Restraints on Alienation

Parcel is landlocked after 90 year easement ends

/ Estates and Future Interests, Real Estate Transactions, Restraints on Alienation, Servitudes

Most courts granted an easement by necessity when an owner severs its land and leaves a parcel without access to a public road. The easement allows passage over land that had been connected to the landlocked parcel before it became landlocked. The courts differ on whether this is a mandatory rule of law (owners are not allowed to create land to which there is no access) or a default rule based on the implied intent of the parties, in which case the courts will allow a parcel to be landlocked if that is what the parties bargained for. The argument for a mandatory rule is that land has no use if the owner cannot get to it and no one will buy a landlocked parcel, making the land inalienable. The argument for a default rule is that the owner of the landlocked parcel can always give or sell it to …

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Reverter clause requiring property to be used for church purposes not an invalid restraint on alienation

/ Estates and Future Interests, Real Estate Transactions, Restraints on Alienation

The Virginia Court held that a future interest requiring forfeiture of title if property was not used to church purposes was a valid possibility of reverter, and was not an invalid or unreasonable restraint on alienation of land. Canova Land & Inv. Co. v. Lynn, 856 S.E.2d 581 (Va. 2021). The court said that a liberal interpretation should be granted to deeds involving land granted for charitable purposes because limiting property to charitable uses is consistent with public policy.

Reverter clause requiring property to be used for church purposes not an invalid restraint on alienation

/ Estates and Future Interests, Real Estate Transactions, Restraints on Alienation

The Virginia Court held that a future interest requiring forfeiture of title if property was not used to church purposes was a valid possibility of reverter, and was not an invalid or unreasonable restraint on alienation of land. Canova Land & Inv. Co. v. Lynn, 856 S.E.2d 581 (Va. 2021). The court said that a liberal interpretation should be granted to deeds involving land granted for charitable purposes because limiting property to charitable uses is consistent with public policy.

California limits enforceability of private transfer fees

/ Estates and Future Interests, Real Estate Transactions, Restraints on Alienation, Servitudes

California passed a statute prohibited private transfer fees unless used exclusively to support the encumbered property or cultural, education, charitable, recreational, environmental, conservation, or similar activities. Cal. Civ. Code §1098.6 (2018 Cal. Stat. ch. 306). Note that the Federal Housing Finance Agency and the Federal Housing Administration are prohibited from dealing in mortgages on properties encumbered by private transfer fee covenants that do not provide a “direct benefit” to the real property encumbered by the covenant.12 C.F.R. §1228.1.

Discovery rule tolls statute of limitations for enforcing a right of first refusal

/ Estates and Future Interests, Real Estate Transactions, Restraints on Alienation

The Texas Supreme Court held that the owner of a right of first refusal was not too late in asserting it because the statute of limitations did not start running until the owner knew or reasonably could have known that the right had been triggered. Carl M. Archer Trust No. Three v. Tregallas,566 S.W.3d 281 (Tex. 2018). The sellers of a surface estate granted the buyer a right of first refusal to purchase the mineral estate within 60 days after being given notice of an intent to sell those rights. The right of first refusal was recorded. Without giving such notice, the owner of the mineral estate sold that estate to a third party in 2007. Four years later (and outside the statute of limitations), the owner of the right of first refusal found out about the conveyance of the mineral estate and immediately sued to nullify it. The statute of …

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Will devising home to testator’s four children and his widow that allowed her to “remain” in the home “for as long as she desires” gave her a tenancy in common interest with protection from removal by partition

/ Concurrent or Common Ownership, Restraints on Alienation, Wills and Inheritance

In an older case that came to my attention, the Massachusetts Supreme Judicial Court held that a will that gave a widow the right to “remain” in the home “for as long as she desires” did not create a life estate when her interest was shared with the decedent’s four children. Hershman-Tcherepnin v. Tcherepnin, 891 N.E.2d 194 (Mass. 2008). Rather, the court interpreted the conveyance to create tenancy in common interests shared equally by the five while giving the widow immunity from being forced from the house by partition. Significantly, the court did not consider that restraint on partition to constitute an unreasonable restraint on alienation. However, since she had brought an action to partition the property, she waived the right to be protected from ouster through partition sale.

Possibility of reverter or right of entry cut off after 30 years

/ Estates and Future Interests, Real Estate Transactions, Restraints on Alienation, Title Issues

Massachusetts law sets a thirty year limit to possibilities of reverter following a fee simple determinable or rights of entry following a free simple subject to condition subsequent. Mass. Gen. Laws ch. 184A, §7. This contrasts with the 90 year limit for executory interests. Mass. Gen. Laws ch. 190B, § 2-901. The 30 year limitation was recently applied in Town of Winchendon v. Brandywine Farms, Inc.,2018 Mass. LCR LEXIS 91, 2018 WL 2297177, 26 Land Ct. Reporter 253 (Mass. Land Ct. 2018).

Section 8 (housing voucher) tenants cannot be evicted without cause even if their lease term has expired and the landlord has opted out of the housing assistance program

/ Consumer Protection, Homelessness, Leaseholds, Real Estate Transactions, Restraints on Alienation

The Third Circuit has ruled that the federal statute, 42 U.S.C. §1437f(t)(1)(B), that gives Section 8 (housing voucher) tenants the right to “remain in their housing developments, even after their landlord has opted out of the federal housing assistance program,” gives them the right to stay unless just cause can be shown to evict have the right to remain even if the lease term has expired. Hayes v. Harvey, 2018 U.S. App. LEXIS 24848 (3d Cir. 2018).

Permanent rights of refusal for tenancy in common interests owned by family members held void as unreasonable restraints on alienation

/ Concurrent or Common Ownership, Estates and Future Interests, Restraints on Alienation

A Massachusetts court has held that permanent rights of refusal applying to tenancy-in-common interests were void as unreasonable restraints on alienation. DiSchino v. Delanson Circle Holding, 2018 Mass. Super. LEXIS 67 (Mass. Super. Ct. 2018). The court noted that the state had a strong policy against unreasonably long restrictions on the alienability of land but that reasonable restraints are valid and enforceable. Rights of first refusal are not unreasonable if they are not for a fixed price or a long period. Here, however, the rights of first refusal owned by co-owners existed in perpetuity. That meant that even after an interest was transferred to another owner, it would remain subject to the right of first refusal whenever that new owner decided to sell the owner’s interest. The permanency of the restraint on alienation (it would effectively last forever) doomed it. In contrast, a restraint on partition of tenancy-in-common interests might …

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Retroactive restraints on leasing in homeowners associations

/ Condominiums and Homeowners Associations, Estates and Future Interests, Leaseholds, Real Estate Transactions, Restraints on Alienation, Servitudes

The courts continue to divide over the question of whether it is fair to allow homeowners associations to impose retroactive restraints on leasing on existing owners who purchased with no notice of the restriction. While most states allow this, a few do not, and the Restatement (Third) of Property (Servitudes) §6.10(2), §6.10 cmt. g, takes the position that such major changes in property rights can only be accomplished prospectively unless there is a unanimous vote to alter those rights. The Idaho Supreme Court recently adopted what appears to be the majority approach, authorizing a homeowners association to retroactively prohibit existing owners from agreeing to short term rentals of less than six months. Adams v. Kimberley One Townhouse Owner’s Ass’n, 352 P.3d 492 (Idaho 2015). In contrast, the Supreme Court of Washington refused to allow retroactive restraints on short term rentals in Wilkinson v. Chiwawa Commties. Ass’n, 327 P.3d 614 (Wash. 2014), requiring unanimous approval for such …

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