Also known as:repurchase agreement · repurchase · repos · repo
Written by attorneys · grounded in primary & secondary sources — see below
An agreement reserving to the conveyor an option to repurchase the whole or any part of the interest conveyed. The reservation is invalid under the rule against perpetuities when the option may continue longer than the maximum period allowed and would create an interest in land or another unique thing.
Sources & Authorities
How it applies
Common Examples
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Reserved Repurchase Option in Land Conveyance
Ralph Richardson conveyed a parcel of undeveloped land to Rocky Mountain Mining while reserving an option to repurchase the parcel at a fixed price. The option contained no time limit and could be exercised by Richardson or his heirs decades later. Because the option might extend beyond the perpetuities period and concerned unique land, the reservation failed under the governing rule. Rocky Mountain Mining therefore held the land free of the repurchase right.
Long-Term Repurchase Right After Sale
Roberto Reyes sold a unique historic building to Raven Logistics under a deed that included a repurchase agreement allowing Reyes to buy the building back at any time within fifty years. The agreement set a fixed price well below future market value. Because the option could last longer than the maximum perpetuities period and affected unique property, the reservation was invalid. Raven Logistics therefore owned the building without any repurchase encumbrance.
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Practice Essays2
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Restatements
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Common questions
Frequently Asked
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When is a reserved option to repurchase invalid under the rule against perpetuities?+
The option is invalid when it may continue longer than the maximum period allowed and would create an interest in land or another unique thing. The rule applies even if the option is reserved in the deed of conveyance itself. Exceptions exist for destructible interests, charities, and unissued corporate shares.
Does every interest retained by a conveyor have to satisfy the rule against perpetuities?+
No. Interests that are neither remainders nor executory interests and that are left in or limited in favor of the conveyor or the conveyor's successors are exempt from the rule, except for reserved options to repurchase. The exception for repurchase options prevents indefinite restraints on alienation of unique property.
How do courts treat repurchase agreements that appear in conditional-sale transactions?+
Courts examine whether the transaction was intended as security for an obligation rather than a true sale. When mortgage intent is shown by clear and convincing evidence, the repurchase right is treated under mortgage rules instead of as a standalone option subject to perpetuities analysis.
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