PROPERTY OUTLINE NGT – SP’02
IX. WHAT IS PROPERTY
1. 2. 3. 4. 5. 6. right to use right to transfer right to exclude others from occupying or using the “thing” right to alter right to possess right to enjoy fruits Problems with “bundle of rights” is that none of them are required. Ex: owned wetland, can‟t use or build on it. Historical preservations can be owned, can‟t be altered.
A. Property is a bundle of rights:
Barry Bonds: who owns the baseball? One idea: Mr. Hayashi owns ball - strong clear possession, not guilty of the assault on Popov Standards: baseball standard, hunting standard Problems with idea: invitation to a brawl. Popov‟s counsel: baseball is not life, rules shouldn‟t apply to society Lots of extralegal ways to deal with these issues without having to go to court
B. Four types of institutions that regulate/govern property
1. 2. 3. 4. background legal principles social norms – way that society organizes itself private contractual relations political institutions Property rights – rules to allocate scarce resources (focus on land rights) Property rights are rules that structure relationships over people and things Property is rhetoric: a language used to decide when and if people have rights in relation to others in regards to things
C. Philosophical Perspectives
Four competing justifications for private property: i. John Locke – Natural Rights Property in their own person – control over your body Problems: not complete control of your body: drug use, selling organs wasn‟t an issue in 1698 Property by acquisition: Property is that which a person removes out of the state of nature and mixes his labor with it – if you pick up acorns on someone else‟s property is it considered yours? Property rights by acquisition – can pick up only as much as you can consume. Problems with theory: Not law today, you can gather more than you need and store them. Less common space nowadays. If two people want to use the property for different things, i.e. collecting feathers vs. collecting acorns, the first possessor gets the right to pick acorns but to not allow the second to pick the feathers may hurt society as a whole. Role of government according to Locke: to protect interests once they‟ve been established ii. Professor Radin – Property and Personhood Based on Hegel‟s theory of society: people are created in their relation to others, creation by society.
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Property is essential, a person becomes a real self only by engaging in a property relationship with something external. Cannot be a fully formed person without property. (1850s, industrial revolution occurred, involves consumption). ongoing relationships with property are essential for personhood - the will is embodied in things suggests that the entity we know as a person cannot come to exist without both differentiating itself from the physical environment and yet maintaining relationships with portions of that environment. Law should protect certain interests group property relationships are important – Radin: claims of property by group are important certain types of property are special to personhood, ex. Property in one‟s body, one‟s home, wedding ring – property has different relationships to different people, i.e. wedding ring to spouse vs. wedding ring to dealer. Discrete units are more important than total assets – losing property is more disconcerting than losing value of wealth – certain property is fungible, can be replaced by money..other property is personal, i.e. wedding ring, that would be disconcerting to losing it. Government should be able to take someone else‟s property – things to consider – value to the person, interest of property to person things tied up in personhood vs. fungible things When should society be allowed to come in and take people‟s property? House should not be taken if it‟s a home…however taking of an apartment building if it increases society‟s wealth in general then government shouldn‟t even have to pay compensation. Problems: Is certain property so bound up in personhood that it cannot be bought? Probably not. Could this actually be applied by courts? Arbitrary to determine what is considered so important and personal to a person. Standards that can be set up to determine personhood objectively? Objective list of personhood in property: o Type of dwelling, Uniqueness/built on their own, How long have they been there/been in the family, Significant events in house, Location, on a beach, etc., Relationship with community, Specialized, e.g. gardens Personhood vs. economic efficient use of land Ex. Old lady owning a lucrative piece of land full of oil. Overall social benefit vs. personhood.
iii. Rawls Theory – distributive theory To determine the just allocation of benefits and burdens of social life, ask what distributive principles would suitably disinterested persons choose Veil of ignorance – exclude from the minds of those choosing principles of justice all knowledge of their own abilities, desires, parentage, and social stratum. Difference principle - the fundamental institution 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 social class. Ideal contractarian state. If they were ignorant, they would choose what was most necessary to them. Everyone needs a little bit, so we share/contract so everyone has the basic necessities. Cannot be a person without a minimal amount of property. Under a veil of ignorance, people aren‟t likely to take risks because they are willing to give up a lot to at least have something. People rather have the guarantee of something rather than the opportunity to succeed or fail. Wilson‟s critique of Rawls - Believes that not all people are risk averse, they are risk takers. Rewards should be proportional to effort. Some people are more skilled, smarter than others. (Pritchett: doesn‟t risk averse/risk takers depend on who you are? Those on bottom will buy Rawls theory those on top will not) How to apply Rawls theory to the real world o Theories we‟d want to establish – Idea is to protect the needy by allocating assets. E.g. Democratic socialism, state capitalism, communism o Laws to include that support Rawlsian state – special taxes, welfare programs, rent control, subsidized low income housing
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RECAP Hypo1: two people claim a piece of land, one has used it to build a home and another has used it to hunt to feed his family. Locke: who was first on land? Radin: who has more personhood? Rawls: minimal necessities, perhaps both have rights? Hypo2: second person wanted to cultivate the land to sell food to feed the area people Locke: whoever was first still wins Radin: personhood of living there is stronger than selling Rawls: selling food is producing a public good, increases the general wealth of the public Hypo3: homeowner has the rights, and the gov‟t wants to take the land and condemn it to turn it into a recreation area Locke: whoever was first still wins Radin: personhood vs. greater societal wealth, compensation for personhood? Rawls: analyze whether recreational use is viewed as necessary, and considered a spreading of wealth Hypo4: homeowner has right, govt wants to condemn land and give it to a private auto mfr. Radin: one private party vs. another private party – harder to determine Rawls: depends on how much the transfer to the private auto mfr would increase the distribution of wealth Hypo5: homeowner has right and gov‟t turns land over to a political group that would create an estate for themselves Radin: not allowed, personhood is more important Rawls: not allowed, taking from the poor and giving to the rich
iv. Utilitarianism Want to maximize aggregate wealth in society as a whole. Not concerned with distribution of assets. Free market will ensure an efficient allocation of resources in the absence of market failure. Legal institutions are supposed to establish property rights, protect voluntary exchanges through contract and create incentives to use resources efficiently. Property rights help us use the property rights efficiently. o Ex. If you have a piece of land that farmer values at $1000 and some developer values it at $1500, the land should be sold to developer somewhere between $1000 costs. o Utilitarian argument: Private property is good, public space is not the best way to allocate resources. o Counterargument: humans do not only focus on utility, sometimes public ownership is better.
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Goals of Utilitarianism Society – maximize aggregate welfare, free market competition will maximize economic efficiency in the absence of market failure, legal institutions should enforce property rights and hold people to their contracts Problems with Utilitarian System.
Basketball example – pickup basketball game, first come first play. Winner stays on court. First come first serve rule is clear and fair. People set up own rules to efficiently allocate resources. I.e. if lots of people play at court, they play to a lower point system. Majority adjudication, winning team has some rank to adjudicate conflicts relating to court. Has nothing to do with the legal system. Generally there is no transferability of rights in line to play next. There is some sense of exclusivity in courts but in general there is an expectation that you can play, exclusivity doesn‟t really apply. There is no ownership (lacks universality) of the basketball court. The point: There are social norms that allocate rights to use property without the need for the legal system. Investment in the University of Pennsylvania – who owns UPenn? Everyone owns the school – investment in the ideas of the school and not the property Non-profit corporation of UPenn owns Upenn (universality, no one owns Penn). Penn is owned by a corporation but it cannot exclude rights to the use of its facilities. Penn can‟t just say “public can‟t use this”. Since Penn open its doors to a large group of people its hard for it to exclude and discriminate (lack of exclusivity).
D. Comparing Property Regimes in Different Resources
o Oysters o Tragedy of Commons. Private vs. Public property. In public – people take oysters and leave, don‟t consider replenishing the area. Solution suggested – allocate certain rights to areas, leasing the property (private ownership or public ownership with licenses), so it‟s to their benefit to replenish the resources. Lobsters o Issue of maintaining the ecosystem isn‟t as important in the lobster domain. Communal public ownership works because social norms and assumed regulations are stringently in place. Cohesive lobster groups, close knit. Social norms police themselves, hierarchy of fishermen. Problems: Wealth is aggregated in a selective few, reduced distribution of wealth. Perhaps stalled progression resulting in less efficient use of resources, no incentive to improve, mitigates against innovation. Excludes people that may be better fishermen. Point: without legal regulations, utilitarianism isn‟t the only solution, a quasiprivate property system may work. Organ Donations – currently is a Rawlsian system o Other values that our legal/social system care about other than maximizing aggregate welfare. o Moral issues exploitation – economic/social problems o Problems with the prevention of organ sales: there are people waiting for kidneys because of desperation, a black market exists for kidneys unregulated industry, people are taking a risk that they may not have to take if law changed. it works well in Iraq exploitation of the needy
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X.
ACQUISITION OF PROPERTY
A. Rules:
a. First-in-Time Rule (Rule of Capture): i. First person to take possession of a thing owns it 1. rewards labor
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2. protects investment in resources ii. A prior possessor prevails over a subsequent possessor
B. Acquisition of Land
a. Discovery of America i. Justifications 1. Discovery gave title to European nations which passed title to the states or to the US - Native Americans were not in possession of America because they were hunters that did not settle into permanent setting 2. Conquest gives title – Johnson v. M‟Intosh (property confers and rests upon power) ii. Native American Right of Occupancy 1. No title, right of occupancy subject to the control of, the sovereign Congress
Johnson and Graham‟s Lessee v. M‟Intosh ISSUE: Can Native American Indians give title to tribal land to private individuals? Who has title over land? FACTS: P, Johnson, granted land from Illinois-Piankeshaw Indians in 1773/1775. D, M‟Intosh, granted land by US in 1818. Who owns it? (Under Locke‟s theory – Johnson should get it since he was the first to obtain it.) MARSHALL‟S HISTORY LESSON: Indians have the right to use/occupy/possess the land but not the right to transfer the land. Europeans “discover” land. European governments transferred some land to individuals and once colonies set up, transferred to the state. After revolution, you still held title to your land. After that the exclusive right to purchase land was in states, and the states ceded some land to the US governments. Three levels of ownership: 1.) individual, 2.) state, 3.) US government. Ceded land to US government to give them a source of revenue by allowing them to sell off land to settlers to fund government. If settlers and Indians had a dispute over land, the government would step in to arbitrate dispute. Treaties made between government and Indians – giving up some land to get other land not a real contract because there was no real consent. MARSHALL‟S PRINCIPLES ARGUMENT: Principles: - exclusive right to purchase from the Indians resided in the government - discovery gave an exclusive right to extinguish the Indian title of occupancy, either by purchase or by conquest; and gave also a right to such a degree of sovereignty, as the circumstances of the people would allow them to exercise - conquering of land of civilized people still belongs to the original civilized people, exception here for the Indians because it is assumed that they are not civilized – not able to control their property properly: no title system, used land less intensively - Conquest gave the right to take property by “eminent domain” – have to pay compensation MARSHALL‟S BELIEFS: disagrees some with these principles: “However extravagant the pretension of converting the discovery of an inhabited country into conquest may appear…” Believes Indians were “compensated” by being “civilized” by the Europeans and by payment by money or land. HOLDING: Indian inhabitants are to be considered merely as occupants, to be protected, indeed, while in peace, in the possession of their lands, but to be deemed incapable of transferring the absolute title to others. M‟Intosh owns land because US not Indians owned it before. “If it to be indispensable to that system under which the country has been settled, and be adapted to the actual condition of the two people, it may, perhaps, be supported by reason, and certainly cannot be rejected by Courts of justice. Plaintiff do not exhibit a title which can be sustained in the Courts of the US. STICKS IN THE BUNDLE: Indians had the right to use, the right to enjoy the fruits, and the right to possess. No right to transfer, alter or exclude. BOTTOM LINE: The “civilized” people rule supreme a way to justify that the ends justify the means, a way for US to grow. At the time, the US government was moving westward, impinging on more Indian lands. Marshall is worried that the judicial court will be irrelevant if he rules the other way since the legislature and states would not listen to it. Marshall is trying to craft an opinion that protects some rights of the Indians.
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b. Dispossession of Southern Black Landowners - When is acquisition done fairly and when it isn‟t. i. Examples: 1. KKK attacked family, property folded into neighbors 2. Car dealer foreclosure acquisition 3. State foreclosed for back taxes 4. Government foreclosed for government use ii. Arguments that can be made for P: Duress. Theft. Abandonment by owners? Unconscionability, didn‟t understand the terms of the agreement. Equitable argument. Fraud, misrepresentation, other contractual arguments. Eminent domain argument of necessary compensation. Would argue that they weren‟t treated equally in terms of compensation. Descendents have a claim over ancestor‟s land. iii. Can you argue for the return of land as opposed to compensation? Specific performance? Substantial performance? Complicated vs. Simple transfers of land. Father to son? Sold to another? iv. Arguments against returning land and compensation: utilitarian argument of the efficiency issue, greater distribution of wealth, dependable and clear property rights. People that actually had land taken were dead, should heirs have the right to compensation or to land? Even when acquisition seems to violate our sense of fairness in the violation of law, courts often uphold property rights because they want to protect expectations that people have for property rights. Provides stability…if not protected it‟s a slippery slope opening up to an abundance of litigation.
C. Capture of Wild Animals (Pierson v. Post)
1. If wild animals are captured, they belong to the captor, must be captured 2. Justifications a. Competition – results in more capture of foxes b. Ease of administration – promotes certainty and efficient administration c. Created when there was a need to destroy wild animals, now the rule of capture, promoting pursuit and killing, leads to over-capture of fish and over-investment in capture technology
Pierson v. Post ISSUE: Whether Post, by the pursuit with his hounds in the manner alleged in his declaration, acquired such a right to, or property in, the fox, as will sustain an action against Pierson for killing and taking him away? What acts amount to occupancy, applied to acquiring right to wild animals? Trespass on the case (claim for damage by Post resulting from the consequence of unlawful acts of Pierson) LOWER COURT: at trial, judgment for Post, for appeal, judgment for Pierson. FACT: Post, with his hounds, pursued a fox. Pierson saw Post pursuing fox and killed fox. Hunting on wasteland ownership of land unclear. PIERSON‟S ARG: To create a title to an animal ferae naturae, occupancy is indispensable, even wounding will not give a right of property in an animal that is unreclaimed. No title in Post. POST: Occupancy, manucaption, includes pursuit. TOMPKINS: Pursuit is not enough. Quotes: Puffendorf, Barbeyrac, Grotius (legal commentators) and Justinian produced the law of the roman empire. Justinian says pursuit alone does not establish property rights. Puffendorf and Barbeyrac require possession or mortal wounding of wild animal. Grotius requires control, even if only by trapping. Based decision on these learned authors “for the sake of certainty, and preserving peace and order in society.” HOLDING: judgment for Pierson since “his act was productive of no injury or damage for which a legal remedy can be applied.” Fact that Post was chasing the fox was not enough to establish property over the fox. THERE ISN‟T A RULE OF LAW ESTABLISHED FOR CERTAINTY. DISSENT: should have submitted to the arbitration of sportsmen. Pursuit should be enough. Decision should have in view the greatest possible encouragement to the destruction of an animal so cunning and ruthless in his career. Goal is to get rid of foxes instrumentalist approach, law should help society. Believes Barbeyac is the most rational of authors, and should be followed. DISCUSSIONL
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Under Locke‟s theory – Post has put the work into it first. Utilitarian rule – Livingston wins – gets rid of foxes which would improve society Which is the better rule? Why would we want to use hunters as arbitrators? They‟re more expert. However, you don‟t want just anyone forming laws…possibility of bad systems.
Whale Problem – p. 59-60 GOALS: No – goes against Goal, Yes – support Goal Rules allocating property rights Efficiently kill Safety of whalers Share the wealth No Yes/No Reward useful labor No Yes/No Line holds the whale Yes/No Yes/No Possession of carcass Lowered boat holds whale Reasonable prospect Harpoon holds the whale No No Brand holds the whale Mortal wounding SUMMARY: rules are hard to assess and hard to delineate property rights along clear lines.
