VI. Public Policy Limits on Enforceability of Servitudes and Future Interests

VI. Public Policy Limits on Enforceability of Servitudes and Future Interests

A. RESTRAINTS ON ALIENATION

• 
  Restraints on alienation of leaseholds more likely to be upheld than restraints on alienation of fee interests
  
• 
  Sometimes held to be valid either to promote interests of grantors in controlling future use or enhancing the value of units to be marketed or to promote the interests of neighbors in ensuring compliance with covenants
  
• 
  5 types of restraints on alienation:
  

1. 
   direct restraints on transfer
   
2. 
   servitudes requiring the consent of either the grantor or the association to transfer property
   
3. 
   rights of first refusal/preemptive rights
   
4. 
   leasing restrictions
   
5. 
   restraints designed to keep housing affordable by low and moderate income families
   

Horse Pond Fish & Game Club v. Cormier, N.H. (1990)

• 
  Facts: Parcel of land restricted to prevent alienation of land from Fish and Game Club absent unanimous vote of membership or dissolution of club. Club later registers as charitable corporation. Later a land swap deal is contemplated but single member votes against deal.
  
• 
  Rule: Rule of “reasonable restraints” generally does not apply in the case of a gift to a charitable trust or charitable corporation
  
• 
  Holding: Reversed and remanded; court held restriction unreasonable
  

Northwest Real Estate Co. v. Serio, Md. (1929)

• 
  Facts: Northwest prevented the sale of property to Serio based on a covenant restricting the alienation of the property, specifically one that prevented its grantees from selling a property before a certain date without its consent.
  
• 
  Rule: Fee simple title conveys unrestrained power of alienation incident to absolute ownership
  
• 
  Holding: Restriction inconsistent with fee simple title conveyed by deed and thus invited
  
• 
  Dissent: Restraint on alienation intended to give developer power to control character of development to secure return and grant early purchasers security
  

• 
  Facts: Land subdivided and sold only to members of Assembly of God Church. Owners later attempt to sell property contrary to restrictions.
  
• 
  Rule: Clause in a deed prohibiting grantee from conveying land to another without approval of grantor, when grantor transferred a fee simple estate, is void as inconsistent with nature of estate in fee
  
• 
  Holding: Outright grant of fee defeats claims of church
  

Wolinsky v. Kadison, Ill. App. Ct. (1983)

• 
  Facts: The Board of Directors for a condo complex exercised its right of first refusal regarding Wolinsky’s offer to purchase a condo after P had contracted to purchase the unit in the same complex where she was already living. P said the Board exercised its right of first refusal because she was an unmarried woman who would occupy the unit with her children.
  
• 
  Rule: criteria for testing the reasonableness of an exercise of the right of first refusal is: (1) whether the reason for exercising the right is rationally related to the protection, preservation, or proper operation of the property and the purposes of the association as set in its governing instruments and (2) whether the power was exercised in a fair and nondiscriminatory manner
  
• 
  Holding: Dismissal of plaintiff’s complaint improper as board may have exercised right of first refusal in discriminatory fashion
  

1. 
   Disabling restraints: directly forbids owner from transferring interest (“O conveys Blackacre to A and her heirs, but any transfer of Blackacre shall be null and void”)
   
2. 
   Promissory restraints: covenant by which grantee promises not to alienate interest in property (“O conveys Blackacre to A in fee simple. A promises [covenants] for himself, his heirs, and his assigns that Blackacre shall not be transferred”)
   
3. 
   Forfeiture restraints: provides for future interest that will vest if owner attempts to transfer interest in the property (“O conveys Blackacre to A, but if A attempts to transfer the property, then to B and her heirs”)
   

E. LEASING RESTRICTIONS

Woodside Village Condominium Assoc. v. Jahren, Fla. (2002)

• 
  Facts: The condo amended their declaration to prohibit owners from leasing their units during their first 12 months of ownership and to no more than 9 months in any 12 month period and no more than 3 units owned by any members could be leased at one time. The changes were made to address concerns that non-owner occupied condos were negatively impacting the quality of life at Woodside. Jahren didn’t comply and Woodside sought an injunction.
  
• 
  Rule: The court said restrictions passed by a condo association will be presumed valid unless shown to be arbitrary, against public policy, or in violation of a fundamental constitutional right because condos and their forms of ownership are strictly created by statute.
  
• 
  Holding: Respondents on notice of unique form of ownership when purchasing units and restriction does not violate public policy nor constitutional rights