Land Use Controls A. Introduction a. An oil refinery is built next to a house—why is it there? Presumably, it makes economic good sense. There must be some positive virtue for society to have the refinery there. However, there are also costs to it being there. i. How do you adjust to varying uses of land as to minimize costs and maximize benefits? ii. How do you bring in a plot of land to achieve the most efficient land use? B. General Strategies a. Determinable Estates. i. FS determinable—terminates estate upon commercial use of the property ii. FS on condition subsequent—gives right of entry when condition is met1 b. Natural Rights. Rights inherited with the land. i. Nuisance. Owner of land has certain rights attached to the land. Part of the bundle of rights you get is freedom from nuisance, ii. Trespass. Right to eject others from your property (ius excludendi). iii. Support. Lateral; subjacent. c. Servitudes. Type of contract. Between private parties. i. real & equitable ii. negative easement—no commercial building d. Zoning. Local government decides uses by statute e. Regulations and Takings. Regulating particular actions taken by people on the property Nuisance PRACTICAL POINTERS SUBSTANTIAL HARM INTENTIONAL UNINTENTIONAL NOT SUBSTANTIAL UNREASONABLE NEGLIGENT BALANCING THRESHOLD RECKLESS TRESPASS ULTRAHAZARDOUS Would payment put ∆ out of business? NO LIABILITY Yes No NUISANCE 1 e.g., if used for commercial purposes then O has right of entry. Maybe by a later year it would be beneficial for land to be used commercially and then O can sell right of entry and not use his power of termination and move to Florida. GENERALLY A. POLICY a. The extent of one’s property rights are determined, to an important extent, by the effects that the exercise of one’s rights have on others. b. Whether a property interest will be legally recognized is contingent on the effects of exercising that right on others. i. “A nuisance may be merely a right thing in the wrong place” c. Most land conflicts are regulated by nuisance law B. Trespass vs. Nuisance Trespass Nuisance Ius Excludendi—right to exclusive possession Utendi—right to use and enjoyment Components Blatant, direct physical invasion Offensive, nontrespassory interference Harm—not an element Substantial harm Intent—not an element Intent Rationale Stops adverse possession or prescriptive The need to protect the ability of owners to easement. derive benefit from their own property without undue interference by others justifies limiting free use and development Filters None—can sue for nominal damages Yes—intrusion is only actionable above some level or quality of harm. Remedies Actual Damages Temporary Damages Nominal Damages Permanent Damages Self-Help Injunction Examples Personal, Rocks Noise, Odor, Smoke, Dust, Flies a. Privileged non-permissive entries: i. Departing tenant, licensees have reasonable time to return for their possessions ii. Right to retrieve in some circumstances b. Trespass on the Case: i. Indirect injury (like reputation) ii. Injury to reversionary or nonpossessory interest 1. Like AP trespassing against your tenant, as landlord can’t kick him out until tenancy is up 2. Elements: harm, breach of some legal std (willfulness or negligence) C. Nuisance Law a. Sic Utere Tuo Ut Alienum Non Laedes. i. Translation: Use your land in a way that it doesn’t injure someone else. Per se Per accidens Activity that is always a nuisance no matter how Nuisance in fact—unreasonable under particular reasonable. circumstance. No defense Intentional: liability if conduct is U/R Operationally—∏ doesn’t have to show Unintentional: liability for neg, reck, or ADA anything further. Note: Almost always statutorily-defined nuisance Private Public Interference with ius utile of an individual Interference with general community interest Person bringing suit must have a property interest Usually brought by DA or public official that is affected or must allege bodily harm. To have standing to sue, private party need not own any affected land, but must show special injury different from the public at large. POLICY: want to avoid excessive lawsuits seeking to enforce a public right. D. Restatements If the utility of the conduct is greater than the gravity of the harm, OR a. If the harm caused by the conduct is serious and the financial burden of