Clarity Yes No Yes
No
D. Water Rights – Streams and Lakes
a. Riparian rights include quantity, quality, and velocity of water b. Riparian land – all land under a unit title adjacent to a body of water - Use on Nonriparian land – riparian right attached to the riparian land and can never be transferred to a nonriparian owner – “right runs with the land c. Natural flow doctrine – each riparian owner is entitled to the natural flow of water, without material diminution in quantity and quality (domestic use). In artificial, commercial use – owner can use water so long as it does not materially affect the quantity or quality of the water - Not allowed to use water on nonriparian land - Water storage is not permitted NOTE: limits commercial and irrigation uses, not efficient (anti-utilitarianism) d. Reasonable use doctrine – riparian owner is entitled to a reasonable use of the water, downstream owners cannot enjoin the owner or recover damages unless they are not receiving enough water for their needs or the upstream owner is substantial interfering with their needs i. Domestic use: Evans v. Merriweather - Domestic use preferred over others (drinking, bathing, for farm animals on a small farm, and for irrigation of a private garden) – upstream owner can take whatever water is necessary for domestic purposes without regard to its effect on the natural flow of the water or the needs of lower riparians - Domestic uses are necessary to maintain life – can be established at any time, even if it interferes with existing nondomestic uses
Evans v. Merriweather ISSUE: action over the destruction and diversion of a water course. To what extent riparian proprietors, upon a stream not navigable, can use the water of such stream? How do you allocate rights between two people that have riparian rights. FACTS: Evans is above Merriweather on stream. Dam constructed on stream by Evans‟ servant to lead water into Evans‟ mill and dries up stream for Merriweather. Riparian rights – rights of owners of land next to stream. PH: Merriweather wins in lower court and judgment is affirmed here. HISTORY: farming for own subsidence. Judge wants to protect the family farmers. Looks at English Precedence – water flows in its natural course, and should be permitted thus to flow, so that all through whose land it naturally flows, may enjoy the privilege of using it. A riparian proprietor, though he has an undoubted right to use the water for hydraulic or manufacturing purposes, must so use it as to do no injury to any other riparian proprietor.
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Question 1: What is a reasonable use? Rule: separation of the wants of man in regards to water into two types: 1.) natural – necessary, 2.) artificial – added comfort, not essential. Natural wants trump artificial needs. Question 2: What is considered necessary and indispensable? Irrigation not considered necessary here because it‟s not arid land. Question 3: How to delegate use for artificial needs? There is no blanket rule applied to artificial use of water, up to jury to decide if just proportions used. Without a contract or grant, neither has a right to use all the water, all have a right to participate in its benefits. One cannot take all the water, none can have an exclusive enjoyment. Goal: This is to protect certain groups of people and not a utilitarian argument.
Rule and a Standard Standard - “reasonable use” – balance the interest of one farmer to that of another, depends on the facts of the case Rule: a rule is clear and can be applied to every case. With a rule, everyone knows where they stand. Problem with a standard is that you‟re not as sure of what you‟re doing is right or not. Litigation is more likely in terms of a standard. Who‟s going to decide the standard?
ii. Commercial use: Upstream owner cannot take water for commercial purposes unless there is enough water for the domestic use of all riparian owners (irrigation of large farm is commercial, not domestic use) iii. Economic justification – courts should intervene to achieve efficiency because of the high transaction costs that will prevent private parties from cutting a deal e. Prior appropriation – prevalent in arid states, doctrine of capture where water rights are determined by priority of appropriation of the water i. can be used on land far away from the water (nonriparian use allowed) ii. Once a right in water is established, it is an interest independent of the land and can be severed from the land and sold to another for use on other land (Coffin v. Left Hand Ditch Co.) iii. Economic Justification – permits the transfer of a prior appropriation right to a user who puts a higher value on it, and transaction costs are low
Coffin v. The Left Hand Ditch Co., 1882 FACTS: P,Left Hand Ditch, claimed to be the owner of certain water by virtue of an appropriation from the south fork of the creek. D, Coffin, owns land next to and below south fork. LHD used a dam and a ditch to carry land from the creek to their land. Coffin, tore out part of dam so he could irrigate his land. Left Hand Ditch sued for damages and an injunction. The Left Hand Ditch, appellee, won in the lower court and Coffin, appellate, appealed. LHD wins in appellate court. ISSUE: Did Coffin have the right to the water because he was adjacent to the stream, did the owner of riparian rights have higher priority than one with appropriated rights. RULE: First appropriator using stream for beneficial purpose has a prior right to the stream. COURT‟S REASONING: Irrigation is a necessary need not an artificial one. A clear rule is necessary, they want people to irrigate the land, but with limited water, and so a clear rule would encourage people to invest their money without fear of having their property rights taken away. Doctrine of riparian rights is inappropriate in Colorado. LHD is a commercial farm. Looks at different past statutes to determine which one applies to case. Have to figure out when the claim was created and therefore, which statute applies. STATUTES: 1876 – prior appropriations is the law. Other acts: 1861, 1862 – owner of land should have riparian rights and water should not be diverted to the detriment of others. However, court reinterprets these laws to favor LHD and riparian rights only exist only if Coffin had been using it in the first place. Hence, reinterpreted doctrine of riparian rights to be the doctrine of prior appropriation. Also interpreted riparian rights to be applied to land in the valley and not just next to the stream - Duty to guard against extravagance and waste, and to so divide and distribute the water as most economically to supply all of the earlier appropriators thereof according to their respective appropriations and necessities, to the extent of the amount remaining in the stream. HOLDING: for LHD, via a RULE of the doctrine of first appropriation.
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E. Adverse Possession
i. If, within the number of years specified in the sate statute of limitations, the owner of land does not take legal action to eject a possessor who claims adversely to the owner, the owner is thereafter barred from bringing an action in ejectment. ii. Means of acquiring title to property by a long, uninterrupted possession iii. Title by adverse possession cannot be recorded because it does not arise from a recordable document but from operation of law – to record, must file a quiet title action against former owner resolves issues of marketable title iv. Requirements: possession has to have been 1. actual – must show that he actually possessed the land b. constructive possession – exception to requirement of actual possession in which an adverse possessor holds “color of title” to all land in deed – claims based on a document that turns out to be defective 2. hostile, and with a claim of right – possession is hostile if the occupier claims the land as his own, in derogation of the true owner‟s claim – cannot have expressed or implied permission of the true owner. Must‟ve acted in good faith 3. open and notorious – acts must be such as will constitute reasonable notice – open use without any attempt to hide or disguise his use 4. exclusive – must not be sharing possession with the owner nor the public 5. continuous for the statutory period – must be continuous for the statutory period, not constant. Must decide whether the use is consistent with the type of property involved a. Tacking – successive occupiers may tack their periods of possession together so long as there‟s some privity between them – i.e. one possessor voluntarily transferred possession or an estate in land to a subsequent possessor b. Tolling – statute of limitations is tolled if the true owner is incapacitated when the claimant first takes possession v. Justifications for adverse possession 1. protect title – protects those whose land records are deficient 2. bar stale claims – litigate early! 3. efficient use of land 4. honor expectations vi. Boundary disputes – one of the parties has been in open and notorious possession of a strip of land along his boundary, mistakenly believing it to be his 1. Objective test – if A fences in the land, or otherwise indicates the boundaries and maintains the strip, A acquires title by adverse possession when the statutory period expires 2. Mannillo v. Gorski – when the encroachment of an adjoining owner is of a small area and the fact of an intrusion is not clearly and self-evidently apparent to the naked eye but requires an on-site survey for certain disclosure the encroachment is not open and notorious. Statute of limitations runs only if owner has actual knowledge of the encroachment vii. No adverse possession against government-owned lands
Mannillo v. Gorski FACTS: Gorski, the defendant, built stairs that went over into the property of Mannillo. Gorski took possession in 1946. Mannillo took possession in 1953. Title doesn‟t matter, only when possession was taken. Encroached on P‟s land to the extent of 15 inches. Mannillo complained and Gorski claimed adverse possession. PH: P, Mannillo, won in the trial court. Although D had clearly and convincingly proved that possession of the 15-inch encroachment had existed for more than 20 years however, it was not hostile it was a mistake. Gorski did not know he was taking someone elses property. Gorski appeals.
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ISSUE1: Whether an entry and continuance of possession under the mistaken belief that the possessor has title to the lands involved, exhibits the requisite hostile possession to sustain the obtaining of title by adverse possession? I.e. Does taking by mistaken belief constitute hostile possession under the doctrine of adverse possession? RULE: Maine doctrine: a mistaken doesn‟t count as hostility. rejected because it benefits an intentional wrongdoer and followed Connecticut doctrine which says that mistake can be hostile. Decide to discard the requirement of intentional hostility and held that any entry and possession for the required time which is exclusive, continuous, uninterrupted, visible and notorious, even though under mistaken claim of title is sufficient to support to claim of title by adverse possession. ISSUE2: Whether defendant‟s acts meet the necessary standard of “open and notorious” possession. purpose of open and notorious requirement is to make sure that the true owner has the opportunity to defend themselves. RULE: Title may never be acquired by mere possession, however long continued, which is surreptitious or secret or which is not such as will give unmistakable notice of the nature of the occupant‟s claim. Where possession of the land is clear and unequivocal and to such an extent as to be immediately visible, the owner may be presumed to have knowledge of the adverse occupancy. When the encroachment of an adjoining owner is of a small area and the fact of an intrusion is not clearly and self-evidently apparent to the naked eye but requires an on-site survey for certain disclosure as in urban sections where the division line is only infrequently delineated by any monuments, natural or artificial, such a presumption is fallacious and unjustified. No presumption of knowledge arises from a minor encroachment, only where the true owner has actual knowledge can the possession be considered open and notorious. HOLDING: If Mannillo didn‟t actually know, then case is sent back to trial court to determine whether Mannillo actually had knowledge. Instead of tearing down stairs, maybe compensation to Mannillo? Gorski can argue equitable principles of added value, but still needs to pay compensation to Mannillo. PROBLEM – p.91 8E Smith – deed in 1901 Smith 1940
7W Smith 80 Rose 1928 Rose-Jones 1940
7E Rose/Jones 1928
§324-325 apply because it‟s not based upon a written instrument. Hostile because he intended to take title to this land. Open and notorious. Exclusive. Continuous for over 5 years, tacking. Jones should win. If Jones has paid all the taxes levied, if assessed on the property he is living on then he wins. If he has been paying taxes assessed on the property he really owns, then he may not win.
XI.
CONCURRENT INTERESTS
A. Tenancy in Common and Joint Tenancy
Joint ownership 1. joint tenants – equal, undivided interest in the property with a right of survivorship. Act as one person a. requires four unities: i. unity of interest – to be identical ii. unity of title – interest created in same grant iii. unity of time – required interest to vest at same moment iv. unity of possession – required owners to have equal rights of access b. right of survivorship – if a tenant dies, the rest absorb that interest, does NOT go to heirs i. poor man‟s will – accrual without time and expense associated with probate (i.e. no need to go to court, automatically goes to joint tenants) ii. defeats the claims of unsecured and secured creditors of the deceased co-tenant c. purposes: i. eliminate risk of heirs of uncertain responsibilities ii. avoids shortcomings in the common law system of estates iii. protects illegitimate children
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d. terminated by severance – act of one person can sever a joint tenancy and make the new party a tenant in common i. requiring recordation of the unilateral severance helps ensure that if the nonsevering co-tenant dies first, the severing tenant will not be able to destroy evidence of the severance and assert a right of survivorship to the entire estate 2. tenants in common – form of joint ownership, all have a right to occupy, tenants can act on their own, default method a. without right of survivorship, undivided interest in land gives co-tenants the right to possess and use the entire property, subject to the rights of other co-tenants b. created by agreement, express grant/will or operation of law c. decedent‟s interest passes to his heirs d. terminate tenancy by: i. transferring all of the interests to a single person ii. partitioning of property – one of the owners goes to court and asks for partition 3. tenancy by entirety – joint tenancy unities plus marriage a. can only be terminated by joint agreement of both parties b. doesn‟t exist anymore c. used to exist to try to protect spouses
People v. Nogarr FACTS: appellate – ex wife, appellee – ex-husband‟s parents. Couple separated. Ex-husband mortgaged house to his parents and he died. State wanted to condemn property, parents wanted satisfaction of the mortgage, i.e. wanted return. Ex-husband tried to give parents right to the property. ISSUE: Is a mortgage upon real property executed by one of two joint tenants enforceable after the death of that joint tenant. Who gets returns when State pays compensation, wife or parents? TRIAL COURT: Parents should get money. Joint tenancy severed and now tenancy in common. HOLDING: Mortgage was only a lien, lien is not a unilateral act to sever joint tenancy, Elaine is sole survivor, all title goes to Elaine. CT‟S REASONING: In California, the mortgage didn‟t sever the joint tenancy because title did not pass, just created a lien. Without transferring title, there is no severance of joint tenancy. “If the judgment debtor survives, the judgment lien immediately attached to the entire property. If the judgment debtor is the first to die, the lien is lost. If the creditor sits back to await this contingency, as respondent did in this case, he assumes the risk of losing his lien.” Court is trying to protect the wife‟s interest, wife should be given notice and prove approval. Court is trying to create a tenancy in entirety which isn‟t acknowledged in California. Bank might be more reluctant to lend money to a joint tenant. These days both spouses need to sign the mortgage. Note: Courts usually favor tenants in common to joint tenancy.
Tenants in Common, aka. Co-Tenants – Rights and Obligations Partition – judicial procedure used to end a tenancy in common or a joint tenancy when the cotenants no longer agree on the management or disposition of the property o “in kind” – physical divide the property o “by sale” – property is sold and proceeds divided to the co-tenants proportionally o “by appraisal” – permits one co-tenant to buy out the others at the appraisal price o Purposes:
Utilitarian: helps maximize aggregate wealth Alienability of land Increased productivity of land
Possession – each co-tenant has a right to possess and use the entire property. Ouster occurs when a co-tenant bars another co-tenant from using the property. Ouster can turn into a claim for adverse possession.
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Contribution – co-tenant may demand contribution from the other co-tenants for certain expenditures, i.e. taxes, mortgage, insurance, repairs. Co-tenant may not demand compensation for managing the property. Fiduciary Obligations – co-tenants receive their interests in the same will or grant, or at the same time by inheritance. Restricts the freedom of co-tenants in acquiring common property. Cotenant acquiring superior title to the property must give the other co-tenants a reasonable opportunity to acquire their proportional share. Accounting – compensation for partition for co-tenant‟s share of net rents collected from third parties who have leased the property. Non-leasing co-tenants may demand their share of the net rents received if the ease purports to bind all the co-tenants and if the non-leasing co-tenants have acquiesced in the lease. If the non-leasing co-tenants acquiesce in the lease, they can share in the rents received. If they refuse to acquiesce in the lease, they can exercise their present right of possession as a co-tenant.
Problem, p.215 Bertha‟s claims 1. profits from clay, trees, rent from Corrine, value of Corrine‟s occupancy 2. ousted 3. insurance payment 4. increased profits 5. partition for sale 6. depletion of wine Albert‟s Response to Bertha‟s claims 1. Trees is aftermath, contribution, Bertha might get part of rent from Corinne prior to Albert‟s relationship with her, but afterwards, Corinne is just living with him. 2. Not ousted, she left voluntarily 3. Albert increased the value of vineyard and therefore B should not get the benefits, also, Albert paid the insurance, not Bertha. 4. Bertha didn‟t help out, A and C did all the work. 5. B abandoned property, or A claims adverse possession. A wants partition by appraisal
Delfino v. Vealencis FACTS: land owned by joint owners. Delfino wants to turn it into a residential area. Other owner operates a garbage disposal company. Delfino wants partition for sale and or partition in kind. Delfino doesn‟t want partition in kind because they don‟t want to build a residential area next to a garbage disposal plant, it would devalue the land. Trial court ruled for a partition in sale. PRINCIPLES OF APPELLATE COURT: Partition in kind is default. Partition by sale only if: 1. physical attributes of land are such that partition in kind are impractical AND 2. interest of the parties would be better served by partition by sale ISSUES TRIAL COURT CONSIDERED: 1. partition is kind wouldn‟t be feasible 2. garbage business violated zoning code 3. a waste of land to buffer garbage business 4. extension of road required, loss of land 5. devaluation of development due to business seems like the trial court was only worried about the Delfinos and doesn‟t really look at the other party‟s interests APPELLATE COURT - believed trial court considered some improper factors. No proof that business violated zoning code. Must weigh the interest of all the parties in suit. If you want a partition by sale, that party has to prove the necessity for that. HOLDING: guiding to consider the interests of both parties and suggesting a partition in kind J/O: remanded for further consideration NOTE: if Delfino wins, there‟s greater benefit for more people including the State. Increases the value of land, and makes it more economically efficient. Interest represents Radin‟s theory of personhood and Locke‟s theory because garbage owner was there first. Developers and Lawyers Use a Legal Maneuver to Strip Black Families of Land Problems with partitioning:
Problems with partitioning Policy Issues, recommendations
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1. 2. 3. 4. 5. 6. 7.
lack of representation/resources extreme diversity of ownership lack of education valuation – sale is easier unequal bargaining power unilateral act of one can affect others abuse by lawyers
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2. 3. 4. 5. 6. 7. 8.
