are void.

Remember that the rule against restraints on alienation applies only to legal interests. Restraints on the alienation of equitable interest, for example, a spendthrift clause in a trust instrument, are valid 

Question 5

Restraints on future interests

Answer 5

Restraints on vested future interests, generally are valid to the extent that restraints on present interest of the same type or valid. For example, forfeiture and promissory restraints on vested remainders for life are valid, but disabling restraints on vested remainders for life are void. 

Question 6

Other valid restraints on alienation

Answer 6

The following are valid restraints on alienation: reasonable restrictions in commercial transactions, reasonable options, and rights of first refusal, and restrictions on assignments and sublease of leaseholds.