New York's current statutory Rule against Perpetuities, found in N.Y. Est. Powers & Trusts Law § 9-1.1. N.Y. Est. Powers & Trusts Law § 9-1.1(a), sets forth the suspension of alienation rule and deems void any estate in which the conveying instrument suspends the absolute power of alienation for longer than lives in being at the creation of the estate plus 21 years. N.Y. Est. Powers & Trusts Law § 9-1.1(a)(2). The prohibition against remote vesting is contained in N.Y. Est. Powers & Trusts Law § 9-1.1(b).
In 1978, respondet Symphony and Broadwest Realty Corporation engaged in a transaction whereby Broadwest sold the entire building to Symphony for the below-market price of $ 10,010 and leased back the income-producing commercial property, excluding the theater, for $1 per year. The contract specified that $ 10 was to be paid at the closing and $ 10,000 was to be paid by means of a purchase-money mortgage. Broadwest maintained liability for the existing $ 243,000 mortgage on the property as well as certain maintenance obligations. As a condition of the sale, Symphony, for consideration of $ 10, also granted Broadwest an option to repurchase the entire building. Notably, the transaction did not involve Pomander Walk or the Healy Building. Due to Symphony's alleged default on the mortgage note, defendant Swett served Symphony with notice in January 1985 that it was exercising the option on behalf of all defendants. According to Symphony, it then discovered that the option agreement was possibly invalid. Consequently, in March 1985, Symphony initiated this declaratory judgment action against Broadsteet, arguing that the option agreement violated the New York statutory prohibition against remote vesting and clogged its equity of redemption under the mortgage. The court found that the remedy of recission could not be applied because there was an irreconcilable conflict in applying a remedy that was designed to void a transaction because it failed to carry out the parties' true intent to a transaction in which the mistake made by the parties was the application of the Rule against Perpetuities, the purpose of which was to defeat the intent of the parties.
Are the options to purchase commercial property exempt from the prohibition against remote vesting embodied in New York's Rule against Perpetuities?
Because the common-law rule against remote vesting encompasses purchase options that might vest beyond the permissible period, the court concluded that EPTL 9-1.1 (b) necessarily encompasses such options. Inasmuch as the common-law prohibition against remote vesting applies to both commercial and noncommercial options, it likewise follows that the Legislature intended EPTL 9-1.1 (b) to apply to commercial purchase options as well. Consequently, creation of a general exception to EPTL 9-1.1 (b) for all purchase options that are commercial in nature, as advocated by defendants, would remove an entire class of contingent future interests that the Legislature intended the statute to cover. While defendants offer compelling policy reasons--echoing those voiced by Professor Leach--for refusing to apply the traditional rule against remote vesting to these commercial option contracts, such statutory reformation would require legislative action similar to that undertaken by numerous other State lawmakers