Change in co-tenancy law, higher requirements for partitioning, threshold (prevent unilateral acts) (however, law of co-tenancy isn‟t a federal law, it‟s a state law) Right of first refusal, offer land to co-tenants first Restraints on devisability Partition in kind default Legal services/Judicial sale Government subsidized appraisals Necessity of wills Bar oversight
B. Marital Property
Ways to divide property in dissolution of marriage - Doctrine of equitable distribution – when marriage is dissolved, property is divided equitably by court - Community property – divided 50/50, must decide what is considered community property
In re Marriage of Graham (Colorado) FACTS: Couple married, wife contributed 70% of financial support while husband was in school getting his MBA. ISSUE: whether in a marriage dissolution proceeding a MBA constitutes marital property which is subject to division by the court TRIAL COURT: Yes, it is jointly-owned property to which the other spouse has property right, gave wife money based on future earning of MBA APP COURT: Say that MBA is not marital property, education is not itself property subject to division under the Act, although it was one factor to be considered in determining maintenance or in arriving at an equiable property division RULE: Property embraces anything and everything which may belong to a man and in the ownership of which he has a right to be protected by law, anything that has an exchangeable value or which goes to make up wealth or estate SUPREME COURT: An educational degree does not have an exchange value or any objective transferable value on an open market. It is personal to the owner. Education has none of the attributes of property in the usual sense of the term. Contribution to education can be taken into consideration for maintenance claims. DISSENT: future income earning potential may be considered in deciding property division or alimony matters and the wife‟s award may be increased on the ground that the husband probably will have substantial future earnings. It is not the degree itself which constitutes the asset in question but the increase in the husband‟s earning power concomitant to that degree which is the asset conferred on him by his wife‟s contribution. O‟Brien v. O‟Brien (NY) FACTS: Wife supports husband as he obtains his medical degree. Once he received degree he commenced action to divorce her. ISSUE: Whether medical license acquired during marriage is marital property subject to equitable distribution? TRIAL COURT: found P‟s medical degree and license are marital property, the court ordered a distributive award to D based on value of degree RULE: marital property is all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held. APP COURT: since husband hadn‟t yet practiced medicine, it wasn‟t considered marital property. Wife doesn‟t get anything. STATUTE: recognizes that spouses have an equitable claim to things of value arising out of the marital relationship and classifies them as subject to distribution by focusing on the marital status of the parties at the time of acquisition. RULE: where equitable distribution of marital property is appropriate but the distribution of an interest in a business, corporation or profession would be contrary to law the court shall make a distributive award in lieu of an actual distribution of the property. An interest in a profession or professional
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career potential is marital property which may be represented by direct or indirect contributions and non-financial contributions made by caring for the home and family. HOLDING: based on statute, medical license is marital property, to the extent that license was acquired during marriage. Equitable distribution was based on the premise that marriage is an economic partnership to which both parties contribute as spouse, parent, wage earner or homemaker. Whether a professional license constitutes marital property is to be judged by the language of the statute which created this new species of property. “partnership entity”. DISSENT: equitable distribution was not intended to permit a judge to make a career decision for a licensed spouse still in training California Family Code Community should be reimbursed for contributions to education or training of a party and substantially enhances the earning capacity of the party. Contribution offset by benefits made to community. Factors to consider to determine amount due for support. Cares mostly about money transfers. Which approach, NY or CA, is the better approach?
XII. LIMITATIONS ON USE
A. Theories
Model of Absolute Rights i. Blackstone’s Commentaries – The third absolute right is that of property, which consists in the free use, enjoyment, and disposal of all acquisitions, without any control or diminution, save only by the laws of the land. Right must be exclusive, owner retains the sole use and occupation, every entry without owner‟s consent is trespass. ii. Morris Cohen, Property and Sovereignty – essence of private property is always the right to exclude others. Coase’s Theorem – all efficiency problems associated with externalities would solve themselves if people could bargain costlessly i. Zero transaction cost model - an efficient allocation of resources will be obtained if the transaction costs are zero. The allocation of rights affects only the final distribution of resources, not the efficiency of resource allocation. In the absence of transaction costs, an efficient allocation of resources will obtain regardless of how the legal entitlement is initially allotted.- the market determines whether the activity will continue, not the initial allocation of rights. ii. Positive transaction costs model types of transaction costs problems: 1. Negotiation and litigation – time and effort associated with hammering out an agreement and enforcing it. 2. Free-rider – most likely to occur when there are large numbers of parties who must get together to obtain the benefits of cooperation – transaction costs are too high 3. Hold out – can lead to an inefficient allocation of resources (Radin would say people valuate resources differently) a. Can avoid holdout if A does not make a firm commitment to buy any rights until she is sure that all sellers will sell at the agreed price (less than A‟s cost) time consuming in terms of information costs which may exceed the possible gain from trade 4. Opportunism – when a party attempts to extract a higher price for her entitlement by threatening behavior that would reduce her bargaining adversary‟s wealth, thus raising the adversary‟s willingness to buy the entitlement to avoid such a threat
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Coase Theorem says that entitlement should be allocated to the parties that would have bargained for them in the absence of transaction costs. Externalities are reciprocal in nature. When transactions are costly, an analysis of transaction costs will enable social decision-makers to determine how to allocate entitlements to avoid the more serious harm. Problems: rights, system favors the highest use is the highest use always the favorite use? No. Locke – whoever was there first, Radin – personhood valuation, An Analytic Framework for Common Law Doctrines - Calabresi and Melamed o Three types of entitlement: 1. Those protected by property rules – someone who wishes to remove the entitlement from its holder must buy it via a voluntary transaction, value is agreed upon by the seller 2. Those protected by liability rules – when someone may destroy the initial entitlement if he is willing to pay an objectively determined value for it, must pay damages, destruction of initial entitlement via a payment of an objectively determined value by some organ of the state 3. Inalienable entitlements – transfer is not permitted between a willing buyer and a willing seller; protects, limits, and regulates the grant of the entitlement itself. o Setting of Entitlements – other ways to allocate entitlements Economic Efficiency Choice of set of entitlements which would lead to that allocation of resources which could not be improved in the sense that a further change would not so improve the condition of those who gained by it that they could compensate those who lost from it and still be better off than before. Goal is the highest product for the effort of producing. What is economically efficient varies with the starting distribution of wealth. Presence of various types of transaction costs a society would go about deciding on a set of entitlements in the field of accident law: 1. that economic efficiency standing alone would dictate that set of entitlements which favors knowledgeable choices between social benefits and the social costs of obtaining them, and between social costs and the social costs of avoiding them 2. that this implies, in the absence of certainty as to whether a benefit is worth its costs to society, that the cost should be put on the party or activity best located to make such a costbenefit analysis; 3. that in particular contexts like accidents or pollution this suggests putting costs on the party or activity which can most cheaply avoid them; 4. that in the absence of certainty as to who that party or activity is, the costs should be put on the party or activity which can with the lowest transaction costs act in the market to correct an error in entitlements by inducing the party who can avoid social costs more cheaply to do so; 5. that since we are in an area where by hypothesis markets do not work perfectly – there are transaction costs – a decision will often have to be made on whether market transactions or
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collective fiat is most likely o bring us close to the economically efficient result the “perfect” market would reach Distributional Goals 1. distribution of wealth 2. distribution of certain goods (merit goods) a. broadly accepted preferences b. preferences linked to dynamic efficiency concepts c. highly individualized preferences Rules for Protecting and Regulating Entitlements Private property – an entitlement which is protected by a property rule Property and Liability Rules Hard to believe that a market, a decentralized system of valuing, will cause people to express their true valuations and yield results which all would in fact agree are desirable Problem is eliminated if society can remove from the market the valuation of each tract of land, decide the value collectively, and impose it Eminent domain compensation, although decided objectively, may result in under or over compensation Efficiency is not the sole ground for employing liability rules rather than property rules. Choice of liability rule made because it facilitates a combination of efficiency and distributive results which would be difficult to achieve under property rule
Brief Reprieve for Some in Lead-Tainted Town Who has the entitlement? Doe Run, Renco Smelter Co. or townspeople? Not sure, never been adjudicated. Which rules are being applied? Liability rules, company is paying damages to certain people, i.e. hotel stays, relocation, cleanup. Property rules, residents can be bought out. Assume residents have entitlement Use of Property Rule – injunctions may be unreasonable, affect other benefits such as taxes for schooling. Use of Liability Rule – environmentally not the best solution, plant is still polluting. Are people that move in afterwards, are they entitled to damages? How do you determine what the effects of the damages are? Inalienable Rights – no right to negotiate, lose benefits of having the plant Assume smelter has entitlement Use of Property Rule – litigation and negotiation costs are very high, not all residents agree and the likelihood that they will all get together to negotiate with plant is minimal Use of Liability Rule – Inalienable Rights Policy issues: Who should have entitlement and what should solution be? B.
Trespass Law
Trespassers are strictly liable for intentional physical invasions of another‟s interest in the exclusive possession of land
Pile v. Pedrick FACTS: factory which D built, the line protruded 1 3/8 inches onto D‟s property underground. COURT‟S REASONING: Court said they could treat it as a permanent trespass (compensation) or remove it.
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HOLDING: Court decided to order a removal of the protrusion. D had no right at law or equity to occupy the land that does not belong to them. Entitlement to the resident with a Property Rule. LIABILITY RULE: COASE: price for compensation asked for would be less than the cost of removing protrusion. TRESPASS: should there be damage for trespass? No, since it was surveyor‟s fault and intrusion made in good faith Property Rule Pile v. Pedrick Geragosian v. Union Realty co. Liability Rule Raab v. Casper (district court) Inalienable Right
Entitlement on owner
Entitlement on encroacher Geragosian v.Union Realty Co. FACTS: Theater built by Vartigian, overhang and drainage pipe trespass onto neighbors land. Vatigian‟s land goes to Union Realty Co. in foreclosure. Aaronian sells to Vartigian‟s brother-inlaw, Geragosian. Vartigian knew of the encroachment and his purpose in inducing P to buy the land was to control it and make trouble for Union Realty. Encroachments were unintentional on the part of Vartigian when he built the theater. Cost of a new drain would cost more than worth of trespassed land. COURT: G wins, trespass. U had to remove the fire escape and drain. COASE: not economically efficient, since cost of replacing drain was more than cost of land. Perhaps award damages, an easement, or a buyout instead. Court decisions state that you must have permission before you trespass and without permission you can‟t rely on the court to allow the trespass and expect to just pay compensation for the land. Property owners have the right to allow or prevent trespass on their land and should not be deprived of their land. Raab v. Casper FACTS: Cabin and home both intruded on D‟s land. Didn‟t survey land before building. P warned that he thought D was trespassing on P‟s land but P continued building without double-checking. LOWER COURT: D was acting in good faith and realigned property lines and compensated P. Liability Rule. APP COURT: D stopped acting in good faith when he negligently continued to build house after being warned of possible trespass by P. Should have surveyed or something to determine property lines more definitely when it comes into question. D was N and therefore remanded in question of good faith improver.
C. Social Norms as Property Institutions
Ellickson – Order without law: how neighbors settle dispute – trespass rules in a rural setting
Shasta County and Its Cattle Industry Open range – allowed to send cattle around, liable for intentional trespass or if animal goes to someone else‟s land that is enclosed by a fence. Closed range – strict liability People in Shasta County - know the law even better than the lawyers, they know the distinction between closed range and open range and know which areas are closed and which are open. View law as more black and white then it really is. Believe no liability at all in open areas, which is NOT the law. Lawyers - don‟t know much about law, look at it in terms of negligence. Insurance adjusters – pay claims involving trespass damage, but don‟t really know the law, uinsufficient knowledge of law. They are paying claims when they don‟t actually have to. Thought it that everyone has the same problems so it all equals and balances out. It‟ll work out on its own and they don‟t have to depend on the legal system
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When people don‟t get along, disputes escalate to retaliatory actions after a few “nice” phone calls. Then, next step is to report to the authority. Sheriffs enforce society‟s norms and not really the law.
Schild v. Rubin FACTS: Basketball feud, midday ball interrupted neighbors naps
D. Limitations of the Rights of Property Owners
State v. Shack Under federal law, workers have a right to organize a union and unions have the right to communicate with workers on the employer‟s premises seeking their votes. To secure these rights, an employer housing migrant farm workers cannot exclude union organizers from coming on the property PruneYard Shopping Center v. Robins – 1. Is it fair to make a private owner bear burdens that the public should bear? 2. Does the regulation upset economic expectations? Two requirements are contradictory, don‟t help in making decisions on these type of cases. First amendment right does not require mall owners to allow access for purposes such as soliciting, protecting, etc., but a state court may read a state constitutional right to free speech to include exercising that speech within a shopping mall
XIII. REAL ESTATE TRANSACTIONS
Stages in the transfer of interests in land: 1. execution - buyer and seller execute a contract for the sale of property 2. escrow period – due diligence is done, buyer has the opportunity to use the recording acts and other means to investigate the validity of the seller‟s title, inspect the property, and secure financing 3. closing - delivery of deed and $ exchange, typically takes place a month or more after contract is signed (4.) foreclosure - lender holding a security interest in the property forecloses on the property to satisfy a debt on which the landowner/borrower has defaulted
A. Contract for Sale of Land Caveat Emptor – “let the buyer beware” o Places burden on the buyer of finding physical defects o Not an absolute bar to recovery Covenants of title – normally deal with grantor‟s liability from competing claims to title, not physical defects in the property Implied warranty of fitness for new houses Buyers can sue under the tort of misrepresentation Buyer may claim fraud based on failure to disclose material facts Statute of Frauds requirements on real estate transactions has to be in writing time period has to identify the parties has to describe the land, price other essential terms or conditions contract should, but not required to, also specify other important rights and obligations: o parties‟ rights to the earnest money in the vent of rescission o rights if property is damaged or destroyed
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rights to personal property on the land circumstances in which contract is automatically terminated or elected for termination o method of dispute resolution Exceptions to the Statute of Frauds Part performance – typically when the buyer has taken possession of the property and either paid a substantial portion of the purchase price or made substantial improvements Equitable estoppel – if one party to the agreement reasonably and detrimentally relied on the oral contract
Estate of Younge v. Huysmans FACTS:
1. 2. 3. 4. 5. 6. 7. 8. 8/10/81 - $160,000 - $10,000 deposit 8/22/81 – increased to $172,000 bank confers – bank takes property off the market 8/31/81 – bank letter to Huysmans of acceptance / to draw documents 9/8/81 – Huysmans recorded the bank‟s letter at the registry of deeds – known to public that they had an agreement to buy the property – to provide notice, has no legal impact 9/8/81 – H sells their own house 9/9/81 – H met with bank requesting two separate deeds and the right to assignment 10/81 – H received a copy of the purchase and sale agreement, had issues with: a. rights of H could not be assigned to others b. no provision was made for transfer of property in two deeds c. agreement contained a “fiduciary clause” providing that Bank was not required to sell to H at the stated price if a higher offer were received (is this really an agreement then? Conflict of the meeting of the minds?) 11/81 – Bank discovered record of letter and advised H that they would not proceed with agreement unless letter released from recording at registry 11/18/81 – deal off return uncashed check 12/81 – property placed back on market, bank asked H for release 4/8/82 – unwitnessed release sent to bank 9/82 – Bank sold property to Cuccis who took possession and made extensive and costly improvements 10/82 – Cuccis file a petition to quiet title ask judges to support Cucci‟s possession of property 8/31/82 – H allege a binding contract, breach by bank and request for damages 12/27/1083 – H asks for specific performance
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9. 10. 11. 12. 13. 14. 15.
16. ISSUES: Who has a binding contract? What will court do if it finds that H had a binding contract, was specific performance barred by the doctrine of laches? APPELLATE COURT: found that H had a valid contract but denied specific performance, awarded damages for breach of contract and aggravation and harassment damages in questioning the good faith of the bank RULE: reasonable certainty that a meeting of the minds occurred is all that is necessary to evidence a contract RULE: whether or not laches bars a particular claim is determined not only by the length of time involved, but also by the inequity of permitting a cause of action because of a change in the conditions of the property or the parties involved COURT‟S REASONING: acceptance of offer, acceptance of check, and taking property off the market constituted enough agreement to show a binding contract. H‟s took too long to make the claim for SP. HOLDING: yes there was a breach of contract, damages awarded, no specific performance
B. Establishing Good Title o Clear rules needed to resolve conflicting claims to property and allow prospective purchasers ease
in determining easily and accurately the existence and validity of preexisting claims to property and to protect purchasers from prior secret transactions o Recording system o When a deed to a prior claimant is properly recorded, a subsequent purchaser is deemed to have constructive notice of the prior claim to the property o Notice is a critical factor to determine whether the subsequent purchaser or the prior claimant has superior title o Problems with system 1. competence and accuracy lacking in the recording office
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2. hard to improve due to intricate nature of the various means by which and by whom title to realty may be held 3. complicated procedures to identify and evaluate property law Mechanics of Modern Recording System o Chain of title – chronological series of conveyances, from grantor to grantee, from sometime in the past until the present Recording Acts o Recording statutes protect only subsequent purchasers, subsequent donees, such as heirs and devisees, are subject to the first to acquire prevails rule. o Provide protection only against recordable documents – provide no protection against prior interests held by adverse possession o Do not affect the grantor‟s liability under tort law or covenants of title – recording acts offer a means to resolve disputes between grantees who have competing claims to the same property o Types: Race statutes – subsequent purchaser prevails over a prior grantee if he is the first to record – irrelevant which grantee acquired the land first or whether either of them had notice that the grantor had conveyed the property to more than one grantee Notice statutes – subsequent grantee prevails over a prior grantee if and only if she is a “bonafide (good faith) purchaser for value” FL rule: subsequent grantee prevails if o At time of purchase, there was no notice of prior claim and gave valuable consideration for the interest Race-notice statutes – subsequent purchaser has superior title only if she is both a bona fide purchaser and she records her instrument before the prior purchaser
Miller v. Green FACTS: Miller was in possession of land (bought from Green) when Hines paid Green for land. Miller was previously Green‟s tenant. Defendant Hines claim that their title under their deed is superior to the landcontract interest of the Ps in as much as their deed was recorded first. Statute was a race-notice statute. Miller claims it was evident that they occupied land, and Hines should have had notice. Miller had hauled manure and plowed the land after he bought the land. RULES: Constructive notice required – open, visible, exclusive and unambiguous possession (like adverse possession) COURT‟S REASONING: plowing of land and hauling of manure was open and visible and exclusive and unambiguous HOLDING: what Miller did on property was enough to give Hines notice of possession DISSENT: Miller was there prior to purchase, so plowing and manure hauling could have been signs of Miller as a tenant. Burden on P to establish that Hines was not a bona fide purchaser.
