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INSTEAD OF ASKING WHEN, ASK

HOW: WHY THE RULE AGAINST
PERPETUITIES SHOULD NOT APPLY
TO RIGHTS OF FIRST REFUSAL

Heather M. Marshall
Abstract: In May 2007, the Supreme Judicial Court of Massachusetts held,
as a matter of first impression, that the Rule Against Perpetuities did not bar
the right of first refusal contained in a deed. Although this decision goes
against the holdings of a majority of jurisdictions, there is a notable minority.
This Note analyzes why the Supreme Judicial Court of Massachusetts
reached a different decision than the higher courts of other states and
suggests that future courts should follow the minority approach as
Massachusetts has done.

This Note takes the position that a right of first refusal should not be subject
to the Rule Against Perpetuities. In determining whether a right-of-first-
refusal provision is valid, the Rule Against Perpetuities should not be
applied. Because a right of first refusal creates a contractual right and not a
property interest, it is illogical to inquire into whether an interest created by a
right of first refusal vests too remotely. Further, rights of first refusal do not
necessarily render property inalienable. If a right-of-first-refusal provision
contains language that may affect the alienability of the property, the right of
first refusal should not be analyzed under the Rule Against Perpetuities.
Instead, the Rule Against Restraints on Alienation should be applied. Rather
than focusing on when the right of first refusal may vest, courts should focus
on whether a right of first refusal acts as an unreasonable restraint on
alienation.

Candidate for Master of Laws in Taxation, Boston University School of Law (2011).
Candidate for Juris Doctor, New England School of Law (2010). B.A., Sociology, summa
cum laude, Emmanuel College (2007). I would like to thank my family for their love and
encouragement, and my fianc, David Deitch, for his patience, love, support, and sense of
humor during my law school studies and the writing of this Note.

763
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764 NEW ENGLAND LAW REVIEW [Vol. 44:763

The Rule Against Restraints on Alienation is better suited for analysis of

contract provisions than is the Rule Against Perpetuities, as the time
restrictions connected with the Rule Against Perpetuities are not relevant in
business affairs. Due to its inflexibility, the application of the Rule Against
Perpetuities in business transactions would defeat the underlying policy
goals of the Rule. Courts have justified other exceptions to the Rule Against
Perpetuities regarding real estate transactions and should except business
transactions from the Rule as well. Rights of first refusal should not be
subject to the Rule Against Perpetuities and instead should be analyzed
under the Rule Against Restraints on Alienation.
INTRODUCTION ..........................................................................................765
I. Background Information Regarding Prohibitions Against Restraints
on Property Rights and the Right of First Refusal................................766
A. Prohibitions Against Restraints on Property Rights ................766
1. The Rule Against Perpetuities ...........................................766
2. The Rule Against Restraints on Alienation .......................769
B. The Right of First Refusal .......................................................770
II. Application of the Rule Against Perpetuities and the Rule Against
Restraints on Alienation in Cases Involving a Right of First
Refusal .................................................................................................772
A. The Majority Approach ...........................................................773
B. The Minority Approach ...........................................................774
1. The Minority Position as the Modern Trend in Property
Law ....................................................................................777
2. The Supreme Judicial Court of Massachusettss Decision in
Bortolotti v. Hayden...........................................................778
III. A Right of First Refusal Should Not Be Subject to the Rule
Against Perpetuities. ...........................................................................782
A. The Rule Against Perpetuities Should Not Apply to Rights of
First Refusal.............................................................................782
1. A Right of First Refusal Is Not a Property Interest. ..........782
2. A Right of First Refusal Does Not Necessarily Render
Property Inalienable...........................................................783
B. Rights of First Refusal Should Be Analyzed Under the Rule
Against Restraints on Alienation.............................................784
C. The Rule Against Perpetuities Should Not Be Applied in
Business Transactions..............................................................786
D. Courts Have Justified Other Exceptions to the Rule Against
Perpetuities Regarding Options to Purchase Real Estate. .......788
CONCLUSION ..............................................................................................789
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2010] RIGHT OF FIRST REFUSAL 765

INTRODUCTION
Throughout history, courts have placed great importance on the
ability to freely transfer property from one owner to another.1 This ability
to freely transfer, or to alienate, property has been favored by the common
law for centuries.2 Typically, courts have held that restraints on the
alienation of property are void as contrary to public policy.3 To ensure the
free alienability of property, rules such as the Rule Against Perpetuities
were developed.4 Specifically, the Rule Against Perpetuities limits the
amount of time that property can be suspended out of commerce and
rendered inalienable.5
In May 2007, the Supreme Judicial Court of Massachusetts held, as a
matter of first impression, that the Rule Against Perpetuities did not bar the
right of first refusal contained in a deed.6 This decision goes against the
holdings of a majority of jurisdictions.7 There is, however, a notable
minority.8 This Note analyzes why the Supreme Judicial Court of
Massachusetts reached a different decision than the higher courts of other
states and suggests that future courts should follow the minority approach
as Massachusetts has done.
This Note will take the position that a right of first refusal should not
be subject to the Rule Against Perpetuities. Part I of this Note will explore
the history and purpose of the Rule Against Perpetuities and the related
Rule Against Restraints on Alienation, and will provide an overview of the
right of first refusal, which is also known as a pre-emptive right. Part II will
examine the application of the Rule Against Perpetuities in cases involving
a right-of-first-refusal provision, providing a comparison of the majority
and minority approaches. Part II will also explore the view that the
minority approach is the modern trend in property law and will highlight
the decision of the Supreme Judicial Court of Massachusetts in Bortolotti v.
Hayden.9 Part III of this Note will address why the right of first refusal
should not be subject to the Rule Against Perpetuities. Specifically, this

1. See J.H.C. MORRIS & W. BARTON LEACH, THE RULE AGAINST PERPETUITIES 3
(photo. reprint 1986) (2d ed. 1962).
2. Id.
3. 61 AM. JUR. 2D Perpetuities and Restraints on Alienation to Plant and Job Safety
OSHA and State Laws 90 (2002).
4. Frederick R. Schneider, A Rule Against Perpetuities for the Twenty-First Century,
41 REAL PROP. PROB. & TR. J. 743, 744-45 (2007).
5. BLACKS LAW DICTIONARY 1447 (9th ed. 2009).
6. Bortolotti v. Hayden, 866 N.E.2d 882, 886, 891 (Mass. 2007).
7. See infra Part II.A.
8. See infra Part II.B.
9. 866 N.E.2d 882 (Mass. 2007).
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766 NEW ENGLAND LAW REVIEW [Vol. 44:763

Note will argue that rather than focusing on whether the interest created by
a right of first refusal vests too remotely, courts should focus on whether a
right of first refusal acts as an unreasonable restraint on alienation.

I. Background Information Regarding Prohibitions Against Restraints on

Property Rights and the Right of First Refusal

A. Prohibitions Against Restraints on Property Rights

Historically, the common law has favored the free alienability of
property.10 To be alienable, property must be capable of being freely
transferred from one owner to another, either during the owners lifetime or
at her death.11 Traditionally, restraints on the alienation of property have
been void as contrary to public policy.12 In general, there are four
objections to restraints on alienation.13 First, restraints on alienation make
property unmarketable, which may prevent a particular piece of land from
being used for its highest and best use.14 Second, restraints have a
tendency to perpetuate the concentration of wealth by making it
impossible for the owner to sell property and consume the proceeds of [the]
sale.15 Third, restraints discourage owners from making improvements to
their property; a property owner is not likely to spend money on
improvements to property he cannot sell.16 Fourth, restraints on alienation
prevent creditors, who have extended credit in reliance on the owners free
enjoyment of the property, from reaching the property in order to settle
claims.17 In light of these policy concerns, the common law Rule Against
Perpetuities and the Rule Against Restraint on Alienation were developed
to ensure the free alienability of property.18

1. The Rule Against Perpetuities

The Rule Against Perpetuities is a rule that strikes down property
interests that vest19 too remotely.20 It was created to prevent unreasonable