compensating for this and b. similar harm to others would not make the continuation of the conduct not feasible. i. So, basically, you got to pay unless paying puts you out of business. E. Proving the Elements a. Substantial Interference—it has to be substantial in quantifiable terms (i.e., money) not merely that people don’t like it. i. Depreciation of property value: not enough by itself to constitute nuisance but an imp factor 1. Psychological Nuisance (cemeteries, funeral home): depreciation of neighboring property values an underlying, controlling factor ii. Discomfort: serious discomfort & inconvenience an imp factor 1. Like objectionable noise, odors, smoke 2. Measured by sensibilities of TARP 3. Sunlight: Cutting off sunlight not a nuisance, but blocking solar collectors may be iii. Fear of harm: if the use is a dangerous one that puts adjoining neighbors in fear of harm, it’s a significant factor. 1. Reasonableness of fear tested by general community beliefs & extrinsic evidence based on experience. 2. But may be permitted because it has a high social value (e.g., halfway home) iv. Character of neighborhood: great importance to determining nuisance 1. Residential neighborhoods given preferred status 2. Zoning ordinance is admissible to show community policy w/ respect to desirable land use w/in neighborhood, but not controlling. 2 v. Social value of the conflicting uses: 1. Primary objective of nuisance is to avoid more serious harm and not to resolve conflicts in way to make society poorer 2. If conduct has great social value, Ct reluctant to enjoin it 3. If harm is serious & payment of damages doesn’t shut down plant, Ct may order payment of damages for nuisance & refuse to enjoin activity.3 vi. Coming to the Nuisance: 1. Def: If ∆’s use came first in time, ∏ came to the nuisance 2. Not an absolute bar to recovery. 4 But Court might say that it’s unfair for someone to sue in damages when they move in knowingly where a refinery is. 3. POLICY: ∏ would have paid a price that took into account living next to a refinery and cannot now sue to remove it having paid less. b. Intentionality i. Once ∆ has been notified of nuisance then she is acting intentionally. 1. by the time you get to litigation, ∆ has been warned and now continues to operate nuisance intentionally. ii. Unintentional nuisance is rare5 c. Determining Unreasonableness F. Reasonable & Unreasonable a. Economically reasonable. i. Marginal Benefits. Abatement of odors, particles, noxious fumes is a marginal matter— you may not get rid of them all. The marginal benefit of their reduction goes down as abatement is reduced. 2 Boomer v Atlantic—zoning ordinance permitted use generally, but specific use was done so it was UR interf w/ adjoining prop 3 Boomer v Atlantic Cement—Co. invests $45 Mil & employs many while damage to ∏ is $185 K. Order to pay $185K—no inj. 4 Spur v Del Webb—∏ built residential community, purchasing agricultural land for cheap, after ∆ had established feeding lot. ∏ came to the nuisance--∆ was ordered to stop, ∏ was ordered to pay costs of abatement. 5 Ex.—build refinery and it blows up and noxious fumes spread across the neighborhood; if it’s just fumes and odors it’s not trespass; and ∏ would have to show negligence, recklessness or ultrahazardous (and probably would be able to); but it’s clearly unintentional. ii. Marginal Costs. The more you get rid of the more it costs to do it. Optimal point: where marginal costs intersect marginal benefits. b. i. Underdeterrence. Benefits of reduction are greater than the costs ii. Overdeterrence. You cannot have too little pollution—but the costs are higher than the benefits. c. Problems. i. We don’t know the data or how to measure it d. Analyzing Unreasonableness i. Threshold—the relevant inquiry is the level of interference that results from the conduct. 