1. Property in general a. Many different forms of property: i. Public vs. private ii. Personal vs. Land vs.

Intangible iii. Public-access public property vs. limited access property owned by governments in their proprietary capacity. b. Property rights are in rem (against the world) c. Private property typically comes with three basic rights, although these may be qualified in many ways: i. Rights of exclusions ii. Rights of use iii. Rights of transfer d. Property rights are central to the system, in that they set the base upon which our economic and political structures are built, and also allow society to be built from the ground up in a decentralized fashion. e. Property is also what wars and revolutions tend to be fought over. 2. Establishing Possession a. Wild animals (and other unpossessed property) are res nullius (up for grabs), and is typically possessed upon capture. i. We might require exercise of certain control, (Pierson v. Post) or simply that an individual has a reasonable prospect of making the capture (Pierson Dissent). 1. Our decision will depend on what kinds of behavior we want to reward, and therefore give people an incentive to engage in. a. We might want people to exterminate vermin foxes, or we might want them to persist in the environment as a means of sport. 2. Locke: Mixing ones labor with an item is a means of establishing possession He who has put in more effort should get the fox, because we want to encourage efforts. 3. We also might simply favor more bright-line rules above vague standards. 4. It may also be the case that many remain ignorant of the law, and certain social norms wind up governing how people behave, regardless of the law. b. Goals to pursue: i. Economic efficiency (may have a very broad definition) 1. Includes litigation costs 2. Includes reducing the costs of activities and their consequences as a whole ii. Corrective justice 1. Involves giving resources to the party in the right. iii. Distributive justice

c.

d.

e.

f.

1. Involves giving resources to the party in greater need and/or deprivation. This is generally not looked-to in court decisions. What effect should custom play in outlining our rules? i. Ellickson believes that communities are fairly good at coming up with governing customs for themselves that benefit community members. ii. However, these same customs might impose on outsiders. Doctrine on capture: i. Courts tend not to split items, especially because opposing parties in litigation dont like each other and will be unable to coordinate activities. ii. Wild animals are not considered res nullius unless they return to their natural habitat, or domesticated animals until they return to their wild state and habitat. iii. Landowners often have superior property rights above those trespassing on their lands, because we hold property rights in land above others. Without the ability to exclude others, land also becomes quite difficult to manage. iv. Property rights are often relative: Landowners may have rights above poachers, but poachers have rights above those who might steal from them. Law of finders: i. In whaling communities, it is often customary for the party that killed the fish to obtain property rights in it (as long as its a large or fast whale that is difficult to hold fast to the ship). However, the one who finds it is entitled to a small finders fee (Ghen v. Rich). 1. This incentivizes both killing and finding/salvaging of whale carcasses. 2. This is a norm that the community created that was subsequently adopted by common law. 3. This also reflects the Lockean idea that effort tends to lead to property rights. ii. In both the U.S. and Japan, law requires return of lost items of a certain value (and give rewards for doing so), although customs and norms tend to govern peoples behavior. 1. In Japan, there are higher rates of return for items. 2. In the U.S., return focuses less on knowledge of law and accompanying rewards, and more on altruistic intent and/or feeling good about making the return. 3. Think efficiency: Does incentivizing return for meaningless goods (e.g. cheap umbrellas) lead to over-return? Relative title i. Property rights, typically, are in rem. In other words, they are held as good against the entire world.

ii. On occasion, however, we might consider certain titles to be superior and inferior relative to others: 1. TO > First finder > Later finder/thief (Armory v. Delamirie; Clark v. Maloney) 2. TO> AP1> AP2 3. Person who touches a baseball first = Person who winds up with it (Popov v. Hiyashi)? 3. Law and Economics, Legal Rules, and Norms a. Idea: Legal rules exist to promote efficient results i. Efficiency of result is judged by minimization of sum of: 1. Transaction Costs: Costs associated with dispute resolution (see Pierson majority). a. Favor bright-line rules that will minimize disputes and give clear winner i. Explains why we might want people to take possession to establish ownership, exercise certain control, be in fresh pursuit, or perhaps place their boat on top of a wreck (Eads v. Brazelton). 2. Misallocation Costs: Costs associated with under- or overincentivizing certain activities (see Pierson dissent). a. Question: How do we know which activities we want to promote, and which ones we dont? (Keeble v. Heckeringill) i. Perhaps we can look to classic microeconomics. Courts will promote activities that increase net welfare (perhaps by competition), while forbidding those activities that diminish net social welfare. In other words, we want legal rules that would be arrived at via Coasian bargaining (in the absence of transaction costs). 1. Example: 1410 school case. OK to build a new school to compete, not OK to fire weapons at students trying to attend school. 2. These questions get at how we define good rules of property law. b. Critique: i. Assumes rational man 1. Carol Rose argues that many of our actions cannot be explained (nor do we anticipate that they could be explained) simply by self-interested behavior. ii. Legally-centric 1. Often ignores norms that develop independent of (and perhaps in ignorance of) the law.

c. Applications i. How do people mark parking spaces in the snow? ii. How do people mark tables in the cafeteria? iii. Do these norms reflect the goal of minimizing transaction and misallocation costs? d. Possession i. This is a good bright-line rule for establishing ownership reduces transaction costs. ii. This also gives people incentives to put in effort to obtain things reduces misallocation costs. iii. Of course, taken too far, possession = property would lead to constant stealing. The rule against property rights being vested in a thief reduces the misallocation costs of over-incentivizing possession. 4. Property and Personhood a. Theorists argue over property over the person and body parts. i. Some argue that property rights promote efficient use of these items. ii. Some argue that property rights in the body would have disastrous redistributive consequences. iii. Some argue that treating the body as property strips individuals of their personhood. 1. Marx argues that even alienation of labor deprives on of personhood, and destroys societies favors no markets. iv. In balancing among these competing visions, lawmakers and courts balance among liberal and collectivist worldviews. b. Slavery i. 13th Amendment outlaws all slavery ii. This has a huge impact on our society, as some 75% of the wealth in our society comes from human capital iii. This also creates the incentive to acquire more human capital, because individuals will reap the returns from it iv. Slavery is also seen by almost everyone as morally wrong, contrary to natural law. (Both incentives and moral arguments present in Commonwealth v. Aves.) c. Other types of slavery i. Draft ii. Jury Duty iii. Shoveling sidewalks iv. This shows that there are limits on our concepts of freedom, especially when the public interest is implicated, but liberalism is the default rule. v. Overall, small societies do better with enforcing these sorts of duties than do larger societies. d. Control over Body Parts