Philadelphia deed office – way backed up. Attempt to move to a new computer system is slow. Delay of about 10 months. Legal problems prevalent: o A later purchaser could have gotten their deed recorded first even tho they didn‟t submit it first o A subsequent purchaser may not have notice even with a title search at the time of their purchase due to the delay in the recording Housing scam – Rickie Williams found run-down homes that look like they‟re abandoned. Went to Department of Deeds and got copies of deeds and Williams created false transfer deeds from the original owner to him or to his confederates…which were forged and notarized. Filed the new deed with the department of deeds. Then he‟d sell the property to a purchaser. Fraudulently established a chain of title. o Problems Inefficiencies in deed office - anybody can take a deed down to office, pay fee, and file it.
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Notaries are individual persons – easy requirements, no tests required, no educational program required – can administer oaths, attest to signatures on documents for filing with courts and other governmental agencies o Solutions Make notaries state officers or make endorsement of forgery to be a serious offense Tracking abandoned property
C. Covenants of Title
Covenants of Title promises that the grantor gives to the grantee under caveat emptor, protects a grantee from title defects only original grantee, not his successors, can rely on the present covenant Present covenants – only original grantee can rely on theses 1. seisin – promise that grantor has title and possession of the land 2. right to convey – grantor promises she has right to transfer property 3. freedom from encumbrances – free from undisclosed encumbrances Future covenants 1. quiet enjoyment – promise that no third party will assert lawful title to the transferred property 2. warranty – grantor promises to defend the grantee from any lawful third party claims to the property, grantor covenants to promise the grantee for losses sustained 3. further assurances – promise that the grantor will take necessary steps to perfect title Types of Deeds General warranty deed – includes many traditional covenants of title – promise that grantor and his successors will defend against all lawful claims to the property Special warranty deed – covenants, usually specified by statute, that protect the grantee from certain acts of the grantor Quitclaim deed – contains no promises, grantee has no rights against the grantor for defects of title Breach and Remedies for Breach Present covenants breached only at moment of transfer Future covenants are breached after conveyance when 3rd party has made a claim to the property Basic rule that “let the buyer beware” has changed to implied warranties of fitness for new properties More requirements for home sellers Who should bare the burden? Caveat emptor o Common law: buyer bears the burden – “let the buyer beware” o Disclosure is important – perhaps place the burden on the seller? o Reach agreement for sale, buyer comes in with an inspector – if inspector finds a material defect, the buyer can void agreement o Calabresi – who would be the more efficient bearer of burden? – seller because they know the problems and provide a more efficient allocation of resources
D. Foreclosure of Security Interests
Types of Security Interests Mortgage – lien on the property – default results in foreclosure – proceeds used to satisfy debt Deed of trust – borrower conveys title to trustee – default results in sale Foreclosure
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Property is sold at a public auction, proceeds used to pay the costs of the sale, unpaid principal and interest accrued to date, and then junior liens Two types: 1. judicial foreclosure – lender goes to court and asks to court to foreclose on property and either sell it, give it to the lender, or force property owner to pay with other assets 2. power of sale foreclosure – lender can sell property without having to go through court to adjudicate a dispute, lender may hold a public sale of real property almost immediately after the borrower default. Right of redemption – can get property back if you are willing to pay what you owes, some interests, and perhaps even damages. This may increase cost of borrowing and the lack of subsequent buyers who hesitate due to right of redemption, most of the time, the land lays vacant for awhile. Deficiency Judgment Borrower may be required to satisfy this judgment with personal assets other than the property on which the mortgage or deed of trust was originally taken Some statutes forbid deficiency judgments for foreclosures on purchase money mortgages or on deeds of trust used to secure the balance of the purchase price, particularly, if the real estate contains a residence Others forbid deficiency judgments where the lender used a power of sale foreclosure, thereby giving the lender an incentive to maximize the sale pice at the non-judicial sale Some allow deficiency judgment, but permit mortgages to recover an amount equal to only the difference between the unpaid principal and the property‟s fair market value a the time of foreclosure Mortgagors cannot waive these protections in the initial mortgage agreement Sales of Property Subject to Mortgage A person who acquires secured property normally takes the property subject to the security interest, unless the security interest has a due-on-sale clause Grantee is not personally liable for the debt, unless he agreed to assume it, but since he holds subject to the security interest he will lose the property in foreclosure if he fails to make the loan payments Original borrower remains liable on the promissory note unless the lender releases him Sub-prime lending/Predatory Lending Generally pay a higher interest rate Benefits o New lenders can benefit those with no credit who can now borrow money o Certain neighborhoods that don‟t have access to credit, discriminated by banks, these lenders provide access to credit that people didn‟t have before Problems o a lot of people that have access to these loans have assets but already have lots of debt o Aspects of fraud involved o Access to information, target group don‟t usually understand the market, don‟t understand the terms and conditions o Resulted in increase foreclosure rates Increased regulations, decreased number of sub-prime lenders What role should government play?
XIV. LANDLORD-TENANT LAW
A. Evolution of the Landlord-Tenant System/Landlord Rights and Obligations
Markets Market establishing rights and consent between people – law allows people to make their own agreements – operate on the basis of mutual consent through private, contractual agreements o allocate rights to material resources
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Background legal rules are most usefully seen as a set of default rules that contracting parties usually may vary and override to serve their mutual interest Market system promotes productive uses of resources Freedom of contract – the legal ability of parties to bind themselves voluntarily in exchange for commitments from the other contracting party or parties Property law – limits the types of contractual arrangements that are enforceable and the ways in which such agreements may be enforced Private arrangements that allocate uses of land When does society intervene in these private contractual interactions? Leasehold Interests Contract or property distinctions Types of leasehold interests 1. terms of years – tenancy for a definite period of time, neither party needs to give notice of termination 2. periodic tenancy – automatically renews, ends when one party gives timely, written notice of termination 3. tenancy at will – terminable by the landlord or the tenant at any time, the death of either party, the execution of a new lease to a third party, or the conveyance of the fee 4. occupancy of sufferance – tenant, who was once in rightful possession, remains in possession after his possessory rights have ended, typically when the landlord lawfully terminated the tenancy – not a true trespasser since he didn‟t not enter the property wrongfully Termination of Leases Mutual Agreement – the parties may mutually consent to early termination of the lease Destruction of the Premises – at common law, physically destruction of the premises did not terminate a lease. Some states modify common law rule to provide that a lease is terminated when the premises are destroyed, so long as the tenant is not responsible for the destruction Eminent Domain – if the government takes the entire parcel of leased land by eminent domain, the lease is terminated and the tenant‟s obligation to pay rent ceases, government must pay “just compensation” for the property taken. If the government does not take all of the land, but only part of it, the tenant‟s obligation to pay the full rent remains intact, even though the tenant can use only the remaining portion of the premises Death – a party‟s death terminates a tenancy at will but not other types of leases Substantial Breach of a Material Covenant – tenant‟s beach of the covenant to pay rent is a basis for the landlord to rescind… Reality of Landlord-tenant relationships Do landlords have an advantage of bargaining power? Depends on market When should governments aid tenants because they lack sufficient knowledge? Tenant’s duties Fulfill express obligations in lease Can‟t maintain a nuisance Duty to vacate at the expiration of the lease – if not, there‟s a “hold over” tenant - court looks to actions, language, facts of case to guide their reasoning Landlord’s remedies for Tenant’s breach and for Holding over Forcible Entry and Forcible Detainer – “self help” – change locks, cut off utilities, usually not allowed Unlawful detainer – summary proceeding for eviction o Summary proceedings provide shorter periods for giving notice, filing pleadings, and setting a trial date, and limit the substantive claims and defenses that can be raised o Process Landlord gives notice to the tenant Tenant required to perform an affirmative covenant or quit the premises
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Lease is considered terminated either when the tenant vacates the premises or when the landlord files an unlawful detainer action seeking possession Court may order tenant to pay the rent into a court-managed escrow account pending trial Tenant may raise affirmative defenses Did not breach lease Eviction notice was defective Landlord waived breach Landlord violated local rent control ordinance Tenant owed no rent because of landlord‟s breach Tenant used rent to make repairs Landlord‟s termination was retaliation o What are the benefits of housing court? More efficient process Specializations Time efficiency o Who benefits from this system? Depends on location: Philadelphia housing court – usually favors landlords o Study shows that tenants hardly ever win o Tenants given minimal time to argue their side o In most eviction disputes, tenants evicted o Lot of cases, tenants evidence not considered o Ignored tenants‟ rights to live in habitable residences o Tenants steered towards mediated agreements without being warned that they are giving up their right to appeal o Judges are elected – need money to pay for campaigns – more landlords give more money than tenants bias towards landlords New York housing court – usually favors tenants (changing)s o Used to take a little longer to adjudicate, tenant could stay longer o Tenant used to be allowed to hold rent until adjudication – now there‟s a law requiring to put rent in escrow o Judges had previously been pro-tenant o Judges are generally appointed o Attempts to rectify situation Appointed more judges Oversaw judicial selection process Enacted escrow period Which is better? Tenant-favored or landlord-favored system? Tenant-favored – o balance knowledge problem o tenants have more to lose o depends on geography – housing shortage places should favor tenants Landlord-favored – o depends on whether landlord is a large landlord or small landlord o too much tenant-focus causes lots of problems o efficiency argument o housing surplus should favor landlords Damages Renew lease
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Landlord’s Remedies for Tenant’s Abandonment Tenant has abandoned premises when she has left the premises and has not paid the ren when due Three remedies available after abandonment o Terminate the lease by accepting surrender – court will find surrender when the landlord uses the property in a manner that is inconsistent with the tenant‟s right to possession o Sue the tenant for the rent as it becomes due – courts treat the lease as a contract and require the landlord to mitigate damages by making reasonable efforts to relet the premises o Retake possession to relet the premises on the tenant‟s account
Sommer v. Kridel Sommer v. Kridel - Facts: Kridel enters into lease with Sommer to rent an apartment for two-years. Kridel paid Sommer first month‟s rent and security deposit. Kridel never moved in. Kridel writes letter claiming that he can‟t pay rent because he‟s a student, supposed to get married, engagement called off, parents were supposed to pay rent, he got dumped and he has no money now. Kridel asked Sommer to take the 2month rents deposit and asked to surrender all rights to property. Sommer doesn‟t reply to letter, someone else asks to rent property, Sommer refused, didn‟t re-rent property until a year later. Sommer takes Kridel to court for total amount due for the full two-year term of the lease. Trial court ruled for Kridel, claimed Sommer didn‟t fulfill his duties to mitigate. Riverview Realty Co. v. Perosio – Perosio had lived there for awhile. Court ruled for landlord tho they didn‟t like the rule, but felt inclined to apply it. Common law rule: landlord has no duty to mitigate. New Rule: A landlord has a duty to mitigate damages where he seeks to recover rents due from a defaulting tenant – landlord‟s duty to mitigate consists of making reasonable efforts to re-let the apartment. Holding: ruled that landlord didn‟t meet burden in Kridel and should not get two-year lease, in Riverview – remanded back to court to see if landlord made reasonable efforts to mitigate
Duty to mitigate Utilitarian argument – using resources most efficiently requires one to mitigate Burden seems higher than typical contract law. Landlord‟s duty is pretty strong. Factors to consider to determine whether landlord carried burden to mitigate o Landlord offered or showed the apartment to any prospective tenants o Landlord advertised in newspaper Tenant‟s ability to rebut evidence o Tenant shows that he proffered suitable tenants who were rejected Covenant to deliver possession – implied covenant in lease that landlord will deliver possession a the beginning of a lease term o American Rule – landlord is only required to put the tenant in “legal possession”, landlord right to give possession to someone else, fulfilled obligation if landlord has legal authority to lease the premises and has given no one else permission to occupy the premises Breach occurs if Landlord or someone with paramount title or someone with the landlord‟s consent is in possession when the tenant is first entitled to possession o English Rule – implies a covenant to place the tenant in actual possession of the entire premises a the beginning of the lease Breach occurs if Anyone else is in possession, regardless of the circumstances, at the beginning of the teant‟s lease o Arguments in favor of English Rule
B. Tenants Rights and Obligations/Covenant of Habitability
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Landlord knows better than tenant the status of possession of the premises before the date the tenant is entitled to possession Landlord is the only one who can evict someone improperly in possession before the tenant is entitled to possession Landlord is the only one who can get some assurance that current tenant will not holdover Landlord has greater resources and experience to proceed quickly with eviction Landlord should bear the risk because the landlord is in the best position to evict holdovers and trespassers and deliver actual possession o Under either rule, if landlord does not deliver possession within a reasonable time, the tenant may terminate the lease and recover consequential damages Implied covenant of quiet enjoyment – neither the landlord, someone with paramount title, nor someone acting with the landlord‟s consent will disrupt the tenant‟s possession of the premises. o Most states do not recognize disruptive behavior of third parties in this implied covenant o Some states have modified and made landlord responsible for the activities of other tenants o Cases focus less on whether the landlord is responsible for or approved the disrupting tenant‟s conduct than whether the landlord is legally able to remedy the problem o Actual eviction – when landlord physically ousts the tenants from the entire premists o Problems Policing by landlords Privacy issues Shouldn‟t be landlord‟s duty to act as arbitor Tenant‟s right to habitable premises – o Old rule - caveat emptor, lessee, gave the lessee the burden of inspecting the leasehold before agreeing to lease o Housing codes today are very detailed and require things such as plumbing, fire escape, etc. o Problems with housing codes reinforcement Corrupt or inept inspectors Unlikely for prosecution for violations Difficulty of supervising repairs Receivorship statutes unsuccessful because receivor usually had insufficient capital to make repairs until it had collected rent for a few years Capture – inspectors move from public inspector positions to working privately for landlords Underfunded o Warranty of habitability – part of a broader political and legal movement to address the problems of society at large
o Javins v. First National Corp. Facts: Javins moved into apartment, after moving in, discovered all these problems with apartment, withheld rent. Common law at the time was based on property law, that there was no warranty of habitability. District Court found for landlord. Court‟s Reason: “the continued vitality of the common law…depends upon its ability to reflect contemporary community values and ethics.” Court believes that the old rule based on factual assumptions that are no applicable. The value of the lease in the past was on the land itself but now the value of the lease is to give them a place to live. People these days don‟t have time to do their own maintenance, tenants nowadays don‟t have the skill to fix things themselves, much more mobile population that will have less incentive to repair the premises, and inequality in bargaining power – that landlord knows more, tenants less leverage. Buildings today are more technically advanced and tenants are not skilled enough to repair. Financing – low-income tenants don‟t have money to invest in repairs. Rule: under contract law, there is not an implied warranty for used goods
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Landlords have incentive to improve building even when there is an inequality of bargaining power o Maintain incentive o Investment for obtaining future tenants o Criticism – sometimes it‟s less efficient to improve old buildings – should courts impose a burden on landlords to create an incentive to make repairs? Housing codes – require a warranty of habitability – must meet certain standards – court creates a private remedy of enforcement – tenants can enforce the codes through the law. Tenants now have a liability or a property right? – property rule – because imposes that landlord must fix. Is this right alienable? No, cannot contract out of this, cannot agree to pay lower rent – not alienable. Liability rule – tenant‟s can reduce rent by some amount. No waiver of substantial breaches permitted Wright applied warranty of merchantability applied to apartments o Flaws usually warranty of merchantability is applied to new products and not used goods difference between buying and leasing goods seller sells goods, makes goods, should know their good, whereas in landlord-tenant situation, landlord doesn‟t necessarily know the state of the apartment many landlords not knowledgeable on how to maintain buildings Allows private right of action through housing code What else could Wright have done? o More severe criminal sanctions for violations of housing codes – set by legislature o Tenants should be mandated to go directly to the housing authority o Court could have forced housing board to enforce code and forced legislature to increase funding to enforce housing codes Arg: Courts shouldn‟t be involved in policy making Arg: courts should make policy in landlord-tenant issues because ????