10. MORRIS & LEACH, supra note 1. Common law judges established rules prohibiting
restraints on alienability as early as the thirteenth century. Id.
11. See BLACKS LAW DICTIONARY, supra note 5, at 84.
12. 61 AM. JUR. 2D, supra note 3.
13. JESSE DUKEMINIER ET AL., PROPERTY 195 (6th ed. 2006).
14. Id.
15. Id.
16. Id.
17. Id.
18. See Schneider, supra note 4.
19. Morris and Leach provide the following definition of vest:
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2010] RIGHT OF FIRST REFUSAL 767

restraints on the alienation of property.21 To quote the Restatement Third of

Property, the purpose of the Rule Against Perpetuities is to prevent
excessive dead-hand control of property . . . through intergenerational
transfers that might render property unmarketable for decades, or longer.22
The Rule Against Perpetuities does not invalidate interests that last too
long.23 Rather, the Rule Against Perpetuities invalidates interests that are
inalienable because their ownership vests too remotely.24 When an interest
in property vests too remotely, the property is inalienable because there is
no owner who has title to the property who could sell it or otherwise
exercise aspects of ownership.25 The Rule Against Perpetuities serves to
limit the amount of time that title to property can be suspended out of
commerce and rendered inalienable.26

(a) A remainder is vested when the persons to take it are

ascertained and there is no condition precedent attached to the
remainder other than the termination of the prior estates.
(b) An executory interest (that is, an interest which cuts off a
previous interest instead of following it when it has terminated) is not
vested until the time comes for taking possession.
(c) Most important of all, a class gift is not vested until the exact
membership of the class has been determined; or, to put it differently, a
class gift is still contingent if any more persons can become members of
the class or if any present members can drop out of the class.
MORRIS & LEACH, supra note 1, at 1.
20. Id.
21. See DUKEMINIER ET AL., supra note 13, at 245.
22. RESTATEMENT (THIRD) OF PROP.: SERVITUDES 3.3 cmt. b (2000). Dead-hand
control is exerted when a decedent influences the conduct of a living beneficiary through
control of his or her wealth from beyond the grave. See BLACKS LAW DICTIONARY, supra
note 5, at 456.
23. MORRIS & LEACH, supra note 1, at 2.
24. Id.; Fitzpatrick v. Mercantile-Safe Deposit & Trust Co., 155 A.2d 702, 705 (Md.
1959) (stating that the Rule Against Perpetuities does not invalidate interests which last too
long, but interests which vest too remotely; in other words, the Rule is not concerned with
the duration of estates, but the time of their vesting).
25. See BLACKS LAW DICTIONARY, supra note 5.
26. Id. The policy considerations behind the Rule Against Perpetuities are clear:
The [R]ule [A]gainst [P]erpetuities springs from considerations of
public policy. The underlying reason for and purpose of the rule is to
avoid fettering real property with future interests dependent upon
contingencies unduly remote which isolate the property and exclude it
from commerce and development for long periods of time, thus working
an indirect restraint upon alienation, which is regarded at common law
as a public evil.
First Natl Bank & Trust Co. v. Sidwell Corp., 678 P.2d 118, 127 (Kan. 1984).
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768 NEW ENGLAND LAW REVIEW [Vol. 44:763

The classic statement of the Rule Against Perpetuities is that [n]o

interest is good unless it must vest, if at all, not later than twenty-one years
after some life in being at the creation of the interest.27 In other words, for
an interest to be valid, it must be certain to vest or to terminate no later than
twenty-one years after the death of some person alive at the creation of the
interest.28 The person alive at the creation of the interest by which the
period is measured is considered the validating life.29 The existence of this
person will enable it to be proven that the contingent interest30 will vest or
fail within the life of that person, or within twenty-one years after his or her
death.31 There must be a validating life for an interest to be valid.32
To understand how the validating life is used to determine whether an
interest is valid under the Rule Against Perpetuities, consider the following
two examples:
Example [One]. O transfers a sum in trust for A for life, then to
As first child to reach 21. A is the validating life. You can
prove that any child of A who reaches 21 will necessarily reach
21 within 21 years of As death. The remainder must vest or fail
within this period; it cannot possibly vest more than 21 years
after A dies. The remainder is valid.

Example [Two]. O transfers a sum in trust for A for life, then to

As first child to reach 25. A has no child age 25 or older. There
is no validating life; the contingent remainder is void. You
cannot prove that As first child to reach 25 will do so within 21
33
years after As death.

27. Stewart E. Sterk, Jurisdictional Competition to Abolish the Rule Against

Perpetuities: R.I.P. for the R.A.P., 24 CARDOZO L. REV. 2097, 2098-99 (2003) (quoting JOHN
CHIPMAN GRAY, RULE AGAINST PERPETUITIES 191 (4th ed. 1942)). John Chipman Gray, a
Harvard Law professor from 1869 to 1913 and co-founder of the distinguished law firm
Ropes & Gray, was fabled because he reduced centuries of cases to this one sentence.
DUKEMINIER ET AL., supra note 13, at 245 n.15. For more on Gray, see Stephen A. Siegel,
John Chipman Gray, Legal Formalism, and the Transformation of Perpetuities Law, 36 U.
MIAMI L. REV. 439 (1982).
28. DUKEMINIER ET AL., supra note 13, at 246.
29. Id.
30. A contingent interest is [a]n interest that the holder may enjoy only upon the
occurrence of a condition precedent. BLACKS LAW DICTIONARY, supra note 5, at 885.
31. DUKEMINIER ET AL., supra note 13, at 246. Sometimes a validating life will be a
person who is not mentioned in the instrument. The key is that to be a validating life, a
person must be someone who can affect vesting or termination of the interest. Id. at 247.
32. Id. at 246 n.17.
33. Id. at 246.
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Example Two demonstrates an important point in the search for a person to

be the validating life: in looking at persons who are causally connected
with whether the interest in question will vest or terminate, one must
consider whether there is a possible chain of events that may occur after the
creation of the interest that would cause it to be invalid.34 Note that the test
looks at what might happen.35 If what might happen is that the interest has
not yet vested during the validating persons life plus twenty-one years
after their death, then that person cannot be the validating life.36 Example
Two illustrates a situation in which there is a possible chain of events that
would invalidate the interest.37 Assume that As presently living children,
who are all under the age of twenty-five, die. A has another child, B, a year
later. A then dies, leaving her only child B, age three, alive. B will not reach
age twenty-five within twenty-one years of As death. If the gift vests in B,
it will vest twenty-two years after As death, and this is too remote. Here, A
cannot be the validating life and there is no other life that creates the proof
required to determine whether the interest is valid. Thus, this interest is
void under the Rule Against Perpetuities.38

2. The Rule Against Restraints on Alienation

Like the Rule Against Perpetuities, the Rule Against Restraints on
Alienation prohibits restraints on property rights.39 Both rules serve to
prevent the withdrawal of property from commerce.40 Despite their
similar purpose, it is crucial to note the distinction between the Rule
Against Perpetuities and the Rule Against Restraints on Alienation.41
Namely, these two rules are based on different principles.42 While the Rule
Against Perpetuities was intended to prevent interests from vesting too far
in the future, the Rule Against Restraints on Alienation was designed to
prevent the taking of a property owners power to alienate his property.43

34. Id.
35. See id.
36. Id.
37. DUKEMINIER ET AL., supra note 13, at 246-47.
38. Id. at 247.
39. 61 AM. JUR. 2D, supra note 3, 2.
40. MORRIS & LEACH, supra note 1, at 2. The Rule Against Perpetuities and the Rule
Against Restraints on Alienation are based on the desirability of avoiding the retardation of
the natural development of a community by removing property from the ordinary channels
of trade and commerce. Kershner v. Hurlburt, 277 S.W.2d 619, 624 (Mo. 1955), quoted in
Cole v. Peters, 3 S.W.3d 846, 850 (Mo. Ct. App. 1999).
41. See 61 AM. JUR. 2D, supra note 3, 2; MORRIS & LEACH, supra note 1, at 2.
42. 61 AM. JUR. 2D, supra note 3, 2.
43. Id. [T]he rule against restraints is a rule against direct restraints on alienation,
whereas the [R]ule [A]gainst [P]erpetuities prohibits restraining the alienation indirectly by
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770 NEW ENGLAND LAW REVIEW [Vol. 44:763

To be alienable, property must be capable of being freely transferred from

one owner to another.44 A restraint on alienation is any provision that
prevents the owner of an interest in property from disposing of [the
interest] at all or from disposing of it in particular ways or to particular
persons.45
Another difference between the two rules is the criteria used by each
to determine the validity of an interest.46 While the Rule Against
Perpetuities measures the validity of an interest based on the passage of
time,47 the Rule Against Restraints on Alienation determines the
reasonableness of a restraint48 based on three factors: (1) the purpose of the
restraint; (2) the duration of the restraint; and, in the case of a provision
providing a purchaser with the right to purchase property, (3) the method of
determining the price to be paid for the interest.49 Although the Rule
Against Restraints on Alienation is intended to prevent the inalienability
of present or future vested interests, not every restraint will be considered
a violation.50