i. When thinking about body parts, we consider the rights that individuals have to control their own bodies, perhaps even after death, against the benefits that might be gained from harvesting our bodies for transplant and/or research purposes. ii. Many courts have begun to think of property interests in the body (Newman/Moore Cases), although Ellickson contends that thinking of body parts as possessing all of the traditional attributes of property is a failure to recognize that property has no essential definition, and may reflect different bundles of entitlements. 1. This reflects the importance of rhetoric, which is brought up by theorists in debates about inalienability a. Radin: Calling something property, and placing it on a market, tends to drive people apart and deprive individuals of status as persons. i. Might be OK to give certain assets away, but not to sell them. b. Hirshman: Calling something property, and allowing it to be traded, brings societies closer together, especially as we desire to know each other better so as to turn profits. c. Ellickson: Reconciling these positions, we come to the conclusion that, within groups of intimates, cash signals an arms-length market exchange that is unsavory i. With groups of those with whom we deal but with whom we are not intimate, market exchanges cause us to consider each other more, not less. 1. We might think that commercial actors are less considerate of others feelings, but research shows that the opposite is true. e. Likenesses, Moral Rights, and Cultural Patrimony i. These are all categories whereby courts might interpret certain items as properly removed from the market economy because they are too associated with an individual. ii. Well-known artists may not wish to have their voices taken, because they do not want to have people appropriate their hardearned reputations (Midler Case). iii. Legislatures might choose to preserve the rights of certain visual artists to direct what happens to their work, even after it passes out of their hands (Moakley Case). iv. Legislatures might also choose to remove certain items deemed to be Native American cultural patrimony, if it is closely associated with a tribes self-image (Corrow Case)

v. In all of these cases, however, courts and legislatures are making trade-offs. They are incentivizing the production of these goods, but also allowing less usage of them, such that they are not allocated in an efficient manner. Society might wind up with less imitations and freedom to invent as a result. vi. Furthermore, why are these groups protected? Political reasons? Historical reasons? Or is it our sense that certain items just cannot be treated as typical property? 1. The law does have a certain intuition that mixing money with certain items might lower their value. 5. The Commons a. Hardins Thesis: In the context of an open-access commons, each user will have the tendency to over-use the resource, because: i. His use will not be the factor that pushes it past the limit ii. If he doesnt use the resource, others will use it up anyway iii. This applies to a variety of commons, including the environment, pastures, oceans, the internet, etc. b. In practice, Hardins thesis is often wrong i. Villagers often adopt practice of common ownership and allocating use, without dividing the commons into private property, as a means of: 1. Preserving the commons 2. Knitting the community close together 3. Allocating risk among community members 4. Reducing transactions costs (such as negotiations and fencing) ii. Solution Stinting, whereby people get so much time and space to graze their cows, such that the land will not become barren from overuse. c. Other examples: i. Acheson and Lobster Gangs 1. People operating a commons may look to mild self-help and governance, rather than government and law a. Factors Increasing Norm-Based Governance: i. Small numbers ii. Homogeneity iii. Quality of information regarding breach iv. Ability to sanction/Probability of future interactions ii. YLS Student Lounge d. Property Entitlements (Hohfield) i. Privilege to use ii. Right to Exclude iii. Power to Transfer iv. Affirmative duties to some government center v. May be held by:

1. Single individual 2. Several individuals (co-ownership) 3. Discrete community 4. Everyone in the world 5. Government in its proprietary role vi. While we think of entitlements as being held by a single individual, they may be held by some mixture of people/groups, in an effort to solve different problems. e. The anti-commons: i. The problem of the commons is overuse ii. The problem of the anti-commons is underuse due to too many people holding entitlements/veto power iii. Examples: 1. Construction at Ground Zero 2. Biomedical research (Heller/Eisenberg Article) 3. Storefronts in post-Soviet Russia iv. Madison may have liked the anti-commons (checks and balances) as a means of slowing down policymaking. f. Private Property as a solution to problems of the commons: i. Demsetz: When cost-benefit analyses change with exogenous shocks (e.g. fur trading becomes profitable), societies may move to private property regimes to prevent overuse and reduce the transaction costs associated with cooperation among a community that is not close-knit. ii. Prediction of Demsetz: When transaction costs of private property are reduced (e.g. cost of fencing is lowered), that will favor private property regimes iii. Example: More privatized fields suitable to sheep farming enclosure system in England iv. Critiques of Demsetz: 1. Thompson: Private property a means of class exploitation by allowing for easier transfer of wealth 2. Libecap: A more general theory, which accounts for the need to accommodate different constituencies, and perhaps institute a democratic politics. g. Problems of the Commons: i. Water Rights: 1. Water has a great number of uses to people, both as a means of survival and commerce 2. Wittvogel Thesis: The necessity to use water cooperatively gave rise to the first great civilizations 3. Possible Rules: a. East: Riparian owners may take all the water they need for natural purposes, e.g. drinking, but only what is reasonable for commercial purposes such

that downstream users may use it as well (Evans v. Merriweather) b. West: Superior riparian rights belong to those who use the water first (first appropriation), even if the water is being used away from the natural source (out-of-watershed, e.g. for irrigation purposes). (Left-Hand Ditch Case, i.e. Coffin) i. This entitlement tends to run with the land. ii. Demsetz: Necessity/scarcity/opportunity for profit Stronger private property rights c. England: Can use as much water as you want, so long as you dont interfere with natural flow i. This had negative consequences for industrial revolution uses, and so the English courts compensated by allowing landowners unlimited use of groundwater on their property (Acton v. Blundell) d. Complex statutory Regimes: i. 1922: Seven state compact along with Colorado River dividing up of rights to use the water flow. ii. More recently, drought Secretary of the Interior requires CA to reduce its usage Coasian bargaining among metropolitan water districts and the Imperial Valley farming areas, with the city paying a lot of money to use more water ii. Oil and Gas Rights: 1. Problems with Oil and Gas: a. Quite difficult to extract b. No government ownership, as in most countries (esp. Middle East), and with individual landowners owning property ad infernos problems of the commons and anti-commons i. Often, landowners rushed to build wells right next to each other enormous depletion of resources due to lack of coordination. ii. When there were <4 landowners, coordination was possible due to closelyknit relationships. 2. Rules: a. Property owners may take all they want that is directly underneath their own land, as long as they dont whipstock, i.e. slant their drill/well underneath someone elses land (Hammonds Case)

