1/71 What is Property? What are the rights that relate to it? How can you acquire it? A license to legally purchase space for limited time Rules to allocate scarce resources Structures relationships over other people to that thing Not about things. It‘s rhetoric (a language) to see if people have rights in regards to others over things. Bundle of Rights (UAETPEf) EX: buying a ticket on Amtrak 1) Right to use (right to control) buying a ticket 2) Right to alter didn‘t change the seat 3) Right to exclude excluded someone else 4) Right to transfer sometimes the ticket is transferable, but seat itself can be transferred 5) Right to possess 6) Right to enjoy fruits → bundle of rights are acquired, but can own something and not be able to use/alter/exclude/transfer. Ex. ―own‖ but can‘t use → Govt: can‘t use wetland. Own but can‘t alter → historical preservation Barry Bonds’ baseball std: 1) have to possess clearly 2) without guilt – can‘t be guilty of assault Diff. stds: 1) ask umpire; 2) look for similar case 3) who possesses it first 4) actual possession- this is an invitation to brawl Extra legal ways to solve issues: people solve these on their own: Major League Baseball, the Giants Who else could possess the ball: Barry Bonds, SF Giants (but if the Giants own it, goes against custom) 4 types of institutions that regulate property relations 1. background legal principles—common law 2. social norms—not made in cts, society organizes itself 3. private contractual relations—people agree how to distribute 4. political instit./ govt regs—how land should be regul. LOCKE’S theory of property – 2 definitions of property 1. property in his own person – control over your body (don‘t have complete control over body → no drugs, can‘t sell organs) 2. Labor theory of property: Who uses property first and make changes to it if you pick up property first, its yours (acorns- but thinks a. yours if get from someone else‘s property) if you alter property, it’s yours Locke believes you only get as much as you consume—self-limiting Criticisms of Locke’s Labor theory 1) we can gather and store, get more than we need; 2) people are ee‘s, ‗er owns them; 3) can‘t sell organs, no body control the first possessor gets the right → applied your will to the land One person wants to use the property one way, another person wants to use it another → may hurt society Role of Govt in Society: Protect someone‘s interest once they have been established Professor Radin‘s PERSONHOOD Theory Hegel: People are created in the context of society through the relationships of others property creates people, so it‘s nec. to create personhood. property is essential b/c you need to have a relationship to a thing You can‘t be a fully formed person w/out property → helps you participate in society Once people act on it and care about it, people care about it → the law should protect certain interests Criticism: Hegel wrote during the Industrial Rev. → peoples‘ relationship to property changed 2/71 1. Ongoing relationships to property are central to personhood → Loss in assets no big deal. Loss of things big deal. a. Discrete units more imp. than total assets. Sofa ex.→ losing property more disconcerting than losing value on home b. Money is money, but people place personal value on fungible items 2. freedom only possible in context of group, so claims on property by the group are important (Hegel doesn‘t take this jump) 3. Certain types of property are central to personhood (property has diff. relationships to diff. people) object-loss: ex. wedding ring to a person (close to person w/interest, central to personhood) wealth-loss: ex. same ring to jeweler not as important (more fungible, can be replaced w/ $) Why is this important in law? Which interests do we protect? When should society be allowed to take people‘s property? Govt could take somebody’s property if it gives greater value to it, more $ for the home Govt shouldn‘t take somebody‘s home b/c the home and its things are tied up in personhood If an apt. building → more people benefit; if taking property to ↑ wealth of society, govt doesn’t have to compensate society Limitations/ Criticisms to certain property is so bound up in personhood that it can‘t be taken. 1) Everybody has a price; 2) govt doesn‘t pay more $, > FMV; 3) hard to tell what property is personal to whom. 4) hard to make distinctions & take person‘s arg at face value; 5) May ask for more $ by saying house is really personal. Radin’s view isn’t the most efficient way to allocate resources. Oil on the land, not using it efficiently → resources not allocated best. But if PO thinks land is tied to her personhood, govt can‘t it away. → even though Radin would say that if wealth of society ↑, then the land can be taken away Ways to prove objective std. to personal possession. property tied w/ personhood. Criteria: a. Type of dwelling, How long it‘s been there (heirlooms, in family long time) b. did they build the house themselves? c. Significant events that occurred in the house d. Location & community ties/ relationships e. unique/ special collections (garden- hard to replace, don‘t want to start again) RAWLS THEORY– distributive justice The distributive principles disinterested people would choose wants ―Ideal contractarian state,‖ concerned w/people at the bottom of the social strata → Look what the people at the bottom of the social status want and redistribute the resources Selfhood is important, so people at bottom should have property, too. Everybody should have the basic necessities b/c you can‘t be a person w/out a minimal amt. of resources. Veil of ignorance- wants people to be ignorant of their situation b/c if they‘re ignorant they will choose things that are most necessary to those people Fundamental institutions of society should be arranged so that the distribution of primary goods is to the maximal advantage of a representative member of the least advantaged People at the bottom are more willing to buy Rawls‘ theory Wilson’s critique of Rawls Says Rawls is wrong about human nature. People act upon their natural inequalities b/c some people are smarter or more skilled. They‘re (The San) better off once they have established property rights. Rawls says people won‘t take risks b/c they want to make sure that they have something. People aren‘t willing to give up a lot. BUT, not true → people would take risks. 3/71 How Rawls‘ theory applies to property Law Distributing assets are capitalistic, making sure people have basic necessities. We don‘t need communism, make sure people have the min. and there can be competition in the upper levels. Rawls might want special taxes on the rich, health care, shelters, welfare. Subsidized low- income housing, rent control. HYPOs- theory recap 1. Two people make a claim to land. One already built a home. Other used land to hunt, feed his fam. Who gets rights to land? Locke: who got there first Radin: who values it the most, but there are args on both sides. Rawls: people need the minimum necessities. The person who has a home might argue this is important. The person who has to get food on the land has a good arg, too. He might say that both people have rights as long as they don‘t conflict. 2. Person who hunts feeds the area Locke: who got there first Radin: the person who has the stronger tie to the land (house) might have a stronger case than the person using it as income Rawls: person who feeds society might have more rights; ↑ general wealth 3. if govt wanted to turn the land into a recreation park Locke: who got there first Radin: maybe the govt couldn’t take it, but there would be a balancing act w/the previous list + the FMV Rawls: favors the govt‘s recreational use of the land, what people view as being necessary. Spreads the wealth. 4. Govt wanted to take the land and build an auto factory. Now a private party owns the land. Radin: harder case, but can argue either way Rawls: maybe the private company has a good arg b/c the auto factory is necessary, and will it provide jobs. If the plant is in Detroit, a plant will close and many families will lose their homes and minimal sustenance 5. govt would turn over the land to political people so they could build a state for themselves Radin: not going to like taking the property away from a homeowner to politicians for mansions Rawls: depends on what kind of society the political people want to build. Takes from the poor and gives to the rich, not going to like it. UTILITARIANISM → Maximize aggregate welfare of satisfaction. Focus on society as a whole. Not concerned about distribution (breaks away from Rawls). They want the most amt of assets that society can achieve. → doesn‘t care who gets the property, as long as the largest # get benefit. Legal protection of property rights creates incentives to use resources efficiently. Econ Assumptions: no market failure; Free market will ensure an efficient allocation of resources, govt should establish and enforce property rights; govt protects property rights and foster voluntary exchange of goods and services (b/c this helps us use property more efficiently). Ex. Farm Land. Farmer values at $1000. Developer values it at $1500. The land should be sold to the developer at a price between the two. This depends on how much the property is really worth and how well each can negotiate. 3 requirements for efficient system of property rights Universality: everything is owned by someone Transferability: has to be transferable to a more productive use, but law prevents this at times Exclusivity: can exclude almost all others, but there are lots you can‘t do w/your land More exclusive the prop right, greater incentive to invest resources to develop the property . 4/71 Goal: to allocate resources to maximize aggregate welfare for the majority of its citizens What is aggregate welfare → money, but it‘s hard to evaluate Assumes free market competition will ensure competition absent market failures Legal institution should be concerned w/ fostering property rights through mutually beneficial Ks . Legal system should hold them to the K‘s Limitations: difficult to determine exclusive rights → oceans, power source that the water provides (hydraulic rights), air (we only care about it when someone emits noxious fumes). Tragedy of the Commons—limitations of dividing common property rights. Common good: not owned by anyone, so it becomes overused by everyone and gets destroyed. There is no exclusivity so everyone maximizes their use and uses it as much as they can. Overuse public space b/c 1) it costs them nothing; 2) there aren‘t any limits; 3) more incentive to protect private space. 2 nd: limiting the use of property. Ex. excluding cars completely from Yellowstone. Utilitarianism: Private property rights are the best way to allocate resources. Common ownership isn‘t the best way to allocate resources. Critique: private property isn‘t always the best allocation. Some things can‘t be divided. There is only just one. Public ownership is essential to protecting that resource. Do you need to have private property to allocate resources? Can social systems outside of the law allocate resources? LIMITS OF UTILITARIANISM EX. pick-up basketball → applicability of the 3 rules: universality, exclusivity, transferability Util. doesn‘t always answer all problems. Limitations: Social norms: people have set up their own rules to establish the game o Adjudicate disputes: if there‘s a dispute, who majority decides or perhaps an official. Sometimes there are certain rules written down, or the best player gets to decide the rules transferability: can you transfer your right to play → generally can‘t transfer exclusivity: you can‘t exclude people from the courts. Excl. doesn‘t work in this ex. universality: basketball ct isn‘t owned by any of the players, Philly can own a public court Util doesn‘t work: Social norms allocate property rights; people allocate rights efficiently on their own EX. Does Penn meet the criteria of util? Universality: Who owns Penn? Practical answer: The students, teachers. Students put in a monetary investment, but doesn‘t entitle student to take his chair home. We invest in the idea of the Penn. Legal answer: Penn is non-profit corp chartered by state of PA. The Corp owns Penn, run by trustees has the right to manage the property. Exclusivity: Penn doesn‘t have the right to exclude its members from events. Can‘t tell locals they can‘t be on property → Once tickets are available, anybody can come. But if they‘re disruptive, Penn can exclude them at that time. Most of Penn‘s property owns public streets. The public has an easement. Penn can‘t discriminate and doesn‘t have right to exclude like you would for your private house. Penn can’t exclude, can’t transfer, land is not universal. 5/71 Communal and Private Property Systems Communal land. Problems w/ it: tragedy of commons. Need private property system to remedy. need govt? Oysters: problem w/ communal system: tragedy of the commons situation. Even though it‘s a public land, certain rights allocated to individuals. Problem: People take rocks, so oysters can‘t attach. Solution: we should have private rights or private ownership of these areas. Public property divided to private indiv. through social norms Lobsters: Communal system, public ownership. how is the system structured diff.ly? Lobsters are based less on cultivating even though still caught on public waters. There is a social network. Public (or nobody after a certain depth) owns the ocean, but certain groups own the area. People know through social norms where each group‘s area is located. How they deal w/ infringement on ―property rights‖: o Confront, talk to more seasoned lobsterman, open or cut traps. o Younger people get screwed → more likely to infringe upon others‘ traps b/c more worried about resources and b/c they don‘t have a good spot to catch more lobsters. Communal ownership system works through a utilitarian standard. According to util. goals → Maximizing satisfaction: generally, people are happy w/it. Why does the communal property system work for lobsters but not oysters? Nature of the industry: social norms, social system of lobstermen polices itself. Each guy watches over their cohort. Problems w/ lobster industry: Newcomers don‘t benefit from the system. Older guys have a monopoly. Problems w/ monopoly: agree to ―fix‖ price, control supply, overharvesting (not a problem b/c lobstermen don‘t have much $), barriers to entry (through competition, prices would be lower), doesn‘t allow for much innovation (there might be a better system but old guys do what they‘ve always been doing) Our legal and social systems care about other values over maximizing social welfare. Organ donation → In the US, what problems are there? 1) Moral, ethical issues; 2) Organ donation is an Irreversible process. 3) Efficiency problem: Not regulated, can‘t ensure safety. 4) selling is illegal, black mkt opens. Supply is limited, and people need it; 5) right to control our bodies and not do damage to it. If you’re a utilitarianism, you would sell your organs (Posner doesn‘t have a problem selling kidneys, but hearts would be a diff. issue b/c you need a heart to survive). Fairness problem: rich people will get healthier and the poor people sell their organs. In donation system, everyone is equal. Organ donation system is a Rawlsian system. Econ arg: if you made it legal, it would be cheaper. But, the donor won‘t get more $. People won‘t have access. Exploitation: econ & social problems. Other countries have working systems (Iraq), but problem is that the donor is only getting a small portion ($1k over $20k). In Iraq, the econ system allows that $1k is a decade‘s worth of wages. Allocation of housing, we‘ll allow. Allocation of organs, we don‘t b/c there is exploitation. Bottom line : Can’t enter into a contractual relationship. Selling kidneys result in higher aggregate value, but law doesn‘t care. So, society doesn’t always care about maximum efficiency. 6/71 LIMITATIONS on property USE When can PO‘s exclude? How do you allocate burdens when externalities (cause harm to some) exist? Absolute Rights Blackstone: you have an absolute right to use property freely, to enjoy and dispose w/out any control except only from laws of the land. Law regards private property greatly, so laws won‘t authorize violation of it, not even for the general good. Anyone who enters w/out permission is trespass. Cohen: right to exclude others is the essence of private property. Need consent. Coase: if bargain costlessly, can efficiently allocating resources and deal w/externalities → same result would happen either way. For society it doesn‘t matter, but to people, it depends who pays. CBW ex. CBW have to do something Residents have to do something 1) fume control ($100k) 2) relocate ($250k) $100k fume control $100k fume control 3) air conditioners ($150k) Same result, but depends who has the exclusion rights. Who pays? Problems 1) Transaction Costs exist AND 2) harm is reciprocal 1. litigation and negotiation costs a. costs → hiring attorneys, can‘t afford ct. Residents may not negotiate together 2. free riders a. expect someone else to solve the problem so they don‘t have to deal w/it 3. hold-outs a. the next neighbor will hold-out to get more $ than the last. It‘s like extortion. b. problem on both sides, no matter who has the exclusion rights Radin: people value property diff.ly. Would rather hold out to get a system for fresh air rather than AC Incentive on residents to put pressure on the people doing the hold-out. 4. opportunism a. tries to get a higher price by threatening behavior so the other guy will pay to avoid the threat. b. do something just to spite the other even if it‘s more expensive for you, but it shows that you have bargaining clout in the future 2) harm is reciprocal → So the social policy ques is: who gets to inflict the harm? o In a costless transaction world, society avoids serious harm no matter how the initial entitlements are allocated o In a costly transaction world, social decision makers decide Entitlement should be given to the party that would’ve bargained for it. (transaction still costless) give CBW the right → no incentive to negotiate. give it to residents → incentive to negotiate Least Cost Avoider Rule : property rights will go to the person who can solve the problem at the lowest cost. People have diff. valuations of these rights. Legal system allocates rights the way people value it. If residents have right to be free of pollution. When people have a right, they give a value and don‘t want to lose it. If they don‘t have a value, then they don‘t use it. CBW → this system favors the highest use. Is the highest use the favored use? Calabresi: law places entitlements, but law also decides what kind of protection. How are rights allocated? First Order Decisions: when there are conflicting interests of two or more people, who should get the entitlement? EX: who has the right to make noise v. who has the right to quiet? 7/71 Second Order decisions: how entitlements are protected. Can you sell or trade it? State decides which side wins and which protection should be granted. Entitlement by Property Rules If you want to get the entitlement (from holder), you have to buy it → Voluntary transaction. Seller decides value. (not state) Each party gets to see how much entitlement is worth to him, and seller can veto. Collective decision on who can get the entitlm. But only seller decides ultimate value. Entitlement by Liability Rules Entitl. is protected, but transfer or destruction is allowed when state gives value. You can destroy the initial entitlement by paying an objectively determined value State decides value (not parties) → Value is what original holder of entitlement would‘ve sold it for. Can‘t sell for more if obj value is set. Inalienable Entitlements No transfer b/t willing buyer and willing seller. State intervenes, determines who is initially entitled, what compensation should be paid, forbid sales. Protect entitlement, limit or regulate the grant. Ex. drunk, incompetent → govt says you can‘t transact Entitlement to: property Rule Liability Inalienability property Owner - Don‘t want CBW from Ct. announces a liability rule. CBW tries to Resident being loud- can get an Resident doesn‘t get to set a value, pollute. No injunction from doing it. ct. sets value. pollution. No - EN can buy entitle. in a → Can‘t get injunction. situation where private transaction. POs get damages. CBW can do what they want to do. CBW If residents want to prevent, If CBW had entitlement, PO pay CBW is entitled to Encroaching they have to buy out the EN. damages to stop. pollute in all Neighbor EN has the right, so they circumstances. operate freely Problems Much easier to apply - Value set in market transaction. Kidneys inalienable - property rules fail - hard to set by ct b/c can‘t always - have high transaction costs determine person‘s value (free-rider, hold-outs) - can‘t get injunction, get damages - more efficient. How to entitle people: 1. Econ Efficiency a. Gives entitlement to person w/ highest product for the least effort b. what is econ efficient varies w/the starting distribution of wealth. How you value something depends on your resources. → having more $, you‘ll pay more and ―value‖ the right to live in a pollution-free area. 2. Distributional goals a. Distribution of wealth b. Distribution of specific goods (merit goods) 3. other justice Calabresi: when should you have property rules or liability rules? o cost should be put on the person who can most cheaply and better do a cost-benefit analysis Co is better able to do that b/c they have better knowledge (they put out the fumes) NY Times Article: Lead Paint Town Who has the entitlement? → Lead smelter or residents Lead smelter arg: they have the entitlement. The industry could do whatever they wanted, health concerns never created an entitlement before. 8/71 Residents arg: they have an entitlement. The smelter makes concessions, and is trying to completely clean up the town. The residents aren‘t the consumers. Maybe have entitlement b/c the EPA has intervened. Smelters may no longer have the right. Diff. kinds of Rules. Who‘s getting what? property Rule: exist b/c some residents were bought out. Those people were especially at risk. Co doesn‘t want to buy the other people out. There are a lot of residents, and it‘s a lot of $. Liability Rule: the $ being paid by the Co. can be considered damages. Not paying $ directly to the residents. What are the better rules? Entitlement property Rule Liability Inalienability Residents Benefits: Plant supplies jobs and Benefits: helps the economy, supplies taxes that provides schools Problems: residents may get an Problems: pay damages, but Problems: lose taxes, injunction, and they might be don‘t stop pollution → factory might close, people unreasonable and ask for too if collect damages, out of jobs much $. Not good for the environmentally, it won‘t be the overall utilitarian perspective best solution, the plant will still be polluted. → do people who move in afterwards, are they entitled to damages? → hard to figure out what damages are. Hard to contest what damages are. Lead Co. Problems: litigation costs will be Problems: can pay damages Problems: they get to Has right to high b/c residents will try to instead of buying out. Might be pollute, and people die. pollute negotiate. Problem: residents cheaper to pay damages for sick don‘t agree w/each other. people → there are so many people trying to buy the land. POLICY Who should have the entitlement and which rule should it be? How important is this industry? The answer might be important in deciding what to do. Inalienability → everybody loses if Residents have the right b/c the town will close. People who are Plaintiffs aren‘t always the people affected. Shouldn‘t have a right to subject your body to a certain level of lead. Liability rule: strong arg for damages property Rule: everybody should be bought out, use resources. Public & private interests have to be balanced. Co should be enjoined to a certain point. Max lead amts weren‘t set. Co is the least cost avoider. People shouldn‘t get the shaft just b/c they‘ve been quiet for so long. Their bargaining power was unequal. 