B. The Right of First Refusal

A right of first refusal, also known as a pre-emptive right, is an
example of a type of restraint on alienation that is not automatically
considered a violation of the Rule Against Restraints on Alienation.51 So
long as it does not prevent a current transfer of property, a right of first
refusal is not per se invalid.52 In general terms, a right of first refusal is a
right to purchase property before it is offered to others.53 A right of first
refusal contained in a deed obligates the owner of that property to offer to
sell that property to the holder of the right before the property may be sold

creating nonvested interests. Caudle v. Smither, 427 S.W.2d 227, 230 (Ky. 1968).
44. BLACKS LAW DICTIONARY, supra note 5, at 84.
45. MORRIS & LEACH, supra note 1, at 2.
46. See 61 AM. JUR. 2D, supra note 3, 2; MORRIS & LEACH, supra note 1, at 2.
47. 61 AM. JUR. 2D, supra note 3, 2.
48. An option restraint, for example, is generally considered to be reasonable if the
option price is at market or appraised value, irrespective of the duration of the option.
Iglehart v. Phillips, 383 So. 2d 610, 614 (Fla. 1980).
49. Cole v. Peters, 3 S.W.3d 846, 850 (Mo. Ct. App. 1999).
50. Id. (internal quotations omitted).
51. See RESTATEMENT (SECOND) OF PROPERTY: DONATIVE TRANSFERS 4.4 cmt. d
(1983); see also supra Part I.A.2.
52. RESTATEMENT (SECOND) OF PROPERTY: DONATIVE TRANSFERS 4.4 cmt. d.
53. J.A. Bryant, Jr., Annotation, Pre-Emptive Rights to Realty as Violation of Rule
Against Perpetuities or Rule Concerning Restraints on Alienation, 40 A.L.R. 3D 920, 924
(1971). A right of first refusal is [a] potential buyers contractual right to meet the terms of
a third partys higher offer. BLACKS LAW DICTIONARY, supra note 5, at 1439.
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2010] RIGHT OF FIRST REFUSAL 771

to a third party.54 The person who holds a right of first refusal is entitled to
be given an option to purchase before [the grantor] makes a contract to sell
to another.55 For example, if A has a right of first refusal on the purchase
of Bs house, and if C offers to buy the house for $100,000, then A can
match this offer and prevent C from buying it. The primary justification
behind the right of first refusal is the argument that the holder of the right
will likely value the encumbered property more highly than any third
party bidder.56 This higher value subjectively placed upon the property by
the holder of the right could be due to improvements or investments made
in the property or sentimental attachment to the property.57
While the holder of a right of first refusal has the right to buy before
others, it is important to note that the holder of the right may only exercise
that right if the owner of the property decides to sell.58 Holding a right of
first refusal does not confer on the holder the power to compel an
unwilling owner to sell.59 In contrast, an option to purchase real property
is a unilateral contract that gives the holder of the option the right to
purchase property at a specified time or for a specified price.60 The holder
of an option to purchase real property has the power to compel the owner
of the property to sell, if the holder of the option so chooses.61 For this
reason, a right of first refusal, or a pre-emptive right, is distinguishable
from an option to purchase real property.62

54. See Bryant, supra note 53.

55. Mamo v. Skvirsky, 960 A.2d 595, 600 (D.C. 2008) (quoting 3 ERIC MILLS HOLMES,
CORBIN ON CONTRACTS 11.3, at 479 (rev. ed. 1996)).
56. Jonathan F. Mitchell, Comment, Can a Right of First Refusal Be Assigned?, 68 U.
CHI. L. REV. 985, 987 (2001).
57. Id. at 987-88; see, e.g., Bortolotti v. Hayden, 866 N.E.2d 882, 885 (Mass. 2007)
(stating that the right of first refusal contained in the deed was created to preserve the
economic and sentimental value of the remaining land owned by the . . . family).
58. Bryant, supra note 53.
59. Id.
60. Old Port Cove Holdings, Inc. v. Old Port Condo. Assn One, 986 So. 2d 1279, 1285
(Fla. 2008). An option to purchase real property is:
A contract by which an owner of realty enters an agreement with
another allowing the latter to buy the property at a specified price within
a specified time, or within a reasonable time in the future, but without
imposing an obligation to purchase upon the person to whom it is given.
BLACKS LAW DICTIONARY, supra note 5, at 1204.
61. Cf. Old Port Cove Holdings, 986 So. 2d at 1285.
62. Bryant, supra note 53.
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772 NEW ENGLAND LAW REVIEW [Vol. 44:763

II. Application of the Rule Against Perpetuities and the Rule Against
Restraints on Alienation in Cases Involving a Right of First Refusal
In determining the validity of a right of first refusal contained in a
deed, the provision is first considered under the Rule Against Restraints on
Alienation.63 Under the Rule Against Restraints on Alienation, the purpose
of the restraint, the duration of the restraint, and the method of determining
the price to be paid for the property are taken into consideration to
determine the reasonableness of the restraint.64 In addition to consideration
under the Rule Against Restraints on Alienation, a majority of jurisdictions
hold that a right of first refusal is subject to the Rule Against Perpetuities as
well.65 The Restatement of Property takes the position that a restraint in the
form of a provision that the owner of a parcel of property cannot sell it
without first giving a designated person the opportunity to meet any offer
received does not constitute an unlawful restraint on alienation, so long as
such provision does not violate the Rule Against Perpetuities.66 While there
has been some contention that the Rule Against Perpetuities is not a
satisfactory method of determining the validity of pre-emptive rights, it
has been applied in most of the right-of-first-refusal cases in which it has
been discussed.67

63. See, e.g., Cole v. Peters, 3 S.W.3d 846, 850 (Mo. Ct. App. 1999).
64. Id.
65. Bryant, supra note 53. As the court in Stuart Kingston, Inc. v. Robinson stated:
Although the [R]ule [Against Perpetuities] is most often applied in the
construction of testamentary devices, it applies equally to rights of first
refusal, also known as preemptive rights, to acquire interests in land.
Despite the view of some courts that preemptive rights are merely
contract rights and not direct interests in property, a vast majority of
courts and commentators view such rights as equitable claims sufficient
to support an action for specific performance if the property owner
attempts to sell to someone other than the owner of the right of first
refusal. Because the holder of the right of first refusal acquires merely
an equitable interest, it remains inchoate until the owner decides to sell
thus triggering the right of first refusal.
Stuart Kingston, Inc. v. Robinson, 596 A.2d 1378, 1384 (Del. 1991) (citations
omitted).
66. Bryant, supra note 53, at 928.
67. Id. at 925.
Although several commentators have indicated that even if perpetual in
duration, a pre-emption at the offeror's price is unobjectionable since
free alienation is not restrained, or have indicated that the [R]ule
[A]gainst [P]erpetuities is not a satisfactory device by which the validity
of pre-emptions should be determined in implementing public policy,
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A. The Majority Approach

A majority of jurisdictions hold that a right of first refusal is subject
to the Rule Against Perpetuities.68 The courts adopting the majority
approach have generally done so based on the conclusion that a right of
first refusal creates an interest in property.69 For example, the court in
Ferrero Construction Co. v. Dennis Rourke Corp. reasoned that rights of
first refusal create interests in property and not merely contract rights
because if the property owner attempts to sell to someone other than the
[holder] of the right of first refusal . . . , the [holder of the right] may have a
court of equity enter a decree of specific performance ordering that the
property be conveyed to him.70 Thus, the holder of a right of first refusal
has an interest that will only vest if the owner of the property decides to
sell.71 Similarly, the court in Stuart Kingston, Inc. v. Robinson held that
[b]ecause the holder of the right of first refusal acquires merely an
equitable interest, it remains inchoate until the owner decides to sell.72
According to the majority position, a right of first refusal creates an
unvested property interest in the holder of the right.73 The purpose of the
Rule Against Perpetuities is to prevent unreasonable restraints on the
alienation of property by striking down interests in property that vest too