Warranty of habitability Tenant-initiated remedies to enforce habitability requirements Tenants can use self-help to obtain its remedies without facing eviction for nonpayment Implied warranty is breached only when the defect has a substantial impact on health or safety and only after the landlord has had a reasonable opportunity to cure the defect Three categories of remedies: o Rent application – tenant can use some of the rent money to make repairs if the residence is substantially untenable Problems under Coase theorem – free rider problem o Rent-withholding – tenant withholds rent until the landlord corrects health-threatening defects or otherwise makes the premises habitable. May be held in escrow and once repairs are completed all the money in the account is turned over to the landlord. (pay rent/back rent) o Rent-abatement - tenant simply stops paying rent, if no breach found, landlord can get back rent and possession, good faith belief in inhabitable premises is not a defense Ways to determine amount of rent reduction o Difference between the reserved rent and the actual rent value of the premises during the period of the breach o Difference been the fair rental value of the premises as warranted and the fair rental value of the premises in their present condition o Reduction in rent by a percentage equal to the percentage reduction in value resulting from the breach Efficacy of the Warranty of Habitability
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Critiques believe that warranty does not achieve the goal of ensuring decent housing for poor tenants, and enforcement of warranty might do-income tenants more harm than good o Charles Meyers – The Covenant of Habitability and the American Law Institute three categories of housing will be affected by the covenant: 1. Dwellings that do not comply with the housing code and are considered unsuitable for residential use but that can be bought up to code standards by additional investment that can be recovered through higher rents a. Will result in raised rent that some people cannot afford b. Will result in raised rent that will result in decrease in disposable income for other goods and services 2. Dwellings that do not comply with the housing code and are considered unsuitable for residential use but that can be brought up to code standards by and expenditure that will reduce landlord‟s rate of return a. Short run, benefits tenants because landlord eats costs b. Long run, quantity of housing in the second category will decline unless rents fully reflect the costs of the additional repairs required – because of low profit position, operating costs will eventually exceed profitability c. No new category 2 will be built – while present owners need only cover their operating costs, potential owners must be able to cover their initial capital expenses flawed argument because new buildings have to be up to code 3. Dwellings that do not comply with the housing code and are considered unsuitable for residential use, for which the costs of repair to meet code standards will result in a negative return on sunk capital a. Some portion of the housing stock in the third category will be withdrawn from the market because of the duty of habitability – less housing for low-income tenants b. If not mortgaged – abandoned c. If mortgaged – the mortgager will try to maintain property for awhile, after awhile, the mortgager will default and the lending institution takes over. As long as rental income exceeds costs, lending institution controls. After it becomes profitless, State takes over property for taxes, remove it from tax rolls and pay for repairs out of rental income not reduced by taxes – results in a cycle – after city acquires property, city expenses rise, real estate taxes rise, and more structures are abandoned for city to acquire due to higher expenses resulting from higher taxes Housing is a basic human need, perhaps government should provide more subsidies to allow for minimum standards to be met Should protect children, and warranty should prevent neighborhood decline as long as housing agents can push landlords to keep investing and repairing instead of abandoning – i.e. provide incentives for landlord investment Fair Housing Act – prohibits discrimination in the sale or leasing of housing on the basis of race, color, religion, sex, handicap, familial status, or national origin o Contains limited exemptions for single-family homes sold or rented by the owner without the use of any sales or rental agent or advertisement religious organizations private clubs
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C. Tenants Rights Against Discrimination
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housing for the elderly
United States v. Starrett City Associates FACTS: Starrett built a large housing complex and sought to maintain a racial distribution by apartment. Fear of “white flight.” New York State Housing Authority (NYSHA) cared about integration, racial balance (70% white and 30% minority). The neighborhood surrounding the project feared conversion to rental apartments would result in Starrett City becoming an overwhelmingly minority development – “racial tipping.” To maintain a racial balance, Starrett City maintained a residence of 64% white, 22% and 8% Hispanic. (who were the other 6%?). Lawsuit by blacks, resulted in an increase in percentage of apartments available to blacks. After settling, Federal government brought suit, alleging quota violating Fair Housing Act ISSUE: Whether quota system violated the Fair Housing Act? Plaintiff‟s Arg: singled availability solely on the basis of race, waiting list for blacks longer than whites (preference to whites), fraud in telling minorities there was no housing available when there were. Defendant‟s Arg: believed procedure was adopted at the behest of the state solely to achieve and maintain integration and not motivated by racial animus. Argued the point of white flight and tippng. Trying to prevent a conversion to a predominately minority community. Strict Scrutiny – State must have a compelling interest to have a policy based on race. PH: trial court found for the justice department, found that program violated FHA – didn‟t require a specific program, just that you cannot discriminate. COURT‟S OPINION: o FHA – was enacted pursuant to Congress‟ 13th Amendment powers – to end discrimination and promote integration. END in discrimination would RESULT in integration. o Quota promotes integration but conflicts with anti-discrimination o Supreme Court‟s analysis of what constitutes permissible race-conscious affirmative action under provisions of federal law with goals similar to those of Title VIII provides a framework for examining the affirmative use of racial quotas under the Fair Housing Act based on Court opinions on 14th Amendment cases However, govt specifically did not bring this case up under the 14 th Amendment because they did not want to expand anti-discrimination law in general under the 14th amendment. o Looked at whether the practice is temporary, whether there is existence of prior racial discrimination or discriminatory imbalance adversely affecting whites and quote does not provide minorities with access to Starrett City but rather acts as a ceiling to their access. o Court agreed with the lower court and said there was a violation. The impact of Starrett City’s practices falls squarely on minorities. DISSENT: NEWMAN o Does not believe that Congress intended the FHA to prohibit the maintenance of racial integration in private housing (debates the statutory interpretation, Miner is look at a textual interpretation, Newman looked more at intent) o The maintenance of racial integration was working, met a compelling interest o Statute doesn‟t prohibit integration Who is right? o Preserving a balance ok by limiting the number of minorities? o Should racial tipping be permitted in analysis? o Integration helps eliminate prejudice in the future Section 8 Articles Rendell wanted 50% of Section 8 certificates to be project based stay at the project as opposed to tenant based which allows tenants to live wherever landlords allow for Section 8 subsidies. In project based plan, landlord has the certificates and chooses the tenants, instead of tenant trying to find landlords that will accept the certificates. Historically the government have been responsible for increasing segregation in the US because of their programs. Segregation inherent in the public housing system in the beginning. Urban renewal programs also increased segregation. Federal housing administration in the 1930s favored housing developments in the suburbs and other overwhelmingly white housing developments. Section 8 created to prevent segregation and improve integration. Wanted to avoid the concentration of minorities and wanted to increase interaction amongst different groups. Legal? o Facially neutral decision – but has a disparate impact. o What is the compelling interest?
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Dissuade people from moving out of city, keep neighborhoods intact, entice developers to improve current housing o Program meant to give poor families more options in finding a place to live – to help them escape isolated housing projects and move into real neighborhoods o Nationwide interest to knockdown high rises and sprawling housing projects and build mixed-income townhouse-style neighborhoods o Protect neighborhood stability o Preventing white flight o Preventing violence o Strict Scrutiny or mid-level scrutiny o Not facially discriminatory like Starrett City but did have some racial impact Policy Implications o Rendell‟s policy will restrict free choice – may increase concentration of minorities o Are the landlords accepting the certificates trustworthy? o Which policy is better? Both have benefits. HUD didn‟t accept Rendell‟s proposal but did increase the number of certificates that city got.
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IX. X.
EASEMENTS AND COVENANTS
Servitudes – arrangements between private parties that give one party the right to use or to restrict the use of another‟s land, property rights and obligations created by servitudes pass to successive owners and occupiers without the need expressly to assign these rights and obligations or to renegotiate the arrangement. Types o Easement – right to use another‟s land o Profits a prendre – right to remove natural resources from another‟s land o Real Covenants – lease provisions that bind both the lessor‟s and lessee‟s successors and that are enforced at law o Equitable Servitudes – promises between neighboring landowners that bind their successors and that are enforced in equity Pros: o Useful in designing complex residential, commercial and industrial projects. o They are more flexible and durable. o Restrict the use of individual parcels of land to obtain common benefits o Promote efficient land use because they allow an investor to purchase only the degree of control needed to maximize the investment, rather than the entire fee Cons: o Can freeze land uses and distort patterns of development o Can impose burdens that become unreasonable and depress land values o Transaction costs and free-rider and bilateral monopoly problems may prevent the most efficient use of land
B. o o o o o o
Easements
Easements give the holder the right to use or restrict the use of another person‟s land Does not necessarily create an exclusive right Dominant tenement – benefits from easement Servient tenement – burdened by easement Easement holder cannot normally prevent the servient possessor from also using the land involved in the easement or from granting another easement on the same piece of land, unless clearly established as an exclusive easement Types o Affirmative/negative easements Affirmative easement – privileges the holder of the easement to use of another‟s land
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Negative easement – has the right to prevent the servient possessor from using the servient tenement in an otherwise lawful manner – air, light, flow of an artificial stream, lateral support o Appurtenant/in gross easements Easement appurtenant – incident of ownership of the dominant tenement and is not personal to the original holder, passes with the possession of the dominant tenemant (goes with the land), successor to the servient tenement takes possession of that interest subject to the easement unless he is protected by the recording act o Easement in gross – personal to the holder, independent of his possession of any land (benefits certain people), generally not transferable Creation of easements – must conform to the statute of frauds o Expressed easements – created by contract Easement by grant - created if A conveyed a right-of-way across A‟s land to B Easement by reservation – created if A conveyed a fee simple to B, but expressly reserved for herself a right-of-way across the land.
Green v. Lupo FACTS: G, P, originally owned all land, sold northern part of it to L, Ds. D built house on land. Lupo‟s gave G an easement, G built a mobile home park on their part of the land and people with motorcycles were using the easement access as a practice runway. L were paying off land contract in which G still held title until it was still paid off. L requested a deed release, G agreed in return for the promise of an easement when Ls eventually obtained title by paying off land. L blocked off road, Gs brought suit. ISSUE: Is easement in appurtenant or in gross? Can parol evidence be admissible to prove it was an easement appurtenant? COURT‟S REASONING: written consent was ambiguous and parol evidence is admissible. Strong presumption against personal easements in Washington, presumption for easement appurtenant unless specifically established as in gross. RULE: A servient owner (L) is entitled to impose reasonable restraints on a right of way to avoid a greater burden on the servient owner‟s estate than that originally contemplated in the easement grant, so long as such restraints do not unreasonably interfere with the dominant owner‟s use. DISCUSSION: easement appurtenant logical because often needed for services such as utilities, efficient, increases value of land to easement holder.
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Easements by operation of law Easement by implication – allowed if disputed parcels were under single ownership, there was a permanent or continuous pre-subdivision use across the allegedly servient tenement the use was reasonably apparent upon inspection easement is reasonably necessary easement by necessity – arises when land is subdivided, and one of the parcels is landlocked from the public road. Requires: that the purported servient and dominant tenements were owned by a single owner at time of conveyance easement must be “necessary” scope easement by necessity - depends on a court‟s assessment of what is necessary to permit the owner of the dominant tenement to use her land easement by implication – limited to the prior use of the “quasieasement” and foreseeable changes in the use of the dominant tenement
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Reese v. Borghi – Ps sold land to D, tried to buy another lot they sold earlier to a third party, but D also bought that causing P to be landlocked. D then built their home in a way that blocked the former pathway used by P to get access to reach Witherly Lane. D had made some promise to P to allow access to land, but did not give an express easement. TRIAL COURT: said Reese was entitled to a right-of-way of necessity along the eastern boundary of D‟s land. Believed that since P formerly owned all the parcels, that they had an easement appurtenant thereto over Witherly Lane. D‟S ARG: awarding such a right-of-way constitutes taking of property without just compensation in violation of their constitutionally guaranteed rights, in light of evidence, court did not have power to create an easement by implication, and court erred. COURT‟S REASONING: P‟s common law right to seek a right-of-way of necessity is NOT affected by the fact that he could have a right-of-way by condemnation. P‟s rights rest on a claim to a right-of-way necessity not to an easement by implication based on an “obvious, continuous, and pre-existing use”. RULE: Whereas an easement may be generally based on the implied intent of the parties and while necessity may be an operative factor in determining intent, a way of necessity rests on public policy often thwarting the intent of the grantor or grantee. Demands of our society prevent any man-made efforts to hold land in perpetual idleness as would result if it were cut off from all access by being completely surrounded by lands privately owned. doesn‟t the single-ownership requirement go counter to this public policy belief? CA LAW: Right-of-way of necessity arises by operation of law when it is established that (1) there is a strict necessity for the right of way (ex. Landlocked parcel) and (2) the dominant and servient tenements were under the same ownership at the time of the conveyance giving rise to the necessity. HOLDING: for P, requires an easement by necessity Some states provide statutory procedures for private landowners to condemn a right-ofway of necessity across adjoining properties, allowed when landlocked property owner does not satisfy the requirements to establish an easement by necessity under common law
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By prescription (similar to adverse possession) – justified on the ground of maximizing use of underutilized land. Requirements: Actual Adverse Open and notorious Continuous and uninterrupted for the prescriptive period Claimant‟s good faith is irrelevant Adverse use is presumed if the claimant has used another‟s land
Finley v. Botto – two apartment buildings, Ps claim they owned an easement in a certain walkway lying between two apartment houses owned by P and D. D put up a fence to block walkway. Predecessor owners used to have a brick wall that had crumbled and was replaced by a walkway. P‟s tenants would use walkway to access laundry room and with the fence in place, hindered access. Predecessor claims walkway was an act of being neighborly and did not consider anyone trying to make a legal claim to it. P‟s ARG: was actual, continuous and uninterrupted, and open…was it “notorious” (contrary to the interest of the owner) or “adverse”? COURT‟S REASONING – was not open and notorious, it was a neighborly accommodation HOLDING: use of the walkway by appellants was permissive and not under claim of right DISCUSSION: this was an implied permission not an expressed permission, based on history of fence/pathway. To allow people to do what the Ds did in this case (claiming they gave permission), there is no objective criteria to determine if there‟s an easement by prescription. Vague and subjective. Negative easements – cannot be obtained by prescription. Conduct that would otherwise create a prescriptive easement for light- receiving light the flows across the landowner‟s land for the prescriptive period-does not create a cause of action. Negative easements by
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prescription pose serious threats to developmental values that underlie much of American land use laws
Problem, p. 747 o PATH B o Express easement – No, never anything in writing, nothing agreed upon o Easement by implication – No, not a single parcel of land that was divided by MGE. o Easement by necessity – No, not absolutely necessary, not a single parcel of land that was divided by MGE. o Easement by prescription – No, no knowledge that path was ever used, was used by permission, house blocked it to prevent continuous and uninterrupted o PATH A o Express easement, (estoppel?) o Easement by implication – probably, meets requirements (single ownership, use is permanent and continuous, apparent in use, reasonably necessary) – easement appurtenant or easement in gross? Was easement given specific to kids or to land? Must prove that permission was given in 1972. o Easement by necessity – probably – owned by same people, reasonably necessary, landlocked o Easement by prescription - question of whether it‟s continuous and uninterrupted since farm equipment blocked path sometime, whether there was permission given by kids, statute of limitations for easement by prescription has run out (relationship deteriorated for more than 7 years)
C. o o o o o
Covenants
Covenant – a promise to do or refrain from doing something Real covenant – connected to land in a legally significant way, enforceable by damage Burdens and Benefits of real covenants pass to successive owners of the underlying estate Affirmative real covenant vs. affirmative easement o Affirmative real covenant – promise to do an affirmative act o Affirmative easement – right to use another‟s land, no promise to do anything Negative real covenants vs. negative easements o Both landowners has agreed to refrain from some action on his land that he otherwise is legally allowed to do o Negative easements – generally limited to easements for air, light, support, and flow of an artificial stream Other differences between easements and covenants o Easement creates rights in rem, against the community or public o Real covenant creates rights in personam, solely against the covenantor or her successors Elements of a Real Covenant – assumes that the covenant is enforceable between the original parties under he normal rules of contract, must satisfy the statute of frauds o Burden Intent – original parties must have intended to bind the covenantor‟s successors – can be discerned from the circumstances surrounding the agreement, courts conclude that the parties intended a covenant to run if it touches and concerns the land Vertical privity – exists if the covenantor‟s successor has succeeded to the same estate that the covenantor had, to “succeed”, one may acquire the land by devise, intestacy, grant, or judicial sale – any means except adverse possession (in easements, any possessor of the servient tenement must honor the easement; in adverse possession, title taken subject to easements created prior to his adverse possession, but taken free of predecessor‟s real covenants), requires an identical relationship (ex. A sold W, leased to K, K not burdened since no identical relationship, K does not have the identical interest that W took). Horizontal privity – describes the required relationship between the original covenantor and original covenantee Restrictive approach – requires covenantor and covenantee to have simultaneous interests in the land that is the subject of the covenant (in hp if they are landlord and tenant/owners of servient and dominant tenements respecting an easement)
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Less Restrictive approach – requires covenant to be created simultaneously with a transfer of an interest in land HP of little consequence in landlord-tenant relationships, limits real covenants to those covenants that were created when the lease was executed, which usually covers all relevant covenants HP sharply restricts the ability of fee owners to create real covenants since fee owners often do not want to transfer an interest in land at the same time that they want to create a real covenant Touch and concern – requires that the real covenant relate to the covenantor‟s use of his land (ex. Tenant‟s covenant to pay rent), designed to identify those covenants that a successor ought to be obligated to fulfill simply because he was succeeded to the covenantor‟s interest in the land
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Burden Intent Vertical privity – exists when a successor has succeeded to the same interest as the original covenantee, under the Restatement, a subtenant could enforce the tenant‟s covenants with the landlord Touch and concern Remedy for Breach – real covenants enforced by damages remedy only. Some states now hold that the doctrine of changed conditions is a defense to a claim for damages and may be used to terminate a real covenant Termination of Real Covenants – Real covenants may be expressly designed to terminate at some fixed point in time, or upon some condition
Eagle Enterprises, Inc. v. Gross FACTS: 1951 – Two people (O and B) contracted in deed that O will supply water and B will buy it. Expressly provided that the covenant contained shall run with the land. Express covenant. Successor of B, G, built his own will and refused to purchase the water from successor of O, EE. ISSUE: Whether the promise of the original grantees to accept and make payment for a seasonal water supply from the well of their grantor is enforceable against subsequent grantees and may be said to “run with the land.” I.e. Did the agreement touch and concern the land. HOLDING: Agreement does not seem to touch and concern the land, G wins. COURT‟S REASONING: agreement represents a contract, for it to touch and concern the land it must substantially affect the ownership interest of landowners in the subdivision. RULE: distinction between covenants which run with land and covenants which are personal, must depend upon the effect of the covenant on the legal rights which otherwise would flow from the ownership of land and which are connected with the land. The key question is whether “the covenant in purpose and effect substantially alters these rights.” RULE 2:requirements to show that a covenant runs with the land: i. original grantee and grantor must have intended that the covenant run with the land ii. privity of estate must exist between the party claiming the benefit of the covenant and the right to enforce it and the party upon whom the burden of the covenant is to be imposed iii. covenant must be deemed to “touch and concern” the land with which it runs COURT‟S REASONING: no evidence that other property owners in the subdivision would be deprived from water from EE or that the price of water would become prohibitive for other property owners if respondent terminated appellant‟s service.