9/71 Limits on your land: TRESPASS LAW Pile v. Pedrick → old way: property rights are absolute. Trespass is trespass F: There was a wall that protruded to the P‘s side underground, and P wanted it off of his property. D knew it encroached outside its lines, but it was unintentional b/c the line wasn‘t accurately located in the first place. Court: D is encroaching. Wall has to come down, but P wouldn‘t let them on his land, so they had to take the whole building down from the D‘s side. Higher Ct: D has no right at law or in equity, to occupy land that does not belong to them. Dicta: 2 options: Trespass could be treated w/ P‘s consent as a permanent trespass and compensated in damages D could be forced to remove the trespass P has a property rule. Can do whatever P wants through a voluntary decision. P has entitlement. Ruling Problems: this is inefficient. The P can ask for a high price: the price will be less than what it costs to rebuild. If they‘re a good negotiator- it will be $1 less. If we gave P a liability rule, how do you set the objective value for this little piece of encroachment? Value the land and say that this 1% trespass is valued this much. Make an estimate to how much it‘s worth to the D Take into account if the P has special use for that 1% of land. If P feels he lost something, maybe can‘t set a price. D didn‘t intentionally build wall. If it was intentional, judge will take it into account in valuing the damages of the property owner (give him a little extra). Geragosian v. Union Realty Co. → Sanctity of property and right to exclude are upheld F: V builds a theater, overhang and pipe partially trespasses on D‘s land. (relatively minimal trespass). V knew about the encroachment → intentional. Held: D wins, can‘t trespass. Have to remove the encroachments. General rule: PO entitled to an injunction for removal of trespassing structures. Rationale: want to protect property rights against continuing encroachment. → could claim adverse possession later on. Factors or Arguments: Suffered no damage from trespass Wrongdoer acted in good faith. Costly to remove structures. Neighborly conduct & business judgment would require acceptance of judgment Rights in real property can‘t be taken from owner at a valuation, except for eminent domain. Problem: inefficient. Costs to remove are worth more than the value of the land. ALTERNATIVE: Ct. could issue damages in the value of an easement. Justify these decisions: You can’t trespass, if you do, you’ll have to pay a lot. Tries to prevent future intentional trespasses. Raab v. Casper → not a good-faith improver if you could have prevent trespass. F: D built a cabin, P said D‘s on P‘s land. D doesn‘t get a survey. P sues. PH: said D‘s were good-faith improvers → improves land in good faith and under mistaken belief that he‘s the landowner. Liability rule: D is liable for damages caused by his trespass. Has to pay an objective amt. In other states, P gets to keep the cabin encroachment on his land through property rules. Held: consider issue of negligence. Good-faith improver legislation is to protect people who mistakenly build. D didn‘t act in good faith. Ct. doesn’t force D to survey the land, but they say he should take steps once P told D that he’s building on his property. Take into account factors: interim warning, character and relative cost of improvements made before and after the warning, unitary or separable character of the improvements. 10/71 Policy issues: Legislature protects land owners. Tort law and N law could handle (but there are problems) Put the burden on the person who owns the land to defend it. Landowner is in better position to know where land is. More vested interest. Give landowner more protection b/c there‘s a risk of adverse possession later on. Pass a law that says a county has to survey all the land. (but it‘s costly and sometimes inaccurate) SOCIAL NORMS → how people handle problems outside of the law Affects how society uses legal recourse Can control social behavior and allocate property interests directly → friends, relatives, coworkers, shame, ostracism, workplaces, family, religious communities In close-knit groups, law doesn‘t have much impact on behavior. May depend on if land is developed or rural. Ellickson article (cattle trespass) → Shasta county: rural undeveloped land. They may know the formal rules, but use social norms to respond to cattle trespass. Open range → cattle can wander, unless it‘s intentional, it‘s sheep. Closed range → strict liability, liable for any trespass. How do these laws affect relationships among property owners? Most ranchers understand the law, see it as more black & white. Insurance adjusters pay out claims (when they don‘t have to, so everyone‘s insurance bills go up). Knowledge of the law is inefficient. People just work it out. People keep mental accounts. It will all even out in the end. Don‘t need to go to the legal system. Swallow costs b/c 1. minor damage is inevitable (from wild animals), 2) trespass is reciprocal; 3) no one wants to spend the $, 4) live and let live; 5) neighborly → respect your debt. Sheriff enforces society‘s norms. They‘re mediators, even though hired to enforce the law. How to deal w/deviants Self-help Which is gossip, then violent gossip (threats to kill the animal) Complaints to public officials Go to the person who can change the liability rules Claims for monetary relief Hardly ask for $, ask for in-kind payments (replant the garden if crops were eaten) attorney-assisted claims Coase postulated a world of zero transaction costs. Everyone has perfect knowledge of legal rules. And then society will allocate resources efficiently. BUT, people don’t have perfect legal knowledge. (Lawyers and insurance people in Shasta) Arg #1: Policy: his point: understanding legal knowledge is crucial in understanding policy. If people don‘t understand, then people won‘t be able to follow them. Way they respond to problems is diff. than theorists think. Arg #2: Coase says residents look to formal law to see who has entitlements. Then try to allocate resources accordingly. Who has the right? Problem: ranchers are beyond the shadow of the law. The law is irrelevant to them. People who own little ranches suffer more. Law becomes important when society is changing. His theory doesn‘t explain how the law should change when there is dispute. 11/71 LIMITS ON property OWNER RIGHTS → When can property owners exclude others? State v. Shack → PO can’t exclude everybody, let in basic necessities. F: P housed migrant farmworkers. D wanted to see them to give social services. P wouldn‘t let them talk to them whenever they wanted. D wanted to interview the farmworkers in private. P claims D in trespass. These visitors aren‘t govt workers, work for govt-funded prgms. General Principles: law on the right to exclude → fundamental right to privacy, right to association title to real property can’t mean dominion over people. farm workers: disadvantaged people of society. Landlord & tenant, right to have visitors. Held: an employer can‘t deny the migrant worker the opportunity to see someone from social services or who can provide basic aid to the farmer. Employer‘s right to the land is limited b/c public or private necessity justifies entry upon lands of another for the best interests of another Agency reps can enter the premises so long as their behavior doesn‘t injure others This doesn‘t mean that anybody can come on the land w/out employer‘s consent. ‗er can regulate, but can’t deny privacy or interfere w/ opportunity to basic fundamental rights. Balancing test: there‘s a public need. Workers’ needs outweighed rights of property Owner. Balancing the individual rights of PO against the desires of society. Society has declared protection of farm workers is important. Society can infringe upon PO. Problem: Doesn‘t set a standard when someone can or can‘t be on your property Slippery slope arg: if you let these people in, then you have to let other advocates for farm workers in. Press can have access. Pruneyard Shopping Center → if don’t impair PO’s right, then can be on public space. F: high school kids petitioned their cause on private shopping center grounds. Pruneyard kicked them out, kids sue. Can Shopping Center exclude these petitioners? Distinguished it from Lloyd (precedent), based on US C, shopping centers have right to exclude . Held: Shopping center‘s rights not violated. Can let kids petition on common property. Pruneyard arg: it‘s a private space. Right to exclude is a fund. right. Kids took away that right. Kids were orderly, limited their activity to common areas of shopping center. They did not physically invade Pruneyard‘s property Is this a regulatory taking? → No, not every limitation on property right violates C. If the regulation impaired the value of the shopping center, it could be considered a taking . But here, it did not impair the value and use of the property. The regulatory taking is illegal if it forces some people to bear the burden b/c in fairness and justice, the public as a whole should bear the burden. POLICY IMPLICATIONS: Shopping centers have a right to provide public access. People congregate in private spaces more now. But you want control of your business, and people might be turned off by petitioners. Ct. distinguishes shopping centers from other businesses. 2 principles it announced in taking: 5th Amendment - private property can‘t be taken w/out due process of the law. Taking Question 1) is it fair to make a private owner bear burdens that the public should bear? 2) Is this truly a public burden? Should only public places be used? The 2 reqs are contradictory it is fair to burden public owner, but it disrupts econ business Broad debates when and where the law should regulate private property. Parties can contract around rules. 12/71 PRINCIPLES OF ACQUISITION Johnson and Graham’s Lessee v. M’Intosh F: Johnson got title from Indians → land transferred to him first. M‘Intosh got title from US Govt. later. → there could be other possible owners of the land. Who has title to the land? → M‘Intosh Held: M‘Intosh owns title b/c US owned the title before and was able to transfer it down, but Indians have right to occupy, use. Once Europeans discovered the land, discovery acquired exclusive title. But Indians have rights to the land, too → right to occupy, possess, use…but Indians don’t have right to trans fer - What is the chain of title? o Europeans colonies: 1) Transferred land to individuals, and once states were set-up, 2) British govt transferred land to the states as a representative to the crown o 3 levels of ownership: Individuals, States, United States. Fed Govt can sell land for revenue. - Principles of property rights after conquest o Rights of the conquered to property should remain unimpaired b/c the new and old people need time to assimilate w/each other o Assumes that civilized people are superior and are able to own the land Indians don‘t get the right to the land b/c they‘re not able to control their property; used the land less intensively → land wouldn’t be put to productive use - Marshall acknowledges that the rules he laid forth aren‘t completely justified o Land wasn‘t taken, Indians received compensation of being civilized and Christianity. Got payment: undesirable piece of land. Govt thought it was important to have agreements. Indians didn‘t have a choice in signing the K (under duress, so maybe no real K). Rule: Conquest gave a right to take property by eminent domain. Govt paid, some compensation. Can‘t just take it, some compensation has to be paid. - Underlying rule: White settlers have property rights that need to be protected for the US to grow. o Marshall is balancing what states want to do w/ being ―fair‖ to Indians (have some rights) Indians had right to: 1) use/control: Yes; 2). alter: No; 3. exclude: Yes; 4) transfer: No; 5) possess: maybe; 6) enjoy fruits: maybe Dispossession of Southern Black Farmers articles → law doesn’t protect all PO’s interests 1) Klan attacked family, they left, land folded into neighbors. 2) Delinquent taxes Sold tractors that would break down so black farmers couldn‘t pay and he would take their farms property isn’t always acquired through contractual relationships. Even when acquisitions violate the law (Southern black farme rs, M’Intosh), cts uphold property rights to protect expectations. People need to be able to depend on the system to protect their prope rty. rights. Creating Principles of Acquisition (when done fairly) Hypo: P‘s lawyer: claim for compensation of dispossessed landowner - eminent domain- relied on statement of govt official so statute of limitations should be extended - Descendents have a claim, owners were compensated less, singled out – weren’t treated equally - Duress, theft. Blacks abandoned land, no K, undue influence, unconscion., didn‘t understand terms - Claim for compensation: land should be returned. If the land was unique, specific performance It will be hard to get the land back Argue against paying compensation: - It wouldn‘t be fair to take the land back from some stranger. → can‘t punish for the wrongdoings of one. If passed down from parent to son, then it may be harder to recover. - Util arg: It wouldn’t be efficient to return the land. People are using the land to produce things. Benefits more people. → heir have weaker claim - can‘t trace back the lineage – lack of proof - Slippery slope: allow compensation for this, then lots of cases where peoples‘ land were taken - People depend on property rights 13/71 oneed to protect the investment that has been made. Nobody would ever invest in property if it could be taken away b/c of its history. ACQUISITION OF property → WILD ANIMALS Capture Rule : first person to capture or kill the wild animal acquires it. Pursuit DOES NOT possession. Rewards successful hunters. Bright-line rule. We know who owns it, no hassles - Problem: Just wait for someone to catch it. → doesn‘t encourages owner to invest time and energy to hunt. Just swoop in at last minute. Pursuit Rule : pursue it first, it‘s your possession. → Should be left to the sportsmen. If you spent all day gathering a fox, you don‘t want someone to come in and claim it. Invested time and $ to devote effort into hunting. Pierson v. Post F: Post was in pursuit of fox but Pierson swooped in at last minute and captured the fox. Hunting on wasteland, nobody owns that property. Otherwise, landowner would own fox if killed on the property. Pierson‘s arg: actual capture gives possession. No reason he couldn‘t have right to the wild animal. Post‘s arg: pursuit should mean possession. Held: pursuit doesn’t give possession. It is the person who captures it. → capture rule Majority: uses philosophers from Roman law that capture justifies possession. o Justinian- pursuit doesn‘t justify property rights. (compiled this one huge volume of law). o Babeyrac- exception: if the animal is mortally wounded, this gives property rights o Grotius- have to have control (trapping) Precedent: couldn‘t find precedent, so look to statutes, custom, look to English CL, legal commentators Dissenting Rule: Pursuit should be enough. Should be left to the sportsmen. - Invested time and $ to devote effort into hunting. Don‘t want someone to waste your time. o (Foxes are a bad thing b/c they‘re bad for farmers. Law should do things to help society.) POLICY → Let hunters decide: they think more about what goes into hunting. → Don‘t let hunters decide: Law should set values and then let others allocate the resources. In 1800, it was enough for the hunters to decide. In 2002, we can‘t just have the hunters decide. Won‘t do what‘s best for environment and other factors. Which is more Lockian? → the first person to get capture or 1st to pursue it? Goes both ways. What are best rules to acquire property rights? WHALES: → Chasing Sperm whale: 1st boat harpooned (whale drags along boat). 2nd ship came along and they got the whale and the boat. *PURPOSE: Have to have a standard: legal system should foster specific goals. Hard to see which rule is better. 1) set down objectives. Does the rule help you get to those objectives to allocate resources? Objectives: 1) efficiently kill the whale 2) safety of the whalers 3) clarity go through each rule and figure out which one will better allocate resources. Efficiently kill Safety Clarity Share the Wealth: No- Doesn‘t create incentive to share Yes/ No Yes- equal division Equal division if b/c you want good whalers to do things contrib. to capture Reward Useful Labor: Yes Yes/ No No- don‘t know how equal division if much labor each put in substantially contrib. Line holds the Whale: Yes/ No Yes/ No Yes- have line on it or get it if your line‘s in not Harpoon in Whale: No No No- don‘t know which 1st to get harpoon in harpoon belongs to who → Hard to allocate property rights efficiently. Clarity is difficult in this country. 14/71 HOW TO ACQUIRE property → Wate r Rights Depends on what type of land society we‘re in? dry lands or plush water lands. RIPARIAN SYSTEM: CL: riparian owner has right to natural water flow over his land even if he doesn‘t use it beneficially. Can use water as long as he doesn‘t injure others. 2 people clash: use has to be reasonable & natural for basic needs (then he can use all of the water). Each proprietor could have equal right if water used for artificial reasons. (Evans) Criticism: doesn‘t maximize efficient use of land. Not an efficient allocation of resources. More efficient to have larger farms and not subsistence farmers. APPROPRIATION SYSTEM: more economic. Fist person who uses water beneficially for land gets the right. (irrigation, power, economic use). It‘s better for some to have enough and others go without. (Coffin) Evans v. Merriweather → riparian system F: Evans is above the stream, constructs dam so he gets to use all the water and dries up stream so Merriweather can‘t use it for his mill. Held: Riparian owner can use the water reasonably as long as he doesn‘t injure any other user. Water use has to be reasonable. 2 types of uses: natural or artificial. Only natural uses are permitted: Reasonable use is natural uses to supply necessary wants - drinking water, indispensable → need to survive. Artificial use: increasing wealth. Rules: - Natural use gets priority. If natural use gets all the water, that‘s fine. If Evans had a lot of water needs for his family, he could take it. If use is for artificial needs, can’t take all of the water. If water flows through a person‘s land and he needs it for natural uses, he can use all the water he wants. If water used for artificial purposes, the two have to leave enough for each other If stream is small, can‘t use it for manufacture or irrigation b/c have to take care of natural needs first. If stream is small and for artificial uses, then it‘s left up to the jury Relationship of law to society → water is a prized commodity in agrarian, farming society - Judge is worried about water rights and larger manufacturers are taking it. Farming is becoming more commercialized. Competition over the resource. This opinion tries to protect the farmers. Criticism: doesn‘t maximize efficient use of land. Not an efficient allocation of resources. More efficient to have larger farms and not subsistence farmers. Coffin v. Left Hand Ditch Co: APPROPRIATION SYSTEM F: water shortage, Coffin owns a creek and Left Hand Ditch put in a dam to appropriate water. Dam wasn‘t on Coffin‘s property. Drought, then Coffin tore out parts of the dam so that water couldn‘t be diverted anymore. Held: first appropriator of water from natural stream for a beneficial purpose has the right to appropriation. Left Hand Ditch Co wins. Rationale: It is in the best interest of parties in Colorado b/c cts want to encourage development by establishing bright-line rules for property rights. Left Hand Ditch wanted to make sure that people could get water so that land could be developed in other places. Goal: support development of farms. Factual issues: what matters? when Left Hand Ditch Co took possession to property? When they built the dam? CL: riparian owner has right to natural water flow over his land even if he doesn‘t use it beneficially. → Reinterpreted doctrine of riparian rights to doctrine of first appropriation. Strict property rules: allows us to have certainty Judge went through politics and gave long-convoluted opinion to say that this has always been the law, so people will feel their property rights have always been protected in that way. 15/71 HOW TO ACCQUIRE property → ADVERSE POSSESSION Requirements: 1) Actual possession 2) hostile and w/a claim of rights 3) open and notorious 4) exclusive possession 5) continuous for the statutory period 1. Actual possession: 1) must be an actual, productive use of the land. a. Ex. Use it for fish pond, garden, make repairs, no trespassing signs NOT enough. 2) type and scope of adverse possessor’s use must be consistent w/ certain traits of the land a. if you have a summer home and someone trespasses in the winter, it‘s not actual use 2. Hostile w/a claim of right 1) occupier claims the land as his own in derogation of true owner‘s claim 2) can’t have express or implied permission from true owner Adverse Possessor: in asserting claim to land, make it in good faith mistake (actually think you own it but don‘t) or intentionally trespass (know you don‘t own it, trying to take land) True Owner: if gave permission, then not hostile. Can imply permission from relationship of parties. 3. Open and Notorious 1) can’t secretly occupy land → you have to say that you are claiming this land 2) gives true owner opportunity to defend against adverse possessors 4. Exclusive Possession 1) AP use must be exclusive of the true owner throughout the statutory period. If true owner exercises his ownership rights to the land, the AP hasn‘t been exclusive. 5. Continuous for the Statutory Period 1) 5, 10, 20 years → statutes says 2) Tacking: statute is 10 yrs, A has it for 5 yrs transfers to B for 5 yrs. B‘s rights can tack onto A‘s Manillo v. Gorski (issue on hostile and open & notorious) F: Gorski built the extension that extended into Manillo‘s property. Minor border encroachment 15 in. Gorski didn‘t know he was taking M‘s property. He argues that mistake can still be hostile. Issue: Does mistake constitute hostility? Held: remanded. Depends on reqs of adverse possession. Hostile doesn‘t have to be intentional. Can be a mistake. Unfair to just limit hostile to intentional b/c it favors someone who purposely does something wrong. Ct cares if the D‘s acts are open and notorious. Purpose of open and notorious is so true owner has opportunity to defend themselves against the adverse possession. Ct holds: the 15 inches of land is not open and notorious UNLESS true owner has knowledge. Doesn‘t require someone to give a constant on-site survey. You would have to constantly get someone to survey the land. Creates 2 new standards Don‘t have to survey the land each time somebody makes a change - 1. actual knowledge is required. M has to actually know G was on his land. If M didn‘t know, then G loses on AP. If M knew G was using the land, then G gets land on adv. possession. - 2. Gorski might lose on adverse possession, but he may still keep his steps b/c court argues for equitable principles → what would be fair and just. G could pay M for the land. Gorski could say that he made a mistake, no malice. 16/71 POLICY for AP Justifications Way to protect personhood interests → if you enjoy the use of land, it becomes apart of your value. There should be a restricted time that people let land waste. Social policy People should be rewarded for active involvement of land. Improvements on it, energy, time, labor consumed Issue of fairness is throwing somebody off of land that they lived, worked on. Economic policy Land is used more productively than the real owner did, reward people who produce value to land. Incentive for others to do the same. Criticism It‘s a utilitarian doctrine that makes landowners police their land Important to protect peoples‘ fundamental right to property. Says so in the C. People who put in the purchase price should have their rights protected. Can make it harder to get by extending ―continuous‖ possession Agreed boundaries doctrine implies agreement for contiguous parcels of land where owners don‘t know the exact boundary line. They agreed to an incorrect one, so imply use. Problem p. 91 3 pieces of land 8South 7W 7E Smith built a house in 1901; Smith owned this property in Rose/ Jones owns this property in bought property 40 yrs later 1901. 1928. Rose built house, Jones acquired it Should apply 324& 325 apply where there‘s a question not based on a written instrument. Smith wants to quiet title. He intended to take title to the land. Common-law: 1) actual possession – yes 2) hostile – maybe? Could be a mistake 3) open and notorious – yes- jones should‘ve known b/c his house is there 4) exclusive -- yes 5) continuous – yes tacking doesn‘t even matter in this case. Jones should win. Jones has to pay that the taxes he paid is for the land that his house is built on. If tax was paid on 7E, what he owned, then he loses. 