the common-law [R]ule [A]gainst [P]erpetuities has been applied in

most of the pre-emption cases in which it has been discussed.
Id.
68. See, e.g., HSL Linda Gardens Props., Ltd. v. Seymour, 788 P.2d 129, 130 (Ariz. Ct.
App. 1990); Estate of L.W. Johnson v. Carr, 691 S.W.2d 161, 161 (Ark. 1985); Strong v.
Theis, 232 Cal. Rptr. 272, 276 (Cal. Ct. App. 1986); Neustadt v. Pearce, 143 A.2d 437, 438
(Conn. 1958); Stuart Kingston, 596 A.2d at 1384; Martin v. Prairie Rod & Gun Club, 348
N.E.2d 306, 309 (Ill. App. Ct. 1976); Buck v. Banks, 668 N.E.2d 1259, 1261 (Ind. Ct. App.
1996); Trecker v. Langel, 298 N.W.2d 289, 291 (Iowa 1980); Gore v. Beren, 867 P.2d 330,
338 (Kan. 1994); Low v. Spellman, 629 A.2d 57, 58 (Me. 1993); Ferrero Constr. Co. v.
Dennis Rourke Corp., 536 A.2d 1137, 1144 (Md. 1988); Pace v. Culpepper, 347 So. 2d
1313, 1317 (Miss. 1977); Nickels v. Cohn, 764 S.W.2d 124, 132 (Mo. Ct. App. 1989);
Mazzeo v. Kartman, 560 A.2d 733, 737 (N.J. Super. Ct. App. Div. 1989); Vill. of Pinehurst
v. Regl Invs. of Moore, Inc., 412 S.E.2d 645, 646 (N.C. 1992); Schafer v. Deszcz, 698
N.E.2d 60, 63 (Ohio Ct. App. 1997); Webb v. Reames, 485 S.E.2d 384, 385 (S.C. Ct. App.
1997); Clark v. Shelton, 584 P.2d 875, 877 (Utah 1978); Lake of the Woods Assn v.
McHugh, 380 S.E.2d 872, 874 (Va. 1989); Smith v. VanVoorhis, 296 S.E.2d 851, 854 (W.
Va. 1982); Anderson v. Riegel, 281 N.W. 915, 917 (Wis. 1938).
69. See, e.g., Ferrero, 536 A.2d at 1139 (As rights of first refusal are interests in
property, the great majority of American jurisdictions have applied the Rule Against
Perpetuities to such rights.).
70. Id.
71. Id.
72. Stuart Kingston, 596 A.2d at 1384.
73. See Ferrero, 536 A.2d at 1139.
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774 NEW ENGLAND LAW REVIEW [Vol. 44:763

remotely.74 Because the majority of jurisdictions conclude that rights of

first refusal are interests in property that have not yet vested, the majority
of jurisdictions apply the Rule Against Perpetuities to such rights.75
In determining whether a right of first refusal violates the Rule
Against Perpetuities, courts adopting the majority approach look at whether
the right is limited to a term of years or if it is of unlimited duration.76 In
Ferrero, for example, the right of first refusal in question was part of a
conveyance between two corporations, which theoretically have a
perpetual existence.77 The Ferrero court reasoned that this right of first
refusal violated the Rule Against Perpetuities because under the
conveyance as drafted, the right of first refusal might vest well beyond the
period of some life in being plus twenty-one years that is prescribed in the
Rule.78 Courts adopting the majority approach find that a right of first
refusal that is unlimited in duration automatically violates the Rule Against
Perpetuities.79

B. The Minority Approach

While a majority of jurisdictions hold that a right of first refusal is
subject to the Rule Against Perpetuities,80 there is a notable minority.81 The

74. DUKEMINIER ET AL., supra note 13, at 245; MORRIS & LEACH, supra note 1, at 1; see
supra Part I.A.1.
75. Ferrero, 536 A.2d at 1139; see also Stuart Kingston, 596 A.2d at 1384; Gore v.
Beren, 867 P.2d 330, 338 (Kan. 1994) (holding that agreements creating a pre-emptive right
to purchase real estate constitute property interests which are subject to the Rule Against
Perpetuities); Martin v. Prairie Rod & Gun Club, 348 N.E.2d 306, 309 (Ill. App. Ct. 1976);
Pace v. Culpepper, 347 So. 2d 1313, 1317 (Miss. 1977); Melcher v. Camp, 435 P.2d 107,
113-14 (Okla. 1967); Lake of the Woods Assn v. McHugh, 380 S.E.2d 872, 874 (Va.
1989); Smith v. VanVoorhis, 296 S.E.2d 851, 854 (W. Va. 1982); LEWIS M. SIMES & ALLAN
F. SMITH, THE LAW OF FUTURE INTERESTS 1154, at 61 (2d ed. 1956) (stating that rights of
first refusal are normally subject to the [R]ule [A]gainst [P]erpetuities).
76. See Ferrero, 536 A.2d at 1144.
77. Id.
78. Id.
79. See id.
80. See supra Part II.A.
81. See, e.g., Robertson v. Murphy, 510 So. 2d 180, 183 (Ala. 1987); Cambridge Co. v.
E. Slope Inv. Corp., 700 P.2d 537, 542 (Colo. 1985); Shiver v. Benton, 304 S.E.2d 903, 906
(Ga. 1983); Bortolotti v. Hayden, 866 N.E.2d 882, 891 (Mass. 2007); Randolph v. Reisig,
727 N.W.2d 388, 393 (Mich. Ct. App. 2006); Metro. Transp. Auth. v. Bruken Realty Corp.,
492 N.E.2d 379, 385 (N.Y. 1986); Cherokee Water Co. v. Forderhause, 641 S.W.2d 522,
526 (Tex. 1982); Hartnett v. Jones, 629 P.2d 1357, 1362-63 (Wyo. 1981); Robroy Land Co.
v. Prather, 622 P.2d 367, 371 (Wash. 1980); see also Weber v. Texas Co., 83 F.2d 807, 808
(5th Cir. 1936) (The option under consideration is within neither the purpose of nor the
reason for the rule.); cf. Great Bay Sch. & Training Ctr. v. Simplex Wire & Cable Co., 559
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courts adopting the minority position hold that the Rule Against
Perpetuities does not invalidate a right-of-first-refusal provision contained
in a deed.82 Generally, these courts have reached this conclusion by relying
on the presumption that the sole policy underlying the Rule Against
Perpetuities is the elimination of restraints on alienation.83 The minority
position maintains that, unlike options to purchase real property, rights of
first refusal do not restrain alienation.84 The minority position distinguishes
rights of first refusal, also called pre-emptive rights, from options to
purchase real property.85 The American Law of Property explains the
difference between the two:
An option creates in the optionee a power to compel the owner
of property to sell it at a stipulated price whether or not he be
willing to part with ownership. A pre-emption does not give to
the pre-emptioner the power to compel an unwilling owner to
sell; it merely requires the owner, when and if he decides to sell,
to offer the property first to the person entitled to the pre-
emption, at the stipulated price. Upon receiving such an offer,
the pre-emptioner may elect whether he will buy. If he decides
86
not to buy, then the owner of the property may sell to anyone.
Unlike an option to purchase real property, a right of first refusal does not
give the holder of the right the power to compel the property owner to

A.2d 1329, 1331 (N.H. 1989) (stating that the Rule Against Perpetuities does not apply to
all pre-emptive rights, just those that pose a substantial restraint on alienation); Power Gas
Mktg. & Transmission, Inc. v. Cabot Oil & Gas Corp., 948 A.2d 807, 808, 814-15 (Pa.
Super. Ct. 2008) (holding that a right of first refusal in an oil and gas lease agreement is not
subject to the Rule Against Perpetuities and stating we also question whether, in the first
instance, rights of first refusal . . . ever concern propertied estates such that they should be
brought within the [R]ule [A]gainst [P]erpetuities).
82. See, e.g., Bortolotti, 866 N.E.2d at 891; Old Port Cove Holdings, Inc. v. Old Port
Cove Condo. Assn One, 986 So. 2d 1279, 1285 (Fla. 2008).
83. See, e.g., Forderhause v. Cherokee Water Co., 623 S.W.2d 435, 438-39 (Tex. App.
1981). The Rule Against Perpetuities serves to limit the amount of time that title to property
can be suspended out of commerce and rendered inalienable. BLACKS LAW DICTIONARY,
supra note 5.
84. See Great Bay Sch., 559 A.2d at 1331 (stating that the Rule Against Perpetuities
does not apply to all pre-emptive rights, just those that pose a substantial restraint on
alienation).
85. See, e.g., Uno Restaurants, Inc. v. Boston Kenmore Realty Corp., 805 N.E.2d 957,
962 (Mass. 2004) (A right of first refusal is not an option to purchase property at a certain
price, but a limitation on the owners ability to dispose of property without first offering the
property to the holder of the right at the third partys offering price.). But see Ferrero
Constr. Co. v. Dennis Rourke Corp., 536 A.2d 1137, 1140 (Md. 1988) (declining to
distinguish between an option to purchase real property and a right of first refusal).
86. 6 AMERICAN LAW OF PROPERTY 26.64, at 507 (1952).
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776 NEW ENGLAND LAW REVIEW [Vol. 44:763

sell.87 Nor does the holder of a right of first refusal have the power to
prevent the property owner from selling the property.88 So long as [t]here
is no casting of a cloud of uncertainty on the title to the property, and no
potential to forestall a sale, the minority position concludes that a right-of-
first-refusal provision should not be subject to the Rule Against
Perpetuities.89
Courts adopting the minority position further argue, contrary to the
majority approach, that the Rule Against Perpetuities should not be applied
to rights of first refusal because a right to purchase property before others
does not create a property interest.90 Florida courts, for example, have
consistently held that an option to purchase real property does not create a
valid property interest.91 If an option does not create an interest in property,
a right of first refusalwhich may or may not ripen into an option
depending on whether the owner decides to sellcannot create an interest
in land, either.92 Courts in a number of jurisdictions adopting the minority
approach have reached this conclusion.93
Courts adopting the minority position treat a right of first refusal as a
contract rather than as an interest in property.94 As a contract, a right of first
refusal is not subject to the Rule Against Perpetuities.95 If a right of first
refusal is treated as a contract, and not a property interest, logically the
Rule Against Perpetuities would not apply.96 As the Fifth Circuit held in
Weber v. Texas Co., contract rights are within neither the purpose of nor
the reason for the Rule Against Perpetuities.97 Based on the foregoing,