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*not concerned really with horizontal and vertical privity* - when are covenants appropriate and when aren‟t they? When can agreements be enforced on subsequent owners of land? When do covenants pass with the land? If there‟s no horizontal privity, covenant does not pass with land. Horizontal privity Covenantor and covenantee (original owners) have to have ownership interest in the land, third parties do not have the right to impose restrictions on land use. Most states require that convenantee pass the land to covenantor with the covenant. Vertical privity subsequent owner
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of land must take the same interest as the prior owner, (e.g. fee simple fee simple), must have an identical relationship.
Shelley v. Kraemer ISSUE: Question relating to the validity of court enforcement of private agreements, generally described as restrictive covenants, which have as their purpose the exclusion of persons of designated race or color from the ownership or occupancy of real property. Does judicial enforcement of private covenants amount to State action of discrimination that violate the 14 th Amendment? FACTS: there were 30 out of 39 owners which signed a covenant preventing the sale of land to Negroes and Mongolians. Shelley wanted to buy property from Fitzgerald. The other landowners brought this lawsuit asking for an injunction to prevent Shelley‟s from taking possession. Shelley‟s had already taken the property. PH: trial court found that not all the homeowners signed the agreement so it never became final and complete, found for Shelley. Supreme Court of Missouri reversed, saying covenant was valid and granted injunction. Believed enforcement violated no rights guaranteed to the Shelley‟s by the Constitution. SUPREME COURT OF US: restrictive covenant in and of itself did not violate the 14 th Amendment because it was private not public (relied Civil Rights cases of 1883). 14th Amendment only covered public action. PRECEDENCE: Strauder v. West Virginia: racially restricted jury service, American Federation of Labor v. Swing: enforcement of state courts of common-law policy of state was held to be state action. do they apply? RULE: “state action in violation of the Amendment‟s provisions is equally repugnant to the constitutional commands whether directed by state statute or taken by a judicial official in the absence of statute”; “Constitution confers upon no individual the right to demand action by the State which results in the denial of equal protection of the laws to other individuals” COURT‟S REASONING – “but for the court, the transaction between buyer and seller would have been complete.” WRONG. With an existing covenant, there are other parties with rights in this case HOLDING: Court‟s enforcement of covenant would be deemed State action in the violation of equal protection of the laws guaranteed by the 14 th Amendment.
D. Equitable Servitudes o Equitable servitude – creates an interest in property that passes to successive owners who have knowledge of the restriction o Equitable doctrine to apply when covenant law was too strict to apply – has fewer requirements than covenants o Elements of Servitude o Burden Touch and concern – requires that the real covenant relate to the covenantor‟s use of his land Notice – burden of equitable servitudes do not run unless the party to be held liable had notice of the equitable servitude when he acquired possession; no notice required if the person against whom enforcement is sought as a donee, heir, or devisee. (Privity) – none, anyone with a possessory interest in the land is bound o Benefit Touch and concern Intent o Remedy o Usually injunctive relief o If the covenant is one to pay money, courts usually will not order payment but will impose a lien on the covenantor‟s property, limiting liability to the value of the property o Equitable defenses used to prevent enforcement of equitable servitudes o Waiver
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o o o o o
Laches Unclean hands Estoppel Doctrine of neighborhood change – court will not enforce a covenant in equity if, because of changed conditions, it is no longer possible to fulfill the parties‟ original intent Contrary to public policy
Bolotin v. Rindge Question of equitable servitudes. When they should be enforced and what standards to use to decide whether they should be enforced. FACTS: P owned an undeveloped lot on Wilshire Blvd. Lot had a restriction deed that only allowed a single-family home development. P wanted to build a commercial building. Is deed enforceable? TRIAL COURT: rule for P, restriction not enforceable due to changed circumstances. “A court will declare deed restrictions to be unenforceable when, by reason of changed conditions, enforcement of the restrictions would be inequitable and oppressive, and would harass P without benefiting the adjoining owners” APPELLATE COURT: Changed circumstances evidence not enough, economic value isn‟t enough, Requires a finding that the purposes of the restrictions have become obsolete (P must show residential development was impossible) or that the enforcement of the restrictions on P‟s property will no longer benefit the other landowners. COURT‟S REASONING – purpose of restriction was to preserve tract as fine residential area by excluding activities that might be offensive to residents or which would create noise, traffic, congestion, etc…developing commercially may increase the value of the neighboring lands, but the purpose of the restriction will be violated. o Who should get to decide when the circumstances have changed? Neponsit Property Owner‟s Ass‟n, Inc. v. Emigrant Industrial Savings Bank FACTS: P, N, brought action to foreclose a lien upon land which D, E, owns. P alleges that lien arose from a covenant, condition or charge contained in a deed of conveyance of the land from Neponsit Realty Company to a predecessor in title of D. D purchased land at a judicial sale. The deed supposedly conveys the property subject to the covenant, condition or charge contained in the original deed. Covenant charged a maintenance fee for public area upkeep. ISSUE: does the covenant run with the land? Does the covenant “touch” or “concern” the land? Does the covenant in purpose and effect substantially alter the legal rights which would flow from ownership of land and which are connected with the land? (BROAD interpretation) COURT: Requirements: 1. intent 2. touch and concern 3. privity of the estate between the promisee or party claiming the benefit of the covenant and the right to enforce it, and the promisor or party who rests under the burden of the covenant RULE: Subject to few exceptions, there is now in this state a settled rule of law that a covenant to do an affirmative act, as distinguished from a covenant merely negative in effect, does not run with the land so as to charge the burden of performance on a subsequent grantee. COURT: Association doesn‟t own any land, didn‟t transfer any land, doesn‟t really have horizontal privity but court took a broader understanding, and claimed Association was acting as an agent of the property owners and that was enough to establish privity. “Corporate P has been formed as a convenient instrument by which the property owners may advance their common interests”. Equitable relationship and rights transferred to Home Owner‟s Association. (didn‟t really meet requirements but court decided to interpret covenant as running with the land). DISCUSSION: Privity requirement lessens impact of covenants on land use. Generally should be able to alienate land freely. Privity doesn‟t let covenants always burden the land, and it makes it easier to sell land in the future. However, this covenant doesn‟t restrict the ability to sell land, therefore privity is not required. Notice required for enforcing covenant. Why do you have covenants? Usually increases the value of land.
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IX.
COMMON INTEREST COMMUNITIES
Common values Government has failed Property values Amenities/ Services Enforcement of values/rules Cheaper to buy/ live in? Protection/Regulation Less research/Expressed Expectations/Warranty
A. Creation and Judicial Oversight of Common Interest Communities Benefits of Homeowner‟s Associations:
Common Interest Communities o Developers use covenants, conditions and restrictions to tailor the living environment to a targeted audience. o Creates a quasi-democratic governance structure to manage the community and provide it flexibility to evolve over time o Factors fueling the growth of CIC‟s: Large tax subsidies allows a broader segment of the population to own their own home Overcomes problems with free riders and other problems prevalent in covenants, easements and equitable servitudes Provides shared amenities with no individual burdens Dissatisfaction with provisions of services by local government are eliminated when CIC‟s supplement or take over the basic services of road maintenance, utilities, etc. o Basic structure Exclusive occupancy rights to a dwelling unit Co-ownership of common areas Detailed covenants, conditions and restrictions governing the use and sometimes transfer of units and the use of common areas Assessment of fees to operate the CIC Participation by owners in the governance of the CIC o Predominant Forms Cooperatives Device to share ownership among the residents of large, typically luxury, apartment buildings Constitute about 1% of housing today Concentrated in large cities Often use a corporation or business trust model to structure ownership interest in multi-unit buildings CIC developers form a corporation and convey land to the corporation which assigns stockholders proprietary leases to specific dwelling units Residents do not actually hold title to their apartment, they hold exclusive use and lease renewal rights for as long as they retain their stock Typically financed through blanket mortgage Operates under charter and bylaws Shareholders elect directors to oversee operation If building destroyed, corporate recovers the insurance proceeds and decides whether to rebuild. Residents influence decision by vote. Condominiums Rely on model of freehold interests to structure the rights and responsibilities of residents Members typically own units in fee simple Owners possess title to the interior spaces of their dwelling units extending to or even part way through exterior and common walls.
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Owners are also tenants in common with other unit owners in the underlying land and in the spaces and building parts used in common Three types of documents recorded by Developer: Declaration or master deed – describes land, dwelling units and common element of the building, incorporates applicable covenants and other land use restrictions establishes a homeowner association and provides for the amendment of the declaration and bylaws Bylaws – set forth the rules and procedures governing the homeowners association and the administration of the condo development. Deeds to individual units – transfer title to the purchaser Owners typically finance their ownership interest individually by pledging their fee interest as security If building destroyed, owners have direct access to insurance proceeds and usually have more control in deciding whether a destroyed building will be rebuilt, some states distribute insurance proceeds pro rata. Most common means to create ownership interests in multi-unit residential buildings flexible model adapted to a wide range of uses. Planned Unit Developments and Subdivisions with Mandatory Membership Homeowner Associations Homeowners own both the dwelling unit and the land on which it is built Developers typically establish a non-profit corporation that owns the common areas Homeowners may own common areas as tenants in common Planned unit developments (PUDs) have a quasi-democratic decision making structure – responsibility to manage the common areas, power to assess homeowners for the costs of operating the association, and authority to enforce the covenants, conditions, and restrictions governing the CIC. Model used to plan and market PUDs Prior to sale, developers record a declaration of covenants, conditions, and restrictions which provide for the establishment of a homeowner association and the rules governing its decision-making process, responsibilities, and powers Developer incorporates the covenants, conditions, and restrictions into the deeds of all properties sold in the development Developers increasingly turn to homeowner associations to develop and market homes Judicial Role in Overseeing Homeowner Associations o 5 Models Contract/Consent Model – get the benefit of the bargain whatever it was agreed to, should be upheld Local government model – stricter, judiciary allowed to intervene and oversee Administrative model – view HA as an administrative authority – courts should respect agreements but look at reasonableness and how its implemented Corporate model – laxed standard – closely reflect the specialized contractual nature among members Trust model – run like a trust o Restrictions in originating documents Strong presumption of validity – strike down only if arbitrary or violative of public policy or a constitutional right
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Buyers voluntarily agree to be governed by the terms when they buy in and are entitled to rely on the enforceability of restrictions in originating documents
Hidding Harbor v. Basso Facts: Basso wanted to dig a personal well, CIC said no. Basso digs well anyway, CIC sues. Court: upheld prohibition of any exterior alteration without board approval Rationale: Breaks down two kinds of regulations: 1. restrictions imposed by original declaration (contract) 2. restrictions imposed by board (reasonableness standard) Portola Hills Comm Assn v. James Facts: D, James, wanted to install a satellite dish. CIC said no, in covenant, because they didn‟t want to hurt the aesthetics of the neighborhood. Court: refused to uphold ban because P‟s dish not visible by neighbors and thereby did not impinge upon the goal of the statute
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Restrictions subsequently adopted Requires reasonableness Less deferential review to a subsequent bylaw change than to a covenant in the originating document Courts may balance importance of the new rule‟s objective with the importance of the individual interest infringed upon
Hidding Harbor v. Norman Facts: Bd of director adopted rule prohibiting use of alcohol in certain areas of common use Court: upheld ban Rationale: reliance interest of buyers is not so strong with respect to subsequent changes Winston Towers v. Saverio Facts: D had a dog, P had a policy that pets must be registered, dog was registered. Amendment that all pets not registered were prohibited, dog had puppies. D supposed to get rid of puppies. Court: regulation struck down because it was in effect, regulating retroactively
B. Judicial Role in Overseeing Homeowner Associations
5 Models o Contract/Consent Model – get the benefit of the bargain whatever it was agreed to, should be upheld o Local government model – stricter, judiciary allowed to intervene and oversee o Administrative model – view HA as an administrative authority – courts should respect agreements but look at reasonableness and how its implemented o Corporate model – laxed standard – closely reflect the specialized contractual nature among members o Trust model – run like a trust Restrictions in originating documents o Strong presumption of validity – strike down only if arbitrary or violative of public policy or a constitutional right o Buyers voluntarily agree to be governed by the terms when they buy in and are entitled to rely on the enforceability of restrictions in originating documents
Hidding Harbor v. Basso
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Facts: Basso wanted to dig a personal well, CIC said no. Basso digs well anyway, CIC sues. Court: upheld prohibition of any exterior alteration without board approval Rationale: Breaks down two kinds of regulations: 1. restrictions imposed by original declaration (contract) 2. restrictions imposed by board (reasonableness standard) Portola Hills Comm Assn v. James Facts: D, James, wanted to install a satellite dish. CIC said no, in covenant, because they didn‟t want to hurt the aesthetics of the neighborhood. Court: refused to uphold ban because P‟s dish not visible by neighbors and thereby did not impinge upon the goal of the statute
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Restrictions subsequently adopted o Requires reasonableness o Less deferential review to a subsequent bylaw change than to a covenant in the originating document o Courts may balance importance of the new rule‟s objective with the importance of the individual interest infringed upon
Hidding Harbor v. Norman Facts: Bd of director adopted rule prohibiting use of alcohol in certain areas of common use Court: upheld ban Rationale: reliance interest of buyers is not so strong with respect to subsequent changes Winston Towers v. Saverio Facts: D had a dog, P had a policy that pets must be registered, dog was registered. Amendment
that all pets not registered were prohibited, dog had puppies. D supposed to get rid of puppies. Court: regulation struck down because it was in effect, regulating retroactively Restraints on Alienation
Laguna Royale Owners Assn v. Darger Facts: Attempt to assign undivided interest in a property to others which violated a provision of the deed by which D acquired property, prohibiting assignment or transfer of interest in the property without the consent and approval of Association‟s predecessor in interest. Rule: In approving or disapproving transfers or assignments, Association must Act reasonably Exercise its power in a fair and nondiscriminatory manner Withhold approval only for a reason or reasons rationally related to the protection, preservation and proper operation of the property and the purpose of Association as set forth in governing instruments In Condo setting – each unit owner must give up a certain degree of freedom of choice which he might otherwise have in separate, privately owned property Owners as a group should have the authority to regulate reasonably the use and alienation of the condos
C. Future of CIC Governance
Duration o Winokur – enforcement of all restrictions imposed by servitude regimes, limiting neither the duration nor the content of servitudes, can undermine the availability of neighborhoods conducive to human flourishing, where each individual‟s identity can be based on personal control of a unique place in the residential environment o Korngold – servitudes should be enforced like other contracts for efficiency, moral obligation and freedom of choice Individual Rights
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o Most constitutional restrictions don‟t apply to Has Susan French -
X.