i. Case also stands for the notion that oil/gas being stored underground is ferae naturae, or free to be captured by anyone. This rule has since been overturned if the oil/gas has previously been captured. b. Common arrangements: Large oil/gas companies bear capital outlays and risk of there being no resource, while landowners receive 1/8 of profits on all extracted resources. c. Correlative Rights Doctrine: Similar to rule of Evans, in that owners must account for the interests of those around them, and not take oil out such that it hurts their interests. 3. Solution: Unitization a. This involves vesting title in one landowner who is then required to share out the profits associated with the resource extraction. This will, however, give appropriate incentive to consider costs and benefits associated with resource extraction methods, thereby solving the collective action problem. b. One possible owner: Government i. Examples: 1. ANWR 2. Middle Eastern Countries c. In TX and OK, similar solutions have been created, vesting property in one owner, but with surrounding landowners having votes as to how the property is managed, with votes apportioned by acreage. h. Private Property in Land i. Possible regimes: 1. Communalism: Everything owned communally 2. Marxism: Everything owned by the state 3. Anarcho-Capitalism: Everything privately owned 4. Ellickson: Throughout history, societies have come up with different mixtures of state, common, and private ownership to meet their needs. ii. Goals of Private Property (see also Ellickson below) 1. Reduce transaction costs of constant cooperation 2. Increase incentive to put the appropriate amount of effort into caring for property a. Communalism may produce this effect for a while when there is some driving ideology (e.g. religion in Salt Lake City or Zionism on Kibbutzim) b. However, these efforts tend to peter out over time

c. Jamestown and Plymouth tried communalism as a means of risk-spreading, and there was massive shirking private property regimes i. Communalism as a form of risk-spreading is only engaged in when social insurance and close-knit communities are underdeveloped 3. Promote close-knit relationships with neighbors by requiring common action to solve common problems a. This works especially in the context of repeat interactions among neighbors over time iii. Problems/Critiques of Private Property: 1. Marx and Engels: a. Wealth distribution effects b. Separation from the species-being 2. Fairness in distribution 3. Rousseau: Private property gives rise to civil society, but also separates humans from the state of nature iv. Universal Theories of Property 1. Blackstone: Private property in land develops naturally as a response to growing agricultural needs and practices 2. Ellickson: Private property in land evolves as the best means of reducing sums of transaction costs and deadweight losses in dealing with small and medium-sized events. a. These are means of satisfying the most basic human needs: i. Survival ii. Social Insurance iii. Self-Actualization b. While private property deals poorly with large-scale problems such as pollution, so do state property regimes (e.g. Communist Russia) c. Most of all, private property forces owners to internalize the costs of their activities. If an individual receives the benefits and suffers the harms of his behavior, he will consider them more carefully, and pursue amounts that are more beneficial. v. Examples of Diverse Practices 1. Open-field village a. Communally-owned fields for grazing b. Privately owned animals c. Private ownership of small strips in each field i. Gives incentive to sheepherders to spread grazing activities, and therefore spread dung.

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2. Family: An enclave of communalism in a private propertydominated society that represents an enormous percentage of our economy vi. Land ownership in the United States 1. Original Acquisition a. No such thing as Native Title honored by Europeans. b. Rather, title passed via conquest, as a means of regulating conflict over land among European powers (Johnson v. MIntosh) c. This is what permitted western development, as it clarified land titled in what would have otherwise been a highly contested area that would have resulted in many overlapping claims i. This satisfied our desire for a system that provides clear signals of ownership as described by Roses article d. From the Native Americans point of view, however, the federal government is the only buyer of their land (monopsonist) depressed prices i. Guilt over this behavior has led to massive Native American reparations and privileges over time. ii. This isnt necessarily the norm. Conquerors tend to recognize the land title of previous sovereigns, because failure to do so leads to enormous conflicts and transaction costs. 2. The Federal Land Domain a. 18th-19th centuries: Enormous land acquisition by the federal government b. 19th century: Enormous efforts to privatize federal lands i. Land Grants (Homestead Act) ii. Land auctions iii. Squatter grants iv. Checkerboard grants to railroads to incentivize construction of transcontinental railroad v. Some states (e.g. Nebraska) <1% federallyowners c. 20th century: Revived efforts to maintain federal landownership i. Some states (e.g. Nevada, Alaska) almost entirely owned by the federal government ii. This era was ushered in with the New Deal, when the Taylor Grazing Act stopped

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private farmers from grazing cattle for free on federal lands (the close of the frontier) iii. Thought: Temporary lessees tend to overuse resources. A long-term owner (e.g. federal government) has more incentive to manage resources well over time 3. Private Property Narratives: California Gold Miners a. 1849: Develop a system based on individual ownership of claims b. Developed from pre-existing norms about individual productivity and democracy c. Also gave incentive to work hard to dig out gold less shirking d. Example of anarchy resulting in cooperation, rather than violence e. 1850: With efficiencies of scale in mining, more wage labor end of private ownership system that had developed spontaneously 6. Public Land a. In creating a city, planners have options: i. Plan Grid City (e.g. New Haven, New York) 1. Certain planned, organic communities have grown up in recent years, however (e.g. Celebration, FL) ii. Dont plan Organic City (e.g. Boston) b. Regardless of plan, most cities contain some mixture of public and private space question of who governs the public spaces and how: i. Private actors ii. Public actors iii. Laws iv. Norms (Jane Jacobs) c. Public Trust Doctrine i. Navigable waterways are generally the property of governments, held in trust for the publics use. 1. The Army Corps of Engineers ensures that these waterways remain properly used, and may issue permits. Generally, it is quite normal to fill in land Boston a. Landfill can raise property values and lead to more variegated uses. b. It can also preserve public access to shorefronts owned by many private actors. c. However, there are environmental concerns. d. Furthermore, we generally wish to preserve public access to publicly-held lands. ii. Courts and the Public Trust Doctrine 1. Factors affecting court decisions a. Will the land be publicly or privately owned?