87. Bortolotti, 866 N.E.2d at 889.

88. Id.
89. Id.
90. See Old Port Cove Holdings, Inc. v. Old Port Cove Condo. Assn One, 986 So. 2d
1279, 1287 (Fla. 2008).
91. Id.
92. Id. (internal citation omitted).
93. See, e.g., Randolph v. Reisig, 727 N.W.2d 388, 392 (Mich. Ct. App. 2006)
(Because the right of first refusal gives the holder fewer rights than an option, we conclude
that if the latter does not create an interest in land, neither does the former.); Robroy Land
Co. v. Prather, 622 P.2d 367, 370 (Wash. 1980) (The holder of a right of first refusal has
far less of an interest in land than the holder of an ordinary option.).
94. See, e.g., Randolph, 727 N.W.2d at 392 (Michigan courts have generally treated . . .
agreements containing first-refusal rights as contracts, not property interests . . . .).
95. The Rule Against Perpetuities deals with the vesting of interests in property, not
with contractual rights. See MORRIS & LEACH, supra note 1, at 1.
96. See Randolph, 727 N.W.2d at 392.
97. Weber v. Texas Co., 83 F.2d 807, 808 (5th Cir. 1936); see also Power Gas Mktg. &
Transmission, Inc. v. Cabot Oil & Gas Corp., 948 A.2d 807, 814-15, 818 (Pa. Super. Ct.
2008) (holding that a right of first refusal in an oil and gas lease agreement is not subject to
the Rule Against Perpetuities, stating, we also question whether . . . rights of first refusal . .
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2010] RIGHT OF FIRST REFUSAL 777

courts adopting the minority position hold that the Rule Against
Perpetuities does not invalidate, nor should it be applied to, a right-of-first-
refusal provision contained in a deed.98

1. The Minority Position as the Modern Trend in Property Law

The minority position adopted by a number of American jurisdictions
appears to be the modern trend in property law.99 As observed by Professor
Jesse Dukeminier, [t]he modern trend . . . has been to free preemptive
[rights] from the Rule [Against Perpetuities] and to subject them instead to
the rule against unreasonable restraints on alienation.100 In 1944, the
Restatement First of Property recognized that an option or right of first
refusal is subject to the Rule Against Perpetuities.101 The Restatement
Third of Property reversed the Restatement Firsts position, however, and
now states that the Rule Against Perpetuities does not apply to pre-emptive
rights.102 Comment b to section 3.3 of the Restatement Third of Property
provides an overview of the historical development of the application of the
Rule Against Perpetuities to pre-emptive rights.103 It notes that courts first
began to apply the Rule Against Perpetuities to commercial land
transactions, including options and rights of first refusal, in the late

. ever concern propertied estates such that they should be brought within the [R]ule
[A]gainst [P]erpetuities).
98. See, e.g., Greenshields v. Warren Petrol. Corp., 248 F.2d 61, 71 (10th Cir. 1957)
(holding right to purchase oil and gas restricts land use in perpetuity but is presently vested);
Weber, 83 F.2d at 808 (holding rights to purchase oil not within traditional purpose of Rule
Against Perpetuities); Robertson v. Murphy, 510 So. 2d 180, 183 (Ala. 1987) (holding that
right to repurchase created conditional fee that vested from outset and, thus, was exempt
from the Rule Against Perpetuities); Cambridge Co. v. E. Slope Inv. Corp., 700 P.2d 537,
542-43 (Colo. 1985) (en banc) (holding technical application of Rule Against Perpetuities to
right of first refusal of condominium units inappropriate); Gartley v. Ricketts, 760 P.2d 143,
145 (N.M. 1988) (holding that a right of first refusal is not a future interest and not subject
to Rule Against Perpetuities); Robroy Land Co., 622 P.2d at 369 (holding Rule Against
Perpetuities not applicable to pre-emptive rights); Hartnett v. Jones, 629 P.2d 1357, 1363
(Wyo. 1981) (stating that the right of first refusal is not within the policy that the Rule
Against Perpetuities was designed to uphold).
99. See Old Port Cove Holdings, Inc. v. Old Port Cove Condo. Assn One, 986 So. 2d
1279, 1288 (Fla. 2008).
100. Jesse Dukeminier, A Modern Guide to Perpetuities, 74 CAL. L. REV. 1867, 1908
(1986); see infra Part III.B.
101. See RESTATEMENT (FIRST) OF PROP.: SOCIAL RESTRICTIONS IMPOSED ON THE
CREATION OF PROP. INTERESTS 413(1) cmt. e (1944) (Preemptive provisions, being
analogous to options upon a condition precedent, must comply with the [R]ule [A]gainst
[P]erpetuities in so far as their maximum duration is concerned.).
102. RESTATEMENT (THIRD) OF PROP.: SERVITUDES 3.3 cmt. b (2000).
103. Id.
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778 NEW ENGLAND LAW REVIEW [Vol. 44:763

nineteenth century.104 Applying the Rule Against Perpetuities to

commercial land transactions had both its virtues and its vices; [t]he virtue
of the rule was that it invalidated all interests that lacked a durational limit,
thus clearing titles without any need to inquire into the utility of the
arrangement. Its vice was that it operated arbitrarily, applying a time period
totally unsuited to commercial transactions.105
Despite years of complaints that the Rule Against Perpetuities should
not apply to pre-emptive rights, it was not until the 1980s that courts began
to adopt the minority position.106 Comment b to section 3.3 of the
Restatement Third points out that [w]hile some courts continue to adhere
to the old view, there is authority to support using restraints-on-alienation
doctrine rather than the [R]ule [A]gainst [P]erpetuities, which blindly
invalidates transactions without regard to merit.107 In a recent case
involving pre-emptive rights, the highest court of Massachusetts adopted
the minority approach and declined to apply the Rule Against Perpetuities
to rights of first refusal.108

2. The Supreme Judicial Court of Massachusettss Decision in

Bortolotti v. Hayden
In Bortolotti v. Hayden, a case of first impression,109 the Supreme
Judicial Court of Massachusetts held that a restriction in a deed that gave a
grantors heirs the right of first refusal to purchase a parcel of land in the
future did not violate the Rule Against Perpetuities, even though the
restriction had an unlimited duration.110 This decision is in conflict with the
majority of jurisdictions, which hold that a right of first refusal is subject to
the Rule Against Perpetuities.111 Many of the cases that adopt the minority
view involve rights of first refusal in connection with unique interests in