ZONING
acceptance that private markets don‟t always work and government must intervene to organize society and take away some property rights for the broader good. Mechanism for Land Use Regulation o Zoning ordinances – to impose limits on the size and location of structures, the size and shape of lots, and the use of land and structures o General Plans – specify the jurisdiction‟s goals for future development, including distribution of population density and infrastructure o Subdivision Controls – establish specific criteria for the location and design of streets, major utility lines, and other public infrastructure, and they frequently require dedications of land or payments for off-site improvements o Building Codes – dictate building methods, structural elements, minimum habitability standards and aesthetic elements. May also restrict the owner‟s right to change designated historic buildings
A. Euclidean zoning system
o Standard State Zoning Enabling Act – municipalities could regulate land use to promote health, safety, morals, or the general welfare of the community. ADD – p.900
Village of Euclid v. Ambler Realty Co. FACTS: Euclid set up six different zoning districts with different levels of restrictions on types of developments allowed in each zone. Attempt separate uses. P‟s land is partly zoned for residential use only and not industrial use and therefore limited their abilities to develop the land profitably industrially. PLAINTIFF‟S ARG: claimed ordinance violated the 14th Amendment in depriving appellee liberty and property without due process of law, and denies it the equal protection of the law. Sought an injunction. DISCUSSION: With the changes in society, government needs to change to reflect these changes. “While the meaning of constitutional guaranties never varies, the scope of their application must expand or contract to meet the new and different conditions which are constantly coming within the field of their operation. RULE: Although a degree of elasticity is thus imparted, not to the meaning, but to the application of the constitutional principles, statutes and ordinances, which, after giving due weight to the new conditions, are found clearly not to conform to the Constitution must fall. COURT‟S REASONING: Law based on police powers – government has the obligation to intervene to help protect public welfare. Law of nuisances – allows regulation of property. must consider the specific circumstances surrounding the case, overly broad. Some of things restricted under zoning laws may not be nuisances, (zoning ordinances are broader than nuisance laws) – However, the court was “not prepared to say that the end in view was not sufficient to justify the general rule of the ordinance, although some industries of an innocent character might fall within the proscribed class” PRO‟S OF ZONING: segregation of residential/industrial buildings makes it easier to organize fire rescue operations, increase the safety and security of home life, tend to protect street accidents, reduce traffic noise, more favorable environment in which to rear children, etc. COURT‟S R: believes apartments come very near to being nuisances, zoning maintain the character of neighborhoods, nand help maintain public health, safety, morals, and general welfare. STANDARD OF REVIEW: Rational basis but lots of discretion to local governments to make ordinances – “substantial relation” test – zoning ordinance would be set aside of if it “is clear that [the city council‟s] action „has no foundation in reason and is a mere arbitrary or irrational
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exercise of power having no substantial relation to the public health, the public morals, the public safety or the public welfare in its proper sense.” RULE: where equitable injunction is sough on the ground that the mere existence and threatened enforcement of the ordinance, by materially and adversely affecting values and curtailing the opportunities of the market, constitute a present and irreparable injury, the court will not scrutinize its provisions, sentence by sentence, to ascertain by a process of piecemeal dissection whether there may be, here and there, provisions of a minor character, or relating to matters of administration, or not shown to contribute to the injury complained of, which, if attacked separately, might not withstand the test of constitutionality. Daniel R. Mandelker, The Zoning Dilemma o Dilemma – gap between the adoption of the zoning framework and its execution in the market place o Should we perceive the land market as making perfect or imperfect allocations through the pricing system o Economists say we don‟t need zoning laws because private owners will efficiently allocate land – market will result in an organized society similar to zoning ordinances o However, individual entrepreneur will only consider their own opportunity costs and gains, will not consider externalities that his developments will affect on others o Zoning ordinance based on the separation of land use incompatibilities must therefore intervene to prevent the visitation of externalities which the private market cannot prevent. Zoning ordinances correct for the externalities which the private market need not consider. o Zoning involves matters of taste and preference rather than an observable physical effect. Zoning strategies based on judgmental preference carry with them an implicit hierarchical model of residential development in which single family developments is favored – upward pressures on these more favored uses are assumed to visit harmful externalities which the legal system should control. o DISCUSSION: nuisance law doesn‟t solve all problems Bradley Karkkainen, Zoning: A Reply to the Critics o Zoning protects a homeowner‟s consumer surplus in a home and in the surrounding neighborhood, that lies above the market value of that home o There exists neighborhood commons – collective resources – rights of urban dweller to rights in individual dwelling and inchoate rights in a neighborhood commons o Purchaser of residential property in an urban neighborhood buys not only a particular parcel of real estate, but also a share in the neighborhood commons o High level of consumer surplus may attach to features of a neighborhood commons. Highly subjective and may not widely be shared by those who have never lived in the neighborhood so they add little to market value of property o Resources are non-fungible and irreplaceable o Like one‟s home, one‟s neighborhood may be centrally bound up in one‟s definition of self and sense of his or her place in the world. o DISCUSSION: doesn‟t the market value include these intangibles? Assume that when you bought the house you assumed that the neighborhood would remain the same..and zoning laws help assure this consistency. Is zoning more democratic? Allowing constituents to voice what they want? However, democratic process is limited to the current residents and not future residents If quasi-commons is subjective, and personal to individual preferences Richard Epstein, A Conceptual Approach to Zoning: What’s Wrong With Euclid o No clear demarcation separating nuisances, for which regulation is appropriate, from ordinary activities, for which it is not. o Zoning process misunderstands the way in which individuals wish to integrate and coordinate their activities o Although there is some local disadvantage to having just one deviation from that particular patter of uses, there is a huge overall advantage o Hard to coordinate zoning o Entitlement to make land use decisions should rest with the individual property owner
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Nuisance law, servitude law, and takings doctrine are adequate Nuisance Servitude – agreement through covenants extremely difficult to enforce Ellickson o Covenants not going to work, nuisance damages are the way to go o Zoning is an example of specific deterrence systems which impair the efficiency of resource allocation to the extent that they require compliance with a standard even when the prevention costs involved in compliance exceed the resulting reduction in nuisance costs. o Detailed mandatory zoning standards inevitably impair efficient urban growth and discriminate others o Consensual systems of internalization are good mechanisms for handling external costs, particularly in area where much of the land is still undeveloped o Pervasive but individually trivial harms caused by noxious land uses cannot be efficiently internalized through nuisance suits Fischel – Equity and Efficiency Aspects of Zoning Reform o Zoning is in response to market failure – an attempt to redistribute property rights or “entitlements” from those who own undeveloped land to other community residents o Unfair to hold zoning to efficiency standards since it‟s in response to areas that are inefficient o Benefits of zoning: limit on increased costs, lower tax rates, enjoyment of open land, preservation of values, and prevention of environmental disamenities Benefits are those perceived by existing residents who comprise the community not potential occupants To the extent that any degree of restriction of development is enforceable, the total benefits will be reflected in the value of existing housing o Coase Theorem Initial entitlement in restriction (zoning) does not have to be at the maximum benefit point Problem not one of laissez faire vs. planning but involves two questions: Of the various initial entitlements in land use restrictions Which is most equitable and Which is most likely to lead to the maximum benefit point? o Efficiency (Utilitarian argument) vs. Entitlement (Locke) DISCUSSION: Are zoning ordinances a good thing? o Pro: seem less judgmental and arbitrary than nuisance law o Con:
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B. Exclusionary Zoning
Exclusionary Zoning – the deliberate exclusion of low- and moderate-income families and individuals, often has a disproportionate impact on racial minorities Techniques of exclusionary zoning: o Large-lot zoning o Large minimum square footage requirements o Prohibitions on apartment buildings and mobile homes o Prohibitions on multi-bedroom apartments o Expensive architectural or building standards o Overzoning for nonresidential uses Key motivation for requirements is to keep out residential developments for low-income families that increase the demand for public services but that do not generate a corresponding increase in property tax revenue Assumptions about the motivation and consequences of strict zoning practices o Desire for a low marginal tax rate and high service benefits per family relative to tax rates o Increase in local housing prices which keep the poor out o Ensure residential segregation by income and race o Aggravates problems characteristic of segregated metro areas No clear criteria to define exclusionary zoning Lack of remedial tools
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Pennsylavania o Zoning ordinance whose primary purpose is to prevent the entrance of newcomers in order to avoid future burdens, economic and otherwise, upon the administration of public services and facilities is invalid
Surrick v. Zoning Hearing Board – not about race FACTS: P wanted to build multi-family dwellings, tho zoned for single-family dwellings. Denied his petition for variance. There are other zones that allow for multi-family dwellings, small zone that allowed not just multi-family dwellings but also other industrial developments. Not completely outzoned, but definitely limited. COURT‟S REASONING: Principles to consider standard of review – substantial relationship to health and safety and general welfare of community (rational basis) “fair share principle” – attempt to determine whether ordinance is exclusionary 1. whether the community in question is a logical area for development and population growth 2. examine the present level of development within the particular community 3. whether the challenged zoning scheme effected an exclusionary result or, alternatively, whether there was evidence of a “primary purpose” or exclusionary intent to zone out the natural growth of population Focus is not on the motives/intent underlying the zoning ordinance but on the ordinance‟s exclusionary impact Court says you can‟t exclude certain groups of people HOLDING: For Surrick, Township has not provided its fair share of multi-family housing which it must do DISCUSSION: This is a standard not a rule. It needs to be considered on a case-by-case basis specific to the facts of the case. PROBLEM WITH ANALYSIS: “fair share” is a subjective standard, hard to try a distinctive line. Things township needs to consider: present population, future population, proportion in single/multi-family housing, look at development in similar communities P‟s evidence needed – flow of multi-family dwellings, if selling affordable housing – is it worth litigating? Fernley v. Board of Supervisors of Schuylkill Twp. FACTS: Developer wanted variance for multi-family dwellings in an area zoned for single and two-family dwellings only. Present case has a total ban on multi-family dwellings. PH: For D, believed township is not a logical area for growth and development, noone is excluded ISSUE: Whether a fair share analysis must be employed to assess the exclusionary impact of zoning regulations which totally prohibit a basic type of housing HOLDING: Zoning ordinance is impermissibly exclusionary because it totally prohibits the construction of multi-family dwellings – fair share analysis is inapplicable since there‟s a total ban on multi-family housing. For P, granting variance based on Casey. Approval for the developer‟s plan is not automatic but must be predicated on the suitability of the proposed site and various health and safety considerations. COURT‟S REASONING: There is a presumption of Constitutionality in any zoning ordinance. P has the burden of proving invalidity (proves a total prohibition of a legitimate use), burden shifts to the township to show that its ordinance is reasonable to promote public health, safety, morals and general welfare. RULES: - The Constitutionality of a zoning ordinance which totally excludes a legitimate use is regarded with circumspection and, therefore, such ordinance must bear a more substantial relationship to a stated public purpose than a regulation which merely confines that use to a certain area within the municipality. - Fair share test applies to cases where zoning ordinances effect a partial ban that amounts to a de facto (effectual) exclusion of a particular use as opposed to those that provide for a de jure
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(intentional) exclusion. – fair share does NOT apply when the zoning regulation totally excludes a basic form of housing. - Cases involving de facto or partially exclusionary zoning turn on the question of whether the provision for a particular use in the ordinance at issue reasonably accommodates the immediate and projected demand for that use. DISCUSSION: Do you, as a private individual, have standing to contest this zoning ordinance? No, unless you can bring a claim of racial discrimination. Argument for the right to travel is being impinged? Only if between states – but no one‟s won on this claim. Wealth discrimination? Invidious intent? People in these cases were developers that actually owned property in the township and were prevented from achieving highest potential in developing land. To have standing must show that you have suffered some damages that can be compensated
NJ:
Mt. Laurel – 1.) Court ruled that each township has to meet its responsibilities and provide its fair share…has not said that exclusionary zoning in and of itself illustrates racial discrimination. 2.) Court declared that township had to allow affordable housing, created a system of magistrates to oversee what the townships were doing. 3.) State adopted their interpretation of the fair housing act but P‟s not satisfied. Court approved the legislative act.
D. Growth Controls
Some communities want to restrict or stop all residential and commercial development Reasons: o Preserve certain resources o Prevent over-taxing infrastructure o Exact from developers benefits to which they are not entitled under the subdivision laws o Existing physical and financial resources of community are inadequate to furnish the essential services and facilities which an increase in population required – public welfare Methods used: o Provided tax incentives to slow the pace of development o Issued Bonds o Imposed Moratoria on or limited the number or timing of building permits o Established “greenbelt” zones in which no developments is permitted Problems: o Unlike zoning, growth controls seem ad hoc, and don‟t come as a democratic process o Legal issues: are these fair? Violation of equal protection clause. o Should different standards be applied to growth control, zoning, and takings? Yes, why?
Associated Home Builders of the Greater Eastbay, Inc., v. City of Livermore
FACTS: Ordinance enacted that prevented the issuance of building permits until the overcrowding in schools, sewage pollution, and water-rationing problems were solved. P‟S ARG: Claims the ordinance prevents nonresidents from migrating into the area and in doing so, exceeds the police power of the municipality. COURT‟S REASONING: Applies a rational relation test finds that ordinance is reasonably related to the objective of protecting the public health and welfare. no constitutional violation, question is therefore… WHO HAS A CLAIM: Court believes people outside municipality have standing as well ISSUE: Whether the ordinance is valid in limiting building permits in accord with standards that reasonably measure the adequacy of public services RULE: If a restriction significantly affects residents of surrounding communities, the constitutionality of the restriction must be measured by its impact not only upon the welfare of the enacting community, but upon the welfare of the surrounding region. Must consider the welfare of those which the ordinance significantly affects. – Ordinance carries the presumption of Constitutionality P has to prove their case
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COURT‟S REASONING: Under Euclid, states have a lot of power, however, current case‟s ordinance significantly affects the interests of non-residents who are not represented in the city‟s legislative body. Must decide whether the ordinance is unreasonable. TEST to determine whether a challenged restriction reasonably relates to the regional welfare 1. forecast the probable effect and duration of the restriction 2. identify the competing interests affected by the restriction 3. determine whether the ordinance, in light of its probable impact, represents a reasonable accommodation of the competing interests HOLDING: P has not met burden of proof in disproving reasonable relation. Remanded. DISSENT: elitist concept designed to exclude future residents – no timetable for how long moratorium will last and current residents have no incentive to conserve resources for future growth. Dissent‟s Standards Test: 1. any absolute prohibition on housing development is presumptively invalid 2. local regulations, based on parochialism, that limit population densities in growing suburban areas may be found invalid unless the community is absorbing a reasonable share of the region‟s population pressures (fair share) If Livermore can do this, than other towns can do this – broader ramifications in the bay area. Belle Terre (no houses that can house unrelated members Court said this was ok to preserve the character of the community) not the same issue in this case. Right to housing is more than an esoteric principle, housing is special, prevention of movement of people in living area should be subject to stricter scrutiny. (housing ordinances are different results in the exclusion of people) DISCUSSION: What can P do to prove their case? Define standards see if it‟s reasonable. Should they do just enough for the people already living there or should they do more to allow new people to move in? Township is worried about slippery slope, fixing problem, people move in, then have to fix problem again…. Does ordinance make sense? Is it fair in policy? Should townships give first priority to the needs of its residences? Is it necessary? Shouldn‟t market take care of these issues anyway, i.e. if sewage problems and education problems, developers wouldn‟t want to live there?
Ellickson, Suburban Growth Controls: An Economic and Legal Analysis o Effects (assuming non-elasticity) On present owners - Benefits those living in the municipality already – keeps their house prices constant or increases them, landlords prevent competition On suppliers of new housing - Costs largely felt by landowners who own tracts of undeveloped land On Housing consumers - Prices raised on new and used housing. Reduction in surplus to 1) current tenants, 2)new households moving in, (people that want to buy) 3) tenants that can‟t afford rent increases, and 4) potential immigrants who have decided not to buy or rent there because of the price increase or antigrowth policies Believes 1,2 are hurt the most – current tenants have higher property interest 3,4 not hurt as much Extraterritorial effects – more attractive, demand for housing in surrounding areas is enhanced, prices for old and new housing is also increased o Legal Approach - Proposed Rules Suburb must be entitled to enforce restrictions on landowners or else it will not be able to implement efficient antigrowth programs (perhaps by compensation) Government should be allowed to prohibit “subnormal” activities; if prohibiting normal activities, must provide compensation. Township defines what “normal” is hierarchy – uses of land that are better than others – single family considered the best considered normal
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Law of Development Restrictions – Quotas, Moratoria, and Reg. of Area, Bulk and Use Construction quotas – Moratoria -
XI.