17/71 LIFE ESTATES 1. Present v. Future interests o Present: holder is entitled to immediate use of resource. o Future: entitled to future use 2. Estate v. nonpossessory interests (right to use or restrict land use → easement, covenant, equitable servitude) 3. Freehold (fee simple and life estate) v. nonfreehold estates (leasehold estates) PRESENT INTERESTS → 1) fee simple & 2) life estate Fee Simple is inheritable. 2 types. Can partition fee simple interests. 1. Fee simple absolute: continued ownership not subject to any conditions o Most complete interest in property. It‘s infinite. NO limitations on its inheritability, and can‘t be divested. Doesn‘t end b/c of some event. 2. Fee simple defeasible: subject to a condition that can end present interest. Can lose property b/c of some event, or forfeited to grantor or another grantee. Fee simple determinable Automatically ends when some event occurs. Fully transferable & inheritable. Determinable fees comes with a future interest in the grantor called possibility of reverter. Ex. ―Smith gives to jones so long as jones doesn‘t use it as a commercial establishment‖ o Durational aspect: so long as, while o Forfeiture: automatic o Grant has an express restriction on the use of the property o Possibility of reverter Fee simple subject to a condition subsequent Not automatic, have to take action Duration: Provided that, but if Right of entry/ termination EX. R grants property to E provided that the property isn‘t used as a commercial establishment. If it is used, then grantor can take property back. - E gets fee simple, but grant has express condition. R‘s future interest is power of termination or right of entry. R‘s interest then became a present interest in fee simple. Fee simple subject to an executory limitation ―R grants property to E but if E uses alcohol on property, then to X.‖ Also automatic (upon violation of condition, X‘s interest automatically becomes a present interest) Executory interest (the person who gets it by default) Always automatic for FSSEL. Fitzgerald v. Modoc County F: grantor gave Modoc County land so that it‘s used to build a school (the ―so that‖ is in contention). Modoc sells land to 3rd party. Heirs said you didn‘t use the property, so it should go back to the heirs. Modoc says it was just a wish. Issue: was that grant a fee simple subj. to a condition subsequent? Held: it seems like a fee simple subsequent to condition subsequent, but court said it wouldn‘t be fair for the 3rd party to lose out. Policy issue: An innocent 3rd party could be punished b/c of a conflict b/t grantor and grantee, but not fair 18/71 Courts don’t like defeasible fees b/c land is easily forfeited if grantee violates a condition. It doesn‘t give them discretion, so they provide rules of construction Ask if language is precatory: just a desire, a wish, precatory language is legally unenforceable Can‘t say, I hope, I wish Ask if language can be construed as a covenant some agreements are tied to the land if it‘s a covenant, then grantor can recover damages, doesn‘t lose property, just pays damages courts will generally try to find a fee simple absolute . → I give to him, he can do whatever he wants to it Life Estate. 3 types of interest: The estate can potentially have one or more human lives. Grantor can control property at life tenant‘s death, device to control inheritance. 1. ―to Jones for life‖ → life estate exists for life of Jones. After Jones dies, reverts back to the grantor → reversion 2. ―to Jones for life, remainder to Smith.‖ → Smith has a future interest that becomes present interest when Jones dies→ Remainder 3. ―to Jones for the life of Charles‖ → pur autre vie (created for life of another person). Jones interests lasts as long as Charles is alive. Bundle of Sticks. right to use may have a right to alter right to enjoy fruits do not have right to transfer—can sell your interest but not the property itself. Waste: can‘t do something w/the property that hurts future interest - life tenant can‘t exploit property to interfere with future interest of the remainderman or reversioner. Future interest guy can get damages or injunction. Affirmative: intentional or negligent exploitation of resources. Destroys buildings, cause permanent injury & devalues land. Ameliorative waste : make changes that alters character of the property, but ↑ value of land. Permissive: when life tenant fails to take reas. steps to protect property. (no repairs, doesn‘t pay taxes) Brokaw v. Fairchild → can‘t change character of interest F: Father gives a Fifth Avenue house to his son as a life estate. Son wants to tear the house down and build apartment buildings. Who has the future interest → the father‘s brothers and sisters. Son‘s arg: area is changing into more apt complex. Get a larger return. The son wants it torn down b/c it‘s too much $ from him. Held: son can‘t tear down the house b/c court protects the grantor‘s wishes. This is more important to the court than the needs of the life estate holder. To tear it down would change the inheritance b/c house will revert to Brokaw‘s sisters and brothers. Can’t change anything from the grantor’s desires. The son can use and enjoy the property, but must pass it on unchanged (law in NY). Life estate has right to use but not ownership or dominion. Distinction: you can tear down the house IF the house was valueless. Brewery case: neighborhood changed so much that it was an industrial site. But here, still conceivable to have a house on 5th ave. temporal dimension to property rights—can have rights that exist in the future, but they still have a present claim Policy reasons for defeasible estates People could completely inalienate the land that they have. Arg against: way to protect land. 19/71 PRESENT INTERESTS → Problems on p. 157 1. O conveys Blackacre to A and his heirs. A uses it to detriment of land. Can A‘s kid enjoin A? A‘s interest: has a fee simple absolute A has a fee simple absolute, so nobody has control over his property A‘s kid is an heir only if he‘s in the will But courts understand that this means to A ―and his heirs‖ 2. to A for life, remainder to B. A sells interest to X. X dies while A is still alive. Who gets immediate right X has life estate B has remainder (indefeasibly vested remainder) After the transfer, X has a life estate, pur autre vie X dies, then it goes to X‘s heirs until A dies. A dies, remainder to B 3. to A for life or until she goes to law school A has a life estate determinable (A then has a Fee simple determinable) O has 2 interests – either when A dies (reversion) or A goes to law school (possibility of reverter) If A never goes to law school, A dies, then O gets the property -- has a reversion. But it‘s not a condition → If she goes to law school, provided that she go to law school Condition requires you to take some action 4. to A so long as Blackacre is used only for school purposes A has fee simple determinable O has possibility of reverter 5. to A on the express condition that Blackacre should be used for school purposes… On condition that → fee simple subject to condition subsequent O has power of termination, right to entry 6. O conveys Blackacre ―to A so long as A uses the land for school purposes, then to C.‖ A: fee simple determinable → but it‘s a fee simple subject to executory limitation C: has executory interest O: no interest 9. O conveys Blackacre ―to A, subject to the condition that the land will automatically be forfeited to O in the even it is used for other than school purposes, and O shall have the right to enter and terminate A‘s interest‖ A: fee simple subject to limitation O: uses both, fee simple determinable, but he uses on condition, so it looks like fee simple subject to condition subsequent. Then automatically forfeit 20/71 FUTURE INTERESTS Entitles holder to possess land in the future. He doesn‘t have present right but can protect his present right (waste) or sell the entire estate (partition). 3 future interests in grantors 1. reversion a. becomes present interest on termination of the interest granted. Don‘t have to explicitly put in grantor‘s reversion. Reversions are transferable, descendible, devisable. b. R gives ―to E for life‖ → when E dies, it reverts back to R. 2. power of termination a. allows grantor to terminate interest to enforce a condition subsequent in a grant. Has to be express, but not transferable. It‘s descendible, devisable. b. ex. R grants his present interest in fee simple absolute to E on condition that property isn‘t used as a brewery, and if it is, R has right to reenter and take it. 3. possibility of reverter a. when grantor grants a determinable interest. b. R grants to E so long as property isn‘t used as a brewery. R has possibility of reverter b/c grantee‘s interest forfeits automatically when condition is violated. 2 future interests in grantees 1. remainder a. interest in 3rd party that follows natural expiration of interest. b. To Jones for life, and then to Smith. Smith‘s interest is a remainder. 1) contingent remainder (ex. p. 160) → are there conditions w/ it? i. If identity of remainderman is unknown (unborn kids) ii. If remainder is subject to a condition precedent (an express condition in the grant that has to happen before potential interest can take the property). 2) vested remainder (if not contingent, then it‘s vested) → identity if known, no conditions Vested remainders have more rights than contingent remainders. i. indefeasibly vested remainders a. no condition subsequent specified in the grant that might result in the interest going to someone else ii. vested remainders subject to open a. grant goes to an expandable class. b. to A, then to my heirs. Don‘t know who my heirs are b/c kids can expand iii. vested remainders subject to complete divestment a. when grant has a condition subsequent that could divest remainderman of entire interest. b. To Jones for life, then to Smith, but if Smith uses alcohol then to Brown. → Smith has remainder. It‘s vested b/c identity is known and there aren‘t conditions precedent. BUT, Smith could get his interest divested. Brown has an executory interest. 2. executory interests a. no natural expiration. It could go on forever. b. to jones so long as no one uses alcohol on prop, then to Smith. → Smith has executory interest 2 kinds of executory interests 1. springs from the grantor to grantee 2. shifts from grantee to 3rd party Rule Against Perpetuities Support inalienability of land. Allows people to transfer land. Grantor wants to control the land in the future. Rule prevents grantors to have influence too far in the future. Battle b/t wealthy groups. 21/71 FUTURE INTERESTS problems: p. 169 1. A has a life estate B has an indefeasibly vested remainders 2. A has a life estate O has a reversion. B has a reversion and a fee simple absolute. O has a springing executory interest. (usually has a kind of condition) Contingent remainder is between two people. p. 169 #2:‖to A for life‖ – B has a reversion b/c O had a reversion. B doesn‘t have an executory interest It is created by the occurrence of a specified event. Remainders are created by a natural event. It would look like B has a remainder, but b/c O transferred his interest and he has a reversion, B also has it. #3: A has an executory interest – fee simple determinable subject to an executory interest. B has an executory interest. B has a shift in executory interest, doesn‘t go back to O. If A leaves NY, it goes to B. #4: A has a life estate. B has an executory interest. Not a contingent remainder. Remainder is only created by a natural event. B is attending A‘s funeral is not a natural event. A dying is a natural event. B doesn‘t acquire interest until the funeral. B has an executory interest. O → A → O → B if he goes to the funeral. Doesn‘t go directly from A to B. springing executory interest. #5: A has a life estate. B has a life estate unless A goes to law school, subject to executory interest (specified event). B has a remainder. Is it contingent or vested? Identify of remainderman is known. It‘s subject to a condition precedent. B doesn‘t get the estate if A does something. But B has a vested remainder (no condition subject to B), subject to complete divestment. C: not dependent on a natural event, so it‘s an executory interest b/c it‘s not a natural event. Remainder → contingent. Remainder is acquired after a natural event. → vested Executory Interest specified event. #6: A: has a fee simple subject to an executory interest. (―to A‖) B: not dependent on natural event, so it‘s an executory interest. C: has a remainder. Remainderman is known. Subject to a condition subsequent. So it‘s a continent remainder. It‘s going to B for life, then to C. Dependant on a natural event. (Paste table) 22/71 CONCURENT INTERESTS 2 forms of non-marital concurrent interests: joint tenancy AND tenancy in common Common-Law Rules of Ownership Major difference → joint tenancy has a right of survivorship. If A & B are joint tenants. A dies. B gets it all. Tenancy in common favored over joint tenancies. Joint tenancy can be severed by agreement of all joint tenants or by unilateral act. Joint tenancy Tenancy in common (default) Tenancy by Entirety Defn. Has right of survivorship. A&B All tenants have an undivided Extra protection for own land, B dies, A gets it all. interest. Each co-tenant can use marriage prop, entirely. Creation - narrow system of ownership - Created by will → what the Need mutual Only formed by 4 unities: grantors intended agreement of all 1. unity of interest → interests - Or created by law. parties have to be same for each party 2. title (granted in same grant) 3. time (vested at same moment) 4. possession (get equal rights to land) All interests have to be equal. Take the land as one person. Termination - all joint tenants can terminate Death doesn’t terminate. Could only be - unilateral act. One person can - Interest passes to heirs who determined by joint sell his interest. New parties become tenants in common agreements. become tenants in common w/ By partition, makes grantee old parties. tenant in common - also by involuntary conveyance: creditor liens, becomes tenant in common Differences - right of survivorship. Doesn‘t - one party can‘t get it all, upon Doesn‘t exist go to heirs. Goes to one party. death, interest goes to heirs. anymore. Used to - used as a poor man‘s will. Joint tenancy has right of protect spouses. - Joint tenancy allows you to survivorship. avoid inheritance tax, debt, and probate. - act as one person, only do things together Nogarr case → joint tenancy wasn’t severed b/c husband didn’t transfer his interest F: between wife and husbands‘ parents. Husband mortgaged house without consent of wife to his parents. Couple divorced. Husband died, and dispute is whether the state can condemn the property. Parents wants $ from mortgage. Did the parents have a property interest? Parent‘s arg: Calvert transferred interest, the joint tenancy was severed. Held: parents should NOT get the mortgage. No a unilateral act to sever joint tenancy. Survivorship in joint tenancy goes all to wife. Calvin mortgaged the property but he didn‘t sever the joint tenancy b/c he didn‘t transfer title. (in some states, divorce could sever joint tenancy). - Calvert didn‘t transfer legal title of possession to parents. → ct looks strictly at this. - CA law: title did not pass; it just created a lien. o When you take out a mortgage, you transfer title to the mortgagor. You don‘t have to transfer title to get a mortgage. 23/71 But did husband intend to sever joint tenancy? If Calvert just transferred his interest, the parents would‘ve had a tenancy in common. Ct justifies its decision. → parents could‘ve enforced their lien right away. POLICY: trying to protect the property. Wife should be given notice and have a right to agree. Ct is developing tenancy by entirety → protecting the marriage. Ct. brings this up b/c tenancy by entirety doesn‘t exist in CA. Protecting spouses from acts of husbands. Problems of joint tenancy If Elaine died first, they would‘ve had an interest in the entire property If you‘re a mortgagor: you will try to get your lien earlier; get both parties to sign. Will result in more paperwork. - makes it harder for joint tenants to get money. People will be more reluctant to lend money to joint tenants. → Mortgage companies would require both spouses to sign a mortgage. Does joint tenancy make sense? Cts. generally favor tenancy in common b/c rights are clearer in tenancy in common. When one joint tenant transfers a life estate or leases their property to a tenant, law is all over the place. RIGHTS AND OBLIGATIONS OF CO-TENANTS 1. Partition → way to end tenancy in common or joint tenancy. Way to divide property b/t co-tenants. Partition in kind: physically divide the property Partition by sale: sell property, divide proceeds in proportion to each person‘s fractional interests Partition by appraisal: allow one cotenant to buy out the others at the appraisal price 2. Right to possess → each tenant has right to possess & use entire property. Each cotenant has right to sell his interest. Cotenants don‘t have to pay rent. Right to ouster → bar another cotenant from using the property. 3. Right to Contribution A cotenant can demand contribution from other cotenants for expenditures (pay taxes, mortgage, insurance, necessary repairs). Co-tenant can‘t demand compensation for managing the property. 4. Fiduciary Obligations Each has fiduciary relationship with each other if they get interests in same will or at same time in inheritance. Restricts freedom of co-tenants in getting common property. Cotenant who gets title at an execution, mortgage foreclosure, or tax sale hold title for benefit of other cotenants. Entitled to a reas. period of time – to pay their share of purchase price. 5. Accounting Cotenant can ask for his share of rents. Co-tenants not really successful if they claim waste (one person devalues land) co-tenants may demand a share from income of the property Tenancy in Common Agreement (supplement) A & B should put this in agreement. Contributions: if one cotenant refuses to contribute, they are deemed as loans. It‘s like a punishment clause, X% points higher than the prime rate. Management: who will manage the property? If you have to get an agreement from all tenants, it‘s hard to manage the property. Major Decisions: selling property, putting it on loan. mortgaging the property Partition: b: Right of First Offer: After 45 days, can sell on something else. 24/71 Part c: if you don‘t follow the rules, any side sales are null and void. Problem p. 215 Bertha‘s claims: They take the property as joint tenants, but we will apply tenancy in common b/c the estate was severed when they broke up. She will argue for severance, so she has claims as a cotenant. She can ask for: 1) profits from the clay b/c it was her property as well 2) the rent that Corrine paid & when C stopped paying → value of the rent that would have been paid 3) $500,000 insurance payment 4) increased profits – profits from sale of wine 5) partition (sell the property)- she wants her half-share of the property. a. Probably ask for partition in sale. Not partition in kind b/c you would have to physically divide the property, nor does she want to live there. 6) Depletion (if there was a more substantial claim- like oil) 7) Ouster. Bertha can claim she is ousted, he was not allowed to use the property. Albert‘s counter-claims: Response to Bertha‘s claims: 7) he didn‘t kick her out. She left voluntarily, but she might say that they couldn‘t live together, and he started living w/someone else. 1) she shouldn‘t get the trees or the clay. This occurred afterwards. 2) under right of possession, Corrine doesn‘t have to pay rent b/c she‘s just living w/him. Cotenants can use the property any way that she wants, non profitable relationship, just letting a friend stay there. 3) Albert put in all the work to revive the vineyard, she didn‘t do anything. She didn‘t help him financially. She didn‘t pay any of the insurance. But Bertha could say she‘ll pay the $500 to get the $250k pay-out. 4) Increased profits. Bertha didn‘t put any work into the vineyard. A&C did all of the work. 5) She didn‘t make a claim for years and abandoned the property. Albert took property by Adverse possession. Albert spent $ on the house. Investment is labor. Albert wants partition by appraisal. A can lease the property to whomever he wants. C has a right to occupy the property, even though B doesn‘t want it. Partition In choosing b/t partition in kind and partition by sale , LOOK AT: physical attributes of the land. Can land be divided easily? AND Are the interest of parties better promoted by sale? Does person have strong attachment to land? Livelihood, business? Hard to divide up property for partition in kind. Road rerouted? Zoning codes? Delfino v. Vealencis F: V. owns a garbage business of the land. Wants (partition in kind- divide the land). Delfino wants to partition and sell it for apt buildings→ partition by sale. Delfino doesn‘t want Vealencis on the land b/c it will affect their apt rentals. Held: it should be partition in kind. Principle: Have to take into account the interests of both parties , not economic gain of one party. The tenant made a home, and her livelihood from the business would decrease. Who has the burden of proof? → If anyone wants partition by sale, they have to prove it’s necessary. Dissent: Partition in kind would‘ve hurt these parties b/c it would be hard to divide property, apt business wouldn‘t be injured, road would have to be rerouted, violated zoning code 25/71 POLICY: it‘s hard to balance which interests should come into play. Econ arg: If apt complexes are built, it‘s better b/c can collect more taxes → good for econ develop. BUT garbage business would go out of business. Nothing would preclude her from rebuilding her business, but she‘s not getting the value of her business. She‘s not getting goodwill, just the value of the land. She only has 1/3 of the land, and the Delfino‘s own a larger share of the cotenancy. Cts don’t consider the # shares of land. This interest represents Radin‘s theory (personhood) and even Locke‘s (the garbage business was the 1st to get there). POLICY ARTICLE: Developers & Lawyers use Legal Maneuver to Strip Black Families of Land Do changes need to be done to partition law? Why has partition been used to hurt these farmers? People took advantage of these landowners: Social and Legal System Structure Unequal bargaining power → unfair advantage Lack of representation or resources (to hire lawyers or negotiate) → corrupt lawyers Lack of education/ lack of knowledge Extreme diversity of ownership: no one having a will and it being split like 64 ways- one person‘s interests could have the entire land sold → easy to abuse system Valuation difficult: hard to know how much the land was worth Judges award partition by sale b/c it’s easier. You have to appraise the land for partition in kind. One unilateral act can affect others. POLICY OPTIONS: to address these difficulties. How to improve the situation? Change in co-tenancy law → Higher requirements/ pass a threshold Problems: cotenancy is state law. Congress only changes this on a federal level. Right of first refusal. Can‘t sell to a 3rd party until you offer it to other cotenants. Put limits on how many heirs can inherit the land. Restraints on devisability. Make partition in kind the default Force judge to play more of role/ legal services should be appointed Govt could subsidize land appraisers- if well-publicized, people would know their rights more Problems: hard to implement. Would have to appraise every piece of land. Educational Program- necessity of a will Benefits Philly to have ownership be clear, so they can get taxes. City appraisals don‘t reflect value of land b/c political pressures to keep value down so people pay less taxes. Sanctions for lawyer abuse → bar oversight. ABA: Professional Conduct. Does partition need legislation? It‘s a problem when one person comes in and takes the land. Family members force each other out. What is the purpose of partition? What should the purpose be? Utilitarian arg: helps maximize aggregate welfare. Partition it maximizes it. Sometimes it wasn‘t maximized b/c there were other interests. Should it be to protect others‘ land? Restricted use of Partition What is just? It‘s not protecting the people. Immigrants coming in. Blacks. It focuses on development & not agrarian interests. Partition supports ina lienability of land. Land should be able to be sold so people who can take advantage of it better. 