Overview Of The Perpetuity Act

Historically, the common law remainder rules and the doctrine of indestructibility did not apply to executory interests or equitable future interests. Thus landowners could create a long series of future interests to tie up their land.

The courts responded by adopting the “rule against perpetuities”. Under the rule, a contingent interest must “vest in interest” no later than 21 years after some life in being named at the creation of the interest, with an allowance for a gestation period. “Vested in interest” means that the donee’s identity is ascertained and no condition precedent prevents the donee taking possession. It is not necessary that the donee have full possession to be “vested in interest”.

The Act continues and modifies the common law rule as follows:

1. The Act lists “lives in being”. At common law, the instrument creating the interest determined “lives in being”.
2. The drafter of an instrument may substitute a period of up to 80 years instead of the common law period for vesting. If an instrument does not name a life in being, the Act creates a presumption that the interest must vest within 80 years.
3. The Act creates a presumption that an instrument is valid until actual events indicate otherwise. At common law, an instrument that violated the rule was automatically invalid.
4. A court may rewrite an instrument to prevent it from failing, as follows:
   1. Where vesting is void because the instrument specifies an age over 21 years, the court may reduce the specified age to the age necessary for validity. The Act also creates presumptions as to the age at which a person may have a child.
   2. A court may exclude certain persons or classes where their inclusion would invalidate a class gift.
   3. A court may vary the disposition to conform to the rule against perpetuities where it can discern the general intention of the disposition (the “cy-pres rule”).
5. A gift subsequent to a void gift stands if it would be valid if it stood alone.
6. The Act partially restrains the rule’s application to certain types of future interests, for example, charitable trusts such as property donated to a university or university foundation. At common law, the rule applied to all future interests.
7. As to options to purchase and rights of first refusal, the Act fixes the vesting period at 80 years and a court presumes the interest valid until events prove otherwise. The option to purchase or right of first refusal is void as between the original parties and any third parties if not exercised within 80 years.
8. Neither the common law nor the statutory rule apply to options to renew a lease.

GENERAL EFFECT ON LAND TITLE PRACTICE

Overview

The Act applies to instruments taking effect on or after January 1, 1979. The common law rule continues to govern instruments taking effect before that date. An instrument purporting to create a property interest that vests outside the perpetuity period is invalid unless saved by one of the Act’s remedial provisions.

Relevant Provisions of Land Title Act

The Perpetuity Act is particularly relevant to registrations of trusts under s. 180 of the Land Title Act.

Exceptions to the Rule against Perpetuities

In addition to the exceptions under ss. 4 and 5 of this Act, the rule against perpetuities does not apply to:

1. an agreement or document entered into under the Strata Property Act, S.B.C. 1998, c. 43 or the bylaws of a strata corporation (see s. 291(3) of the Strata Property Act);
2. land held by an institution pursuant to s. 27 of the College and Institute Act, R.S.B.C. 1996, c. 52; or
3. the property of a university pursuant to s. 52 of the University Act, R.S.B.C. 1996, c. 468.

CROSS REFERENCES AND OTHER SOURCES OF INFORMATION

See “Perpetuities in Real Estate” in Real Estate—1997 Update (CLEBC, 1997).