104. Id.
105. Id.
106. See id.
107. Id.
108. Bortolotti v. Hayden, 866 N.E.2d 882, 891 (Mass. 2007).
109. Id. at 886.
There are no Massachusetts cases directly addressing whether a right of
first refusal contained in a deed, which grants the right to purchase
property on the same terms as any bona fide offer that may be
acceptable to the grantee in the future, falls within the scope of the
[R]ule [A]gainst [P]erpetuities.
Id.
110. Id. at 883, 891.
111. See Ferrero Constr. Co. v. Dennis Rourke Corp., 536 A.2d 1137, 1139 (Md. 1988).
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2010] RIGHT OF FIRST REFUSAL 779

land, such as oil, gas and mineral leases.112 In contrast, the interest in
Bortolotti v. Hayden was a parcel of commercial property.113
Bortolotti v. Hayden involved a parcel of land with a right of first
refusal contained in the deed.114 The property at issue, located in Marstons
Mills, Massachusetts, was originally part of a larger tract of land owned by
Mr. Haydens father (Hayden Sr.).115 In 1976, Hayden Sr. had transferred
his ownership in the parcel of land to Hayden Land Development Company
(HLD), which was a joint venture between Hayden Sr. and partners
Albert Mattson and Robert G. Kesten.116 The purpose of HLD was to
develop, manage, and operate a shopping center on a portion of the larger
tract of land that included the parcel at issue in this case.117
At the time of Hayden Sr.s death in 1980, he held 565 shares of HLD
stock.118 For tax purposes, the executors of Hayden Sr.s estate participated
in a stock redemption plan with HLD, in which HLD conveyed four parcels
of the larger tract of subdivided land to Hayden Sr.s estate in exchange for
150 shares of HLD stock.119 The executors of Hayden Sr.s estate then sold
the four parcels of land to Mattson, subject to a restrictive covenant giving
Hayden [Sr.]s heirs, executors, administrators and assigns the right of first
refusal of any offer on the land that Mattson or his successors might
receive.120 The restrictions contained in the deed were imposed both to
protect the value of the larger tract of land owned by HLD and to preserve

112. Eric T. Berkman, Court Oks Unlimited First-Refusal Right in Deed, MASS. LAW.
WKLY., May 28, 2007, at 1. For examples of cases involving unique interests in land, see
Weber v. Texas Co., 83 F.2d 807 (5th Cir. 1936), cert. denied, 299 U.S. 561 (1936);
Producers Oil Co. v. Gore, 610 P.2d 772 (Okla. 1980); Perritt Co. v. Mitchell, 663 S.W.2d
696, 697 (Tex. App. 1983); and Forderhause v. Cherokee Water Co., 623 S.W.2d 435 (Tex.
Civ. App. 1981), rev'd on other grounds, 641 S.W.2d 522 (Tex. 1982). These cases all
involve rights of first refusal in connection with oil, gas, and mineral leases.
113. Berkman, supra note 112, at 36.
114. Bortolotti, 866 N.E.2d at 883.
115. Id. at 883-84.
116. Id. at 884.
117. Id.
118. Id.
119. Id.
120. Berkman, supra note 112, at 36. In part, the restrictions contained in the deed read:
The grantee of these premises and his heirs, executors, administrators,
and assigns shall not sell or otherwise dispose of said premises except
after first offering the same for sale to the grantors, their heirs and
assigns upon the same terms and conditions as those contained in a bona
fide offer received by and acceptable to the grantee.
Bortolotti v. Kesten, No. 05152, 2005 WL 3670420, at *1 (Mass. Super. Ct. Dec. 6,
2005).
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780 NEW ENGLAND LAW REVIEW [Vol. 44:763

the economic and sentimental value of the remaining land owned by the
Hayden family.121 The deed was recorded at the Barnstable County
Registry of Deeds on August 4, 1981 as Document Number 284,458.122
In 1983, Mattson conveyed the four lots to Kesten, with the recorded
deed explicitly stating that the property is subject to the restrictions as set
forth in Document No. 284,458.123 In 1996, Kesten sold two of the lots to
Robert Bortolotti.124 At this time Hayden Sr.s heirs, Robert F. Hayden IV
and his sisters, signed two documents that were titled Assent to Sale, and
these documents were recorded at the Registry of Deeds in Barnstable
County.125 By signing the Assent to Sale documents, Hayden Sr.s heirs
expressly waived their right of first refusal, pursuant to Document Number
284,458, regarding the two lots.126
Eight years later, in December 2004, Bortolotti agreed to buy another
lot from Kesten and entered into a purchase and sale agreement for the
parcel at issue in this case.127 Kesten and Bortolotti scheduled the closing
date for March 18, 2005.128 On February 14, Bortolottis attorney, on
Bortolottis behalf, sent a letter to Hayden notifying him of the purchase
and sale agreement and of the fact that there was a twenty-day period when
Hayden could respond and match what was written in the agreement.129 If
Hayden did not choose to match the offer, the letter requested that he sign
and return the enclosed Assent to Sale document to Bortolotti.130 On
approximately March 7, 2005, Haydens attorney hand delivered a letter to
Kestens attorney that contained Haydens intention to purchase the
property and a check for the deposit in the amount required by the purchase
and sale agreement.131 Kesten accepted the check and the letter, but the
closing scheduled for March 18 never took place.132 On March 17, 2005,
Bortolotti sued Hayden and Kesten seeking a declaratory judgment voiding
Haydens first refusal rights and ordering Kesten to convey the parcel at
issue.133 Bortolotti argued that the right of first refusal contained in the deed

121. Bortolotti, 866 N.E.2d at 885.

122. Id. at 884.
123. Id. at 885.
124. Id.
125. Id.
126. Id.
127. Bortolotti, 866 N.E.2d at 885.
128. Id.
129. Id.
130. Id.
131. Id.
132. Id.
133. Bortolotti v. Kesten, No. 05152, 2005 WL 3670420, at *1 (Mass. Super. Ct. Dec. 6,
2005); Bortolotti, 866 N.E.2d at 885.
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2010] RIGHT OF FIRST REFUSAL 781

was void and unenforceable under the Rule Against Perpetuities.134 The
lower court granted partial summary judgment in favor of Bortolotti,
declaring Haydens right of first refusal void and unenforceable.135
Hayden appealed the judgment, and the appeal was transferred to the
Supreme Judicial Court of Massachusetts on its own motion.136 The
Supreme Judicial Court reversed the lower courts decision and directed
entry of judgment for Defendant Hayden,137 holding that a restriction in a
deed that gave a grantors heirs the right of first refusal to purchase a parcel
of land in the future did not violate the Rule Against Perpetuities, even
though the restriction had an unlimited duration.138 The court found that the
restriction in the deed did not violate the Rule Against Perpetuities because
the Rule did not, in fact, apply.139 Relying on its decision in Uno
Restaurants, Inc. v. Boston Kenmore Realty Corp.,140 the court
distinguished an option to purchase property at a certain price, which has
been held by the court to violate the Rule Against Perpetuities, from a right
of first refusal.141 The purpose of the Rule Against Perpetuities is to prevent
property from being unmarketable for excessively long periods of time.142
The court reasoned that a right of first refusal, unlike an option to purchase
real estate, does not prevent property from being marketable.143 The court
stated:
Because the holder of a right of first refusal may only choose to
purchase property on the same terms as a bona fide offer, if and
when the owner decides to sell, there is no power . . . to
encumber an owners ability to sell the property for a lengthy
period of time.144
In the instant case, the court reasoned that because [t]here is no . . . cloud
of uncertainty on the title to the property, and no potential to forestall a

134. Kesten, 2005 WL 3670420, at *1.

135. Id. at *5.
136. Bortolotti, 866 N.E.2d at 884.
137. Id.
138. See id. at 891.
139. Id. at 889.
140. 805 N.E.2d 957 (Mass. 2004).
141. Bortolotti, 866 N.E.2d at 888 ([A] right of first refusal is not an option to purchase
property at a certain price, but a limitation on the owner's ability to dispose of property
without first offering the property to the holder of the right at the third partys offering
price.) (quoting Uno Rests., 805 N.E.2d at 962).
142. See RESTATEMENT (THIRD) OF PROP.: SERVITUDES 3.3 cmt. b (2000); see also
supra Part I.A.1.
143. See Bortolotti, 866 N.E.2d at 889; see also supra Parts I.B, II.B.
144. Bortolotti, 866 N.E.2d at 889.
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782 NEW ENGLAND LAW REVIEW [Vol. 44:763

sale, there is no threat to the alienability of property.145 Where there is no

risk of rendering property unmarketable, the [R]ule [A]gainst
[P]erpetuities logically should not apply.146

III. A Right of First Refusal Should Not Be Subject to the Rule Against
Perpetuities.

A. The Rule Against Perpetuities Should Not Apply to Rights of

First Refusal.