6 1. the value of the ∆’s operation is irrelevant. ii. Balancing the equities—does gravity of harm outweigh the utility of conduct: 1. Social value of use/enjoyment invaded 2. Suitability of use invaded to the locality 3. Impracticality of preventing or avoiding intrusion 4. effect of compensation on ∆’s business a. ∆’s activity no longer feasible—no payment b. ∆’s activity still feasible—payment G. Other Methods of Regulation a. Command and Control— i. Government steps in and forces specified activities— 1. government may be wrong—technology may not be best thing; some may rather leave it to the court system ii. Mandates best available technology iii. Specifies allowable outputs or inputs b. Incentive systems— i. regulator estimates efficient level of emissions given damages of pollution v cost of abatement & then: 1. Gives fee (tax, fine) when polluting, or 2. Gives permits which you must purchase to pollute Make people who pollute pay a tax: have tax equal to damages c. Tradable Permits— i. Set up markets for permits of pollution 1. e.g., 1000 tons/day—for a city as a whole ii. How do you decide which company gets the permits? 1. assign different polluters a certain right to pollute (based on historical use) and allow them to trade 2. companies will sell to those who want to pollute more 3. arrivee at efficient use REMEDIES A. Generally a. Purpose: to make those damaged whole— i. objective (economic) value vs. subjective (sentimental) values b. Liability Rules: i. State protects owner by making transgressor or converter pay market value of damages ii. Criticism: damages paid are not how owner values but how market values it c. Property Rules: i. People can be irrational with their property—in other words, they can do things with their property that aren’t necessarily economically optimal ii. State guarantees assigned rights through 1. Injunction, OR 2. Fine higher than expected value to transgressor iii. Entitlement cannot be taken by one willing simply to pay market price. iv. Note: equity only when there is no adequate remedy in law (damages are not sufficient) 6 Jost v. Dairyland Power Coop. d. Ari Weinberg Hypo: i. Ari has a lemon tree on the land—there for ornamental purposes. Stone says it’s a suboptimal use of land and wants to tear it down and bring it to his land… 1. Liability Rule: Stone pays market value of tree. 2. Property Rule: Stone not allowed—Ari can have tree for whatever purpose he wants—regardless of its social benefit. B. Types a. Damages i. Temporary— ii. Permanent—compensation for present and future harm. Polluter pays for a servitude to the land to allow for continued pollution. 1. Criticism: There could be changes or improvements in research and costs of nuisance would be reduced or eliminated. Giving permanent damages would stifle research—there would be no incentive to research or invest in new technology7 b. Injunction i. ∏ can extract from the ∆ what it’s worth to the ∆ to have the injunction released. 1. ∆ wants to avoid this: will argue for damages over injunction. C. Entitlement a. Different rules establishing who is entitled to: i. pollute ii. be free from pollution b. Breakdown Recipient(R)—R entitled to be free from pollution Polluter (P)—P has right to pollute Property Rule R gets injunction No injunction—R must pay whatever P R can make P pay higher than market demands to stop value for damages to R8 Liability Rule P can pollute but must pay R damages P can pollute unless R pays polluter’s court- Criticism: no incentive to pollute less— determined e.g. license to pollute9 Damages=P’s costs in abating pollution. 10 c. Implications i. Property rule for Rs— 1. Enjoin the factory: the have to pay off each person to eliminate inj. there are so many people any one of them can outdo the whole thing a. if there’s one person who’s irrational, who doesn’t agree to settle at any price then the injunction will be maintained 2. Criticism: a. holdout—some people may hold out and maintain injunction b. free-rider—some people will not agree unless they’re given more money ii. Liability rule for Rs— 1. Give damages to each person: a. Equated to a cement company going to ∏’s backyard which had a lot of sand, and taking the sand to put it to a higher use 2. Awarding damages is the same as allowing them to take the resident’s property for their own use. 7 Hypo: Suppose the EPA steps in and asks factory to cut their emissions in half. Company is forced to cut down and if they gave residents a lump sum they would have overpaid them. They paid for the right to pollute at the level they were polluting. 