Unless you are a practicing attorney, had some form of legal education, or are an aspiring Jeopardy champion, there is a good chance you have never heard of the Rule Against Perpetuities (simply known as the “Rule”).  The Rule dates back to the 17th Century under English common law, and its purpose was and still is to promote the free transfer of land for later generations by not encumbering land with vague or remote contingencies that would otherwise allow the dead to dictate land ownership for years from beyond the grave.  In Texas, the Rule is modeled after the common law definition, which states that no interest in real property is valid unless it must vest, if at all, within twenty-one years after the death of some life or lives in being at the time of the conveyance.

If the Rule is as clear as mud to you, do not worry, as interpretation of the Rule has been confusing first year property law students and Texas courts alike for literally centuries.  Simply put, the Rule is in place to prevent remote contingencies that would create real property interests in some and remove real property interests from others years after an original conveyance of real property was made.   While the Rule is an important consideration in all aspects of real estate law, it is most frequently invoked in the interpretation of wills and estates and oil and gas leases.

Most recently, the Texas Supreme Court settled an issue revolving around the Rule in November, 2018.  In ConocoPhillips Company v. Koopmann, 547 S.W.3d 858 (Tex. 2018) (“Conoco”), a lessee of an oil and gas lease contested the validity of a reservation of a property interest made in a deed of fee-simple title as running afoul of the Rule.  In Conoco, a grantor named Strieber conveyed a deed of fee-simple title to the Koopmanns that contained a reservation to Strieber of a one-half participating royalty interest, which would be extended “as long thereafter as there is production in paying or commercial quantities” pursuant to an oil and gas lease on the tract.  Id.  The Koopmanns had an interest in such royalty, as the failure for the land to produce oil in paying or commercial quantities would mean the Koopmanns’ would be entitled to the royalty interest. Id.  The Koopmanns contended this interest in the royalty was a “vested possibility of reverter,” meaning the interest was valid upon granting of the deed with the possibility that it would revert back to the Koopmanns upon the interest’s expiration (i.e., the failure of the land to produce oil in paying or commercial quantities).  Id.  Alternatively, the lessee, Burlington, contended that the reservation constituted a “springing executory interest,” meaning the reservation did not immediately vest, and did not comply with the Rule because it was not certain to vest within twenty-one years of the issuance of the deed.  Id.

Ultimately, under the adoption of the common law version of the Rule, the Koopmanns’ interest after the expiration of the reservation was ruled a springing executory interest because it was not known at the time of creation of the interest whether the Koopmann’s interest would vest within twenty-one years (i.e., the land could have produced oil in paying or commercial quantities for many years beyond the twenty-one years from the creation of the interest).  Id.  Despite this finding, the Koopmanns’ interest was not invalidated under the Rule because doing so would not be consistent with the intent behind the Rule, which is to prevent landowners from using remote contingencies to maintain property within their family lineage for multiple generations.  Id.  Instead, the Koopmanns’ interest was maintained, as the interest served a useful social purpose of removing complications from title because the initial reservation in the fee-simple deed had expired.  Id.  As a result of the foregoing, it is now legal precedent for courts to “exempt interests following granted or reserved defeasible term interests from the Rule.”  Id.

Practically speaking, Conoco serves as a reminder that any future real property interest can ultimately be subject to invalidation under the Rule pending the wording of such interest.  Drafters of conveyance documents must be sure to make the grantor’s intent clear and not include any interests in real property that could not vest within twenty-one years of some life and being at the date of execution of the instrument creating the interest.  The fact that Conoco made it all the way to the Texas Supreme Court shows that the Rule is still a worthwhile consideration and that it is more than a complicated exam question for first year property law students.