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b. Is the purpose of the transfer public or private benefit? c. Will the public have access to the space? d. The more these answers tend to favor private actors, the greater the likelihood that courts will nullify the transfer (Illinois Central Railroad; Lake Michigan). e. Overall, courts are loath to permit legislatures to sell land held in public trust to private actors in perpetuity. 2. Problems with the Doctrine a. Anti-majoritarian b. Creates an anti-commons by giving all members of the public standing to sue. d. Beach Rights i. Complications: 1. Where public and private land meet 2. Generally shifting topography ii. Ocean rights: 1. According to U.S. law, states own the first 3 miles out 2. 1982 Treaty: Nations can control navigation up to 12 miles out 3. Nations can control resources up to 200 miles out 4. Question: What happens in places where claims overlap? iii. Owning the beach 1. Generally the land below the wet sand land is held in public trust. 2. Property owners own dry sand land, but 3. If the public has customarily used the dry sand land for recreational purposes over time, then the public may have established an easement for that use (Oregon/Thornton Case) a. Ruling based on custom, rather than prescriptive rights, because it is applicable to dry sand land through Oregon, and not a particular tract. b. Case raises a takings issue: is there such a thing as a judicial takings? 4. Leydon v. Greenwich: Greenwich cannot restrict access to a municipal park for doing so would violate the first amendment Are constitutional provisions implicated by property law regimes? a. Ellickson argues that they should not be, and that municipalities should be flexible in dealing with their public lands, considering: i. Provision of public goods ii. Providing democratic space

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iii. Governance by norms, rather than laws b. Ellickson Thesis: Reality of public spaces isnt the result of monolithic legislation, but rather mixed means of controlling them. 7. Intangible Property a. Hard to identify who owns intangible property, and it might be a better fit for an open-access regime, because its not as disposable b. However, some property is congestible (EM spectrum) some ability to exclude others (The Tribune Company Case). c. Possible rules for property in the EM spectrum: i. First-in-time ii. Auction 1. Favored by Coase 2. General move in this direction with law and economics influence, despite fears of monopoly iii. Invite applications based on the degree to which programming is in the public interest iv. Generally, we have moved toward a mixture of all three of these regimes, with generally alienable property rights, and our mix is based on varying conceptions of anti-trust, property, and speech law d. The Internet i. Generally, internet domain names are claimed on a first-come, first-served rule of first capture. ii. These domain names, however, are perfectly transferrable, and the Coase Theorem would predict that this system will allow them to wind up in the hands of those who value them the most. iii. Like in the Keeble case, however, courts may intervene to combat cybersquatting when it might not otherwise occur in the absence of transaction costs (PETA v. Doughny). 1. This ruling was based on a theory of trademarks, however. e. Types of Intellectual Property Protections i. Trademarks 1. Companies rely on trademarks to promote themselves and establish clear signals to customers 2. For customers, trademarks reduce the transaction costs associated with searching for goods by providing recognizable signals 3. From a social point of view, trademarks encourage companies to invest in maintaining high quality products and good relationships with customers 4. In a case like PETA, we might be worried about PETAs reputation being damaged, but also about protecting free speech rights a narrow holding

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a. Grounded in interference with trademark, i.e. squatter did an insufficient job of informing consumers that he wasnt really PETA. 5. Anti-Cybersquatting Act of 1999. A libertarian internet regime wasnt doing the job, and so Congress voted to provide injunctive relief to those whose trademarks were being interfered with on the Internet in bad faith. This matches with the courts interpretation of Keeble (see above), and Ellicksons definition of bads. a. But arent bad faith interferences more easily recognized by consumers, and therefore less in need of statutory elimination to meet the purposes of trademarks? 6. Current Rules: Only dilution of trademark, and not customer confusion, is necessary for a violation ii. Real Property 1. As long as internet communication doesnt slow down networks functioning or damage computers, an action for trespass to chattels will not lie for utilizing a companys email system to deliver a message that company deems unwanted, or claims hurts worker productivity (Intel v. Hamidi) 2. Other potential causes of action based on real property precedents: a. Trespass to land b. Nuisance c. Malicious interference with prospective business opportunity. d. Why must we file the right action? Probably so that courts may know which authorities and analogues to look to when making their decisions. iii. Copyrights 1. Generally, parties can only copyright their works, and not the information that is in them. 2. However, as between two parties who are both commercial sellers of information, the one who expended more effort in gathering time-sensitive information might have a superior right to use that information (INS v. AP). a. This is a quasi-property right, invented by the court to create what it deems to be an equitable result. b. However, Brandeis contends that the notion of courts creating property rights is quite dangerous given their implications. c. Within the journalistic community, norms and shaming might be a better way of constraining

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behavior, and courts should probably pay attention to the practices of that community. d. This allows for greater political (i.e. free speech) rights, but also for more trading information among parties, and greater incentive simply to acknowledge sources. e. Today, because copyrights are given by statute immediately when information is fixed, i.e. the piece is published, this case would go off on a copyright theory today. iv. Patents 1. At common law, inventors have first mover advantages to put their products on the market 2. However, products must be sufficiently novel so as to give rise to the necessity of protecting it as a new contribution to society (Trenton Industries Case) a. In making this determination, however, the court substitutes its judgment for that of the people in the patent office. Are they worried that the patent office has been captured by patent-lovers? 3. At the same time as denying the patent, however, the court does apply an equitable theory based on the dissemination of information, recognizing in some manner an interest of an inventor in being able to control information he has created so as to gain profit for himself, or the inability of others to surreptitiously appropriate that knowledge. v. Comparing Copyrights and Patents 1. Patent standards are much more stringent than copyright standards 2. Patent protections also last for shorter periods of time than do copyright protections 3. This may be because we wish to allow commercially useful innovation more quickly in the realm of patents. 4. This law may also result simply from disparities in lobbying power. f. General intellectual property issues i. There are two camps, those who think we have too much intellectual property, and those who think we dont have enough 1. These camps have different ideas about whether the internet should be parcelized or not, and the extent that people should be able to receive damages for internet trespasses 2. There is growing consensus toward the notion that we have too much intellectual property ii. Some are worried about incentivizing the creation of useful ideas, products, etc., while others are worried that providing too much

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iii. iv.

v.

vi.

vii.