8 Schultz v. Estancias--∏’s get injunction against ∆ who installed noisy A/C tower right by their home. Given power to bargain (or not bargain at all) with injunction up to the ∆’s costs of installation of individual A/C units in each apartment 9 Boomer v. Atlantic Cement—∆ ran $45M cement company; damages to ∏ were $185K. After balancing the equities, ∆ was only made to pay damages—no injunction given. Dissent: equated liability rule with giving power of condemnation to a private firm because only government should be able to take things at market price. 10 Spur v. Del Webb--∏ can’t collect damages if he came to the nuisance—he is ordered to pay ∆’s cost of abatement. 3. forcing someone to take damages is like giving the power of eminent domain— power to condemn land and pay market price (damages)—which is limited to the government a. if the government takes a servitude on your land due process says they have to compensate you. b. Allows private party to avoid constitutional responsibility of due process. d. Bargaining i. ∏ wins the injunctionholds the right; negotiating with ∆ 1. Willing To Pay (WTP)—bargaining ceiling—what ∆ is willing to pay for ∏ to remove injunction. 2. Need To Receive (NTR)—bargaining floor—what ∏ needs to receive, at minimum, to remove the injunction. e. Examples i. Numbers 1. ∏’s damages suffered: $20K. 2. ∆’s cost of pollution filter: $200K. 3. ∏’s value of nuisance-free residence: $300K ii. Recipient 1. Liability rule—WTP is $20K. WTP isn’t higher because liability rule limits amount to damages. 2. Property rule—WTP of ∆ shoots up to $200,000. Though actual damages are only $20K and if ∏ was irrational about it they could bargain for $200K—i.e., they value peace and quiet more than mere damages will cover. a. If they value it at $300K—then they’ll never sell injunction. Because there NTR would be higher than the WTP iii. Polluter 1. Liability rule—∏’s WTP $300K—but would only have to pay $200K because that’s what it would cost ∆ to abate pollution 2. Property rule—∏’s would have to pay whatever ∆’s wanted—so ∆’s could bargain up to the ∏’s WTP. a. If ∆’s value pollution beyond ∏’s WTP—they will not stop their pollution. ECONOMICS A. Efficiency Criterions a. Kaldor-Hicks Criterion—a change is efficient if there is enough gain that the person made better off could (by payments) make those disadvantaged no less well off. i. It may be too expensive to locate those who lose money—if the gains to the winners are large enough that they could have paid the losers then that is efficient. ii. If Gains to gainers exceed losses to losers societal net gain iii. Injunctions may not give as high a social net gain b. Pareto Criterion—a change is efficient if at least someone comes off better and no ones comes off worse. i. Activities that satisfy K-H may not be Pareto efficient 1. Pareto efficiency not often found so just try to reach K-H ii. Since it requires compensation of those who lose it becomes very costly to arrange wealth transfers from beneficiaries to losers. iii. Hard if legislature or judges can’t pass any law that doesn’t pass this test B. Coase Theorem—market will move to its highest valued use assuming there are no transaction costs. a. No transaction costs is an unreasonable assumption—the more parties involved, the higher then transaction costs b. If transaction costs are negligible—it doesn’t matter to society who wins or loses. They will get the same mix of land uses for societies point of view. i. The use of the land isn’t affected by who wins or loses, however, because of the negotiations involved the profits of the owners will be affected. c. When there’s damage there’s no good or bad guy—the activity is just not beneficial to both of them. i. Legal fortuity—if ∆ has a refinery and ∏ has a residence and wind happens to blow smoke in ∏’s way; ∆ is in no way acting wrongfully. C. Transaction Costs: a. Behavioral Problems: i. Hold Out: Each person has incentive to hold out for exorbitant price, which may ruin it for everyone else who is willing to settle for less ii. Free Rider: Tendency to let others do it instead iii. Strategic Behavior: ↑ transaction costs b. Harder to win injunction because of balancing of equities. c. Injunction reduces transaction costs of having to repeatedly go to Ct to get damages d. Transaction costs may be so high (because of large community) that if you don’t have an injunction, things don’t get cleaned up & people won’t get together for anything short of an injunction i. why not join the class of all affected by people— 1. when it gets time to release the injunction you’ll