1. A Right of First Refusal Is Not a Property Interest.

The Rule Against Perpetuities should not be applied to rights of first
refusal because a right of first refusal is not a property interest.147 Merely
holding the right to purchase property before others does not create a
property interest.148 Until the holder of a right of first refusal exercises their
right to purchase, he has no legal interest in the property.149
It is recognized that an option to purchase real property does not
create a legal property interest.150 An option merely creates a contractual
right.151 If an option does not create a property interest, it logically follows
that a right of first refusal cannot create a property interest either.152 The
holder of an option has the power to compel a sale of the property at will.153
In contrast, the holder of a right of first refusal has no power to exercise
their right to purchase the property until the owner of the property decides
to sell.154 The holder of a right of first refusal thus has fewer rights than the
holder of an option.155 Because the right of first refusal creates fewer rights
in the holder than an option, if an option does not create an interest in
property, neither can a right of first refusal.156 As a contractual right, a right
of first refusal is not subject to the Rule Against Perpetuities.157 The Rule

145. Id.
146. Id.
147. See, e.g., Old Port Cove Holdings, Inc. v. Old Port Cove Condo. Assn One, 986 So.
2d 1279, 1286-88 (Fla. 2008).
148. See, e.g., id. at 1286-87.
149. Id.
150. See JOHN W. REILLY, THE LANGUAGE OF REAL ESTATE 287 (5th ed. 2000) (stating
that an option does not give the optionee any estate in the property).
151. See id.
152. Old Port Cove Holdings, 986 So. 2d at 1287.
153. See Randolph v. Reisig, 727 N.W.2d 388, 392 (Mich. Ct. App. 2006).
154. Id.
155. Id.
156. See id.
157. See, e.g., id. (Michigan courts have generally treated . . . agreements containing
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2010] RIGHT OF FIRST REFUSAL 783

Against Perpetuities deals with the vesting of interests in property, not with
contractual rights.158 Because a right of first refusal is a contractual right,
and not a property interest, logically the Rule Against Perpetuities should
not apply.159

2. A Right of First Refusal Does Not Necessarily Render

Property Inalienable.
The Rule Against Perpetuities should not apply to rights of first
refusal because a right of first refusal does not necessarily render property
inalienable.160 A right of first refusal that merely gives the holder of the
right the power to purchase property on the same terms as a bona fide offer
does not prohibit the alienation of property, and thus should not be subject
to the Rule Against Perpetuities.161 The Rule Against Perpetuities is
concerned with property interests that have not yet vested; its purpose is to
limit the amount of time that title to property can be suspended out of
commerce and caused to be inalienable.162 In the case of most right-of-first-
refusal provisions, however, the title to the property is never suspended out
of commerce.163 The owner of the property may choose to sell the property
at any time and may accept any offer for the sale of the property that he
chooses.164 Unlike an option to purchase real property, a right of first
refusal does not give the holder of the right the power to compel the
property owner to sell.165 Nor does the holder of a right of first refusal have
the power to prevent the property owner from selling the property.166 In
most cases, a right of first refusal merely gives the holder of the right the
power to match the terms of a bona fide offer.167
In Bortolotti v. Hayden, for example, Hayden, the holder of the right
of first refusal, had no power to exercise his right until Kesten, the owner
of the property, decided to sell.168 At the time when Kesten did decide to
sell the property and entered into an agreement with Bortolotti, Hayden

first-refusal rights as contracts, not property interests . . . .).

158. See MORRIS & LEACH, supra note 1, at 1.
159. See, e.g., Randolph, 727 N.W.2d at 392.
160. See 6 AMERICAN LAW OF PROPERTY 26.67, at 511 (1952) (stating that the Rule
Against Perpetuities ought not to be applied, since the future interest of the pre-emptioner
constitutes no impediment to transfer of the property).
161. Bortolotti v. Hayden, 866 N.E.2d 882, 889 (Mass. 2007).
162. See BLACKS LAW DICTIONARY, supra note 5.
163. See Bortolotti, 866 N.E.2d at 889.
164. See id.
165. See id.
166. Id.
167. See Bryant, supra note 53.
168. See Bortolotti, 866 N.E.2d at 885; supra Part II.B.2.
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merely had the right to purchase the property on the same terms as set forth
in the agreement.169 Hayden had no power to compel Kesten to sell the
property, nor did he have any power to specify the sale price.170 Because
Hayden only had the right to match the terms of a bona fide offer on the
property and had no additional power, the right of first refusal contained in
the deed did not prohibit the free alienation of the property.171
Because a right of first refusal does not necessarily render property
inalienable, the Rule Against Perpetuities should not be blindly applied to
all right-of-first-refusal provisions.172 Where a right of first refusal merely
gives the holder of the right the power to purchase property on the same
terms as a bona fide offer, there is no threat to the alienability of the
property, and the Rule Against Perpetuities should not apply.173

B. Rights of First Refusal Should Be Analyzed Under the Rule

Against Restraints on Alienation.
Rather than blindly applying the Rule Against Perpetuities to all right-
of-first-refusal provisions, rights of first refusal should be analyzed under
the Rule Against Restraints on Alienation on a case-by-case basis. The
purpose of the Rule Against Restraints on Alienation is to prevent direct
restraints on alienation.174 In contrast, the Rule Against Perpetuities
prevents indirect restraints on alienability created by interests that have not
yet vested.175 When considering the validity of a pre-emptive right, the
inquiry should not be when the right vests, but whether the right directly
prevents free alienation of the property involved.176 A standard right-of-
first-refusal provision, which merely gives the holder of the right the power
to match a bona fide offer, does not prohibit the free alienation of
property.177 It is possible, however, for a right-of-first-refusal provision to
contain language that may affect the alienability of the property.178 In these

169. See Bortolotti, 866 N.E.2d at 885.

170. See id.
171. Id. at 889.
172. See, e.g., Randolph v. Reisig, 727 N.W.2d 388, 392 (Mich. Ct. App. 2006).
173. See, e.g., Bortolotti, 866 N.E.2d at 889.
174. Caudle v. Smither, 427 S.W.2d 227, 230 (Ky. 1968).
175. Id.
176. See 6 AMERICAN LAW OF PROPERTY 26.66, at 509-10 (1952) (arguing that courts
should have analyzed options and pre-emptive rights under the Rule Against Restraints on
Alienation rather than the Rule Against Perpetuities because [e]verything of value in the
option device could have been preserved, and its evils combated more effectively than can
be done through the [R]ule [A]gainst [P]erpetuities).
177. See Bryant, supra note 53.
178. See, e.g., Bortolotti, 866 N.E.2d at 889.
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situations, the reasonableness of the right-of-first-refusal provision is best

determined under the Rule Against Restraints on Alienation.
A deed might contain, for example, a right-of-first-refusal provision
with a duration of one hundred years permitting the holder of the right to
purchase the property at a fixed price if the property owner decides to
sell.179 Although the holder of this right does not have power to compel a
sale, the right to purchase at a fixed price may restrict alienability if, for
example, the passage of time has caused the fixed price to bear no relation
to the actual market value of the property.180 Because the holder of the right
may have the right to purchase the property at an artificially low price if the
owner decides to sell, the owner may be deterred from selling the property
or from making improvements to it.181 Conversely, a deed might contain a
right-of-first-refusal provision with a duration of one hundred years
permitting the holder of the right to purchase the property at a fixed price
as determined by an appraisal of the property at the time it is to be sold.182
Here, the owner should not be deterred from selling the property or making
improvements to it because he can rest assured that the property would sell
for its appraised value.183
In the above examples, the reasonableness of the right-of-first-refusal
provisions is best analyzed under the Rule Against Restraints on
Alienation.184 If the Rule Against Perpetuities were applied instead, the
provisions would automatically be void based solely on their duration;
application of the Rule Against Perpetuities allows for no consideration of
whether the provision even serves as a restraint on alienation. In analyzing
the above examples under the Rule Against Restraints on Alienation, it
would first need to be determined whether the provisions permitting the

179. Selig v. State Highway Admin., 861 A.2d 710, 718-19 (Md. 2004).
180. Id. at 719; see, e.g., Peele v. Wilson County Bd. of Educ., 289 S.E.2d 890, 892-93
(N.C. Ct. App. 1982). This is known as an independent fixed-price option. See Iglehart v.
Phillips, 383 So. 2d 610, 615 (Fla. 1980).
181. Selig, 861 A.2d at 719.
182. See Iglehart, 383 So. 2d at 615-16. This example describes a dependent fixed-
price option. See id. at 615.
183. See id. at 615-16.
184. See Cambridge Co. v. E. Slope Inv. Corp., 700 P.2d 537, 542 (Colo. 1985) (en banc)
(Because the preemptive right . . . poses no threat to . . . free alienability . . . we perceive no
reason to invalidate the right under the [R]ule [A]gainst [P]erpetuities.); Bortolotti v.
Hayden, 866 N.E.2d 882, 889 (Mass. 2007) (Because the holder of a right of first refusal
may only choose to purchase property on the same terms as a bona fide offer . . . . the [R]ule
[A]gainst [P]erpetuities logically should not apply. In our view, this position is better suited
for business transactions, such as the one here, in which the right of first refusal was
created.); Metro. Transp. Auth. v. Bruken Realty Corp., 492 N.E.2d 379, 385 (N.Y. 1986)
(recognizing that, at least in commercial settings, rights of first refusal are best regulated by
the [R]ule [A]gainst [U]nreasonable [R]estraints on [A]lienation).
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786 NEW ENGLAND LAW REVIEW [Vol. 44:763

