Associations Avoid Getting a "Bad RAP"
Mention "RAP" to legal practitioners and they may audibly groan as they recall their days in law school when the sometimes confusing "Rule Against Perpetuities" was taught in their respective property law classes. The Rule Against Perpetuities, or RAP for short, states that "[a property] interest is not valid unless it must vest, if at all, within 21 years after the death of some life or lives in being at the time of the conveyance." Huh? Say what?
Basically, RAP safeguards against the future vesting of property if it requires a waiting period or other delay in transfer of title lasting longer than 21 years. Really, it is a policy favoring the free transfer of property NOW versus the hording of that property for distribution or conveyance LATER.
Fortunately for Associations, property interests created by restrictive covenants - interests that "run with the land" - while seemingly "perpetual" in nature (since these DCCRs typically automatically renew every 10-20 years by express provision), actually vest when title in the property vests. Thus, there is no "remote" vesting of title in these interests and they would not violate the RAP. So the good news for Associations is that annual maintenance assessments, and any other restrictive covenants contained within the Association's deed restrictions, do not upset the Rule Against Perpetuities and remain valid property interests.
This RAP issue reared its head in a somewhat novel legal challenge by a homeowner who had been sued by his Association for delinquent maintenance assessments. The homeowner alleged that the deed restrictions for his community were invalid because they automatically renewed every 10 years after the initial 20-year term, which seemingly would violate the RAP. The Court didn't bite. Instead, the Court ultimately found that the covenants to pay assessments, as well as the lien that attached to each homeowner's property, were covenants running with the land and, as such, vested when the homeowner took title to the property. Thus, the homeowner in this case lost his argument and the Association avoided getting a "bad RAP."
Basically, RAP safeguards against the future vesting of property if it requires a waiting period or other delay in transfer of title lasting longer than 21 years. Really, it is a policy favoring the free transfer of property NOW versus the hording of that property for distribution or conveyance LATER.
Fortunately for Associations, property interests created by restrictive covenants - interests that "run with the land" - while seemingly "perpetual" in nature (since these DCCRs typically automatically renew every 10-20 years by express provision), actually vest when title in the property vests. Thus, there is no "remote" vesting of title in these interests and they would not violate the RAP. So the good news for Associations is that annual maintenance assessments, and any other restrictive covenants contained within the Association's deed restrictions, do not upset the Rule Against Perpetuities and remain valid property interests.
This RAP issue reared its head in a somewhat novel legal challenge by a homeowner who had been sued by his Association for delinquent maintenance assessments. The homeowner alleged that the deed restrictions for his community were invalid because they automatically renewed every 10 years after the initial 20-year term, which seemingly would violate the RAP. The Court didn't bite. Instead, the Court ultimately found that the covenants to pay assessments, as well as the lien that attached to each homeowner's property, were covenants running with the land and, as such, vested when the homeowner took title to the property. Thus, the homeowner in this case lost his argument and the Association avoided getting a "bad RAP."
posted by William G. Gammon at 10:08 AM
William G. Gammon
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