## Facts

- Broadwest Realty Corporation owned a two-story Manhattan building on Broadway (between 94th and 95th Streets) with a theater and income-producing commercial space.
- In 1978, as part of a tax-motivated sale-and-leaseback arrangement, Broadwest sold the entire building to The Symphony Space, Inc. (a not-for-profit arts organization) for a below-market price of $10,010.
- Symphony Space leased back the commercial portion to Broadwest for nominal rent ($1 per year), while Broadwest remained responsible for a $243,000 mortgage and certain maintenance-related obligations.
- As a condition of the sale, Symphony Space granted Broadwest (for $10 consideration) an option to repurchase the entire building on specified future dates at fixed prices.
- The option was exercisable in multiple time windows extending as late as 2003, and it was not measured by any “life in being.”
- Broadwest later assigned its leaseback and option interests to successor entities, including Pergola Properties, Inc., and related defendants.
- In 1985, Symphony Space defaulted on mortgage-related provisions in the transaction documents, which triggered circumstances under which the option holder could seek to exercise the option.
- The defendants gave notice of their intent to exercise the repurchase option; Symphony Space filed a declaratory judgment action seeking a ruling that the option was void under New York’s statutory Rule Against Perpetuities, EPTL 9-1.1(b).
- Supreme Court (New York County) granted summary judgment to Symphony Space; the Appellate Division affirmed and certified a question; the New York Court of Appeals reviewed and affirmed.

## Issues

1. Whether an option to purchase commercial real property is exempt from New York’s statutory Rule Against Perpetuities, EPTL 9-1.1(b).
2. Whether New York courts should apply a “wait-and-see” method to commercial options, judging validity by what actually happens rather than by possibilities at the time the option is created.
3. Whether this repurchase option was void at creation because it could be exercised (and thus vest) outside the statutory perpetuities period.

## Decision

- The Court of Appeals affirmed the Appellate Division’s order declaring the option void.
- The court held that EPTL 9-1.1(b) applies to options to purchase commercial property; New York recognizes no blanket commercial-option exception.
- Applying the traditional “possibility” test at the moment of creation, the court held the option invalid because it could vest more than 21 years after any life in being (the option extended to 2003 and was not tied to measuring lives).
- The court rejected a “wait-and-see” approach and declined to rewrite the statutory scheme through a judicially created exception, leaving any reform to the Legislature.

## Legal Principles

- Under EPTL 9-1.1(b), an interest in property is invalid unless it must vest, if at all, within 21 years after one or more lives in being at the time the interest is created.
- New York applies the Rule Against Perpetuities by evaluating the interest at creation; if there is any possibility of vesting beyond the permitted period, the interest is void from the start.
- Options to purchase real property create contingent future interests that fall within the statute unless the Legislature provides an exception.
- Commercial purpose, party sophistication, and tax-motivated structuring do not exempt an option from the statutory rule.
- A long-dated, fixed-price purchase option can burden alienability by discouraging investment, financing, or sale, which is among the concerns addressed by the Rule Against Perpetuities.
- Rights of first refusal may raise different concerns than affirmative purchase options because a preemptive right typically operates only after the owner chooses to sell; the court did not extend any prior tolerance for certain preemptive arrangements to the option in this case.

## Conclusion

In *Symphony Space*, the New York Court of Appeals held that the statutory Rule Against Perpetuities in EPTL 9-1.1(b) applies to commercial real-estate purchase options and invalidated a repurchase option that, on its face, could be exercised beyond the perpetuities period; the court also refused to apply a wait-and-see method or craft a commercial-transaction exception by judicial action.


Symphony Space, Inc. v. Pergola Props., Inc., 88 N.Y.2d 466, 669 N.E.2d 799, 646 N.Y.S.2d 641 (1996)