Also known as: direct restraints · direct restraint of trade
Written by attorneys · grounded in primary & secondary sources — see below
A provision in a servitude that expressly limits the class of persons to whom the burdened estate may be transferred or the conditions under which transfer may occur. Such a provision is invalid if unreasonable. Reasonableness is determined by weighing the utility of the restraint against the injurious consequences of enforcing it.
Federal Market LLC owns a parcel in a mixed-retail development. Its deed contains a covenant barring conveyance to any discount retailer. After a prolonged retail downturn, Federal Market receives no offers from permitted buyers but obtains a premium offer from Bridge Shop, a discount chain. The covenant prevents the sale despite extensive marketing efforts.
Owner O conveys Blackacre to A by deed that expressly denies A any power to transfer or encumber the parcel before O dies. A later attempts to mortgage the land to secure a loan. The deed clause directly prevents the encumbrance and any sale until O's death.
Select any source to read its text and confirm it supports the definition.
Grantor conveys land subject to a recorded provision that the grantee may sell only to members of a designated family line. Years later the grantee receives an offer from a qualified outside buyer at market price. The clause blocks the transfer regardless of the buyer's financial ability.
A court weighs the utility of the restraint against the injurious consequences of enforcing it. Utility includes preserving family land, affordable housing, or specialized community character. Injurious consequences include reduced marketability, depressed value, and frustration of owners' ability to sell or refinance.
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A direct restraint expressly limits who may receive the property or the conditions of transfer. An indirect restraint arises from a use restriction that merely narrows the market of potential buyers without naming a forbidden class of transferees.
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Yes. A restraint reasonable when created may become unreasonable when market conditions eliminate all realistic buyers who satisfy the restriction. Courts consider whether the owner has made good-faith marketing efforts and whether the restraint now functions as a near-total barrier to alienation.
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No. Recording provides notice and affects priority but does not determine substantive validity. The restraint remains subject to the reasonableness test that balances utility against injury to alienability.
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…in the service of the governmental interests explained above, and in recognition of the fact that such restrictions are not direct restraints on speech but rather on its financing. See, e.g., Randall , 548 U. S., at 273 (dissenting opinion). But those restrictions concededly present a tougher case, because the primary conduct of…