TAKINGS
Been – “Exit” as a Constraint on Land Use Exactions: Reasons for imposing exactions upon development o Shift to the developer the costs of the public infrastructure that the development requires o In sharing the costs of infrastructure between developer and customer, exactions induce a more efficient use of the infrastructure o Mitigate the negative effects a development may have on a neighborhood – encourage efficiency by forcing the developer and its customers to internalize the full costs of the harms that the development causes o Enable growth in areas that might otherwise be stalled by growth control o Discourage growth or prevent certain kinds of development in order to preserve the exclusiveness of a community or to preserve its fiscal position o Redistribute wealth from the developer or its customers to others or to prevent the developer from appropriating wealth created by the activities of the local government Types of Exactions o Subdivision Exactions – subdivision controls and conditional rezoning frequently require dedications of public infrastructure, such as streets, parks, sewers, etc. Require developers to provide on-site infrastructure in exchange for subdivision approval Upheld against Constitutional challenge on the grounds that development caused the need for the improvements and that the improvements would specially benefit the subdivision o Impact Fees – imposed on developments to help finance a range of municipal facilities that may be required as a result of development Upheld usually as long as there is an adequate relation between the fee and the additional burden imposed on public facilities o Linkage Programs – usually require the developer to pay fees reflecting the cost of housing construction, feeds deposited into a fund dedicated to the construction of lowand moderate-income housing – “affordable housing” presume that a new commercial development will either displace existing private land uses or create new demand for particular land uses that the market will not supply some states require express statutory authorization and others have found implied authorization Federal Constitutional Challenges to Exactions
Nollan v. California Coastal Comm‟n: FACTS: Coastal Commission required the landowners to dedicate a public easement across their property in exchange for a building permit. Commission wished to prevent the blocking of the view of the ocean that would be caused by the large house to be built on the beachfront property. COURT‟S REASONING: If Commission had simply required the landowners to dedicate an easement to increase public access to the beach, a taking would have occurred. But here, there was an exchange for a building permit. If the Commission could deny permission to develop because of the negative impact of the development, it could impose appropriate conditions on its approval of the development. However, the condition substituted for the prohibition fails to further the end advanced as the justification for the prohibition – lack of nexus between the condition and the original purpose of the building restriction coverts the purpose to something other than what it was. Enhancing the public‟s ability to traverse to and along the shorefront does not serve the governmental purpose of visual access to the ocean from the roadway.
A. Exactions
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RULE: A permit condition that serves the same legitimate police-power purpose as a refusal to issue the permit should not be found to be a taking if the refusal to issue the permit would not constitute a taking HOWEVER – to survive a constitutional challenge, an exaction must mitigate the specific adverse impacts caused by the development. Condition required must have a nexus to the concerns of the commission HOLDING: For P, there was not an essential nexus between the legitimate state interest and the permit condition exacted. DISCUSSION: Was it fair to require Nollan to provide access to the beach because it was Nollan that was preventing the access to the beach? Yes, alternative is not allowing Nollan to not build at all. Yes, nuisance law application No, extortion – No, singling out of individuals to bear the burden of the public is wrong – do these constitute takings?
Been – Exit as a constraint on land use exactions: rethinking the Unconstitutional Conditions doctrine o Why are the courts so upset in Nollan? Court doesn‟t want government to ask for exactions for “bad purposes” – demanding inappropriate payments from people, imposing unfair burdens on people o Pros of exactions o Create incentives for developers to take the efficient level of precaution against harm and by forcing developers to consider all costs in determining how much to develop o Criticisms of Nollan opinion: costliness o It will prevent local governments from spending exactions for something other than a remedy for the harm at issue, even when that course would be most efficient o Nexus test raises the possibility that judges will substitute their value judgments for the judgments of the legislature under the guise of assessing the closeness of the fit between an exaction and the purposes for which development might have been denied o Nexus requirement has the cost of chilling local governments‟ creative attempts to resolve the problem of harmonizing demands for economic development with the goals of preserving the environment and improving the quality of life within the community o Possible problems with exactions o Certain groups singled out because they don‟t have political power o Allow municipalities to redistribute wealth by charging the developer more than the costs of the harm that the development is causing and transferring that overcharge to others o Encourage the government to over-regulate in order to give itself a way of raising money or other benefits o Over-regulation may prevent development that would have been socially beneficial o Over-regulation may eventually lead to under-regulation – municipalities will become dependent upon exactions as a way to balance their budgets without the political difficulties of tax increases that they will sell development too cheaply and provide insufficient protection against harms that developments may impose upon a community o Why exactions aren‟t really a worry – lots of competition to limit extent of exactions o Community don‟t want to punish developers, they want them to come in to develop the community o Community must compete with its own electorate o Community must compete with higher levels of government - developers can go to state to impose restrictions on exactions
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Community must contend with competition from the private sector because a developer can invest the money it would spend on a development project in some other capital-seeking enterprise o Flaws in her argument o Perhaps developers don‟t have a choice of where they want to build (really want to build in SF, hot spots) o In the short run, people may really not want developers to come in (Livermore) Wendell‟s personal belief – of the three type (zoning, growth controls, exactions), exactions are the least problematic although courts have struggled a lot less with zoning. Court‟s intimately involved in assessing exactions (Nollan, Dolan)
Dolan v. City of Tigard FACTS: City of Tigard conditioned the approval of the P‟s building permit on the dedication of a portion of her property for flood control and traffic improvements. City adopted development plan – required landowners to provide 15% of land as greenway, worried about flooding of a particular creek as a result of increased development on the plain. P sought to expand her business and zoning commission conditioned the permit on giving greenway land to the city and to provide a bike pathway. She asked for variance, it was denied. ISSUE: What is the required degree of connection between the exactions imposed by the city and the projected impacts of the proposed developments? When is government required to pay compensation? HOLDING: For Dolan COURT‟S REASONING: Zoning – different, because this was an individual property rather than classifying a regional area (spot taking), and required individual to cede land to the government (would have constituted taking if required without being conditional of the permit) In Nollan, there was no nexus, so therefore didn‟t have to get to the proportionality argument. Here, there was a nexus. Tigard loses because there‟s no need for a public greenway rather than a private greenway and no nexus between requiring a easement to recreational visitors and city‟s interest in reducing flooding problems. RULE: Principles in determining unconstitutional conditions: 1. has to be an essential nexus between legitimate state interest and permit conditions 2. has to be “roughly proportional” – city must make some sort of individualized determination that the required dedication is related both in nature and extent to the impact of the proposed development DISSENT: burden of proof now on the government to prove that its actions are reasonable. Concern with judicial activism – overreaching and micro managing state decisions – zoning has to show an exact fit heavy burden, AND its hard to predict and be certain, since it‟s based on the whim of the courts (second-guesses government officials). Courts should let government regulate. substantive due process argument – economic regulation vs. individual rights
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Do Problems on p. 1063, problems 2,3
B. Regulations of Use
Penn Central Transportation Co. v. City of New York NY had the first landmark preservation act and this was the first case involving it. City establishes act to foster civic pride and beauty to protect and enhance city‟s attraction to tourist, to support and stimulate business and industry, to promote the use of historic districts, landmarks, interior landmarks and scenic landmarks for the education, pleasure and welfare of the people of the city. Wanted to rip the top off and extend on the original design. Fiscal issues during the time, public outcry over tearing down of penn station. Penn Central one of the last railroads in the country, the largest railroad and only rr that served passenger and freight service. Sues to allow RULE: General Principles of takings law: Balancing test 1. economic impact
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2. character of the invasion 3. reasonableness of the interest 4. general welfare COURT‟S REASONING: Euclid – government can intervene for general welfare of the public Miller v. Cheney – defer to legislature on certain issues P‟S ARG: this was a taking because the regulation denied them the use of the air space above grand central – should be compensated COURT‟S REPLY: Can‟t break up a piece of land, either all land is taken or none is taken P‟S ARG: this isn‟t a zoning ordinance because it only applies to 400 properties (zoning requires application to everyone), singles out a small number of people COURT‟S REPLY: Not that different, has a different impact on those in the future, landmark designation may even increase the value of the property, every building under NY may fall under this ordinance in the future (not discriminatory) P‟S ARG: city has condemned air rights of Penn Central‟s property – should be compensated COURT‟S REPLY: Not a condemnation, condemnation has a higher standard – requires taking of all of property, Penn can sell air rights to neighboring buildings, landmark commission hasn‟t rejected every possible plan, just the ones submitted so far DISSENT: o Zoning is different – decrease in value balanced by increase in neighboring benefit (balance of interest) this case, only imposed on individual property o Question is: does this act cause some people to bear the burden that should be borne by the public? o Thinks it does – property is a bundle of rights and taking away one results in a deprivation of property – right to develop was taken away DISCUSSION o Was this a taking of property? o No o Yes o Was this a taking that needed to be compensated? o Transferability of the air rights o Tax benefits o Rehnquist – landmark designation act required Penn Central to bear the burden of many does this really single out a small amount of people unfairly? o Arg1: is a singling out but not unfair o Arg2: is singling out and unfair o Does aesthetic preservation fall within police powers of State? o Arg3: is it more fact dependent? Depends on when owner purchased the property, reasonable expectations of the owner o Arg4: they are still making profit, even though not profiting to the maximum there are practical limitations placed by society o Arg5: there‟s a continuum of protection from “no protection” to “full protection” court balances many different factors to determine what kind of protection to give (Brennan closer to no protection in property rights and Rehnquist closer to full protection of property). When does compensation kick in on continuum? o Takings law is confused because the cases are so fact dependent and judges have to balance the interests based on the facts standard not a rule. Ad hoc approach. o When should the few bear the burden of many? When compensation is required that means the many bear the burden, without compensation, the few bear the burden. Is there any way to draw this line?
SAX – Some Thoughts on the Decline of Private Property o Trend, people are more distrustful of development – results in a redefinition of property rights o Going against Brennan that this wasn‟t a taking of property rights, decides to define property o Penn Central case is a perfect example – property rights are changing because the needs of society are changing o “we have endowed individuals and enterprises with property because we assume that the private ownership system will allocate and reallocate the property resource to socially desirable uses.
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Any such allocational system will, of course, fail from time to time. But when the system regularly fails to allocate property to “correct” uses, we begin to lose faith in the system itself. Own system is declining to the extent it is perceived as a functional failure – since such failures are increasingly common, the property rights that lead to such failures are increasingly ceasing to be recognized.” – Interest question in Penn Central is not why the owner failed to receive compensation, but why private ownership of Grand Central Station did not lead to the correct allocation, that is, to maintaining the property as an unobstructed, architecturally distinctive railroad station.” Private negotiation process that forced people to go to political process Examples like landmark preservations where we don‟t let the private market work? o Low income housing o Wildlife preservation o Wetlands protection o Minimum Standards – Warranties, etc. o Growth controls o Water resources Needs of society change and therefore the way we define property changes What would Sax say about Penn Central Case? o Shouldn‟t feel sorry for the P, that‟s the way the world works
Lucas v. South Caroline Coastal Council FACTS: 1986, L purchased two beachfront lots intending to build single-family homes on them like the neighboring properties. 1988, Beachfront Mgmt Act barred the development on new homes – protection of environment (and desire of neighbors not to build anymore homes). Lucas wasn‟t required to get any permit when he brought the lots, but was required to get the permits after Act was passed. Denied variance which prevented him from building on the property. Rendered property “useless”. ISSUE: Whether the Act‟s dramatic effect on the economic value of Lucas‟s lots accomplished a taking of private property under the 5th and 14th Amendments requiring the payment of “just compensation.” SCALIA‟S ARG: When does this result in taking requiring compensation without case-specific inquiry into the public interest advanced in support of the restraint? o Physical invasion of property no matter how minute and no matter how weighty the public purpose behind invasion o Regulation denies all economically beneficial or productive use of land 5th Amendment is violated when land-use regulation “does not substantially advance legitimate state interests or denies an owner economically viable use of his land” When no productive or economically beneficial use of land is permitted, it‟s not realistic to assume that the legislature is simply adjusting the benefits and burdens of economic life private property is being presented into some form of public service under the guise of mitigating serious public harm (constitutes a taking) In some cases, Government does deny people the use of their land, i.e. nuisance law here you can‟t just make up a harm or say there is a benefit. Requires a clear standard: o Land-use regulation does not effect a taking if it substantially advances legitimate state interests o When State seeks to sustain regulation that deprives land of all economically beneficial use, it may resist compensation only if the logically beneficial use, State can resist compensation only if the logically antecedent inquiry into the nature of the owner’s estate shows that the proscribed use interests were not part of his title to begin with. Some inquiries to make o Degree of harm to public lands and resources, or adjacent private property posed by the claimant‟s proposed activities o Social value of the claimant‟s activities and their suitability to the locality in question o Relative ease with which the alleged harm can be avoided through measures taken by the claimant and the government
No Compensation
Compensation
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any physical taking
Denial of Economic benefit
If there are background common law principles, taking is allowed and does not require compensation
If there is no background common law principle, State can still allow the taking, but must provide compensation
nuisance law common law
no common law principles
Protection in private property is special because it‟s specifically mentioned in the Constitution – notion that title is somehow subject to the implied limitation that the State may subsequently eliminate all economically valuable use is inconsistent with the historical compact recorded in the Takings Clause that has become part of our constitutional culture. HOLDING: D must identify background principles of nuisance and property law that prohibit the uses he now intends in the circumstances in which the property is presently found. Only on this showing can the State fairly claim that, in proscribing all such beneficial uses, the Beachfront Management Act is taking nothing. DISCUSSION: Court‟s trying to set bright-line rules instead of arbitrary standards subject to the opinions of the Court however, still requires flexibility Penn Central and Lucas talk the same language but come up with different approaches to government and interests of society Sax gives a more nuance explanation of the Penn Central case Two ways to look at takings and compensation – who determines what property is? o Sax/Brennan view Society function – shapes property relations When society changes, understanding of property rights changes o Scalia./Rehnquist view Property is individualized State has burden of proving the interest in wanting to change property rights is justified
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REVIEW QUESTION 1: Looking for critical legal skills – spotting issues – prioritize and order responses by strongest to weakest. Include all, but acknowledge usefulness of arguments. – Can assume some facts - Tenancy-in-common Law 2 Kim’s Pay off the loan - take interest - give loan to Ortega Petition in kind - Delfino case Right of first refusal (tough arg) Fiduciary duty (tough arg) Right of redemption right of refusal - doc needs to expressly create obligation right to approve fractionation/waste NO - Structure of ownership (tenancy in common) has no impact as to what you can use on property – can use all, not partitioned, can‟t deny access to anyone else - Results in ouster of other parties they can claim damages and injunction YES - contract Right of contribution - Considered a loan - Issue of necessity O’Brien’s Same as Kim‟s Ortega Claims in the problem Doty & Dean Same as Kim‟s
1
-
Same as Kim‟s
-
Same as Kim‟s
-
Right to sell under CL
Ouster
Same as O‟Brien‟s
Same as O‟Brien‟s
tenancy in common
3 4
-
Right to Contribution
-
Not Necessary
-
Same as Ortega
5.
agreement should require each person in the couple to have to buy out the interest of the others if they were to break up.
Policy Issues – Petition by sale, contract issues not crucial issues – On Issue Spotting Question, FOCUS ON ISSUES NOT POLICY Jot down notes. Possible ways of answering question. Prioritize them. Quality of the answer – how well you analyzed the usefulness of that approach
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QUESTON 2: Policy Question 1. a. Locke – first come first serve i. limitation on use (use only how much you need) ii. question also limited to exactly who first acquired the property what is the property? 1. The domain? 2. the name? iii. Like real property, this was a new territory – new form of property pulled out of state of nature iv. Is there enough labor in it to consider it as having taken it out of the state of nature? b. Radin-Hegel – personhood i. Company should get name and not squatters, because the name encompasses the value of the company not the squatter who just purchased it for money ii. Name used on website used in a different way conflicting personal interest (individual sites vs. commercial sites) iii. Corporations are or aren‟t persons? iv. Emotional attachment? v. How much is your name your person? c. Rawls – Distributive Theory i. Links to different companies from that original site ii. Depends on who is doing the most socially beneficial work with the website iii. What is the benefit being distributed? 1. support innovation vs. protecting investments iv. allows new people into a new market small fries have opportunities too v. may stay out, say this isn‟t focus of theory not a primary good? d. Utilitarianism – maximize aggregate wealth i. Use of website if act of being creative, exploring a new website ii. Value of website depends on the market iii. Maximize the opportunities iv. Not efficient use of allocations? Overpriced domains, pass costs on to customers? v. Cyber squatter helped create interest in the internet, there was no value before they obtained the name e. Pierson v. Post – definition of property i. Registration, attainment of domain name = capture? ii. Establishing name = chasing? f. Riparian rights i. First use = person who gets name first has first use ii. Reasonable use = protect people because there are lots of different uses, allocation of uses = share use? 2. Costless transactions – which system of allocation of domain names would be preferred a. Coasean system – bargaining in private market i. There are transaction costs tho – negotiations cost money, free-rider problem, hold out problem b. Since there are transaction costs, how do you allocate the rights? i. Person who would have bought it in the absence of transaction costs ii. Why allocate right to the company if they don‟t care to use it? perhaps you don‟t want the brand to deterioate c. Calabresi and Melamed / Property Rights of Trademark Liability Rights Company X - Squatter won‟t want to buy it if comp X -? given property rights, doesn‟t promote innovation Squatters/ Person X - If squatter demands too much money, who registered the prevents innovation and utilization to X-? name maximum benefit
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