North Carolina § 41-32 - Possibilities of reverter, etc.

§ 41-32. Possibilities of reverter, etc.

Except as otherwise provided in this section: A possibility of reverter preceded by a fee simple determinable; A right of entry preceded by a fee simple subject to a condition subsequent; or An executory interest preceded by either a fee simple determinable or a fee simple subject to an executory limitation; This section does not apply to a possibility of reverter, right of entry, or executory interest held by a charity, a government or governmental agency or subdivision excluded from the Uniform Statutory Rule Against Perpetuities by G.S. 41-18(5) or to an arrangement relating solely to an interest in oil, gas, or minerals. becomes invalid, and the preceding fee simple becomes a fee simple absolute, if the right to vest in possession of the possibility of reverter, right of entry, or executory interest depends on an event or events affecting the use of land and if the possibility of reverter, right of entry, or executory interest does not actually vest in possession within 60 years after its creation. History (1995, c. 525, s. 1.) COMMENTARY With certain exceptions, this section imposes a 60-year time limit on the duration of certain possibilities of reverter, rights of entry (also known as rights of re-entry, rights of entry for condition broken, and powers of termination), and executory interests. Possibilities of reverter and rights of entry are generally exempt from the common-law Rule Against Perpetuities. But their nonreversionary counterpart - the executory interest that follows either a fee simple determinable or a fee simple subject to an executory limitation - is subject to the common-law Rule. By statute in some states, possibilities of reverter and rights of entry expire if they do not vest within a specified period of years (such as 30 or 40 years). These statutes, however, do not apply to the type of executory interest described above, which is the nonreversionary counterpart of the possibility of reverter and/or right of entry. G.S. 41-32 treats all three future interests alike by limiting their duration to 60 years and by excluding them from the Statutory Rule. Unless the possibility of reverter, right of entry, or executory interest is an interest in favor of a charity, government, or governmental agency or subdivision that is excluded from the Statutory Rule by G.S. 41-18(5) [or is an arrangement relating solely to an interest in oil, gas, or minerals], the maximum period any of the three can exist is limited to 60 years; if it has not vested by the 60th anniversary of its creation, it ceases to exist and the preceding fee simple becomes a fee simple absolute. Example 1. G deeded real property: [Alternative 1] "to the City of Sidney for as long as the property is used for a public park, and upon the property ceasing to be used for that purpose, the property is to go to B and his heirs." [Alternative 2] "to the City of Sidney for as long as the property is used for a public park, and upon the property ceasing to be used for that purpose, the property is to revert to G and his heirs." In both alternatives, the City of Sidney has a fee simple determinable. In Alternative 1, B has an executory interest. In Alternative 2, G has a possibility of reverter. Both B's and G's future interests are excluded from the Statutory Rule by G.S. 41-18(9). Both are subject to the 60-year limit on their existence imposed by G.S. 41-32. If the property is still being used for a public park on the 60th anniversary of the date of delivery of G's deed, the City of Sidney's fee simple becomes a fee simple absolute. Example 2. G deeded real property: [Alternative 1] "to A and his heirs on condition that the property be used for residential purposes, and if the property is not used for residential purposes, G is to have the right to re-enter and take possession of the premises." [Alternative 2] "to A and his heirs, but if the property is not used for residential purposes, to B and his heirs." In Alternative 1, A has a fee simple subject to a condition subsequent; G has a right of entry that is excluded from the Statutory Rule Against Perpetuities. In Alternative 2, A has a fee simple subject to an executory limitation; B has an executory interest that is excluded from the Statutory Rule Against Perpetuities. In both alternatives, A's fee simple becomes a fee simple absolute on the 60th anniversary of the date of delivery of G's deed, unless the property was used for nonresidential purposes on or before that date and, in Alternative 1, unless G has properly exercised his right of entry on or before that date. Event or Events Affecting the Use of Land. G.S. 41-32 only applies to possibilities of reverter, rights of entry, and executory interests if the vesting depends on an event or events affecting the use of land. The purpose of this restriction is to exempt family-oriented dispositions from the 60-year time limit in cases where the Statutory Rule Against Perpetuities is a more appropriate measure for controlling the interest. Example 3. G's will devised real property "to my daughter A and her heirs, but if she should die without descendants, to my son B and his heirs." Although B has an executory interest preceded by a fee simple subject to an executory limitation, B's executory interest is not controlled by G.S. 41-32 because the event on which its vesting depends does not relate to the use of land. Instead, B's executory interest is governed by the Statutory Rule Against Perpetuities, under which it is valid from creation because it complies with G.S. 41-15(a)(1). The phrase "event or events affecting the use of land" is to be given an interpretation appropriate to its purpose. Thus, a devise to a church "so long as the church shall maintain and promulgate its present religious belief and faith and continue as a church" is not a family-oriented disposition and should be found to describe an event affecting the use of the land. Exception for Certain Charitable and Governmental Interest. The last sentence of G.S. 41-32 exempts certain interests held by a charity, a government, or governmental agency or subdivision from the 60-year time limit. The excluded interests are those excluded from the Statutory Rule Against Perpetuities by G.S. 41-18(5). That section codifies the common-law principle that a nonvested property interest held by a charity, a government, or a governmental agency or subdivision is excluded from the Rule Against Perpetuities if the interest was preceded by an interest held by another charity, government, or governmental agency or subdivision. Example 4. G devised real property "to the X School District so long as the premises are used for school purposes, and upon the cessation of such use, to Y City." The nonvested property interest in favor of Y City (an executory interest) is excluded from the Statutory Rule under G.S. 41-18(5) because it was preceded by a property interest (a fee simple determinable) held by a governmental subdivision, X School District. The fact that the interest of Y City is excluded from the Statutory Rule Against Perpetuities by G.S. 41-18(5) means that the 60-year limit imposed on certain executory interests by G.S. 41-32 does not apply. Legal Periodicals. - For article, "Perpetuities Reform in North Carolina: The Uniform Statutory Rule Against Perpetuities, Nondonative Transfers, and Honorary Trusts," see 74 N.C.L. Rev. 1783 (1996).