It is a longstanding and well recognized concept that the owner of property is free to dispose of or transfer that property as they see fit. Occasionally, however, the transferor of property may attempt to place restrictions on a buyer’s future ability to sell or transfer that property. This article will briefly examine such restrictions on alienability and the validity of these restrictions in property transactions in Texas. If you are involved in a transfer of property involving a restraint on alienation in the Austin, Round Rock, or Pflugerville area, contact the real estate and probate attorneys at the Law Office of Farren Smith for an initial consultation.
Basics of Alienability and Restraints on Alienation in Texas
Generally speaking, alienability, or the ability to freely sell or otherwise transfer property, is inherent in the ownership of property. A restraint on alienation is a term in a conveyance of real property which seeks to prohibit or limit the ability of the recipient of the property to sell or transfer their interest in the property. Because alienability has traditionally and commonly been viewed as an inherent aspect of property ownership, such restraints on an owner’s ability to dispose of their property are disfavored and commonly voided by courts as against public policy.
A common example of a restraint on alienation is a fee tail. A fee tail was a restrictions placed on sales or inheritances of estates which prevented the recipient from selling or devising the estate to anyone outside of the family. The purpose of a fee tail was to keep property within a family, regardless of the desires of the recipients of the estate. Fee tails have been abolished in nearly every state, including Texas.
Permissible Restraints on Alienation in Texas
While generally speaking total restraints on alienation are void and unenforceable, some restraints may still be placed on the sale of real property. Typically, Texas courts will allow partial restraints on alienation that are deemed to be reasonable. Texas courts will find a restraint valid if it is reasonable after considering the following factors:
- The restraint is limited in duration.
- The restraint allows for a variety of types of transfers
- The restraint is limited in the number of persons to whom transfer is prohibited
- The restraint tends to increase the value of the property
- The restraint is against an interest that is not readily marketable
See Randolph v. Terrell 768 S.W.2d 736 (1987) . As made clear by these factors, only restraints that are limited in scope will be found valid. Total or complete restrains on alienation will almost never be found valid. A common restrain on alienation that has been found valid by Texas courts in many (but not all) situations is a right of first refusal .
Due to the complicated nature of these restraints and the transactions they arise in, it is advisable to consult with an attorney to evaluate the validity of such restraints. If you are involved in a transaction in the Austin, Round Rock, or Pflugerville area, contact our offices for a consultation.
- 17-254 Dorsaneo, Texas Litigation Guide