property protection for intellectual property allows creators to exclude others from using their ideas too much, thereby preventing social benefits and progress. In general, intellectual property regimes are governed, like other property regimes, by a mixture of common law, statute, and norms. Intellectual property rights are exceptions to anti-trust laws, as they are grants of a temporary monopolies: 1. Monopolies are generally thought to allow for wealth transfers from consumers to producers, and also to reduce overall social utility (i.e. cause deadweight loss). 2. However, we allow these monopolies on the theory that people will best invent when they can profit from their inventions. a. We might also give official prizes, but do we trust officials to make these sorts of decisions regarding who is deserving? 3. This reflects the idea that innovation is a pure public good from which no one can be excluded. We want to maintain some degree of privacy in order to make sure that it is created in the first place. a. This is a market defect that we try to offset by creating another market defect, i.e. by awarding property rights. If we want to get the most creation, what regime should we adopt? 1. This reflects a basic debate among the aforementioned camps about why inventors invent: money, prestige, status? a. We might treat commercial innovators differently from pure innovators, whatever that means. b. Example: In the era of Napster, many fewer people bought CDs less incentive to make music? (However, drop probably wasnt due to Napster, so its difficult to know.) 2. How long should we allow monopolies to exist such that future innovation may take place? What do people actually do? 1. They might rely on the Fair Use Doctrine, the notion that allows use of copyrighted works for certain uses, such as scholarship. 2. They might ignore it altogether, as few lawsuits are brought over the issue. Lawmaking of intellectual property 1. Tends to be federal, rather than state, law, because ideas clearly travel among states freely. The Constitution recognizes this, and explicitly authorizes Congress to make this law.

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2. In todays age, a great deal of treaties concern international intellectual property law, as ideas can flow freely throughout the world 8. Property and Philosophy a. Concerns about utilitarianism i. Property tends to preserve and reinforce existing power dynamics. ii. Property distributions often do not result in one most efficient relationship, but rather result from initial allocations of claims and concepts of justice (Kennedy and Michelman argument). b. Property and Distributive Justice i. While policy may take distribute justice into account at times (e.g. Homestead Act), courts do not actively promote social justice when formulating opinions. ii. Oftentimes, policymaking regarding property reinforces unequal distributions of entitlements, even at the expense of efficiency (e.g. Copyright Act). iii. Hints of distributive elements 1. Forced sharing of needs (Kennedy and Michelman) a. In biblical times in Ancient Israel b. In the open-field system of medieval Europe gleaners could legally take some property c. In the tort defense of private necessity. d. These are exceptions, however, as property owners are typically able to exclude others from use of their property, without reference to need or relative position. 2. State of nature a. Fundamentally doesnt exist in the world, as even preliterate societies had private ownership of crops. iv. Rawlsian Philosophy 1. Expresses the concept of the veil of ignorance. If everyone steps behind that veil, we (as risk-averse actors) will come up with the society whereby any inequalities can only make everyone better off, and preserve space for equal political rights. 2. Critiques a. As social wealth increases, we are able to focus more on self-actualization, and the ability of property to determine who we are (Radin on personhood). In other words, absolute levels are vitally important. b. Does not account for duties to create social wealth, but only rights to consume it. c. Do we consider merit better than luck as a social differentiating factor?

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d. We might consider more than inequality, but also absolute levels, and basic security levels. 3. Gini Coefficients a. Measure levels of inequality in a society b. Okun: If we try to make policies that decrease inequality, we face the leaky bucket problem, and overall social welfare will decrease c. Gini coefficients can change in many ways, as poor get poorer (such as by immigration), or the rich get richer. i. Ellickson: Depending on the data you choose to analyze (household income, household expenditures, financial assets, land, human capital) you can make different cases about how much inequality exists. d. Generally, U.S. inequality is considered high and rising, but similar to India and China. e. Question: Do we worry about absolute or relative status? If we worry about relative status, why do people go to Yale Law School, or from Haiti to the U.S.? f. These gini coefficients are snapshots of data in time, and are highly problematic, especially when we consider that evaluations of information like the CPI may be flawed (Boskin thesis). g. While we may worry about inequality, law and economics scholars tend to think that predicating legal rulings on distributive outcomes is a highly inefficient way of pursuing redistribution, which is best pursued through broad policy solutions. c. Property and Freedom i. Friedmann: Private property protects our negative liberties, i.e. most of the things protected in the Bill of Rights. 1. Only positive liberties explicitly defined are 13th Amendment and rights to education in state constitutions. 2. Although, certain scholars contend that positive liberties (e.g. to minimum income) are embedded in constitutional principles. ii. Basic argument #1: Security in property protects political independence, i.e. ability to speak out. iii. Basic argument #2: Market competition creates incentive to allow for free flow of ideas, even ones with which we disagree. iv. Critique: How closely do we want political power to mirror economic power? 9. Private Property in Land a. Terminology

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i. Blackacre is the default term for a piece of privately owned land. ii. Total entitlements in the owner of Blackacre represent our vision of the maximum rights/powers that may be held by someone who owns land. 1. In practice, these are always qualified. iii. The fee simple is the maximum bundle of ownership entitlements. b. Characteristics i. Property rights are in rem, i.e. against the world. ii. Property rights are in perpetuity, i.e. may be passed down. 1. Even North Korea has a system of inheritance. iii. Property rights also tend to come with duties to the state. iv. Example of conflicting characteristics 1. English system was market-based and geography-based. This made transfer easy. 2. The Maori property system was resource-based, which made selling any discrete piece of land quite difficult. 3. With the shift to a market economy, the English moved the Maori out, and thereby upset their entire political and social structure. c. Negative consequences? i. Atomization/Isolation (esp. a Marxist concern, related to fetishizing of property) ii. Distributive consequences d. Boundary Problems i. There are often ambiguities about what we own, which is different from Blackstones clear conception. ii. Ascession: We tend to think that things that are very closely associated with things we own also are things we own 1. Almost every legal system in the world assigns title of trees to property owners, and calves to the owners of the mother. 2. Water boundaries a. Private disputes i. If were talking about a navigable body of water, there is question as to whether individuals may have ownership rights at all, due to the public trust doctrine. ii. Accretion: If the course of water changes slowly, over time, then whoever has title of the property to the water retains that title. iii. Avulsion: If the course of water changes rapidly, then whoever has title of the land to the middle of the former bank retains that title, even though the bank is now dry.