have HIGH transaction costs 1. maybe other people didn’t mind e.With high transaction costs, paying off all owners may be too much & may deplete any social gain D. Fairness a. Wealth distribution b. Minimum guaranteed healthy environment c. Set up preferred activities as done in cumulative zoning E. Inconsistent Land Uses a. Rationale: from the point of legal system you don’t jump in and say that one guy is bad and the other is good. You balance the value of the activities. i. there has to be some next best use to the land—opportunity costs b. Inquiry: look at what would happen if one person owned both parcels and how a single owner optimize the use of the land i. This will result in the socially-efficient use c. Hypo: Keeble v. Hickeringill i. Land Use options: 1. H: Shooting Range, $200; Bed and Breakfast, $100. 2. K: Duck pond, $120; Rice growing, $110. 3. Socially Optimal: Rang ($200) + Rice ($110) = $310. ii. Possible Outcomes 1. If H loses: H can’t operate shooting range. H’s lawyer talks to K’s lawyer and has $100 to bargain with to release the injunction on H, meaning K needs to drop down from ducks to the next best use. a. Then H pays K (any amount over $10 is worth it), K dissolves injunction—and we get the optimal, socially-efficient solution. 2. If K loses: K only has $10 to bargain with—and H would never accept that because he’s making $100 extra with the shooting range. a. So again, H gets to operate his shooting range, K grows rice and we have our optimal, socially-efficient solution. iii. The guy who wins the suit shifts the dynamics of the negotiation 1. H would rather win and not have to bargain— 2. But even if he loses he’ll still get to run the range, he’ll just make less money d. Note—this is only when transaction/negotiation costs are negligible and parties are rational (meaning—motivated by profit and not by a love for ducks) F. Distributing Added Wealth a. Neighborhood Effects i. Greenacre and Blueacre—adjacent plots, single family houses, value= $1M ii. Greenacre introduces polluting use (factory): 1. increases their value by $6K 2. decrease value of blue by $2K b. Entitlement i. P has entitlement to pollute—then P will continue to pollute 1. Not-Pareto efficient— 2. Is Kaldor-Hicks—the society as a whole is doing better ii. If R gets damages 1. that is Pareto efficient—cuz P will pay damages to R iii. If R gets injunction 1. net gain of $4K but now R can participate in the bargaining c. Nash solution— i. If you have a rich bargainer and a poor bargainer—the rich person will come out with the lion’s share of the money. ii. Suppose that a rich uncle leaves to people A & B 50K if they can agree how to divide, if they can’t agree—it goes to USC 1. suppose A is rich and B is poor and more desperate. 2. rich guy doesn’t value the money as much and would be willing to pass on the money but B who’s desperate is willing to take $7K and the other guy will take more… 3. the utility to A is less than that to B… iii. APPLICATION— 1. in injunction negotiation, richer party will probably get more than the poorer party… (??) HYPOTHETICALS A. Biparty— a. 1 recipient (R) and 1 polluter (P)--$15,000 for damages b. Assume liability rule for R i. $10K for Filters—the threat of $15K would lead to company getting the filter—because it’s cheaper ii. if it’s $100K for Filters—then threat of $15K lawsuit wouldn’t result in installation of filters—lawsuit is cheaper c. Assume property rule for R i. $10K for Filters—company would put in filter: that way injunction can’t be enforced because the nuisance is eliminated ii. $100K for Filters—R can then bargain for up to $100K for the company to pay off to remove the injunction d. Assume property rule for P i. R has to pay P to stop—P may only require $10K, which is the cost of the filter, OR he may bargain up to $14,999, right up to what damages would otherwise be to R. B. Community— a. 15 Rs—each damaged $1000; Filter can be put in for $10,000 i. the efficient thing to do is put in the filter—it’s causing $15K worth of damage but it can be solved for $10,000 ii. for any one R to bring a suit it would require hiring a lawyer, or they can get a class action—but there’s transaction costs: getting lawyers, negotiation costs b. if there are transactional costs then it does make a difference who has the injunction and how the case ends up.