26/71 MARITAL property 2 kinds: common law & community-property 2 diff. approaches to dividing property upon dissolution of marriage Equitable Distribution o property is divided equally or equitably- judges have broad power to divide property, look at factors: length of marriage, kids, age, health, education, skills, occupation, future earning potential Community-property o property is joint unless parties create separate property (buy w/ separate funds) o pro-rata share o get property by who had title o transmutation: lets spouses freely transmute property from separate to community, vice versa o death: spouse gets separate property and half of community property. Is education considered property for distribution? Education is NOT property. (Graham) no exchangeable value can‘t be transferred/ sold or bought on open market personal to the holder→ it‘s the cumulative product of lots of years of work → it‘s an intellectual achievement. Don‘t force someone to be locked in that career so he can pay off his anticipated earnings to spouse Hard to fix present value of a degree B/c you have opp. to earn doesn‘t mean you‘ll earn that much Education is property. (O’Brien) Get a return on your investment. If he dies or if they stayed together longer, she would‘ve gotten anticipated future earnings. She would‘ve had an interest in accumulated property. Makes woman not dependent on alimony → party should be self-supporting Equitable See CA statute below → balancing test Balancing test factors: Marketable skills, unemployment, Extent of contribution, Duration of marriage, age and health, Ability to pay, Balance of the hardships In re Marriage of Graham → MBA is not property, can’t be divided F: Husband got his MBA, wife contributed 70% towards his education. They divorced. Held: MBA is not property. Education is not property Property is: has an exchangeable value that makes-up wealth or estate → broad defn. Education isn’t property b/c no exchangeable value, can’t be transferred/ sold or bought on open market personal to the holder→ it’s the cumulative product of lots of years of work → it’s an intellectual achievement. BUT, consider the contribution to the education. Dissent: equity demands that ct seek extraordinary remedies to prevent injustice. She made an investment and she should get a return. If he dies or if they stayed together longer, she would‘ve gotten anticipated future earnings. She would‘ve had an interest in accumulated property. O’Brien v. O’Brien (NY)→ MD is property, it’s divisible upon divorce → equitable distribution state F: husbands get a MD, wife puts him through school. He divorces her 2 months after his license. Held: education will be considered property. Declared the future value of the degree b/c he acquired the license during marriage. Go to the statute: all property acquired by either or both spouses during the marriage is community property, regardless of the form in which title is held. 27/71 Problems w/alimony- causes them to have a continual relationship Maintenance- get everything done w/at once, makes her more independent Husbands arg: 1. he‘s locked into a career, has to go into that professional practice (can tell ct when he changes) 2. has no exchange value license doesn‘t have to fit the traditional concept of property. A professional license is a valuable property right, reflected in $, effort, and lost opportunity. 3. Alternative remedies → rehabilitative maintenance or reimbursement for direct financial contrib. Statute doesn‘t authorize retrospective maintenance 4. Hard to fix present value of enhanced earning capacity. Cts struggle w/the problem all the time Dissent: Just b/c you have the opportunity to earn a lot doesn‘t mean you would actually get to earn that much (it‘s hard to become a surgeon). CA Statute: the community shall be reimbursed to education. If you contributed $ to your spouse, you get that $ back, + interest. Contributions are offset by substantial benefits you received. Only thing they care about is the money transfers You didn‘t get much out of it less than 10 years. Balancing test factors: Marketable skills, unemployment Extent of contribution Duration of marriage, age and health Ability to pay Balance of the hardships, goal that party should be self-supporting If you get a loan, then a spouse wouldn‘t get anything. Maybe it‘s pushing people to make pre-nups. 28/71 REAL ESTATE TRANSACTIONS → establishing good title 3 stages 1. Execute a K 2. Escrow Period recording acts, due diligence is done → title, searches, investigation of transaction 3. Closing 4. Mortgages & foreclosures Requirements of SOF in Real Estate Has to be in writing Specify Time period State purchase price Identify parties describe land and interest to be conveyed Other essential terms → Rights and obligations of other K‘s (If property is damaged) Exceptions to SOF Equitable Estoppel (the H‘s sold their own home) → detrimentally and reasonably relied or other party is unjustly enriched. Part Performance → buyer took possession and paid a substantial portion of the purchase price or made substantial improvements. Tender of Performance Time is of the essence Diff. remedies for breach- rescission, restitution, damages, and spec. perf. Estate of Younge v. Huysmans → there was meeting of minds, but no spec. perf (equitable remedy) F: H wanted to buy land from bank, recorded it, bank accepted, H sold their home, deal broke. Bank kept asking them for a release. H signed unwitnessed signed release, bank sold to others, others made improvements to land. Bank made a petition to quiet title. H argues for binding K, ask spec. perf. Huysmans took the letter from the bank to the Registry → recorded the letter So it would be known that anybody who went to the Recorder would know that there was an agreement to buy the property. → Provide notice to everybody. If Bank screws you, it‘s a security. Bank couldn‘t sell it to other people. By recording it, the Huysman may not have known that they had an agreement. Recording it doesn’t lock in the price b/c if it wasn’t in the SOF, then the price doesn’t matter anyways. H‘s arg: if they had an agreement, bid on it, sold their house, H should get it b/c there was an agreement Held: there was a K b/t H and the Bank. There was a meeting of the minds. Denied spec. perf, Rationale: Was there a meeting of the minds? Looking at all of the facts, there was an agreement on all of the issues. The Bank accepted the offer in a letter. Reasonable certainty that a meeting of the minds. There was a meeting of the minds, but it doesn‘t satisfy the SOF. No spec. perf for Huysmans Issues of laches: the H‘s waited too long to make the claim again. The new owners bought and made extensive, good faith improvements at big expense. Unreasonable delay and prejudice to the opposing party are required for a finding of laches. H‘s had reason to know that improvements were being made. H may not have good faith. Spec. perf. in K‘s are usually given in unique circum, but in real estate, fundamental fairness is against giving land. 29/71 Establishing Good Title Recording systems: must have clear rules to allow prospective purchasers easily and accurately determine if there are any preexisting claims to the property (protects them from secret transactions) Problems: wasteful, expensive, archaic, uncertain to achieve land ownership, scattered, too many people, intricate substantive property law makes it harder to improve the system, complicated procedures. Look up Chain of title. Marketable title statutes: how far back in time a search should go. Helps limit burden of title searches. Recorder of Deeds: they record deeds. Never used to be recording systems, but changed over time. Now there are so many people that the property is transferred to not just family. Title is a legal word. Deed is an actual piece of paper. Can have title without a deed. Problems: our system is more complicated. Each county has its own recording system. Recording offices are frequently political. In Philly, he‘s now appointed b/c there was corruption before. How do these systems work? Have a deed → register the deed at the office and have them record it. Want to make sure that the seller actually owns the property and hasn‘t sold it to someone else. Why does it matter to establish good title? People do things fraudulently or by mistake. More than one person can have a claim to property. Who has legal title to property when the grantor transferred it to more than 2 parties. 2 systems of recording title. 2 ways to look for title. 1. grantor-grantee type: go there and look at the person who last owned it (Smith), then search who owned it before him, who got it before him. a. Some states require you to go back many years. Real estate agents search titles (not lawyers) 2. by the property: go there and look up the deed for the property Types of Recording Acts: 1) race statutes - if two guys say they own the property, whoever records it first gets it. i. Clear-cut rule, strict 2) notice statutes - two guys- the one who wins is if he has a bona fide purchase for value. i. Have to have paid for it ii. Can‘t have constructive notice of the property - Ex. if one guy had notice ….(If you didn‘t have notice, then you prevail) - Notice statute doesn‘t provide much deterrence for the grantor to sell to two people 3) race-notice - one guy will win if later guy had notice of prior conveyance - if later guy didn‘t have notice, whoever records first wins → These statutes don‘t apply to gifts. → These statutes only protect subsequent purchasers. Only protect against recordable documents POLICY: which recording acts is better? If the goal is to record document- race statute better → strict rule is better, more clear-cut. But if there‘s a back-log and happen to record a later deed before the first one, then rule no good. Race notice screws over the people who didn‘t record (black farmers) – system abuse Notice statutes are more equitable. Helps to balance interests. Can‘t just say you don‘t know, have to say you don‘t know and went down to find out 30/71 Miller v. Green F: Miller occupied the land. Hines said their title was superior b/c they recorded first. Miller said he constructed notice b/c they were doing things on the land. Green sells property to Miller and Hines. Miller was Green‘s tenant, leased the farm. Hines has a claim b/c he recorded first. Wisconsin had a race-notice statute. Miller said it doesn‘t matter that Hines recorded first. General Rule: constructive notice has to be open, visible, exclusive, and unambiguous Miller‘s notice: he plowed land and hauled manure on it. Held: Miller‘s notice was enough under race-notice statute. Dissent: Miller didn‘t do anything diff. than he had done before. There‘s no push to register your deed b/c it was still taken away. It‘s more equitable and fair that Miller should get it b/c Miller was there for a while, knows the land better. Articles Deeds office in Philadelphia has massive backlogs and sloppy handling. Legal problems: first person to get it to the office wins the race. o Sell the place to a 2nd person 3 months later, and when they do a title search in the escrow period, there is no indication that the house was sold later o In notice statute, the later purchaser would win. (no notice) POLICY DISCUSSION: Philadelphia Housing Scam article Ricky Williams - He stole people‘s run-down homes, assumed they were vacant, occupied by older people If he says he has a claim, there‘s no one there to contest it. He kept running deeds at the Recorder of Deeds office. He would get the legal description from the old deed. Staff would type of new deeds. And have them forged, notarized that signatures were correct. It was a transfer of deed from the old person to him. He would record it in his ownership. Then sold it- had a 2nd deed to transfer from him to a buyer. Anybody can have a deed and get it filed. Notaries are a big gap. Have to post a bond against $3,000, has to be endorsed by a state Senator. Can take depositions and affidavits. They have power, if you can convince them to accept fraudulent signatures. car registration is a little more secure than deeds (but it might not be- don‘t know what process is) COVENANTS OF TITLE Promises the grantor gives to the grantee → Covenants usually captured in the deeds Present Covenants Seisen: promise that the grantor has title Right to convey: promise that grantor has right to transfer the property Freedom from encumbrances: promise that land is free from undisclosed encumbrances (mortgage, lease, real covenant, lien, outstanding taxes) Future Covenants Warrant that there are certain things the grantor will do in the future Warranty: grantor promises to defend grantee from lawful 3rd party claims. Also covenants to compensate grantee for losses Quiet Enjoyment: promise that no 3rd party will assert lawful title to the property. o Promising no other party will assert title Further Assurances: grantor will take necessary steps to perfect title. It‘s the only covenant that can be specifically enforced. o Breached when 3rd party made a claim to property 31/71 Special warranty deeds: removes some warranties. Quitclaim deed: has no promises whatsoever. Grantee doesn‘t have rights against the grantor for defects of title. (pay much less for the property) Who owns property? Condition of the property? Law hasn‘t really talked about - What is the condition of the property? The law doesn‘t really focus on what the state of the property is. Let the buyer beware. But this has changed b/c states have created implied warranties of fitness for new properties. Law is also changing for used homes. More requirements for home sellers than general. Have to give some assurances to home buyers. Who should bear the burden? The buyer or the seller? Disclosure should be put on the seller. no incentives for seller to disclose under caveat emptor. How it works: Buyer comes in w/an inspector. If the inspector finds material defects, then agreement can be voided. Caveat emptor forces people to do inspections. Seller could initially put up the $ for one inspection. No matter where you put the burden, people allocate responsibilities adequately. Could make the process more inefficient. Can protect against it. More efficient to disclose b/c it spends less $, know less about the problems. Calabresi: who should have the burden? The seller is the least cost avoider. They are in the position to know what is wrong. More efficient allocation of resources. Seller can fix the problem before the house is sold, or can seller can disclose. Sometimes the houses are for rent for a long time, so the seller doesn‘t know about what happens in the house. Only knows when something bad happens. Emphasis is on the buyer b/c buyer live there everyday. Don‘t want sellers to have to defend a suit five years ago. Let them go on w/their lives. Mortgages and Foreclosures 2 types of security interests Mortgage: borrower gives the lender a lien on property until loan is repaid. If default, lender forecloses on property and sells it to get back the debt. Deed of trust: o Borrower gives interests to lender. Transfer the title. Few East coast states do that. Rural areas do that. o Gives more security to the lender than the lien. Buyer still gets more control and influence. o Law moves away from this b/c of possible abuses by trustees. borrower gives the title to a trustee. Trustee holds it until debt is repaid. If default, then trustee follows lender‘s instructions (usually sell the property to repay debt). If borrower repays the loan, trustee gives the title back to him. Foreclosure Borrower can‘t pay. Lender is forced to foreclose on property. 2 types Judicial: lender goes to court and asks for the court to foreclose on the property and sell it. Private: common in home mortgages. When you borrow $, give lender right to sell. Can avoid judicial process and sell property directly. Most lenders want private foreclosure. Don‘t want to pay legal expenses, time going to ct. Requirements in most states: right of redemption. Buyer can get his property back pay what you owed in addition to interest. Problems for: buyer, seller, and 3rd party (3rd party won‘t be likely to invest b/c the interest isn‘t secured) 32/71 ARTICLES Anti-deficiency statutes Predatory Lending/ Sub-prime lending: How much role should govt play in regulating this? If you have bad credit, lenders are less willing to lend you $, but these new lenders would lend bad credit people $ and really high interest rates. Benefits: Opens up credit to people who didn‘t have credit. Community-reinvestment Act: certain neighborhoods don‘t have access to credit. Banks discriminate against them. → gives access to credit for people who didn‘t have it before. Problems: This may not be the best way to approach problem w/access to credit. These people aren‘t completely destitute. Govt has other low-interest loans in place. Banks don‘t have to deal w/the problem of lending $ to people. Fraud: the loaner could put in hidden clauses. Basic problem: people sought out don‘t understand the market and don‘t have the access to information or resources to decipher increasing costs. Solution: increase info to those borrowers. Increase bargaining power to provide for more info. Foreclosure rates increased dramatically. Foreclosure has negative impact on neighborhoods. Affects peoples property values. → societal problem Should it be regulated? Has been increased regulation. Lawsuits against these Co.s, like Citicorp. # of subprime lenders has ↓ b/c they don‘t make much $ off of it. Don‘t make back their $. property value may decrease, hasn‘t increased. Fraud has ↓ a little. Don‘t know if access to credit in these neighborhoods has ↓. There has been ↑ in govt education in telling people to get how to other sources of credit. Market was flawed, Regulation ↑. What role should govt play in property transactions? Govt is implicit in home financing: Federal Housing Admin or Fannie guaranteed a # of overwhelming mortgages. We don‘t‘ have a free market in home finance. What kinds of restrictions should the govt impose? 33/71 LANDLORD TENANT LAW Law allows people to make their own agreements. Private parties negotiate contractual relations in a free market to establish rights and responsibilities between people. Contractual agreement. Generally, they are market institutions. Allocate uses of land. When should govt (society) rewrite private contractual relations? When should it intervene? Is it appropriate for govt to impose restrictions? Is a lease a contract or a property interest? Distinction isn‘t that helpful. Types of leasehold interests 1. Terms of years (this term expires) Tenancy for a certain period of time, Mutual agreement, fixed beginning and end date No notice that lease ends, just ends at last day of the year 2. Periodic tenancies (this term renews automatically) Automatically renewed at end of each lease period UNLESS one party give timely notification (for leases < 1 yr: 1 period. For leases > 1 yr: 6 months advance termination. Express agreement o But will find implied lease if landlord accepted rent checks, if both parties still act like there‘s a lease even though there‘s no valid lease 3. Tenancy at will (can be terminated at any time) Terminable by the landlord or tenant at any time by death of either party, execution of new lease to 3rd party, or conveyance of fee Express agreement Can result when parties have no lease (didn‘t make one or lease is void) but the tenant has possession with landlord‘s permission o Ex. your company gives you free housing i. Factors that cause a lease to be terminated 1. Mutual agreement a. At CL: tenant couldn‘t terminate a lease. Changed. 2. Destruction of property a. At CL: tenant still had to keep paying 3. Eminent Domain a. Reality: most leases say property taken by eminent domain, tenant doesn‘t get anything 4. Death a. Terminates tenancy at will 5. Substantial breach of Material Covenant a. When a breach of covenant terminates a lease 4. Occupancy at sufferance The tenant used to have lawful possession, but when the lease was terminated, he is still in possession. Temporary situation Landlord can hold the occupant at sufferance for another lease term or evict and get reas. rental value Do L or tenants have the advantage? Landlords have the advantage, but Law regulates more in NY where there isn‘t so much rental space. What info. or knowledge do tenants have? When should govt aid tenants b/c they lack sufficient knowl? 1. Reality: it takes longer for the plumbing to be fixed. 34/71 i. We tend to believe that the law will protect us anyway for things that are so extreme/ egregious. ii. Protecting yourself may matter for the security deposit. Can negotiate. Bargaining Power Based on market conditions, economy, interest rates, sophistication of parties Subject to form documents (usually one-sided) People don‘t think they can negotiate between them, don‘t have enough knowledge Tenant can still negotiate or decline the lease Form documents sometimes void contrary to public policy Unlawful Detainer summary proceeding for eviction landlords have a legit need to occupy their place again after tenant breaches lease, maintains nuisance, commits waste 1. landlord serves tenant with notice (but if it‘s after the expiration of the lease, no notice needed) have to vacate premises or landlord can file unlawful detainer 2. trial date set. Tenant can have affirm defenses: didn‘t breach the lease eviction notice defective landlord waived the breach landlord violated local rent control ordinance tenant owed no rent b/c landlord breached warranty of habitability tenant lawfully used rent to make repairs landlrd‘s termination of lease was retaliatory Damages: can exclude damages and counter claims. Parties get them in separate civil action. Can hold tenant to another term. If a tenant abandons the place, LL can: 1) terminate lease by accepting surrender sue tentnat for rent as it becomes due retake possession to relet premises on tenant‘s account DUTIES Tenant’s Duties Can‘t maintain nuisance, can‘t destroy the property Duty to vacate at expiration of lease LL’s duties Law generally frowns on this (more so in large cities): Cut off utilities, change the locks, take possessions until they pay rent When the lease expires, LL can evict, renew the lease, unlawful detainer Unlawful detainer: tenants are unlawfully holding the property. Process for eviction: 1. landlord serves tenant w/notice (but if it‘s after the expiration of the lease, no notice needed) have to vacate premises or landlord can file unlawful detainer 2. trial date set. Tenant can have affirm defenses: didn‘t breach the lease eviction notice was defective landlord waived the breach landlord violated local rent control ordinance tenant owed no rent b/c landlord breached warranty of habitability 35/71 tenant lawfully used rent to make repairs landlord‘s termination of lease was retaliatory there’s a problem w/the unit, that’s why I didn’t pay my rent LL arg: you found the defect after you stopped paying rent. 3. Damages: can exclude damages and counter claims. Parties get them in separate civil action. 4. Can hold tenant to another term. Housing Court: just for LL-tenant relations Why we do have this kind of court? More efficient Repetition of the same issues - A lot of cases arise May be harder for a tenant to bring action in a regular court → it‘s a diff. system Time is essential b/c these are peoples‘ homes and LL has $. But what about the medical insurance claims? The action doesn‘t affect just the person, it affects the community, and everybody‘s rental rights. If we didn‘t have an expedited system, the system would collapse. The situation would get worse especially since people are living in the same close quarters. You‘re going to get $ at some point, but that‘s diff. from access to your household. POLICY IMPLICATIONS: Who benefits more from the system of housing courts? LL: the LL has to protect its econ investment. Protects status quo. It could take 2-3 years for disputes, but LL benefits b/c tenant could just stay until court evicts them. Having a streamlined system benefits LL. Tenant: could argue that the system is better. ARTICLES → Ask: where did the article come from? NY article: housing courts are slanted towards the tenant. More efficient housing courts Avg time is dropping. Tenants were allowed to withhold rent, but now people have to put $ in an escrow account People complained that the judges used to be pro-tenant. 1. Judges in NY are appointed. LL organizations try to intervene and influence who gets appointed. There are more tenants in NY, so they can get more votes. Philly article: housing courts are slanted towards the LL. Lot of back-up and admin hassle. Avg time is increasing. 