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1. Anticipates the water changing courses again, and we dont want to change title multiple times. b. Public disputes i. Courts tend to apply private law as stated above to boundary disputes among states (Nebraska v. Iowa). ii. Real question is why states care about changing borders, or why they dont fuse? 3. Fixtures a. Laws tend to be default rules, which we may alter by contracts i. This puts disclosure incentives on parties whose intentions are somehow out of the ordinary. b. When evaluating what is and is not a fixture, courts tend to look at: i. Whether the owner of the item is a renter or property owner (Strain v. Green) ii. Expectations of parties iii. Whether the value of the house and the item is greater when the two are paired than when they are kept apart. e. Exclusion i. Considered by essentialists to be the basic right associated with private property ownership, because it is what allows us to use our property (Jacque v. Steenberg) ii. Is this an absolute right? Clearly not, because of the exceptions to exclusion rights noted above. 1. What role should norms, redistributive concerns, and the role of the criminal justice system play in our evaluations? iii. We might limit rights of exclusion when highly desirable activities require limits, but the transaction costs of negotiating those limits would be high (e.g. airplanes and sub-surface mining rights). 1. In the air, we might consider several solutions: a. If you cant use it, you cant exclude planes from it (Hinman v. Pacific Air Transport). b. Implied easement/consent c. Liability for trespass only in the case of actual harm or interference with ability to enjoy property (Causby). d. The point is that air rights are necessary to being about to enjoy the surface. However, there must be limits in order to allow highly desirable/profitable activities to happen. iv. Exclusion v. Nuisance

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1. Exclusion has the benefit of being a simple, easily-known rule 2. Exclusion also allows governance to devolve to private owners of property (private attorneys general solution). a. The only role of the state is to back up private landowners. 3. Exclusion fits in well with essentialist understandings of property. 4. Nuisance law, however, requires governments to make choices, and courts to assess reasonableness. It is a much more contested field of law. 5. Nuisance law also represents the bundle of sticks view of property, whereby there are limits on individual rights that are associated with what we call owning property. f. Nuisance i. To determine what is a nuisance, courts look both to reasonableness of use, but also circumstances of use. ii. There is the presumption, however, that one has the ability to use his property as he sees fit (Hendricks v. Stalnaker). 10. Law and Economics a. Coase Theorem i. Strong version: Regardless of initial allocations of legal entitlements, we will get the same allocation of resources. 1. Example of cow rancher next to corn farmer 2. Example of confectioner next to doctor ii. Critiques 1. Does not account for wealth effects: When we change peoples wealth, we change their preferences affect definitions of efficiency 2. Transaction costs economics a. Some (e.g. Ellickson) think transaction costs are high, esp. in oil/gas example where 4+ owners could not agree how best to exploit an oil field. b. Some (e.g. Ayres/Epstein) think transaction costs are low, and that justifies strong property rights and lots of complex law. 3. Actors may ignore the law, even if they know it a. Might prefer norms which are perceived to be more effective, or at least more neighborly b. Generally, will prefer litigation in high-stakes disputes involving strangers i. E.g. Car accidents with cows on Shasta County highways ii. People hire lawyers to do property things 1. Write wills 2. Get divorces

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3. Buy homes iii. Point: Litigation is the exception in disputeresolution, and not the rule c. Note: Governance by norms may be consistent with the strong version of the Coase Theorem, yet suggests a very different starting point for our analysis 4. Behavioral economics a. Loss-Aversion: People will generally need to be paid more for something they have than they would pay in order to get it. i. This is because people tend to value what they have more than what they dont. ii. Coase assumed that people analyze opportunity costs and payments the same way, which is descriptively false. iii. This instinct may be good, however, as it helps preserve stabilities and status quos. iv. An example of bounded rationality b. Bounded Self-Interest c. Bounded Willpower 5. Expressive Effects of Law a. Laws affect our valuations. b. Evaluation on entitlements may be affected by what the law says about the entitlements. c. Examples: i. More angry when people talk in the quiet car ii. Less likely to vote when its required due to less intrinsic motivation d. Point: There is a feedback mechanism between laws and norms 11. Property Rules, Liability Rules, and Doctrine a. Limits on Exclusion Rights based on necessity i. When there is necessity in the moment, bargaining becomes extremely expensive courts more likely to impose liability rule protection for property owners (Ploof v. Putnam). ii. The problem is that this is generally ex post, distributive justice analysis. From an ex ante perspective, imposition of liability rules might create a moral hazard problem, as people do not need to internalize the costs of engaging in risky activities. b. Limits on Exclusion Rights based on custom i. When it is tradition to throw private lands open for public use, courts may do so (McConico Case, which allows abrogation over property rights in antebellum South Carolina for hunting). 1. Tradition limited to unenclosed, undeveloped land.

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ii. This analysis is very closely related to existing norms. It is also a place where norms and laws create feedback mechanisms for each other, as laws requiring warning/no trespassing signs may be considered unneighborly within close-knit communities, but be common when signaling to outsiders. iii. Right to roam statutes have been instituted in certain European countries, as legislatures attempt to compensate for what is perceived to be excessive closing-off of land. c. Limits on Exclusion Rights based on public need/accommodation i. One who has brought migrant workers onto his land for hire cannot exclude aid workers from reaching those migrants, as doing so would limit their rights (State v. Shack). 1. However, if migrant workers refused the aid workers entry, then Shack would be justified in excluding them as well (point being the rights of those who live on land, not the rights of outsiders to enter). ii. In social mixing bowls (aka Comedy of the Commons, aka the agora), we might wish to hold spaces open for democratic purposes, such that people of all social strata can come together (Uston Case). 1. In these places, free speech rights come into conflict with private property rights. 2. Regarding regulating these sorts of places (e.g. town greens, casinos, malls, etc.), the Supreme Court and federal government have largely backed off, allowing states to find the optimal mix of individual rights and exclusions. a. Exceptions: i. Civil Rights Act ii. Political speech on university campuses (Schmidt case) 3. We might at least be concerned about private entities controlling our modern agorae. d. Encroachments and Remedies i. In general, injunctions and the criminal law tend to be associated with property rules, while damages tend to be associated with liability rules. ii. When encroachments are unintentional, slight, and do no harm, courts may be willing to enforce damages remedies, rather than injunctions (Pile v. Pedrick; Golden Press) 1. Ex Ante Negatives a. Lack of sufficient care regarding fence construction? b. Liability rules may well undervalue property owners true valuations

