Restraint on Alienation: A condition that limits the ability of the guarantee to alienate the land.
Typical restraint is land given in a will, attached to which would be a condition that if the land is sold to certain persons, or used for certain purposes, or not first offered to certain persons, then the estate ends.
Also called a Forfeiture restraint: the estate is forfeit if the condition is broken.
Voided if the restraint is substantial (if it would substantially affect the selling price).
Ex. Thibodeau An attempt to prevent the grantee from conveying to anyone but the grantee’s son
Nothing in Fee Simple means that you cannot limit it.
1 – Partial restraints on alienation are permitted, but only if there is no notion of repugnancy at the root of the judicial policy. The difference here is degree of repugnancy, not principle itself.
2 – Stephens v. Gulf Oil Canada: Very substantial (but not total) restraints survive court scrutiny if they’ve been bargained for. Here requirement that if 2/3 parties wanted to sell their lands, the two parties would have to first offer the parties to each other at agreed prices. This was held to be a contractual provision and thus freedom of contract prevails over “repugnancy.” Had it been an imposed condition, it would have failed.
Laurin v. Iron Ore Company of Canada;1977 NFLD. Sup; 427; Restraint on Alienation; Conditions that are unreasonable in price and time are void
Facts: Iron ore came up with several policies to sell houses to their employees that they had built, subsidized, and were selling at a loss. Plaintiff pays 1$ for title deed which is registered with following restrictive covenant with three conditions: if you are no longer an employee, if you don’t pay your mortgage, or if the employee wants to sell its property. 1974 changes allowed the workers to sell to other iron ore employees. if the owner wanted to sell to a person who is an employee of the defendant, the defendant will buy the property back and sell it to the buying employee at the same price and conditions as it sold the property to the selling employee in the first instance. However, an owner would still be limited in the amount he could sell his property, because the clauses limited the ability of the average buyer to borrow money on the security of a property. The home’s market value was badly influenced by conditions attached to the title limiting resale value, the provisions limiting resale value must also influence the prospective purchaser.
Issue: Are these 1 – conditions, 2 – convenants on the properties that substantially take away power of the owner, and are 3 - thus void for being repugnant to the very concept of ownership?
(Goodridge – 1 Yes 2 – No 3 - Yes) – The obligation was created by the grantor (the requirements to sell back the house through them to another employee) and is unreasonable as to price and time and is therefore a substantial restriction on alienation and void.
Test (Rowan note: test not set out explicitly):
1 - Is there a (a) conditions or (b) convenant and;
2 - if it’s a condition, is it a restraint on alienation and thus void?
Part 1 of Test
Conditions: is created by the testator or the grantor. In a will, all cases are necessarily conditions because they are created by the testator: it is a restraint on alienation and is void whether absolute or substantial.
A grantor may not create a condition that is a restraint on alienation by disguising it as an option.
Covenants: Made by the grantee. Options or right of first refusal given independently and subsequent to the acquisition are not reviewable by the court. When covenants stand separate and apart from the instrument under which title was acquired, and are not in any way associated with the acquisition of title (unless it is oppressive or unconscionable), then court’s will not interfere.
Part 2 of Test
Instrument must be looked at as a whole.
Repurchase rights contained in a conveyance or created immediately following execution will not be interfered with by courts.
Repurchase rights contained in conveyance or created immediately following execution which are not reasonable and such nature are conditions and if they restrain absolutely or substantially are void.
If the obligation is not reasonable as to time and price, then this is a restraint on alienation: IT IS A CONDITION and void.This is a question of fact.
Case: 1 – It was entered into freely by the grantee, thus could be a condition.
2 - The grantee (the Iron Ore) only subsidized the original cost and interest in the mortgage because he had to. Even with this, the Laurin is still denied the benefit of improving property values, as the subsidization through the mortgage would deplete the house price by $15000. There is no profit to a man who knows he is required to sell at an every reducing price
Reasonable: Options, repurchase rights, pre-emptive rights that purport to require the title holder to sell the land to the previous owner or someone designated by him at a price that must be calculated without reference to improved property values and;
Time; which are designed to endure for a long period are;
Substantial restraints on alienation as a condition and are void.