purchase of the property at a fixed price are truly restraints on alienation.185

A restraint on alienation is any provision that prevents the owner of an
interest in property from disposing of [the interest] at all or from disposing
of it in particular ways or to particular persons.186 In the first example
above, the owner of the property is not absolutely prevented from disposing
of the property, although he may be discouraged from doing so. In the
second example, it seems unlikely that the owner of the property would be
prevented from selling, unless market conditions in the area show that he
should be able to sell for a much higher amount than at which the property
was appraised.
If, for some reason, these provisions were considered to be restraints
on alienation, courts applying the Rule Against Restraints on Alienation
would then determine whether the restraints are reasonable by considering
the method provided for determining the price to be paid for the
property.187 Whether a restraint is reasonable depends upon its long-term
effect on the improvement and marketability of the property. Once that
effect is determined, common sense should dictate whether it is reasonable
or unreasonable.188 In the above examples, there are a number of elements
to consider in determining the reasonableness of the provision, including
the purpose and use of the property, the appraised or fair market value of
the property, the amount of the fixed price, and whether the fixed price is
independent or is dependent on other factors for determination.189 It is clear
that due to the individualistic nature of each situation and the level of
analysis needed to determine whether a restraint is reasonable, it would be
illogical to blindly apply the Rule Against Perpetuities to all rights of first
refusal.190 Whether a right-of-first-refusal provision should be upheld
hinges on whether it acts as an unreasonable restraint on alienation, not
whether it vests too remotely.191 To ensure the fairest results, rights of first
refusal should be analyzed under the Rule Against Restraints on Alienation
on a case-by-case basis.

C. The Rule Against Perpetuities Should Not Be Applied in

Business Transactions.
The Rule Against Perpetuities should not be applied in business
transactions, as its application would defeat the underlying goals of the

185. See MORRIS & LEACH, supra note 1, at 2.

186. Id.
187. See Cole v. Peters, 3 S.W.3d 846, 850 (Mo. Ct. App. 1999).
188. Iglehart, 383 So. 2d at 614.
189. Id. at 614-15; see also supra notes 180, 182 and accompanying text.
190. See, e.g., 6 AMERICAN LAW OF PROPERTY 26.66, at 510 (1952).
191. See id.
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Rule.192 Theoretically, corporations have a perpetual existence.193 The time

periods connected with the Rule Against Perpetuities, lives in being and
twenty one years, are not relevant in business affairs.194 While the
duration of right-of-first-refusal provisions may offend the basic policy of
the Rule Against Perpetuities, the offense is properly offset by their utility
in modern legal transactions.195 Right-of-first-refusal agreements between
two corporations promote the use and development of the property
involved, while imposing at most a minor impediment to alienability.196
The usefulness of right-of-first-refusal provisions in business transactions
is sufficient to justify excepting these provisions from the Rule Against
Perpetuities.197
Bortolotti v. Hayden provides an example of a right of first refusal
contained in a deed as part of a business transaction.198 In this case, the
purpose of the right of first refusal giving Hayden the power to match a
bona fide offer on the property was to protect the economic and sentimental
value of other commercial land owned by the Hayden family.199 Although
Haydens right of first refusal was of unlimited duration, at no point was
alienability of the property restricted, as Hayden had no power to prevent
or to compel a sale or to dictate the sale price.200 Here, not only is the
property freely alienable, but the owner of the property is encouraged to
develop and make improvements to it. Due to the Hayden familys
sentimental attachment to the property and their commercial use of the
surrounding land, any improvements to the property at issue would only
make the property more valuable. Improvement of property and
development for its best use would encourage competitive bidding on the
open market for any parcel. Here, the fact that the Hayden family had an
economic and sentimental attachment to the surrounding parcels only made
the property at issue more valuable. When property is highly valued, it is
more likely to be put to its best use.201

192. See Metro. Transp. Auth. v. Bruken Realty Corp., 492 N.E.2d 379, 384 (N.Y. 1986);
see, e.g., Wong v. DiGrazia, 386 P.2d 817, 823 (Cal. 1963) (stating that the Rule Against
Perpetuities should not be applied to commercial agreements in [a] rigid or remorseless
manner).
193. Ferrero Constr. Co. v. Dennis Rourke Corp., 536 A.2d 1137, 1144 (Md. 1988).
194. Metro. Transp. Auth., 492 N.E.2d at 384.
195. Id. at 383.
196. Id. at 384.
197. Id. at 383.
198. See generally Bortolotti v. Hayden, 866 N.E.2d 882 (Mass. 2007).
199. Id. at 885.
200. See Bortolotti v. Kesten, No. 05152, 2005 WL 3670420, at *1 (Mass. Super. Ct.
Dec. 6, 2005).
201. See Metro. Transp. Auth., 492 N.E.2d at 384-85.
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788 NEW ENGLAND LAW REVIEW [Vol. 44:763

So long as they do not serve as restraints on alienation, right-of-first-

refusal provisions in business transactions may encourage improvement
and development of property. Application of the Rule Against Perpetuities
to such business transactions would invalidate otherwise legitimate
transactions, simply because of the inflexibility of the Rule.202 Due to its
inflexibility, the Rule Against Perpetuities should not be applied in
business transactions.

D. Courts Have Justified Other Exceptions to the Rule Against

Perpetuities Regarding Options to Purchase Real Estate.
It would not be unreasonable for courts to permit an exception to the
Rule Against Perpetuities for rights of first refusal in business transactions.
Over the years, courts have carved out three other exceptions to the Rule
Against Perpetuities application to options to purchase real estate.203
Courts have held that the Rule Against Perpetuities does not apply to a
lessees option to renew a lease or to a lessees option to purchase all or
part of the leased premises.204 Courts have also held the Rule Against
Perpetuities inapplicable to an option to extend the scope of an easement or
profit held by the holder of the easement.205 Although options generally
may violate the Rule Against Perpetuities if they vest too remotely, courts
have nevertheless justified these three narrow exceptions because these
three types of options yield social benefits that offset the consequences of
that violation.206 Similarly, the usefulness of right-of-first-refusal
provisions in business transactions justifies their exception from the Rule
Against Perpetuities.207 The social benefit of promoting the development of
property for its best use far outweighs any public interest that may be
served by automatically invalidating rights of first refusal that vest
remotely.208 Courts have justified other exceptions to the Rule Against
Perpetuities regarding real estate transactions and should exempt business
transactions from the Rule as well.

202. See id. at 384.

203. Ferrero Constr. Co. v. Dennis Rourke Corp., 536 A.2d 1137, 1140 (Md. 1988).
204. Id.
205. Id.
206. Id. at 1141; see, e.g., Cambridge Co. v. E. Slope Inv. Corp., 700 P.2d 537, 542
(Colo. 1985) (en banc) (holding that the Rule Against Perpetuities did not apply to rights of
first refusal contained in condominium declaration, as condominium ownership was a form
of property interest unknown to earlier common law; thus, an exception for rights of first
refusal to purchase this specialized type of property interest has little bearing on whether
rights of first refusal in general should be exempt from the Rule Against Perpetuities).
207. Metro. Transp. Auth., 492 N.E.2d at 383.
208. Id. at 384-85.
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CONCLUSION
In determining whether a right-of-first-refusal provision is valid, the
Rule Against Perpetuities should not be applied. Because a right of first
refusal creates a contractual right and not a property interest, it is illogical
to inquire into whether an interest created by a right of first refusal vests
too remotely. Further, rights of first refusal do not necessarily render
property inalienable. If a right-of-first-refusal provision contains language
that may affect the alienability of the property, the right of first refusal
should not be analyzed under the Rule Against Perpetuities. Instead, the
Rule Against Restraints on Alienation should be applied. Rather than
focusing on when the interest may vest, courts should focus on whether a
right of first refusal acts as an unreasonable restraint on alienation. The
Rule Against Restraints on Alienation is better suited for analysis of
contract provisions than is the Rule Against Perpetuities, as the time
restrictions connected with the Rule Against Perpetuities are not relevant in
business affairs. Due to its inflexibility, the application of the Rule Against
Perpetuities in business transactions would defeat the underlying policy
goals of the Rule. Courts have justified other exceptions to the Rule
Against Perpetuities regarding real estate transactions and should except
business transactions from the Rule as well. Rights of first refusal should
not be subject to the Rule Against Perpetuities and instead should be
analyzed under the Rule Against Restraints on Alienation.