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c. A margin of error rule might promote more careful behavior, and also encourage neighborly negotiations/conversations. 2. Ex Post Plusses a. Do not encourage unjust, opportunistic behavior. b. Redistributive consequences (Rawlsian) e. Liability Rules and the Anti-Commons i. Four Potential Solutions to Entitlement/Remedy Mix, when we have a mill that needs to flood nearby land: 1. Property Rule Protection for Land 2. Liability Rule Protection for Land a. Benefit: Solve the holdout problem, while compensating landowners (Head v. Amoskaeg) i. Legislatures recognize the potential for under-compensation, and may require compensation above market value. 3. Property Rule Protection for Flooding 4. Liability Rule Protection for Flooding a. E.g. Spur v. Del Webb Case. b. This was Calabresi & Melameds major insight. ii. Property rules tend to be associated with injunctions, criminal law, and punitive damages, while liability rules tend to be associated with damages. iii. Similar anti-commons solution in eBay case, when we entitle patent and copyright owners to receive only damages. 12. Other Limitations on Property Owners Rights a. Limitations on Right to Destroy i. When courts are more likely to limit rights to destroy ones own property 1. When the owner is dead 2. When the destruction results in enormous deadweight loss, or externalities (contrary to public policy- Eyerman Case) a. Case illustrates some of the limitations of the strong version of the Coase Theorem. ii. Considerations 1. Pros on Limits a. Efficiency b. Prevent the dead hand from maintaining control perverse incentives for the living 2. Cons on limits a. Freedom of contract and libertarian values b. Limitations on Transfer Rights i. The norm is that there are no rules against the transfer of real estate. ii. Primary reasons for non-transfer rules:

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1. Paterfamilias 2. Anti-alien; Preserving a close-knit community a. Example: Abraham and the Cave of Machpelah in Genesis 23 b. Courts will look in this circumstance to whether the restriction on alienability is reasonable in time and purpose (Lauderbaugh Case). c. This allows for balancing among efficiency, social cohesion, and libertarian theories. iii. Contrary to Polanyis thesis that alienability of fungible land alienation of people from each other is a new phenomenon, societies have long improved productivity and incentives to work by making land alienable. This change has been associated with exploding civilizations. iv. Absolute restraints on transferability by contract are generally not permitted. However, those restraints may exist for a reasonable time, as in the form of bailments (which transfer possession, but not property rights) (Allen v. Wright). v. Debate: 1. Ex Post, constraints often look like theyre debilitating on peoples ability to control their own land. 2. Ex Ante, constraints may be what allows people to alienate land to others in the first place c. Adverse Possession i. Although this is a remarkable doctrine, as it allows thieves and squatter possession of goods, nearly every society in the world has a version of it, although Statutes of Limitations vary by state in length. ii. Procedural Postures 1. Actions for ejectment (brought by TO) 2. Actions to quiet title (brought by AP) iii. Rationales (Ewing Case) 1. Clear up title Promote economic development 2. Incentivize the gatekeeping function, and give land to those who make use of it Incentivize efficiency iv. Doctrinal Adjectives: Possession must be 1. Actual a. Must have possession, not simply claim it b. Almost never litigated 2. Open a. Sensible, because the theory behind adverse possession has a lot to do with parties reliance on open appearance of ownership b. Also does not reward land held sneakily 3. Continuous

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v.

vi.

vii.

viii.

ix.

a. One need not be physically present continuously, but rather simply display continuous markings of possession/ownership b. On advice of counsel, large, institutional landowners often exclude people briefly, in order to interrupt claims for adverse possession and/or prescriptive easement 4. Exclusive a. Can result in prescriptive easements if not exclusive 5. Hostile/Adverse a. We want people to be able to gift or lease their land, and take it back as they see fit b. To break this stream, someone may send a letter permitting the usage. 6. While these rules are intended to be clear, theyre often ambiguous in the context of real cases. Prescriptive easement is a related concept, whereby someone can gain a right to use property for a particular purpose, even if they do not own that property outright. Interesting Note: In J.A. Pye, a clear case of adverse possession in the UK, the European Court of Human Rights invalidated as contrary to human rights in property. Alternate Doctrinal Adjectives: 1. Claim of right- Some courts require the AP to have a good faith belief that the property is rightfully his (Carpenter v. Ruperto), although this is not the majority doctrine (more related to notions of corrective justice). a. However, Helmholtz argues that courts are more likely to give APs title when their possession is in good faith b. Furthermore, in many jurisdictions, state of mind affects the length of the statute of limitations. 2. Color of title Tacking 1. No re-setting of statute of limitations under conditions of privity for either TO or AP (Howard v. Kunto) recommended to obtain a house inspection service to check the boundaries, although courts sometimes rule that de minimus encroachments are insufficiently open as to qualify for adverse possession. 2. Perhaps if AP(a) ousted by AP(b) (i.e. no privity), AP(a) has superior title relative to AP(b). Remedies 1. Given that adverse possession cases are often hard, and appeal to our sense of distributive justice, we may want to

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allow greater flexibility in rights and remedies (see Calabresi/Melamed), as argued by Merrill. 2. However, given the goals of adverse possession, simplicity tends to prevail. 3. Remedies are often driven by politics, as in locations where adverse possession may lead to title vesting, but we have sympathy for ousted parties, e.g. people who lost property due to Nazi or Communist regimes. x. Ex Post v. Ex Ante 1. Ex post, adverse possession allows for distributive considerations 2. Ex ante, we might want a rule that encourages good gatekeeping, but most of all, clears title dating far back, such that people can invest money in expensive assets such as homes without worrying about losing that property in actions on claims dating far back. xi. Adverse Possession and Cognitive Psychology 1. According to Tversky and Kahnemann (contra Coase), we worry more about losses than we are eager for gains of the same size. 2. This might explain why were inclined to allow someone to keep what she already possesses. xii. Adverse Possession of Government Lands 1. Generally, cant do it. 2. This is primarily because the government has lands so vast that gatekeeping is difficult, and also because we generally make allowances for non-nimble governments xiii. Adverse Possession of Chattels 1. Generally cannot adversely possess copyright 2. May involve different adjectives regarding when the SoL begins to run: a. Time of conversion (Songbyrd Case) b. Time of discovery of thieves possession and identity c. Time of demand 3. Implicated in consideration of these issues are title to cultural artifacts, such as the Elgin Marbles and Rosetta Stone. 13. Time Divisions of Land a. We divide Blackacre by: i. Use ii. Time iii. Joint Ownership iv. Creditor/Debtor Rights (Based on securing debts, which property, as an immobile asset, is uniquely suited to do)