1. Judges are elected in Philly. They need $ to pay for a campaign, and LLs can give more cash than tenants. Lawyers and firms give $ to judges. Which system for judges is better and why? It‘s better for an elected judiciary so $ doesn‘t have such a controlling factor. LLs seem to have more bargaining power, so tenants may get favorable position for judges Tenants have more to lose by not having a home In NY, tenants have fewer options. LLs are less well-off in Philly. Majority of LLs are small owners in Philly. Most LLs are small owners, and now there are management companies. o But, small LLs that only have a couple of units, and they are dependent on the $. Situation: Lease has expired, but tenant and LL are trying to negotiate the lease. Deals w/contractual bargaining. Cts look at negotiations. Tenant refuses the rent, but LL accepts, so then there‘s an implied lease. Have a holdover tenant. Depends on the facts of the case. 36/71 Tenant might refuse to negotiate for a bit. (assumes LL doesn‘t want to evict and go through hassle) Sommer v. Kride l → LL has duty to mitigate damages. F: Tenant entered into a lease w/ LL for 2 years. For 1st 6 weeks, 1st month wasn‘t due. Tenant pays one month and security deposit. Then he wants to back out b/c he doesn‘t have the $ to pay. LL doesn‘t reply to it. 3rd party tries to rent the place, but LL refuses. LL files for damages. Traditional rule: LL is under no duty to mitigate. in favor of tenant for justice and fair dealing. Held: in fairness and equity, a LL has to mitigate damages when the tenant abandons the property. Should negotiate it in leases. Should interpret the lease as a K. New rule: LL has burden to prove that he tried to mitigate. Factors: Whether LL showed apt, advertised apt, can rebut evidence Problem w/this ruling: LL relied on past rules, so he waited for 2 years. He complied w/ law, and ct. changed the rule. Every apartment is diff. Assume he has 10 apts., 5 are empty, 1 pulls out. Does the LL have to show all of the apts equally? LL chose not to show the empty apartment that the tenant was in. Duty to Mitigate Can we justify the duty to mitigate in the context of the theories earlier in the semester? Utilitarian idea: many people are unhappy w/an empty apartment. → want good housing on the market, want returns and people who put $ on the housing on the market Give LL incentives to let apartments 3rd party who wants to live there, can‘t original tenant doesn‘t want to live there Is there a difference between this duty to mitigate and K‘s duty to mitigate? Less of a duty to mitigate in K law. Duty they impose to the LL is tougher than duty to mitigate under most contractual situations. TENANT’S RIGHTS AND RESPONSIBILITIES Law implies some covenants → 2 most important: 1. COVENANT TO DELIVER POSSESSION American rule: LL has to give legal possession, as long as LL can give tenant possession, it‘s enough English rule: have to give actual possession, allow tenant to give actual possession and exclude other people, get rid of other people who are on the property (better rule) Arg in favor of English rule: LL is the better cost avoider: LL has better info, better access to prevent trespass LL knows better, is the only one who can evict anybody is there, LL can give assurances 2. COVENANT OF QUIET ENJOYMENT → Law: LL should have resp. to quiet tenants LL covenants that nobody else has a right to title or disrupt the tenant. The history of this concerns title or claim, doesn‘t have to do w/conditions of property or house. Didn‘t traditionally have to deal w/noisy neighbors. Didn‘t have to deal w/Nuisances, but now the law has a broader interpretation of the covenant. Should LL be required to prevent other tenants from committing nuisances? Law: LL should have resp. to prevent tenants If it‘s egregious, LL should limit infractions. Can‘t make LL the representative for one tenant. He may not be good at being the arbitrator. In a bad neighborhood, LL may be threatened by other people. LL should have burden of calling police, but he may not live there to know 37/71 LL should give rules and regulations, but the problems of having all of these rules → people may not want to live there. Conflict of interest: LL may just want to keep them in Where there‘s rent control, LL puts lots of rules to try and get them out. Lots of cases on: what‘s a reasonable rule? WARRANTY OF HABITABILITY Traditionally, there was no warranty. Anything on the land was resp. on tenant. Changed as urban society developed. What you‘re leasing is the apartment, not the land. Late 19 th century, courts imposed loose standards. Housing codes: build out of brick, not wood. Regulatory agencies were in their infancy. Enforcement was nonexistent. Housing standards were in most cities, but do little to protect tenants. Code reqs increased, LL complained about the detailed nature of the codes. Codes increased costs. Made it unaffordable to build and lease housing. There‘s a paternalism to housing codes. They have basic concern of the poor, and need to control people. Push for baths in every apt. Housing codes are very detailed today. Problems w/housing codes: Not enforced b/c the agencies aren‘t enforcing them. Laws protecting poor people aren‘t prosecuted that often. If LL doesn‘t comply, it‘s a criminal violation. But the DA doesn‘t prosecute these offenses b/c it‘s not good for their career. Enforcement of codes: Tenants might use the system to exploit or take advantage of LLs. Poor people wouldn‘t take advantage of these codes. Upper middle-class are complaining → These codes are protecting people who can protect themselves. Capture: LL groups can ban together and lobby, they can influence the codes. If you‘re a housing inspector, you have to improve housing quality. You‘re not going to be tough on the people who could give you a job later on. These agencies can‘t truly be independent. Not enough $ for housing inspectors. Javins v. First National Reality Corp → there’s wrty of habit. implied in law F: Tenants argued that there were housing violations, so he didn‘t pay rent anymore. LL sues b/c tenants didn‘t pay rent. Sociological jurisprudence: cts look at society to see best way to allocate rights. What‘s really going on in LL-tenant relationship. Asks if the law fits. Held: there‘s a wrty of habitability implied in law. Breach of wrty gets remedies for breaching Ks. Rationale: 1. Old rule was based on assumptions that don‘t make sense for today interest in the land used to be agrarian, but today, you‘re leasing an apartment people used to be able to do their own maintenance. Tenants used to have their own skill. But now they can‘t. whatever was on the land, people could fix it. Inequality of bargaining power. Tenant no longer has the same knowledge as L. Ordinary consumer doesn‘t have the knowledge to make adequate inspection of mechanical instrumentalities. (cars, plumbing, structural defects). A much more mobile population today, so people will spend less time improving the apartment. Tenants aren‘t likely to fix anything b/c they‘ll move in a year. Negative impact on properties b/c the quality isn‘t kept up. Tenant won‘t treat the property well. Tenants don‘t have the $ to finance the apartment. K law: buyer of goods relies on honesty of supplier Uses consumer protection cases that consumers should be protected 3. Today, everything is more urban. Urban housing market is diff.. o Racial and class discrimination, shortage of adequate housing, makes tenants accept faulty housing. o LL has incentive to maintain building, inequality of bargaining power gives incentive for LL to do maintenance? 38/71 Only to get future tenants, so LL wants to maintain building. Still have an interest to protect investment. o In Urban housing markets, LL expect them to deteriorate. It‘s efficient to let have the building deteriorate than keeping on investing the $. o Should the law create an incentive for the LL to maintain the building? → you‘ll pay damages if you don‘t upkeep. There is no implied warranty of merch for used goods. But the court should go in that direction. Housing codes: require a warranty of habitability, meet certain standards. Create a private remedy. So he says that Tenants can enforce the law. Give them the rights. Do tenants have a property right or a liability right? Tenants can demand in court that housing codes should be met. Housing codes impose a property rule to get LLs to fix it. lowered rent would be a Liability rule. Is this housing code right inalienable? Can a tenant give away a K? Can not agree to a lower rent to take property that doesn‘t meet the code. It‘s inalienable, can‘t give away this right. BROADER THEORY: Critiques and Defenses of Warranty of Habitability In Javins, judge analogized that there‘s a Warranty of merch. for other products, so there should be a warranty for apartments, too. K warranties apply to new products, not used goods. Warranty of merch exists b/c the seller has more reason to know about the product. So many of the goods were verbal and could be negotiated more. Applicability of the housing code to the debate: Ct says that he gives tenants a private right of action that complies w/ housing code. The role of courts in structuring relationships between people. Should the court be involved in this? Could other things be involved other than the wrty of habitab? No Could have more severe criminal sanctions. LLs couldn‘t abuse their property. Keep it out of the courts and go directly to the housing authority. Judges have said to go to the housing board and enforce these codes. Force the govt to do what it‘s supposed to do. It‘s not efficient to have to keep going into the courts. Yes: Arg in favor of courts being involved Courts shouldn‘t make policy, it‘s left to the legislatures. Courts have overseen these conflicts for a while, so it makes sense for them to set standards for what‘s a suitable apt. Myers on Wrty of Habitability 3 categories of apts: don’t comply w/ code, but can be brought to code 1) charge higher rents 2) will cut LL‘s profits 3) LL‘s loses money 1). If the dwelling is improved and rents are raised, the tenants can‘t afford the new property. - Even people that get to stay, the arg is that it decreases expendable income. - Deeper criticism: restricts freedom of choice. Forces the person to spend less on clothes, food, and recreation. It‘s still a burden upon the tenant. Should the tenant have a right to choose to spend only a certain amt? The law imposes the choice. i. Assumes free choice that people wanted to stay there. ii. Health issue: society says even if you want to stay there, you can‘t b/c it imposes health risk. iii. Children don‘t have input into where they live → health consequences. Parents are required to do certain things. 39/71 2) low-income tenants are initially benefited in the short-run. But he won‘t be able to recover all of his costs, so there will be less quantity in these apartments. Bumped into category 3. - Operating costs will force him into deficit and removed from the market. - Decrease in production of housing. No new properties will be built. i. But this arg is flawed b/c warranty only applies to used housing. New buildings have to be up to code. 1) Builders will factor into costs long-term. 2) If govt intervenes at the filtering process and ↑ cost, it affects everyone below. (upper middle-class build, then middle class moves in later, etc.) - Owners can‘t cover their initial capital expenses. Hard to secure adequate housing today. 3) Housing will be abandoned if LL loses $. - The housing will be withdrawn from the market. Repair costs will be too high. If court enforces the code, then the LL will just take it out of the market. - Mortgagor will default, and lending institution takes over. Then Cities ↑ tax rate, rental properties slip into deficiency. Then State takes over, property is lost b/c of tax delinquency. i. Tax foreclosures result in vicious circle unless substandard structures are demolished. Other things were going on: - Warranty of Habitability was a small part of this. Inflation ran wild. Cost to borrow $ to repair was really high. Vietnam War. - Many of these neighborhoods are changing. Other incentives to abandon your building. Didn‘t want certain races living there. How legal doctrines affect markets. Even if wrty affects markets in these ways, we should enforce it b/c 1) protect children 2) warranty can prevent neighborhood decline if there‘s a concerted effort among housing agencies to increase incentives. In response to Myers, Subsidy. Important to have these houses up to code. Housing is a basic human need. People shouldn‘t live in housing w/a minimum std. More efficient to intervene at beginning than at the end. Do we want govt to subsidize having more money for drugs? o The lower the housing, the more crime that runs rampant. Pritchett supports housing subsidies : people make assumptions that better housing will improve peoples‘ lives. That‘s not always true. People should have affordable housing. 3 ways for tenants to deal w/an apt that is NOT habitable 1. rent application: tenant fixes the problem, take it out of the rent 2. rent withholding: don‘t pay any rent until LL fixes it 3. rent abatement: don‘t pay any rent. The LL then files an unlawful detainer for possession and back rent. Tenant says that LL breached warranty of habitability. Put the $ in an escrow, then a court declares how much the tenant has to pay. LL gets the back rent. Tenant pays less in the long run. a. reduce rent by equal percentage of value b. pay the fair rental value POLICY: Which one of these is best for the tenant? Rent application Benefits: IF you can fix the problem by yourself or if it‘s a small problem. Don‘t have to go to ct. Tenant can fix the problem right away. Gives tenant incentive to fix the problem. Problems: Puts burden on tenant → might not have $ to front. the tenant want to use an expensive product, then the LL doesn‘t want to pay. 40/71 LL knows better what to do Tenant can‘t get access to it (electrical problem) Coase: LL could fix it more efficiently. (may have his own handyman). Free-rider problem: Want all tenants to chip in, but a few tenants won‘t bargain or care about what happens in the building. This is the rule in rural towns Rent withholding: Benefits: LL likes this b/c he doesn‘t lose $ in the long-term. Problem: doesn‘t seem fair to make tenant pay back fees for living in substandard conditions. Rent abatement: Best for tenant But problems: LL will take the lower rent (But tenant may be fine w/that, too) Have to look at preferences for parties involved. This is the rule in big cities. DISCRIMINATION in LL-TENANT LAW Fair Housing Act: it was the result of 4-5 decades of activists. Can‘t discrim based on race, sex, handicap. Thought that if they passed this, then problem would be solved. Exception to Fair Housing Act: indiv selling your own home is not bound by the law if you don‘t go through a real estate agent or advertise it in the paper. Activists clearly against segregation. How much influence should govt have? What kinds of societal interests push govt to intervene? Starrett City F: Att. General filed suit against Starrett b/c they built a large housing complex and wanted to maintain the racial balance to prevent ―white flight.‖ NY State Housing authority gave funding to build it, cared about racial balance. 70% white, 30% minority. People in the neighborhood wanted racial balance, too. Neighborhood was concerned about tipping → pt. where certain % of minorities move in, whites will move out. Starrett City had a strict quota system when someone moved out, they would only let the same race move in. Long waiting list developed. There was still a quota, but increased it. Fed govt brought suit saying that quota system violated the Fair Housing Act. DOJ got involved b/c during Reagan years: quota system thought quotas are a bad thing. DOJ Arg: can‘t single people out solely on the basis of race. Apts were unavailable to minorities Produces a discriminatory effect; waiting list; mmgt would tell people apts weren‘t available even though there were. Starrett Arg: they realize they discrim, BUT to effectuate the purposes of the Fair Housing Act, they have to prevent the reghettoization of a model integrated community. Try to prevent white flight, promote integration Strict Scrutiny: the State better have a compelling interest to justify discriminating. Can discrim if it proves a compelling interest. PH: DOJ won. Can‘t discrim. based on race → Fair Housing Act said you can‘t discrim. Can‘t have well-intentioned programs to discrim. Tipping std. was not a compelling interest. Ct. of Appeals: analysis of Fair Housing Act. Act is supposed to end discrim and promote integration. These two don‘t correspond. Quotas support integration, but conflicts w/racial discrim. Act doesn‘t help us answer the ques. Bases his opinion on S.Ct affirm action cases, based on 14th Amendment, not on Fair Housing Act. But DOJ said it violated Fair Housing Act, not the C. (B/c Reagan administration didn‘t want to expand anti-discrim law, so they based it on something else). Ct. bases it off of C. Discrim isn‘t always illegal. Discrim has to be: 1. temporary 41/71 2. directed at certain group of people (this was too broad to meet certain standards) 3. ceiling quotas are unC, but access quotas are upheld. Dissent: Starrett City is a great example of racial integration. They were trying to balance conflicting interest. Not a bad thing. Debate about statutory interpretation. Major: More contextually based. Plain meaning of the words. Dissent: looks more at legis. history. Looks more holistically. There‘s a substantial debate about if quotas ↑ or ↓discrim. Fair Housing Act doesn‘t have a position, so people should do whatever they want. Congress didn‘t envision this issue, so decision should be left to private property owners. POLICY: 2 articles about Section 8 Read the two articles on Section 8: Imagine you‘re general counsel to the secretary for HUD. She proposed Rendell‘s situation. She asks 1) is this legal? 2) is this a good idea? Rendell‘s plan: want 50% of sec. 8 certificates be project-based, be owned by property organiz that will provide housing for people. Diff from tenant-based ones where they can go anywhere. Majority are black or latino. Is this legal? This is a facially neutral decision. Sec. 8 certific go to many people. Doesn‘t discrim on its face. So it‘s not subject to St. Sc. If the law was subject to St.Sc.: we would have to have a compelling govt interest. If you have this certif., can give them to housing organiz to build them and have housing be more available. There are racial issues for his policy. It‘s not just a C matter, it‘s a stat. Interpretation matter. Congress might have to amend Fair Housing Act and Sec. 8. In favor of doing this: compelling interest: to prevent housing discrim. Prevent racial conflict. Protect neighborhood integrity. Preventing white flight. Are these compelling interests? Legal matter: could be subject to st.sc, or mid-level, but probably mid-level. Can make args for state. Fair Housing Act Proposal: govt have been resp. for ↑ segregation in cities. Public Housing program in ‘30s were based on race- black and white projects → segreg. was inherent. Housing authorities would direct people to certain projects. Urban renewal programs: renewed areas that had racial minorities. Public housing uprooted Bread-lining: govt favored housing in the suburbs, overwhelmingly white. Against discrim- in favor of integration. Law says you can‘t discrim, market will adjust to let people move wherever they want. Theory behind Sec 8 program → tried to help influence the market Free choice → Rejection of old policy where you tell them they have to live Gives market incentive to provide for public housing for the poor Access to resources for better jobs, schools Is what Rendell wanted to do a good thing? Bad policy: he‘s putting restrictions on where people can live, goes against Good policy: b/c LL‘s aren‘t required to accept the vouchers. LL‘s who accept the vouchers are in pretty segregated areas anyways. LL‘s aren‘t required to accept the vouchers anyways. have providers that care about the people they‘re serving, ↑ amt. of housing People who don‘t want Sec. 8 people to move in b/c they don‘t keep up property, property value decreases, don‘t meet neighborhood standards HUD didn‘t accept it, ↑ # of certif., then decided how to allocate that increase. City couldn‘t build project housing. Back to Starrett City → which is better? Majority: can‘t have a quota. Minority: should have a quota Racial balancing may not be troubling, but can‘t have quotas on white perceptions of ―white flight‖. 42/71 You can‘t determine when a ngborhd tips. Is it appropriate for a ct to consider stats of white flight? Setting quotas validates prejudice. → Social science of tipping: little scientific understanding NON-POSSESSORY INTERESTS Easements Profits a prendre: right to take resources from ground (won‘t discuss) Covenants Equitable servitudes More flexible, easily arranged, durable; restrict use of indiv. land to obtain common benefits All are interests in property that can be transferred contractually. Debate on whether we need all 3. Can create many diff. kinds of contractual relationships. EASEMENTS Gives holder right to use or restrict use of another person’s land 2 parties to each easement → Dominant tenant: benefit from easement → Servient tenant: burdened by easement. 2 types Affirmative easement: right to use (privileges the holder of the easement to use another‘s land) Negative easement: restrict people from use (can have a neg. easement if one restricts your access to light, air, lateral support) Right to prevent the servient possessor from using the servient tenement (even though he‘s using it lawfully) 2 diff. types of easement appurtenant: sticks w/the land (not personal to the original holder) (limited by express terms) in gross: personal to the grantee → not transferable. (erecting billboards, install utility lines out) Green v. Lupo → motor home park case F: P: Green. D: Lupo Green owned entire land, sold part of it to Lupo. Lupo‘s built a house on their property. Green‘s built a motor home park and used the roadway on both lands as a runway. Lupo‘s didn‘t like it. It was a land contract. The Green‘s own title while Lupo‘s were paying off their land K. Green‘s asked for an easement in the future b/c Lupo‘s own the land and they‘re going to want to go through the land. Issue: Is it an easement appurtenement or easement in gross? This distinction is important b/c determines who wins. If appurtenement: Greens win b/c they could transfer ownership to mobile home park In gross: Lupo‘s win b/c they can‘t transfer to the mobile home Written Easement specifically said: ingress and egress for roads and utilities. Ct. said this was ambiguous. They took in parole evidence. (evidence outside the written instrument) Held: easement was appurtenement. Under WA law, appurtenement is presumed to be found when document is ambiguous. Appurtenement more logical than in gross Logical b/c easement appurtenement applies to land. Making it go w/land, it means if you own the land in the future, you will be able to use it. (especially if the land is landlocked) Efficiency arg: if you didn‘t have this easement, the land would be less valuable. Should be able to transfer. You wouldn‘t buy land that was land-locked w/ no way out. But L won‘t be able to sell land easily b/c of the easement b/c there are motorcycles going through. Utilitarian: increase value b/c they increase access to use of land. 43/71 Irony: they use parole evidence b/c deed was ambiguous but declared appurt. Easement based on ambiguity. Parole evidence is not really used. Cts declared they can use the shared road, even though there was another road available. Rule: declared appurtenement, but → a servient owner is entitled to impose reasonable restraints to avoid a greater burden on h is estate than was originally contemplated in the easement grant. Can have restraints but it can’t unreasonably interfere w/the dominant owner’s use. Ct restricted the use of the easement land—can‘t use it as a runway, but ct. can‘t ban motorcycles totally. POLICY This is an express easement. It goes to the intent of the parties. Lupo didn‘t mean to grant the Green‘s an easement to have a mobile park built on it. Be careful when writing easements. Express easement expressly stated by K, must conform to SOF Easements by Implication reqs 1. two parcels had to be under single ownership 2. there is Permanent or continuous pre-subdivision use 3. Use of easement is apparent to the owner of the servient tenement 4. Use has to be reasonably necessary Easements by Necessity Landlocked: When land is subdivided and one of parcels is landlocked from public road 1) Single ownership: Servient and dominant tenements were owned by single owner at time of conveyance 2) Necessary: Easement is reasonably necessary (CL was absolute necessity) Easements by Prescription (like adverse possession) continuous use of another‘s land for the prescriptive period was authorized by a previously granted easement, and now that grant was lost. Today, public policy justifies prescriptive rights on the basis of maximizing underutilized land. To get a prescriptive easement, need 1) actual, 2) adverse, 3) open and notorious, 4) continuous and uninterrupted for the prescriptive period. Public has a right to access it all the time if easement is created. This is for things like people using your private sidewalk or parking lot. Or the big office buildings downtown. Trying to prevent a public easement by prescription. Negative Easements Can‘t get a neg. easement by prescription. Conduct that would create a prescriptive easement for light DOES NOT create a cause of action. Courts reluctant to find implied easement by reservation. Need a high degree of necessity than for implied easement by grant. Reese v. Borghi Easement W B-1 C Borghi Reese 44/71 B-2 A Borghi builds house Borghi (Reese wanted to buy this land). Borghi said Reese could come on the land Witherly Lane Dispute over a land that was conveyed to D‘s by P‘s. P got 5 pieces of land w/a nonexclusive perpetual easement and a right-of-way appurtenement on a private road. P‘s sold the parcel, so now that there was a part that was landlocked. P said they had an understanding w/D‘s, they would still have an easement along the pathway of land they sold to D‘s. But D‘s built a house that blocked P‘s use of the pathway. Reese: asked for easement by way of necessity Borghi: 1) to award the use of right-of-way is to take property w/out just compensation. 