Also known as: freedom to alienate · alienability · restraint on alienation
Written by attorneys — see sources below.
A legal policy favoring the free transferability of property interests. Courts invoke the policy to invalidate unreasonable restraints that would prevent an owner from conveying title or an interest in land or personal property.
Felicity French leased commercial space to Falcon Dynamics under a lease requiring tenant consent before the landlord could assign its interest. When Felicity attempted to sell the building to a new owner without consent, Falcon Dynamics withheld approval to extract better lease terms. The court applied the consent standard and required Falcon Dynamics to show a commercially reasonable basis for refusal.
Faye Fuller purchased land subject to a recorded servitude limiting resale to buyers approved by the original developer. When Faye contracted to sell to an unapproved purchaser, the developer invoked the servitude to block the transfer. The court weighed the servitude's utility in preserving neighborhood character against the harm to marketability and held the restraint invalid.
Flora Ford's will left controlling shares in Fisher Foods to her son with an absolute bar on any sale or encumbrance. After the company needed outside capital, the son sought to sell shares to raise funds. The court examined the restraint's purpose, nature, and unlimited duration and concluded that the policy favoring alienation rendered the restriction unenforceable.
Floyd Franklin sublet his leased warehouse to Fidelity Trust without first obtaining landlord consent as required by the lease. The landlord refused consent unless Floyd agreed to a substantial rent increase. The court required the landlord to demonstrate a reasonable basis tied to the proposed assignee's qualifications rather than an arbitrary demand for higher rent.
Felix Franco held a commercial lease and sought to assign it to a financially sound buyer. The landlord demanded increased rent and additional security as conditions of consent. The court examined whether the landlord's conditions were commercially reasonable under the lease terms and the surrounding circumstances.
In 1970, the Perlitches entered into a 25-year sublease with Robert Bixler for 14,400 square feet of hangar space at the San Jose Municipal Airport to conduct an airplane maintenance business. The sublease covered an original five-year term plus four five-year options to renew. The rental rate was to be increased every ten years in the same proportion as rents increased on the master lease from the City of San Jose. The premises were to be used by Bixler for the purpose of conducting an airplane maintenance business. The lease provided that written consent of the lessor was required before the lessee could assign his interest, and that failure to obtain such consent rendered the lease voidable at the option of the lessor. Subsequently, the Perlitches assigned their interest to Ernest Pestana, Inc. In 1981, Bixler agreed to sell the business, equipment, inventory, improvements, and the existing lease to Jack Kendall, Grady O'Hara, and Vicki O'Hara. The proposed assignees had a stronger financial statement and greater net worth than Bixler and were willing to be bound by the lease terms. Bixler requested consent from Ernest Pestana, Inc., but the lessor refused, claiming an absolute right to withhold consent arbitrarily and demanding increased rent and other more onerous terms as a condition of consent. The proposed assignees filed suit for declaratory and injunctive relief and damages, alleging that the refusal was unreasonable. The trial court sustained the demurrer without leave to amend. The Court of Appeal affirmed.
View caseFrancesca Fowler and her co-tenant executed a lease of their jointly owned parcel to a third party. Upon the co-tenant's death, the surviving joint tenant claimed the lease had severed the joint tenancy and destroyed the right of survivorship. The court assessed whether the partial alienation through the lease operated to sever the unities required for continued joint tenancy.
Raymond Johnson and plaintiff Hazel Tenhet owned a parcel of property as joint tenants. The deed was executed by Jettie N. Johnson to them as joint tenants. The property consisted of a dwelling house and lot. Its value did not exceed three thousand five hundred dollars at the time of Johnson's death in 1971. Assertedly without plaintiff's knowledge or consent, Johnson leased the property to defendant Boswell. The lease was for a period of ten years at a rental of one hundred fifty dollars per year. It included a provision granting the lessee an option to purchase. Johnson died some three months after execution of the lease. Plaintiff sought to establish her sole right to possession of the property as the surviving joint tenant. After an unsuccessful demand upon defendant to vacate the premises, plaintiff brought this action to have the lease declared invalid. The third amended complaint contained five causes of action. The trial court granted a motion to strike the fourth and fifth causes of action. It sustained demurrers to the second and third causes without leave to amend. But the court made no express ruling on the first cause of action seeking declaratory relief and damages. The trial court sustained demurrers to the complaint and entered a judgment of dismissal. Plaintiff appealed from the ensuing judgment of dismissal to the Supreme Court of California.
View caseA consent requirement is unreasonable when the landlord or tenant withholds approval without a commercially reasonable basis related to the proposed transferee's qualifications or the transaction. Absolute or arbitrary refusals violate the policy favoring free alienability unless the lease expressly grants an absolute right to withhold consent.
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Courts weigh the utility of the restraint against the injurious consequences of enforcing it. A direct restraint is invalid if the harm to alienability outweighs any legitimate purpose served by the restriction.
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A disabling restraint in a donative transfer is enforceable only when the purpose, nature, and duration of the restraint make the policy favoring alienation inapplicable under all the circumstances. Perpetual or total restraints are typically invalid when they interfere with necessary financing or marketability.
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A lease by one joint tenant may sever the joint tenancy by destroying a required unity such as possession or interest, depending on the jurisdiction's treatment of the lease as a temporary alienation. The surviving tenant's right of survivorship is then defeated as to the leased portion.
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