Alienation Restraints

New York Real Estate Journal recently published an article authored by Olshan Real Estate partner Thomas Kearns entitled, “Alienation Restraints” (by subscription). The article discusses restraints on alienation and the rule against perpetuities. Tom explains that the rationale behind the rule against perpetuities is that “property needs to be freely transferable for the good of society and having lots of restrictions will harm the overall community.” Although some restrictions are permitted, those restrictions must be reasonable, blanket no sale perpetual restrictions are prohibited. This forces property lawyers to be creative and test the bounds of reasonableness. Two New York cases have established some guidelines on what is permissible, Demchick v. 90 East End Avenue Condominium (2005) and the case that enabled the Symphony Space Theater on Manhattans’ Upper West Side to profit significantly from an unenforceable option. Tom notes that, “Section 9-1.1 of New York’s Estates Powers and Trust Law (EPTL) gives statutory limits to the time periods for future estates in the statute as 21 years after the named lives being at the time of creation of the interest plus the lives of any child of the named person conceived before the creation of the option.”