2) no intent for an easement by implication → implied easements have to be based on obvious, continuous and pre-existing use Ct: don‘t have to give compensation b/c it was a CL right and not an exercise of eminent domain. But this isn‘t a taking away someone‘s property Ct: an easement can be based on implied intent. Necessity is a factor in determining intent. But a way of necessity rests on public policy that stops the intent of grantor or grantee. Society demands that we don‘t leave land idle b/c the land became isolated. This wasn‘t an easement by implication b/c the use was not apparent. This was an easement by necessity → landlocked, single ownership, necessary Held: P‘s still get to use the land b/c 1) there was a strict necessity for right-of-way when the property was landlocked; and 2) both the dominant and servient tenements had the same ownership at time of conveyance giving rise to the necessity. The law forces these two parties to have a long-term relationship. They most likely don‘t want that. Arg against Reese getting the easement. He caused the problem himself. But, Reese tried contracting around that by trying to move his house (facts) Easement by Prescription (essentially like adverse possession). Based on facts of case. Finley v. Botto F: There‘s a pathway b/t two apt houses. The walkway is used so apt tenants can use the laundry room. Finley says he had an easement, but Botto said no, and built a fence around it. Issue: whether the P‘s use of the land was adverse or did D permit them to use it from neighborly goodwill Held: Finely lost. Have to look at the specific facts. Possession was actual, adverse?, open and notorious?, continuous & uninterrupted It was a neighborly gesture, so it was permissive and not adverse. Finley not claiming title, but an easement (had a right to use) Notorious? Contrary to the interest of the owner. Finley thought he was using his own land, so it might not be. Each thought they were doing each other a favor. POLICY (problems w/deciding adverse possession and prescription) There was implied permission, not express. Ct implied permission (maybe erroneously). Problem w/ organizing people‘s future affairs. How would anybody meet the reqs for prescription if notorious is hazy. People can just say that they gave the other permission, and it won‘t be notorious. In gross is preferred in ambiguity. Majority of cases find easement by prescription, easement by appurt. 45/71 problem p. 748: Are there easements created or either path? Path B express easement? NO easement by implication? NO it‘s a single parcel of land owned by one person. It wasn‘t a single parcel of land. Easement by necessity? NO It‘s not absolutely necessary to use. Doesn‘t have the same ownership. Johnson would argue that the path wasn‘t necessary. Easement by prescription? NO Nothing to establish adv. possession. J allowed them to use it. Path A express easement? Simple answer: NO, nothing in writing arg that there was an express easement: Can infer the kids gave an express easement attached in the land. Kids could‘ve given verbal agreement. But there is no writing, doesn‘t satisfy SOF. Can argue Easement by estoppel → Can assume there was an agreement and it would be unjust. easement by implication? Probably meets reqs: single ownership, permanent, apparent, reasonably necessary (lesser req than easement by necessity) easements by implication are generally appurtenant. Argue In gross: it was just personal, didn‘t attach to land. Kids just wanted to make an arg. Emerson‘s arg: didn‘t want an easement, went to someone else besides their family. Sam Firestone changed the use of the land, so less likely to be personal. → just an easement in gross, less likely for kids. Emerson could argue that even if in gross, it doesn‘t matter. Easement by necessity? Probably but can argue. 2 main reqs: single ownership and reasonably necessary. Emersons can say yes b/c they need to use it. Holder of easement gets to determine if use is reasonably necessary. Easement by prescription? Maybe Adv possession given from kids. Going to argue that you didn‘t have permission from kids. Ques of open and continuous. Farm equipment wasn‘t always there. 46/71 COVENANTS A covenant: a promise to do or refrain from doing something. Real covenant: promise that is connected w/land in a legally significant way. Unlike plain old covenants, real covenants get transferred One party has a burden, the other has a benefit. Equitable servitudes: both parties have a benefit or both parties have a burden. Diff. b/t covenant and easement Affirmative Affirm real covenant: promise to do an actual act (pay rent on time, keep trees trimmed) Affirm easement: right to use another‘s land. (no requirement to do something) Negative Both: one landowner refrains from some action that he‘s legally allowed to do Neg. easements: limited to easements for air, light, support, flow of artificial stream. Neg. real covenants: All other agreements not these (neg. easements) (no excessive noise at night) An easement creates rights against the community or public. Can enforce the easement against anybody. A real covenant creates rights solely against the covenantor or her successors Legal Issue: does the covenant apply to the land and legally bind successors? Criteria to create a covenant: Burden: for covenant burden to pass, need it In writing Intent Original parties must intend to bind the successors. Doesn‘t have to expressly say ―successors‖. A court can discern the intention from the circumstances surrounding the agreement. Vertical Privity Need identical relationship b/t covenator and subsequent landowner. Ex. I bought land from A, covenant passed to me. But then I leased it to Kyle. Kyle not burdened by covenant b/c he didn‘t take the legal interest that I took. Exists if covenator‘s successor has succeeded to the same estate that the covenator had. Successor must have the same interest than his predecessor. Contrast easements: any possessor of servient tenement must honor the easement. Horizontal Privity Relationship b/t original parties. (covenantee and covenantor. I had to buy it or lease it to A. A sold the land, but agreed to burden B. Doesn‘t pass w/the land). A (benefit) passes land to me. (burden) B. A passes to B. Covenants: When can agreements between parties pass w/the land? Horizontal privity? The covenator and covenanentee both have an ownership interest in the land. 3rd parties don‘t have the right to impose restriction on land use. Covenantee has the benefit of the restriction. Don‘t want people who don‘t have an interest to impose their interest. Req for vertical privity: subseq. owner takes the same interest as the prior owner. Fee simple to fee simple. No covenant. Prior owner – FS Subseq. Owner- FS – these used to be restrictions on land use. Most land use controls have to deal w/homeowner‘s assoc, and they don‘t deal w/horiz., vertical privity. Touch and Concern Real covenant has to relate to covenator‘s use of the land. Refers to a physical use of the land. Covenants to pay rent or insurance, sec. deposit touches and concerns the land. Notice 47/71 Benefit Touch and concern → Intent → Vertical privity → NO states require horizontal privity Remedy: Real covenants only enforced by damages But not the remedy in Shelly v. Kramer. Usually lose the land. Eagle Enterprises v. Gross (water well case) F: original parties expressly contracted that the covenant that runs w/the land …that one would supply water, the other would buy it. Later, the successor built his own well so doesn‘t want to pay anymore. Covenant: B had to pay for water. O was required to supply. Both parties seem to have a benefit and a burden. It’s really an equitable servitude. B sold to G, built his own well, refused to buy the water anymore, doesn‘t need it. Issue: Is the covenant enforceable to successors? Does the covenant/ agreement touch and concern the land? Held: Gross won, doesn‘t have to pay anymore b/c there is no touch and concern. Didn‘t touch and concern the land b/c the agreement was a K (agreement to buy and sell water). Even though the original deed expressly stated that the covenant runs w/the land, it‘s insufficient to make the covenant enforceable against later grantees if the reqs for an affirm covenant aren‘t met. The obligation to receive water is a personal, contractual promise, not a significant interest attached to respondent‘s property. To touch and concern it has to substantially affect the landowners. Std: Covenant doesn’t substantially affect the ownership interest of landowners. Ct: The $35 isn‘t significant enough to benefit landowners. But, they‘ll lose revenue everywhere. $35 from each person is a lot of money. If everyone stops paying, then the money they pay won‘t get paid for parks, streets. Matters to other residents b/c the cost of their water goes up. Is this a covenant? We know it‘s a K. O may go after G for the K. what circum are covenants appropriate and inappropriate ? What stds do cts apply? Touch and concern? Covenants: private contractual relationships that allow people to control land use in certain areas. Problems: when certain agreements are inappropriate b/c they‘re against public policy. Are certain covenants inappropriate even though contractually agreed upon? Shelly v. Kraemer → racial covenant can’t be enforced F: white people put a restrictive covenant in their leases that said no blacks or Mongolians can live there. 5 houses already belonged to blacks. Shelly‘s were black, Fitzgeralds wanted to sell them the property. Other people and landowners to court b/c they didn‘t want the Shelly‘s taking the land. Asked for injunction. Shellys bought the property, but they were asked to give it back. PH: covenant not valid b/c not everyone signed it. Issue: can courts under the 14th A. enforce this covenant barring blacks from buying the land? Do you property rights give you the right to exclude certain people based on race? There were state law matters. The ct takes a very narrow question. In most covenants, supposed to get damages. The restrictive covenant didn‘t violate the 14th Amend. It was legal b/c they were actions by private parties. Civil Rights Act of 1866 that it did mean to apply to restrictive covenants, but there are debates. 48/71 S.Ct just looking at state action. If covenants imposed by public govt, then the covenant would be discrim. Said the cases were like: Restricting juries to only whites, giving diff. penalties to only race. (Strauder) Cts as a state actor were deciding what kind of penalties would be paid. Is it just? Ct is an accomplice b/c they are resp. for enforcing restrictive covenant against blacks. There was a willing buyer and seller. If the ct. hadn‘t interfered, there would‘ve been an agreement. But court confuses this b/c Fitzgerald and Shelly were not the only two parties. There were other landowners. Ct avoids this issue. Critiques of the case Ct should‘ve struck it down on public policy (but couldn‘t b/c it‘s a jurisdictional issue) but said it was a C Issue. Have a K, but it‘s not enforceable by law You‘ll see Shelly quoted, against public policy. But, don‘t see everybody enforcing agreement as state action. It‘s a narrow opinion, doesn‘t really protect, only protects minorities in affirmative discrim. change facts: if Fitz. said he can‘t sell b/c of this covenant, Shelly doesn‘t have a cause of action. Shelley wouldn‘t have a case b/c S.Ct MO wouldn‘t be enforcing a state action. Touches and concerns the land. If it doesn‘t touch and concern, then not enforceable. If we‘re MO, does this covenant touch and concern the land? Would lower property value. Arg having more of them would decrease property value. You can do things on land that wouldn‘t touch and concern – like playing loud music – doesn‘t touch and concern. Who lives on the land doesn‘t have a direct relation to the land. Does it affect ownership of the landowners? Should a ct assume that having lots of children affect the land? 49/71 EQUITABLE SERVITUDES Interest in property that passes to successive owners who know about the restriction Need notice. Equitable serv. have replaced real covenants except in LL-tenant law. Ex. it wouldn‘t be right for someone to know about the covenant and not follow it when they bought land Burden Touch and concern notice Benefit Touch and concern Intent Remedy Injunctive relief Limited by public policy, can‘t fulfill parties original intent anymore Have fewer reqs than covenants. It‘s an equitable doctrine for situations where covenant law was too strict to apply. Restricted people from building on a park- hard to apply this covenant to future owners b/c no horiz. Privity. Only reqs: just touch and concern and notice. (couldn‘t call it a cov. b/c didn‘t fit the reqs, but there was notice, so they had to abide by it). Another way of enforcing land use when strict rules of covenant are not met. When should we enforce restrictions? Enforce equitable servitudes? Bolotin v. Rindge F: There was a restriction that people who owned these certain parcels of land could only build family homes on them, not commercial buildings. The property is very valuable (Wilshire Blvd), so P‘s want to built a commercial building b/c it‘s better use of the land. D‘s think an office will ↑ traffic and parking and ↓ the value of their homes. PH: Ct. used Doctrine of changed circumstances: this covenant is not enforceable b/c of changed circumstances. (like Brokaw). The lot had no residential value. So it makes sense to allow owner to build commercial buildings. Doctrine of changed circumstances: Generally, though, if the servitude is in a location where the conditions changed a lot and the purpose of the restrictions aren‘t relevant anymore, then don‘t enforce the restriction. Appellate Ct Held: restrictions enforceable even though the market value of all prop may increase. Money isn‘t enough. Even though more profitable to build a commercial building, but the original intent of the covenant can still happen. Residents have to show that it was impossible to keep residential areas. Have to prove that residential area would burden other landowners. Test: If the original purpose of the covenant can be realized, it will be enforced even though unrestricted use of the property would be more profitable. A deed restriction will be unenforceable if enforcing the restrictions would be inequitable and oppressive and would harass the P w/out benefiting the adjoining owners. Here, the purpose of the restriction was to preserve the tract as a residential area and prevent activities owners would find offensive. People most likely would be offended by the commercial building even though their property value would increase, so the purpose of the restriction can still be achieved. → enforce servitude. Book argues that there shouldn‘t be doctrine of changed circumstances. Who gets to decide when circum have changed? Problems w/ court deciding: don‘t know about the neighborhood than the people living in that area. Should the majority? But if you‘re the minority, you‘re letting people dictate your property rights. 50/71 Neponsit Homeowner’s Association v. Emigrant Bank F: Neponsit charged a yearly fee for maintenance of parks, roads. A Bank bought the land at a foreclosure sale, and they didn‘t want to pay the $4 / yr sale. Issue: Does the covenant run w/the land? If it didn‘t, Bank doesn‘t have to pay. Need intent, touch and concern and privity of estate. Covenant: pay a fixed sum for maintaining roads, parks, beach, or other public purpose. Runs w/the land and enforceable against a subsequent purchaser. Covenant that runs w/the land affects legal relations. Look at intent and substantial effect of covenant Takes broad reading: If anything affects the land, then it touches and concern the land. Held: payment for maintenance can affect ownership interest of land, so it does touch and concern the land. Does the association have privity? Technically the Association doesn‘t b/c the Association doesn‘t own any land or transfer it, so it doesn‘t have horizontal privity. Assoc created after the development was created. BUT, the court wanted to give a broad understanding of what a homeowner‘s assoc. is. The assoc is acting for the individual property owners and what they would‘ve done originally. Each indiv. owner bought from D, D created the Homeowner‘s association (HA), so all indiv have resp. to homeowner‘s assoc. Can‘t rationalize covenants law w/Assoc. law. So ct tried to remold covenant law to make sense for HA. Goal: when land was transferred, Emigrant had notice, should‘ve known they had to pay. When should you be required to follow restrictions that you had no part in? 3rd parties shouldn‘t be allowed to impose restrictions. Some argue that privity lessens impacts on covenants on land use. Generally, should be able to alienate land freely. Easier to sell land in the future. Notice, as long as Emigrant knew about the restrictions (had notice) and could factor the restriction into the price it paid, then the covenant isn‘t a restraint on alienation. Whoever buys it won‘t spend as much money. Notice wins. You have covenants to increase the value of some land. The dominant tenement thinks it will increase the value of their land. Does it ↓ value of servient tenement? 51/71 COMMON INTEREST COMMUNITIES (CIC’s) Why did people want to live in HA? Common values—live w/people who had the same common values as you property values Protection-regulation Govt has failed, so HA would do a better job. Services & extra amenities you can‘t get in a city→ golf course Warranty→ Easier to move into- less research—they do the work for you Enforcement- have backing of neighbors, then can go to a HA board (charge you fines, deny privileges) Cheaper- b/c everything is developed at one time. Economies of scale. But you get investment back in a house. Maintenance is enormous in some places, may not get value. Convenience- don‘t have to mow lawn, supr lives downstairs. Declaration → Blackacre Sample Occupancy restrictions: Can only be single-family housing. Problems: have to decide what a single family is. Extended v. nuclear family? Aunts don‘t count. Non traditional families. Same-sex couples. Violation of Fair Housing Act. Denies minorities housing b/c they can‘t usually afford single family housing. Lot of Con law about zoning, if people have to stay in their zones. Aesthetics If you wanted to work on house, have to submit plan to board. If they say no, then you can‘t do anything. No recourse under the Declaration. No stds for what the board can and can‘t do. Governance It‘s not democratic. It‘s one unit, one vote. Not one man, one vote. Some places—if you own a bigger unit, you get more votes. Decisions made by small # of people. They may or may not have an interest in it. Owners have a vote, tenants don‘t. Funding Pay taxes, board creates budget. Determines how much each property owner would have to pay. If you don‘t pay your assessment, a lien is put on your property. Can be a pretty burdensome thing. They have legal authority to force you to pay assessment. Gives power to push people to pay. Enforcement Only board can enforce covenants and restrictions. Neighbor has to go to Assoc to enforce the covenant (if you neighbor isn‘t cutting his grass, have to go to the board) Problem: would rather work b/t the two people actually involved. Don‘t want to force people to tell on each other- not good for future relationship. Good: better in a mediated setting. Less personal b/c two people don‘t fight it out. Good way to govern a community? Detailed restrictions are a deterrent to people who wants to stray or don‘t understand. You better agree to these things. Once you enter community, you better follow rules. BUT, all the benefits may outweigh. May not have any choice to live there b/c it‘s the only thing around. Living in a gated community sets baseline rules of what a community is. 52/71 HA: people share a common value, live there to fulfill these goals. Once they make bargain, not happy w/it. What‘s purposes of judicial review? STd court should use to allocate rights b/t HA and ownership interests? 1. Contract/ Consent a. Get the benefit of the bargain, whatever you agreed to, you should be bound by it. b. Doesn‘t matter what the court thinks about the nature of the agreement. 2. Local Govt Model a. Judiciary can oversee. HA can‘t do anything that local govt wouldn‘t be able to do. Local govt says you can‘t say that, then HA can‘t say that. 3. Administrative Model a. B/t K and local govt model. Ct should respect those agreements, but look at the reasonableness of agreements and how they‘ve been implemented. 4. Corporate Model a. HA Run like a corporation b. Look at issues of fraud 5. Trust Model a. Run like a trust Hidden Harbour HH v. Basso Portola Winston Towers Facts No alcohol allowed Wanted to dig shallow well Wanted to install Dogs have to be satellite dish. Had registered, changed covenant: no dishes bylaw: no dogs, but (for aesthetics) existing ones allowed. Female had puppies, violated bylaws. Decision HH wins, Assoc Basso wins, allowed to dig well, Portola wins, HA not Savario wins, can‘t adopt A/C no problem ct originally thought reasonable Bylaw was invalid. rules. Reas. test. would happen Reasoning People place Reas. in case of board decision - There is std of reas, Unreas. b/c dogs have restrictions on use v. Reas. of Declaration. but depends on puppies. of alcohol all the Declaration: ct will hold you to circum. time. this. - No evidence that Nothing unusual Board decision: ct will decide it dish would bother about banning reas. somebody else. alcohol. Decl. didn‘t say anything, board - Broad restriction made decision post hoc that has against dish invalid. to be reas. Model Like an admin Board: admin model - Admin (reas. std) - K model: relied, model Declaration: K model (you have - Local Govt model agreed to it, but HA Or a K (people notice) (People shouldn‘t be didn‘t abide agreed to not using punished b/c they this in common want more channels. area) Govt can‘t exclude people from global community.) Critique Bad: Fuzzy Bad: In Declaration, you are - there‘s notice. - procedural problem, reasonableness std also bound to board decisions. Maybe people singling out pet Good: but it‘s a -always have to interpret Decl. bought b/c they owners common area. But through Board don‘t like dishes. - but Saverio had even in K law, But if Board passed ―no well‖ - Rule need govt notice. (would force public policy will resolution before Basso bought, compelling interest. Sav. to neuter dogs) prohibit certain then why wouldn‘t K model be Infringes upon - tied to personhood, things even if K‘d used? property rights. HA can‘t change and for Ct‘s test says wouldn‘t apply. - arg have no control restrict bylaws 53/71 - to amend declaration, need majority vote (in Blackacre) and the developer. 