Property Law. A common-law principle that an interest in property is void unless it vests no later than 21 years after the death of some person alive at the time the interest was created. The Rule was formed to address interests that were too uncertain and to ensure the productive use and development of property by its current beneficial owners by simplifying ownership, facilitating exchange and freeing property from unknown or embarrassing impediments to alienability.
Under the traditional common law Rule Against Perpetuities, the courts could not wait and see if and when the future interest in question vested, the courts were required to analyze the conveyance the moment the conveyance was created to see if the future interest in question violated the Rule.
The traditional Rule Against Perpetuities tended to be harsh, i.e., if there was any scenario, no matter how implausible, under which the future interest would vest, but only after the lives in being at the time of the conveyance plus 21 years, the interest was void from the moment of its attempted creation.
The first step in applying the Rule Against Perpetuities to the property interest in question is to identify the relevant ‘lives in being’ at the time of the future interest in question was created. Remembering that the traditional common law analysis was an abstract analysis that was based on the worst case scenario, no matter how implausible, the next step is to assume that all the relevant lives in being died the day after the Agreement/Amended Agreement was executed. That step takes care of the ‘lives in being’ prong of the Rule Against Perpetuities’ coverage.
The next step under the Rule Against Perpetuities analysis is to count 21 years, thereby completing the Rule Against Perpetuities temporal coverage, i.e., completing the ‘lives in being at the time of the interest’s purported creation plus 21 years‘ temporal coverage. The Rule Against Perpetuities provides that the future interest must vest, if at all, within the lives in being at the time of the interest’s purported creation plus 21 years or the interest is void from its attempted creation. Another way to say the same test is to say that if there is any scenario, no matter how implausible, under which the future interest in question will vest, but only after the relevant lives in being alive at the time of the interest’s creation have died and an additional 21 years have passed, then the interest is void from the moment of its attempted creation.
Although many states have adopted a version of the Rule Against Perpetuities, its application is now less stringer and harsh as it was under the traditional common-law principle.
For instance, California codified the common law Rule Against Perpetuities in 1951. See Estate of Grove, 70 Cal. App. 3d 355, 361 (1977). In 1963, however, due to the perceived inequities, harshness and general difficulty understanding and applying the traditional common law approach to the Rule Against Perpetuities, California statutorily modified the doctrine by authorizing the courts to apply cy pres to the instrument.
Under California Probate Code section 21205:
A nonvested property interest is invalid unless one of the following conditions is satisfied:
(a) When the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive.
(b) The interest either vests or terminates within 90 years after its creation.
In addition to the statutory modifications to the common law Rule Against Perpetuities, the California courts “relaxed” the application of the doctrine by adopting what in essence amounted to a judicial ‘wait and see’ approach. In Wong v. Di Grazia, 60 Cal. 2d 525 (1963), the California Supreme Court adopted a “reasonable time” rule that gave the interest a ‘reasonable time’ to show that it would vest within the common law Rule Against Perpetuities period (21 years). “Although this concept avoids the invalidation of the document as violative of the rule against perpetuities, it so interprets the agreement as to ensure that the interest will vest or fail within the period of the rule.” Id. at fn. 19. This judicially created’ wait and see’ approach to the Rule Against Perpetuities, waiting ‘a reasonable period of time’ to see how the facts actually played themselves out rather than applying the doctrine abstractly the moment the interest was created to invalidate the interest had the advantage of resolving the issue based on the actual facts that occurred in the real world rather than on a worst case scenario that while highly implausible conceivably could have occurred.
As the California Supreme Court expressly stated, however, in Wong v. Di Grazia, a ‘reasonable period of time’ was construed as permitting the courts to wait at most 21 years before voiding the interest – the time period in the traditional common law Rule Against Perpetuities.