The term perpetuity refers to an indefinite period or uncertain period or the state or quality of lasting forever. A better name for this rule can be the rule against remoteness of vesting.
The rule against perpetuity is the rule which prohibits a transfer that makes a property inalienable (not subject to being taken away from or given away by the possessor) for an unlimited period of time or forever.
In any disposition of property, perpetuity may arise in two ways – by taking away the transferee’s power to alienate or by creating future remote interest.
In this article, you will learn about the rule against perpetuity as defined by the Transfer of Property Act.
Object of Rule Against Perpetuity
The main object of the rule against perpetuity is that no property should be tied up or made or rendered inalienable for an indefinite period. Another object of the rule is to ensure that property is circulated freely and actively for the goals of trade and commerce as well as for the improvement of the property itself. Frequent disposition of property is necessary for its more beneficial enjoyment.
Further, free and frequent disposal guarantees that property is healthily circulated in society. Therefore, the rule against perpetuity is also based on general principles of public policy.
Furthermore, the rule against perpetuity safeguards the object of law that the property should be in motion.
Meaning of the Rule Against Perpetuity
The rule against perpetuity is contained under section 14 of the Transfer of Property Act. Accordingly, transfer of property cannot operate to generate an interest that will take effect after the lifetime of one or more persons living at the time of the transfer, and the minority of some person who will be alive at the end of that period and to whom the interest generated will belong if he reaches full age.
In simpler words, section 14 provides that bestowing of interest cannot be delayed beyond the life of the last preceding interest in the living person(s) and the minority of the ultimate beneficiary in a transfer of property. It is to be noted that section 14 provides that granting of interest may be postponed or delayed but not beyond a certain period. If the granting of interest is postponed beyond a certain period, the transfer would be void as being a transfer for an indefinite period or a transfer in perpetuity.
Exceptions to the Rule Against Perpetuity
There are some instances in which the rule against perpetuity is not applicable. These are:
1. Transfer for the Benefit of the Public
When a property is transferred for the benefit of the public, the rule against perpetuity is not applied. And hence, the transfer of property in the development of religion, knowledge, commerce, health, safety or any other profitable purpose to humankind is not void under the rule against perpetuity.
2. Personal Agreement
The rule against perpetuity does not apply to personal agreements that do not create an interest in the property. It only applies to a transfer of property. The rule cannot be applied if there is no transfer of property (i.e. no transfer of interest). For example, this rule does not apply to mortgages as in mortgages, there is no creation of any future interest.