51% v. 2/3 vote? - Pritchett: skeptical of models. Useful for debating, but not so practical. Ques is what std should cts apply? What std. should courts apply? Epstein: should have a K model. Pros and cons of K model: no equal bargaining power. HA made rules that govt can‘t even make. Arg: could‘ve gone to the mtgs, but may not be fair to tell everyone to go. HA impose barriers to people working out their own problems. Declaration makes it hard for people to work it out on their own. Not efficient. like Ellickson article: people would figure it out themselves. Problem that people can‘t agree. Article: could work it out b/c they all had the same types of values. Restraints on Alienation Susan French article: CIC shouldn‘t regulate: 1) free speech, display political signs 2) no restrictions on activities in the property pets should be allowed unless prohibited at time of sale of first lot. If you enumerate certain rights, it assumes you don‘t have others. Worried about protection of property values. Too many restrictions, won‘t be able to sell units. Inefficient. If impose greater restrictions, that assoc will limit the restriction b/c they want the right to alienate the property. CICs v. Public govts Issue: Should fees paid by people to HA be tax deductible? NO: Author of Gated America says no. Tax breaks were usually for you paying more for the value you got. Usually has a public purpose. depends on what your theory of the purpose of govt. Govt isn‘t just for specific services. You‘re paying for something for govt but you‘re also paying for govt services (police). You‘re not really using services from the HA when there‘s a govt counterpart. You‘re going to call the police and not the HA. YES: people pay their HA dues and the public enjoys what they pay for. o CIC‘s are experimental govt. Govt runs things inefficiently, so award people tax breaks to allow these to grow. o Truly common services. These services should be provided by govt—then there‘s an arg. for reduction. 54/71 Legal implications of these private organiz for society. Part Property, part con Law. o Problems w/ having private organiz provide public services. Not concerned w/ due process or equal protection (HA could take away the person‘s rights) Checks & balances. HA doesn‘t have anyone to check them. More efficient system. HA doesn‘t have one man, one vote Broader EP claim b/t people who live in CICs and people who don‘t. People w/in communit ies don‘t have EP. Free speech Right to public assembly What are national govt services? Are there things that HA govts should never perform? Post offices/ utilities: Don‘t want to give natural monopolies to private actors b/c they‘ll exploit them. o Post office Punishment o HA could prevent people from participating in certain activities. Basic human welfare o Trash, water, manage public parks Public policy: the govt takes over things that private owners couldn‘t make money off of. But, what services should CICs provide? None of the above govt functions are clear. HA restrict facilitates only to people who own the property. Easy to say people should K their own living arrangements, but should this be based solely on Property. Ownership? Future of CIC’s Debates: - changed conditions doctrine : HA rules can‘t be enforced b/c they don‘t adapt well to changing economic conditions o only grant this when unanticipated changes wholly frustrate the servitude‘s purpose - buyers don‘t read the assoc rules - large scale servitude regimes should be enforceable by a group smaller than entire development - Enforce like K o Efficient o Freedom of choice- want people to make informed decisions o Moral obligation o Democratic process - Close judicial oversight undermines effective operation of HA, turns them into bureaucracies C restrictions don‘t apply to HA (unless in Shelly v. Kraemer) Expensive to adjudicate, uncertain std of review, courts defer to HA and leave restrictions untouched French: developers have freedom to impose restraints on alienation of indiv. units. They think they are ↑ quality of life and promoting property values (not oppression). - Owners should pick a community on basis of degree of freedom of choice they wish to give up. - Developers are giving more control to HA boards. - Bylaws too rigid: property value ↓ if can‘t adopt to changing conditions. - Bylaws too flexible : if you put restrictions on them later, they won‘t be happy. French‘s Bill of Rights - equal treatment - speech – display political signs, put things outside your house. Assoc can adopt reasonable time, place, and manner restrictions to minimize damage. 55/71 - Religious/ holiday displays - Household composition: can‘t restrict household to determine their composition, but can limit total # of occupants. - Activities in Individually owned Property: - Pets - Allocation of burdens and benefits: - Alienation: can‘t prohibit transfer of any unit or need permission from assoc to transfer. Darger case : HA sued b/c they tried to transfer their ownership. Can‘t under HA rules. - Dargers said it‘s an unlawful restraint on alienation for them not to approve the transfer. - Held: Assoc has to act reasonably in a fair, nondiscrim manner. Withhold approval for rationally- related reasons to protect property. o The Subassignment Occupancy Agreement didn‘t violated D‘s C rights, not invalid as unreasonable restraint. But in HA bylaws, its refusal to allow transfers was unreasonable. o It‘s lawful to have a reasonable restriction on the right of alienation. o HA was right in prohibiting the transfer only if its reasons were rationally related to protecting the property. And they did it in a fair, nondiscrim. way. HA‘s reasons for prohibiting multiple ownership was not reasonable. It would make destroy the peaceful enjoyment of the premises. 56/71 ZONING public response to problems of private market. o 2 sides of the same coin: CICs came about b/c the public govt failed. Zoning: private market doesn‘t always work. Govt has to intervene to take away PO rights for the greater good. Ordinance that limits size and structure of buildings. (won‘t cover the practical aspects) Euclid: approved zoning as C. F: his city set up a 6 districts as a zoning ordinance. It was cumulative, all the higher zones included lower zones. Wanted separate uses for certain districts. Euclid was in 3 districts, he wanted to stay in the industrial district so they could make more $. Euclid arg: zoning violated due process 14th Amend, a taking of property w/out due process of law. Ct: a while ago, zoning would‘ve been approved. But society has changed and zoning should appropriate change w/it. Lochner theory: govt shouldn‘t intervene to regulate private market. Let the market function the way it is. Apply st. sc. when the govt intervenes. C made an exception for zoning. Zoning ordinances are legal b/c of: This fits w/in Police power: state can intervene to protect the health, morals, and gen welfare of society. Law of Nuisances: nuisance law allows regulation of property. If you can regulate by nuisance law, you can regulate by zoning. Flaw in this arg is that nuisance law is overly broad. Ct says: There are other broad regulations that exclude things. There is a rational reason for the health and safety of the community to exclude business buildings from residential areas → Zoning protects health and welfare of society. Easier to provide fire safety apparatus for each section, ↑ safety of home life, ↓ traffic. Can respond and deal w/ problems in a targeted way. Ct focused on wanting to maintain residential character of the issue. Apts are bad. Zoning is good b/c it won‘t destroy the ―residential character‖→ Zoning supports a class structure , separate people on class. Rational Basis: Ct gives discretion to local govts. If validity of ordinance is debatable, then defer the legis. judgment. Broad use of land use regulations. States are given wide latitude for land use. Cts gives great deference to legis. in land use control. Euclid std of review: Zoning ordinance will be set aside if the city‘s purpose is arbitrary, having no substantial relation to pubic health, safety, or morals. What the govt wants to do is acceptable b/c nuisance is pliable and allows for any form of govt regulation. Zoning Commentary: Is it a good idea? Does it work? Does it provide benefits we think govt should provide? Mandelker: Zoning creates a dilemma. Economists: zoning isn‘t necessary b/c private market will regulate efficiently. Wealthy people will move to be w/each other anyway. Poorer people will go towards industrial facilities b/c it‘s cheaper, rich won‘t want to live there. Critiques of zoning: 1. the market could organize society in similar ways. BUT, private market is allocates imperfectly through the pricing system 2. Aesthetic issues: Zoning is about taste and preference. (naturally tends to sway to single family homes). Legal system has to control it. Zoning ordinances are overly broad b/c so concerned w/how neighborhood looks. Restricts other developments people may like. 3. Other approaches: Use other legal structures like law of nuisance. Sue them under CL principles. 57/71 Problems (nuisance law doesn‘t completely solve this problem): free-rider, people don‘t know if people will be sued. Admin costs to bring law suits. Nuisance claims are on big issues about damage already done to you. Zoning tries to prevent damage from every occurring. Defend zoning: zoning corrects for externalities (can prevent them) that a private market can‘t. Externalities: market might work, but it doesn‘t always. Useful for govt to intervene to separate uses. property would be inalienable. Karkkainen → Zoning protects homeowner‘s consumer surplus. In addition to your land property, zoning creates certainty that intangibles will remain the same. These intangibles aren‘t reflected in value of the property, so zoning protects them for you. Want restrictions to protect your neighborhood from changing. Critique: quality of schools, better parks, facilities. Economists include these intangibles in the price of your home. It privileges existing homeowner‘s over future owners. A neighborhood sense is tied to personhood. Zoning doesn‘t just adverse affect your property value. It creates a homeowner consumer surplus in home and neighborhood. Neighborhood commons (sidewalks, parks, churches, theaters) → intangibles that make up the character of the neighborhood. You buy the actual property and the neighborhood commons. Not all neighborhood differences are reflected in property. values. assumes market prices don't fully reflect indiv. value that residents put on their property Zoning is more democratic b/c the representative body meets demands of residents. Critique: it‘s only limited to current residents. People move in 1st, then pass zoning ordinances to their likes, and usually these people are of same SES. When talking about taste, it corresponds to class. Critique: developer assigns zoning, so people won‘t have a choice to begin with. Epstein: govt is bad. Govt thinks only one thing should be in an area. But people like mixed uses, may want a Blockbuster in their neighborhood as opposed to drive far away. Zoning misunderstands how people want to integrate activities for mixed uses in land. Zoning discourages mixed uses. Zoning boards can aggravate coordination problems. Hard to coordinate how people want their neighborhood. There are alternatives to zoning: nuisance law AND servitude law (people would agree to covenants). Problems w/covenants: there are lots of legal problems w/covenants. Privity reqs To impose covenants would be hard to do. Argue changed conditions. Free rider problem (sign covenant but don‘t want to spend time enforcing it) Critique: Epstein assumes that entitlement to decide what to do w/land should be w/ the property owner. But in zoning, some of this right goes to the govt zoning authority. Have to look at initial property rights, mult. Uses, correction covenants, single owners, and forced exchanges Zoning is expensively and timely. Market forces also shape land patterns 58/71 Ellickson: zoning puts high cost on minorities & people w/ little political power. Negotiating covenants is hard to do --- Enforcing covenants is expensive. Thinks nuisance damages are the way to go. HA & CICs are the best thing Need some land use regulations (transaction costs are too high), but it‘s more efficient to enforce municipal land use regs through judicially determined nuisance damages and pre-set fines. Zoning is specific deterrence. Complying might be more expensive than nuisance costs. Alternatives are better b/c mandatory zoning stds impair efficient urban growth and discrim against migrants, lower classes, landowners w/ little political influence 3 costs: nuisance costs: costs of harmful spillovers admin costs: public costs of administering and enforcing land use regs; private costs of dealing w/ other landowners and authorities prevention costs: opp costs of foregone development; out of pocket costs to reduce nuisance costs What minimizes sum of these 3 costs is most efficient. Critiques: ct won‘t grant damages for homeowner consumer surplus. Nuisance law won‘t protect this ―goodwill‖ that can‘t be valued. In big cities, people don‘t share common values. Fischel: zoning is fine as long as done equitably. zoning is in response to market failure. But don‘t hold zoning to efficiency stds b/c they‘re there when things are efficient in the market. ↓ municipal costs, less need for enforcement. Don‘t need to deal w/enforcement costs. Lower tax rates, preserve open land & community social values. Zoning only helps people in the community, produces higher property values. There should be equitable benefits, be distributed equally, achieve maximum benefits. Zoning has to be clear and focus on efficiency. Sometimes it‘s good to have certain plants b/c they‘re efficient. Critique: Rawls: should benefit everybody. Util: maximum benefit will be defined by money. Income produced on land and reflected in higher property value. But if your goal is high property values (Fischel says this is one goal), then the land can‘t be used for low- income. He wants equitable distribution, but this won‘t lead to high property values. Allocates resources more efficiently, but Fischel says zoning shouldn‘t be viewed as efficiently as allocating resources. Zoning is an attempt to redistribute property rights from the landowners (who own undeveloped land) to other community residents. Zoning is how the dominant political parties get control over landowner‘s property. Coase: 1) initial entitlement in restriction doesn‘t have to be at max benefit point. 2) fundamental issue isn‘t whether regs are necessary. Some restriction is needed. Which is the most equitable restriction and which one will lead to max benefit point? Transaction costs: will always be there. Need info about benefits to community, impacts among neighborhoods. Are zoning ordinances good policy? Zoning bad: It‘s class-oriented; The market would be more fair (even to poor) if they could participate in certain communities Zoning is good: People don‘t want factories in residential areas. People should be allowed to live in certain places and keep the character of their neighborhood. Zoning can be used to prevent free speech (can‘t restrict people to have signs on lawn). S.Ct can zone out porn shops. Conflicts w/ right to association. Some places don‘t allow students or extended family to live there. 59/71 Exclusionary Zoning Deliberately excludes low and moderate income people. Achieves racial segregation. No more zones that say blacks or Asians can‘t live here anymore. No more direct racial zoning. Zoning can exclude people through these forms: Large lot zoning, prohibit apts, mobile homes, multi-bedroom apts, overzoning for nonresidential uses, expensive building stds (which house isn‘t affordable). Restrict all residential operations. Why have excl. zoning? To keep out the poor b/c they use a lot of public facilities (↑ demand for public services), but they don‘t contribute much property tax revenue. (The poor impose burdens but still take same amt. of services) Want low marginal tax rate and high service benefits per family relative to tax rates Strict zoning laws increase housing prices (keep the poor out) Then there‘s residential segregation by income and race Disparity in housing opps and jobs for poor, unequal educational opportunities, public service disparities Certain people don‘t want to destroy community character → preference for expensive homes Reinforces class differences, keeps them out of the neighborhoods. Takes place more in suburbs. The best profit-maximizing way for a homeowner community is to: Not build modest-priced housing for school-age children (they suck up free education, yet property taxes have to be uniformaly assessed) Attract blue-chip companies Costs can‘t be spread around: Urban crisis: the poor stay in the cities. Suburbs are like ―tight little islands.‖ Cts: some statues say to refrain from exclusionary zoning to advance general welfare, but it‘s how ―general welfare‖ is defined (cts usually construe to promote the general welfare of the richer peoples). Hard to decide what zoning is exclusionary. Cts aren‘t able to change land-planning laws or raise taxes. If abolished exclusionary zoning, people might just use covenants to achieve the same goal. 60/71 PA struck down exclus. Zoning b/c it violated due process (state doesn‘t have police power over them) A zoning ordinance can‘t have purpose to prevent new people from moving in b/c they want to avoid future burdens on their public services. Surrick: struck down excl. zoning F: Surrick wanted to build multi-family dwellings in a certain zone that predominantly allowed single family homes and gave 1% of land to other uses. Held: Ct granted allowance to build (can‘t exclude certain groups of people). Can‘t have exclusionary zoning, doesn‘t promote public welfare. Surrick wins and gets to build, but there will be other township regulations that will prevent him from building. Township has to provide its own fair share of housing. Under police power, Zoning is OK but Ordinance has to bear substantial relationship to health, safety, morals or gen welfare of community Each town has to provide their FAIR SHARE. FAIR SHARE TEST: Requires local political units to plan for land-use regulations that meet legitimate needs of anybody who wants to live in its boundaries (politicians have to let anyone who wants to live there) Problem: this makes a ct into a legislature. Scope of review limited to determine if zoning formulas is a balanced consideration of factors that relate to housing needs 1) Is the community a logical area for development and growth? 2) If it is, look at present level of development a. look at pop density, % of undeveloped land, available land for multi-family house development 3) Did the zoning has an exclusionary purpose? - Intent v. impact. The court used to look at exclusionary intent. But it‘s still relevant, but look at exclusionary impact. - Fair share test looks at actual impact of zoning ordinance on availability. Looks at intent still. - If land is prime for multi-units, but it‘s not being used, then ordinance will be exclusionary Difference b/t a std. and a rule. This seems like a standard, not a rule. Doesn‘t say if plans will be approved or not by the court. If you‘re a township planning board, it‘s hard to do planning if you have to meet Fair Share test. Have to figure out what present pop wants, how many people live in single and multi-family housing What future people want (hold hearings, get testimony from public, look at similar areas) Are there new companies or factories coming in to have more jobs? If you‘re a developer/ Plaintiff b/c you want to build, your arg: Look at township, see what parts are appropriate for development. If building affordable housing, it‘s not worth pursuing a case w/ high discovery/litigation costs. Township might argue their info is propertyrietary (but they shouldn‘t) Future Residents: people who want to be residents (3rd interested party) 61/71 Fernley F: Guy wants to build multi-unit dwellings, township only allowed single/2-family. There was no provision for multi-units at all. This isn‘t a good fair share case for the region b/c It‘s not a logical area for development. Zoning is a local issue. Single-family the best thing and everything else is deviant. Local govts Hierarchy of what townships want: Single-family → 2fam → multi-family → big apts → public housing → big Commercial → light commercial → heavy comm. (Microsoft) → (Blockbuster-lots of traffic) → (lead co) Issue: should fair share analysis be used when housing totally prohibits a multi-unit dwellings? Surrick only used a partial ban on a certain type of housing. Guy‘s arg: the land is not a logical area for growth and development of multi-units Held: zoning ordinance is exclusionary b/c township didn‘t have justif. for total ban on multi-units fair share test shouldn’t be used for ordinances that totally prohibit apt. buildings. Permitting new construction results in ↑ in community population. But demand in housing isn‘t correlated to pop growth. Township failed to prove that total exclusion of apts is reasonable. Procedure: Cts will view this ordinance is suspicion b/c there was a total ban. Then burden shifts to township to show that its ordinance was reasonable in the interest of welfare and public health . In fed ct: Exclusionary Zoning isn‘t a violation of C. In state ct: they have struck down zoning, there have been diff. stds than Euclid. Relief: the winner of an unC challenge should let winner develop, subject to reasonable restrictions. If it‘s suitable to build on the propertyosed site, and there are no health/ safety concerns, let them build. Ct specifically granted relief so township couldn‘t impose obstacles. You get the variance. POLICY: If they win, it will provide access to this area. But each developer would have to bring its own suit If you want to live in this township, do you have standing to build? If a racial minority, you might have a right to sue. But it‘s not your fault the people who bought suit in these cases already owned undeveloped property. Cts are more comfortable allowing developers bring claims b/c they have a real stake in the value of their property. Generally, cts say no. Poor people aren‘t suspect class. Doesn‘t mean the housing will be built. In order to have standing, have to prove damages. People who want to move there don‘t have any damages that courts can compensate. Future residents don‘t have standing. Mt. Laurel case: Future residents: Racially discrim, housing expensive for minorities. Ct gave them standing for valid claim. Held: each twp has to meet its responsibilities. Townships can exclude but not everybod y. Fair Share test. Exclusionary zoning in itself is NOT discriminatory. Each twp has to give its fair share. NJ S.Ct cases 1. all twp have to provide fair share 2. no housing had been developed. Twp have to provide available affordable housing. Had magis oversee what twp did. State created its own fair housing act. 3. Approved legis. act, recalled magistrates. Admin system will be run by the state so NJ can provide affordable housing. 