The Common Law Rule Against Perpetuities
One of the fascinating elements of common law is its amazing ability to adapt with the changing times. The comprehensive common law rule against perpetuities is a fine example of how something centuries old continues to be relevant in today’s society, perhaps now more than ever. Even if you don’t know the ins and outs of UK property statutes, there is a good chance that you have dealt with a perpetuity (or its effects) at some point in your life. From trusts to wills, the common law rule against perpetuities has shaped the modern legal landscape in countless ways. Let’s delve into the history of this ancient law and discover how it influences our lives to this day via the ubiquitous laws of property and real estate.
In short, the common law rule against perpetuities essentially makes a parallel determination as to when property can be transferred from one owner to another. This means that even with modern laws in place, transfer of property used to (and still does) lead to much confusion. The traditional rule, both in England and the United States, stated that property must be transferred to another party within twenty-one years plus the gestation period for whatever child or animal might be living at the time of the transfer; “at the date of creation of the interest.” In other words, if you wanted to leave property to someone hundreds of years in the future, you were out of luck. That property is tied up with you until after you die, and in many cases, far longer.
The reason why this rule was first created was because of the large amounts of land passed down during the time when England had its colonization efforts. In order to retain control of vast tracks of land, property owners started to leave their estates to their heirs and/or their heirs’ unborn children. Many rich English men decided to enforce restriction on their land by denying any future offspring access to the property that they were technically entitled to. The limits imposed by the common law rule against perpetuities seemingly improved the situation by limiting land and wealth owned by a single family while still allowing the properties to stay in the family until the future owners were ready to take possession.
Today, however, there are few instances where properties are tied up in perpetuity. Most modern common-law countries have entirely done away with the common law rule against perpetuities in favor of legislation which provides the courts more flexibility when dealing with both property and estate matters. Take for example the real estate investment trust. If you were to deal (say) with an investment in a piece of land on Mars, you might find yourself worrying about property rules. Since no court could possibly know what will be happening on the red planet in a thousand years, the concept of a trust defined by the Twenty-one year rule falls apart related to space property.
When considering whether or not the common law rule against perpetuities plays any role in our modern society, it is important to consider the way property is typically bought and sold. In most developed nations, real estate is bought largely for speculation. While things like homes and farmland were once considered major investments, most large-scale property sales are based on future land speculation. When you buy a home, you are actually buying into a market that sees your new house as something all build up the real estate market and increase your home’s value. You are buying the potential that your house will appreciate over time.
This is essentially the same concept with regards to farmland, although it has a little less speculation involved. On the other hand, more futuristic concepts like the purchase of land on Mars are a much tricker proposition. What really makes this an issue is that the spirit of the common law rule against perpetuities (to keep property within a family and out of an estate) is consistently being challenged by foreign acquisition of that property; an even larger concern in the days of oil tycoons and international trade.
When it comes to time-share properties, such as an apartment in the Bahamas, the complexities of owning property that you share with others largely comes down to who is responsible for upkeep and sales costs. However, when considering who owns the property (and more importantly, who owns the rights to the property), the issues become highly complex. In a modern world, this can all be well and good. Yet, when the space race began (and even before), people began to question what they should do about their assets in the event that they were incapacitated. Thus, the idea of creating space trusts made a bit of sense.
As you can see, these concepts are not new, but they are clearly of increasing importance. Whether you buy into a farm or an entire hotel, the complexities of the modern property value make perpetual trust a real concern.