62/71 NEXT SECTION INTRO: More like a nonzoning regulation issue. Zoning was agreed to by govt reps, then enacted, so there‘s a system of zoning. But growth control and takings cases seem ad hoc. → didn‘t target any group of people. One legal issue raised: whether or not they‘re fair, do they violate EP? Should diff stds be applied to zoning, growth controls, takings? Yes, law assesses them diff.ly, but we‘ll study Why? GROWTH CONTROLS Have these to restrict or stop residential and commercial development. Preserves resources and small-town character, prevents over-taxing infrastructure like roads, sewage capacity Give Incentives: Tax breaks Bonds directly to farmers Strictly limit # of building permits to establish greenbelt zones (don‘t all more residential development unless there are adequate public facilities) Livermore case F: city won‘t issue anymore building permits UNLESS sewage, water, and schools are improved. City is concerned w/ booming growth, wants to stop development. Trade assoc. is suing b/c city is overstepping its police power, preventing people from moving into city. Issue: if an ordinance that limits permits b/c of lower public service stds is valid? Held: ordinance is fine. It must be unreasonable and significantly affect a group of people. Ct admits that outsiders are affected from coming in, but P’s didn’t prove ord. was unreas. Under Euclid, municipalities have a lot of power to zone. BUT, there are some limits (cited Mt. Laurel). Ordinance restricting land use is valid if it has a real and substantial relation to public health, safety, and gen welfare. Need rational basis for the ordinance. If ordinance is reasonably related to public welfare, it’s C. Zoning is a police power of the state, can have power but can‘t go too far. Who else has standing? Ct acknowledges that other people outs ide the municipality have standing. In previous notes, we see that outsiders don‘t have standing. Have to look at the everyone affected, not just the residents of the city. Municipalities aren‘t isolated islands. So the real test is if the ordinance re asonably relates to welfare of whom it significantly affects. If affects whole region, look to see if ord. is related to the whole region. POLICY Problems: hard to prove this standard. Std is vague. If you‘re govt, worried about too much litigation. BUT, people won‘t bring suit b/c it‘s expensive. A Philly resident won‘t be interested in suing in CA. Reasonableness and ―significantly affected‖ are vague stds. Defining a class will be hard. Developers may say that they have a claim b/c they‘re preparing to build. But others won‘t have a strong claim. Presumption that municipality is right, so P‘s (developers or other citizens) have to prove their case. Pritchett: Ct has to look at factual stds, find out what steps Has to look at what municipality is doing, but P‘s have to prove 1) it‘s [sewage, crowding] not really a problem; 2) municipality isn‘t doing anything about problems. (hard claim b/c not likely town isn‘t doing anything); 3) gathering facts. 63/71 TEST: Whether a challenged restriction reasonably relates to gen welfare. 1. forecast probable effect and duration of restriction → which facilities fall short, when improvements can be completed 2. identify competing interests by the restriction → city residents v. outsiders 3. see if ordinance reasonably accommodates the competing interests → ordinance has to have real and substantial relation to legis. intent. Dissent: growth controls are usually invoked to preserve nature (beaches, lakes, mountains), not for the suburbs. Looks like the real purpose of ordinance is to keep people out of the city, that‘s why they‘re banning city growth. There‘s no stop-date for the ordinance. Could last forever. Housing is clearly marked w/ public interest. Total exclusion of people from a community is immoral and illegal. This std isn‘t reasonable b/c there‘s no incentive to solve the problem. Twp should have a solution that will help them solve it, have ordinance where city will build, fix sewage problems. (BUT in reality, township wants a static community). Thinks this should be the test (less deference): 1. absolute prohibition on housing development is on its face invalid 2. twp should be held to fair share a. local regs that limit pop are invalid unless community absorbs reasonable share of population pressures b. Problem: Even if have a fair share, P‘s still might not get anything. Dissent: if one town can do this, other towns will put in growth controls. Belle Terre: twp can preserve community; twp can zone out group homes. This is SCt law, but housing is diff./ special, putting limits on it are subject to strict scrutiny. If twp said no businesses, that‘s fine. Twp can‘t exclude people. All towns have obligation to provide their fair share. POLICY: Huge Problem: bad sewage is a problem and it should be an incentive. BUT twp probably showed this isn‘t that bad of a problem. → how much should the twp do? Twp should do more : if they ↑ school size, developers want to move in, as soon as they fix the problem, the slippery slope will be that twp should keep moving in. Twp shouldn‘t do anything: their arg. POLICY: What do we think about growth controls. If you can‘t meet stds, then don‘t get permit. BUT, twp doesn‘t want to look at every permit, so passed a blanket banning statement. For: if twp was broke, its first priority is to its current residents first. BUT, the market would take care of the crisis → developers won‘t want to build, so there won‘t be a problem of growth control. Law favors interest of township. Should apply even-handedly. Will say no to multi-unit dwellings, but yes to fancy co? Against: This forces one town to accept an overflow of another town. There are structural problems w/ zoning. It applies to small twps, but has broader impact. Appropriate for courts to be involved? There are other ways to deal w/ this problem: exactions. 64/71 Ellickson on Suburban Growth Controls Lots of groups can be hurt by growth controls. 1) Existing owners: they do the excluding, have interest in barring competitors If demand ↑, supply is static → rents will ↑ b/c of shortage. 2) Suppliers of new housing: land is inelastic b/c it‘s immobile. Will have large costs. 3) Housing Consumers: if demand ↑, price ↑, surplus ↓. Affected the most: 1) current tenants who like the place too much to move 2) people who move into it in the future. Not so affected: 3) people who leave; 4) immigrants who don‘t come in b/c too expensive 4) Competing Housing: more attractive to consumer, but demand for it ↑, price ↑. Existing consumers are hurt, too, b/c new people outbid rents Fewer voters, easier to control, have an agreement. Should we privilege certain groups? Ellickson doing it for 1, 2 Doesn‘t care much about people who want to rent, care more about people buying a home. How can we allocate rights and resp? Ellickson: Govt should prohibit subnormal activities. If prohibiting normal activities, then govt has to pay just compensation or if not, then declared illegal. Subnormal activities should be regulated. Normal activities 65/71 TAKINGS CLAUSE 5th A, applicable to States by 14th A: private property can‘t be taken for public use w/out just compensation. 5th A: nor shall private property be taken for public use w/out just compensation don‘t want govt making indiv bear burdens the public as a whole should bear in fairness and justice → POLICY issue (after Penn Central Case) Can‘t give up your C right for a govt discretionary benefit Pritchett: Land use controls are problematic. Zoning, Growth Controls, exactions (thinks are the least problematic). Courts struggle less w/ zoning. EXACTIONS 1. Dedications → roads, sewers, schools (subdivision exactions) Poss. solutions to growth controls. Developers should build them, then turn them over to govt. 2. Impact fees Helps finance twp facilities required as a result of develop.. Developer has to pay so twp can ↑ services. Pay twp damages in decline of services. (construction or expansion of water/ sewage). Need relationship b/t fee and additional burden imposed on public facility. 3. Linkage programs Assumes new commercial dev. displaces existing private land OR ↑ demand for low/moderate income housing that market won‘t supply. Pay fees for construction. Deposit linkage fees in fund to build low/mod income housing. Ex. if you‘re a developer in SF, have to build affordable housing. SF is gentrified, so city needs affordable housing OR give city $ so they can build affordable housing. Impose exactions to 1) shift to the developer the costs of public infrastructure that develop. requires; 2) mitigate neg effects a develop. may have on neighborhood (↑traffic, noise, environ. effect) → encourage efficiency by forcing developer and its customers to internalize full costs of harms; 3) growth enablers: allow growth that might be stalled by growth control measures; 4) discourage all growth, prevent certain kinds of developm. to preserve exclusivity; 5) twp captures part of developer‘s profit, redistribute wealth from developer/ its customers to others, prevent developer from collecting wealth Nollan case → 1st case where ct said you can‘t have exaction F: homeowner wants to build a home on coast. City said ok but ONLY IF you build a bridge so public can access the beach (concerned w/ beach erosion.) Nolan had problem w/ requirement. City arg: People feel psychological barrier by not seeing the beach. Held: the city CANNOT have this kind of exaction. The condition has to have a substantial nexus to the problem govt is trying to regulate. Govt purpose to prevent beach erosion, ocean view blockage. Requiring Nollans to build bridge has nothing to do w/ erosion. Psych. barrier not enough, could be valid purpose, but not enough. Put a high burden. If you‘re a town that wants to regulate land use, have to say, regulation will ameliorate harm that‘s caused. Need concern b/t harm and regulation. To survive C challenge, exaction must mitigate specific adverse impacts caused by develop.. Nexus reports: insulate exa. from JR by showing cnxn b/t exa. and govt purpose in having it POLICY: fair to have this exaction on Nollan? Should there be a nexus requirement. Exa is wrong (this is taking): city extorts $, exa. helps pads budget. City could‘ve bought her land, imposed burden on this family. Coastal Commission could‘ve said Nollan can‘t build. (Then she can‘t claim Taking). Comm arg: giving a view is a relatively minor req. Exa is right: Nollans get free private beach w/out exa, & beach is big benefit. 66/71 Prevents tort: Role of nuisance law to these cases. Nollan wanted to initiate nuisance, should have to pay. The winner gets to use $ however it wants. City could‘ve said develop. causes damages, sue as a tort, then use $ however it wants. Pritchett: appropriate for Nollans to bear problems? Govt does this a lot, not unusual, but doesn‘t mean it‘s right. Answer depends on your philosophy of role of govt. Govt should be active in making peoples‘ lives better → exa are OK b/c it helps further this goal. Exa are just one way of approaching problems. Govt should always provide services (pay taxes) → then exa not good b/c everyone pays certain amt, everyone gets same services. Singling people out and getting services is not OK. Been problems: balance econ. devel w/ preserving environ and ↑ quality of life for community (Ct doesn‘t want exa. for bad purposes (cash extortion), doesn‘t want govt to do bad things) Hard to define a bad purpose: 1) not a legit state interest; 2) even if a legit interest, it‘s not related to purpose of what power should serve May be more efficient to let damage be done and then impose damages to internalize costs of activity. Impose costs on builder If Exa. remedies harm, it‘s fair. If exa. isn‘t related, no causal cnxn → social evil, PO should pay. Exa are form of damages, developer should pay for damage of develop. Exa. aren‘t a big deal. Problem w/ Nolan: criticizing nexus, $ goes to same pool or community. People pay into govt → govt decides to allocate. (it doesn’t matter if exa relates to the specific damage it causes) Worried about certain groups being singled out, don‘t want all of govt to be run by exa. If develop. didn‘t damage anything, but twp should still call for it Pay exa to enter community, but still have to pay real estate taxes Govt redistribute wealth → Govt sees exa. as source of funds, don‘t care about the land → govt will overregulate. Twp can tax citizenry at low rate and just tax developers. Everybody should pay same amt (but diff. groups do pay diff. amts.) Twp redistributes wealth by charging more than costs of harm. Twp relies on these to balance budget. Prevent devel. that would‘ve been beneficial. Remedy more costly than harm. Been: exa. aren‘t a big deal b/c Communities want to develop, don‘t want to punish developers. Competition arg: 1) developer can go elsewhere w/ cheaper exactions. (they could leave) 2) can bypass legis. body and go to voters for approval 3) has to compete w/ higher levels of govt 4) could put $ in comm. or industrial buildings that have less exactions than housing devel. → Market works over time, so don’t need to respond. Counter: Exa. are a big concern. Developers need to be in hot housing demand markets, don‘t want to pull out. Govt doesn‘t have control over these places. Housing demands are high, higher rents (in SF) Assumes people want develop., but Livermore didn‘t want anyone there. Judges give their opinion and they don‘t have special knowledge. 67/71 Dolan → when should govt pay compensation? No legal scholars happy w/ these cases. Epstein: Should never be able to have exa. Ct gave leeway to govt. Govt can have exa if you have some nexus. Somewhat Liberal (Been): nexus is too burdensome for govt. F: twp conditioned permit approval on dedicating part of property. for flood & traffic control. Dolan wanted to expand her hardware store. City said she can‘t build in floodplain and has to dedicate it to city. Dedicate pathway for bikes and pedestrians. Dolan asked for variance→ denied. Issue: what‘s the degree of connection b/t exactions and develop. impacts? If city violated 14 th A. by refusing to allow Dolan‘s construction unless conditions are met. Dolan’s arg: deprives person the right to exclude others (essential stick in bundle of rights). She gets no special benefits, not causing quantifiable burdens by her new store. City: there‘s legit public interest. Govt: more efficient b/c they need public bike path, so it‘s better to have govt own it. They might have diff. stds. of care Held: Dolan wins. City didn‘t meet its burden in showing reas. rel b/t flood easement and Dolan‘s building, didn‘t show that bike traffic would ↑ from building Demands were dispropertyortionate to what the city wants to solve. This is regulatory taking, not typical zoning case (zoning regulates property. in general. This was spot-taking/ spot-zoning) → 1) This is an indiv. parcel, not areas of a city; 2) taking b/c there was actual req to give parts of her land deed to city. City would give variance only under these conditions. Was this an unC condition? Principles for unC conditions: 1. Has to be an essential nexus b/ t damage and condition imposed 2. Rough propertyortionality test: city has to make indiv. determination that exaction is related both in nature and extent to impact of develop. (reject reas. rel test) rough property b/t damage caused and condition imposed Before this case, only had nexus req. Ct adds addt‘l req. b/c there is a nexus (no nexus in Dolan). City goals in preventing flooding, access were legit. Land use isn‘t a taking if it substantially advances legit. state interests and doesn‘t deny PO econ. use of his land Dissent arg: biz reg is a strong constitutionally valid demand Her property. is commercial in character, so right to exclude others is already compromised. City has rational plan. Burden of proof: shouldn‘t be on the city to prove its exa is a response to a real problem, but should be on Dolan to show that exactions would impair her land value. Court is micro-managing issues. Cts will be intimately involved, so in the future if zoning board wants to deny, it has to look for an exact fit, do a study of the problem, think about all implications. → zoning board will have to prove it has done all these things to win Even if the city does this, there‘s uncertainty. Should be left to legislatures. Nollan, Dolan important b/c these cases are a return to substantive due process. Ct doesn’t grant DP for economic rights p. 1064 problems 2-3 68/71 REGULATION OF USE Penn Central Transportation Co v. NY (Dolan overrules this case, but think about it) F: Penn Central owns Grand Central. Tried to build offices above, got denied. Sued that the Landmark Law constituted a ―taking‖ of property w/ no due process. Did a taking of a historic landmark occur w/out just compensation? Why preserve historic landmarks? imp. b/c fiscal crisis, Penn Sta. torn down, PC in major debt: 1) landmarks have been destroyed w/out consideration of the values represented 2) structures w/ special historic, cultural, and architect signif enhance quality of life for all enhance city‘s attraction to tourists, stimulate business, for education & welfare of city Think about property values, what area you want to live in. Keep exterior in good repair, alterations have to be approved by landmk assoc. Factors to see if “taking” occurred: Economic impact of the reg. on the PO, extent reg interfered w/ investment-backed expectations: did reg interfere w/ investment? Character of the regulation Reasonableness of interests gen welfare What does reg contribute to gen welfare Physical invasion of property (not interference from public program to promote common good) Restriction on property will be a “taking” if reg isn’t reasonably necessary to promote a subst. public purpose. If restriction doesn‘t serve a subs. public purpose → taking occurred Balance Property owner‘s interest w/ public interest in maintaining the structure. Make sure PO gets economic return (tax exemptions), so doesn‘t have economic hardship NY law: if PO can‘t develop to full extent allowed by zoning laws → transfer rights to other parcels on the block! Arguments Penn central arg: Landmarks Law ―took away‖ gainful use of air rights, valuable property interest Can‘t break up piece of land for rights. All or nothing. Look at extent of interference of the whole parcel (Taking doesn‘t divide single parcel into discrete segments & figure out if rights of one piece have been violated) Arg: its operation has ↓ value of the site Diminution in property value doesn‘t establish a taking. Would invalidate all landmark laws. Arg: landmark laws are more severe, singles out people, so it‘s a taking. Burdened more by landmark law tan zoning law. Zoning applies to everyone. Landmk Law only applies to 400 sites. Landmark law is like zoning. City had a plan. In future, other buldings will be designated landmarks. There are zoning laws that severely affect others. → doesn’t target indiv. Should the regulation just be eminent domain? Not a condemnation b/c Eminent Domain takes all property. Can still use space way it‘s still used. Held: no taking occurred. 1) Restrictions are substantially related to goal (promote general welfare). 2) Permit reasonable beneficial use. 3) Allows for further enhancement. Penn Central doesn‘t lose economically. They still get to use it the way it was meant to be used → primary expectation intact. They get reasonable return. Haven‘t been denied using the airspace, just their present plan denied. Can still build. They could‘ve transferred their rights and built office next door. 69/71 Criticism → majority Focuses too much on public welfare. Doesn’t really look at C. It’s still a taking, and any taking requires just compensation. Did they lose something they had a legal entitlement to? → takings law merges taking and compensation. → once you allow zoning (Euclid), it‘s been law so long that there‘s no problem (yet problems w/ Euclid) → take land, but give tax exemption → another way of giving compensation Dissent: landmark law imposes more regs than zoning. Property owner has affirm duty to preserve property at own expense. There is literally a taking, PO can‘t build on it. → subject to nonconsensual servitude Arg for zoning: ↓ in value will be offset by ↑ in value that comes from the restriction. Everyone in zone is affected, common benefit. The burden should be borne by the whole public, not jus the indiv. Property rights aren’t just the building, it’s the bundle of rights. Take away one, you deprive someone of their property. POLICY: Was this a taking? Should PC get compensated? Majority: there was compensation b/c PC could transfer rights. Not a taking: Grand Central is bustling, lots of economic return. Inappropriate behavior to tear down certain bldgs. Have a right to own but not use it in any way they want. Professor Sax Penn Central represents trend that people are more distrustful of develop, resulted in a redefn of property rights. What are property rights? To Sax, PC case makes sense, don‘t feel bad for them. PC property rights changed. PC Majority: not a property right anyway, so ct didn‘t take away anything. Property rights are changing b/c needs of society are changing. Assume private ownership will allocate and reallocate resource to socially desirable uses. When don‘t allocate to ―correct‖ uses, begin to lose faith in system. Private mkt could protect Grand Central b/c people think it‘s important, so let it stand. Forces people to go to political process so legis can protect property rights. (BUT takes yrs to affect political change). Sax: in long run, political process would work. Less bldgs torn down. Problems w/ private market: Corporations might not value these issues highly. → Penn Central can‘t protect it (it‘s bankrupt). Indiv can‘t get the land. Coase Free-rider problem: people won‘t disclose their true valuation, and people don‘t want to pay for it. People ask govt to intervene. Situations where we won‘t let private market work. Private market can‘t provide low-income housing. Homeowner‘s Assoc sprung up → privatize govt Pritchett: figure out a way for private market to work in 30s. Growth control prevent develop so broader public benefits. Deny indiv PO to develop to protect public good. Water resources: water rights were privatized before. But govt wasn‘t efficiently regulating water resources. Exclusive and non-exclusive benefits People liking historic landmarks is an intangible benefit. 70/71 POLICY on Rhenquist std: landmark law requires a few to bear burdens of many. Is this fair? NO: people make investments, can‘t destroy their $-making scheme. Maybe don‘t destroy it, but give them tax exemptions. YES: it sucks, but for all the people, there‘s aesthetic value. LUCAS v. SC Coastal Council F: Lucas bought strips of land, wanted to build homes on the beach. Act passed that no homes could be built on the land. His land is valueless. Before the law, he could‘ve built homes. Was this a taking? State purpose: to preserve beaches (but legis. was probably motivated by not wanting anymore development) → When do regulations require compensation and when don‘t they? Held: State ―took‖ his land, has to give him compensation. Get compensation if: 1) owner suffers direct physical invasion of property. Govt physically takes land, has to pay. 2) regulation denies ALL economically beneficial or productive use of land. Govt often denies PO the economic benefit of the land. (Nuisance law says you can‘t build a factory b/c it‘s dangerous.) Commercial owners should expect regs will change that affects their biz. Scalia: BUT property regs are diff. from commercial regs b/c Property has inherent rights. Deserves extra consideration b/c it’s in the C. Court figures this out by: General Rule: govt doesn‘t have to pay if they try to prevent serious public harm (even if it completely deprives a person the economic value of his land.) But govt determines harm through the CL. → If CL says it’s already a harm, then it’s a harm. If your neighbors could‘ve sued you under CL (or nuisance law), then govt can regulate by preventing you from developing. Have to see if Lucas would have been allowed to build under the CL. He could‘ve built. Neighbors are using the land for beach homes. But the land might have been completely void of economic value? Can still use it for other reasons. Depends on PO’s Reasonable investment expectations. pay No compensation pay Compensation - any physical taking denial of economic x benefit nuisance, CL - no CL principles CONCLUSION: When there are CL principles that would allow the reg, then the reg is valid. But if reg doesn’t have any CL principles, then it’s a taking → so pay compensation. POLICY of this ruling: Problem: this std is really restrictive. Govt should take land and not have to pay: preserving wildlife, but they‘ll have to pay if there aren‘t CL principles behind it. Bright-line rule: State can take any land and not compensate if it‘s preventing land that‘s injurious to public health, safety, or welfare. (doesn‘t matter how adverse financial effect) CL evolves every time a judge renders a decision. 71/71 Who determines what property rights are? Sax-Brennan: property is a societal function. Shapes relationships b/t people. When society changes, property rights change. a. Radin might be ok with this view, not the individual view. She puts emphasis on value to person. Scalia view: $ amount. b. Trust society Scalia-Rhenquist: property is individualized, really about $. State has burden of proof to change property rights. a. Lucas: state has burden to prove. b. Trust individual We’re on a continuum of how much protection PO should get. Cts have to balance what kind of protection people get. no protection full protection no compensation (private side) compensation paid (public side) TAKINGS LAW confused. Really fact-dependent. Can we set a bright- line std? Problem: future Ps don‘t know what factors are important for potential suits If have compensation, then public should buy the land. How much harm is caused? How much is PO‘s investment value is impaired?
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