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b. The law creates certain, limited (numerus clausus) interests in land in order to avoid problems of anti-commons (# of owners), but also to reduce the sum of administrative and measurement costs and frustration costs (Merrill and Smith article). c. Options for ownership in time: i. Usufruct, i.e. use for as long as you can. ii. Life estate iii. Fee simple (eternal) iv. Favoring fees simple > Usufructs: 1. When land can be improved upon fee simple a. Antarctica, the Moon, and parking spaces are all usufructs 2. When land is scarce fee simple v. Discounting for future interests, land is more valuable if we sustain it over time than if we use it all up now. The genius of fees simple is that, even if property owners know they will die soon, they will still upkeep their land, because their ability to sell it to someone else depends on their doing so. Therefore, the fee simple gives current owners incentives to do right by their land and improve it/care for it efficiently whereas the usufruct or time limited ownership encourages wasteful behavior. d. Current Interests i. Fee simple absolute- The maximum possible bundle of property entitlements, existing in perpetuity ii. Life estate- The maximum possible bundle of property entitlements, for the extent of an identified persons life. 1. If an outsider enters onto a property adversely and giants title, that titled is a life estate measured by the life of the TO of the life estate. This is a life estate measured by another life, por autre vie. iii. Fee simple determinable- The maximum possible bundle of property entitlements, existing until terminated automatically when a named event occurs (as long as), at which point the land will be returned to the grantor. iv. Fee simple subject to condition subsequent- The maximum possible bundle of property entitlements, existing until terminated by the action of the grantor in the future (but if after a certain condition has come to exist). v. Fee simple subject to executory limitation- The maximum possible bundle of property entitlements, existing until terminated automatically when a named event occurs (as long as), at which point the land will go to a third party (third party version of the fee simple determinable). e. Future Interests i. Grantor 1. Reversion- Title automatically returns to the grantor.

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2. Possibility of reverter- Title may return to the grantor following a fee simple determinable or fee simple subject to condition subsequent (i.e. the two defeasible fees). 3. Power of Termination/Right of Re-Entry- Grantor may retake title at a time that is not the natural end of an estate (analogous to a grantees executory interest) ii. Grantees: 1. Remainders: a. Indefeasibly Vested- Necessarily going to a third party (Blackacre to A for life, and then to B and his heirs.) b. Contingent- May go to a third party at the natural end of a previous interest, but we dont know whether the interest will vest, or in whom the interest may vest. i. (Blackacre to A for life, and then to As children.) ii. (Blackacre to A for life, and then to B as long as B graduates high school by 19.) iii. Of course, vesting of interest may predate vesting in possession. c. Vested Subject to Complete Defeasance- May go to a third party at the natural end of a previous estate, but subject to certain limitations that may defeat the fee. i. (Blackacre to A for life, and then to B and his heirs, but if B drinks alcohol before 21, then to C and her heirs. d. Vested Subject to Partial Defeasance/Subject to Open- May go to a third party at the natural end of a previous estate, but subject to certain limitations that may partially defeat the fee i. (Blackacre to A for life, and then to As children, because that category may expand.) e. Remainders cannot follow vested fees simple. 2. Executory Interests- Cut short interests that would otherwise be cut short only by death. a. Shifting- If the interest of the grantee is divested. b. Springing- If the interest of the grantor is divested. f. Doctrinal Notes: i. People who are alive cannot have heirs, but only heirs apparent. Therefore, the phrase A and his heirs creates no interest in anyone unless A is dead. ii. Conservation of Estates: Courts will fill gaps in wills with reversions and/or possibilities of reverter. Often, that means that

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the estate will be passed down according to the statutes of descent (or intestacy statutes). iii. When construing wills, courts look to the drafters intent (Williams v. Estate of Williams). 1. In this case, the court read the drafters intention to create life estates reversion statutes of descent nightmare scenario. 2. Problems with defeasible fees and life estates: a. Often create massively difficult problems associated with the commons, as there are many descendants, and figuring out who all of them are is hard enough. Getting them to all manage property cohesively is even more difficult. (City of Klamath Falls Case). b. Life estates Less incentive to care for property c. Life estates and defeasible fees more difficult to receive a mortgage, often must back a mortgage up with insurance. d. For reasons like this, states often limit defeasible fees to certain periods of time, or pass marketable title acts, whereby holders of future interests must periodically declare those interests in order to retain them. iv. Statutes of Descent 1. A function of state law 2. Per capita: Estate divided equally among surviving heirs of the same generation (e.g. all children dead, 3 grandchildren each get 1/3). 3. Per stirpes: Estate divided among heirs according to degrees of separation from the grantor (e.g. all children dead, 3 children: one grandchild gets because thats the mothers interest, while the others each get , splitting up their fathers interest). 4. Statutes differ whether they give precedence according to degrees of separation from a decedent associated with parents or with bloodlines (consanguinity v. parentelic). (See http://thismatter.com/money/wills-estatestrusts/intestate-distribution-to-ancestors-andcollaterals.htm.) 5. Generally, the freedom to grant property via will is much greater in the U.S. than it is elsewhere. Here, it is subject to very few restrictions (other than it is often difficult to disinherit spouses). g. Waste: i. Holders of life estates cannot alter the property in a way that renders it substantially different from the state in which they

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received it, lest they damage the interests of holders of remainders (Brokaw v. Fairchild). ii. Mitigated somewhat by later doctrinal developments, such as permitting ameliorative waste, or by permitting suits to partition estates Coasian bargaining becomes easier (as the waste doctrine is, of course, a default rule). Also, one may create a common trust, and distribute proceeds. iii. Point: This is a problem of a commons, and is the time equivalent to nuisance law (and another reason why creating estates in land tends to lead to problems). h. Discounting i. Even though a remainder gives title in perpetuity, a remainder that is a long way off might be worth a lot less than a life estate that we receive now. x ii. PV(x) , where r = discount rate, and n = number of years. (1 r)n iii. Point: A dollar in the future is worth less than a dollar today, and if its well in the future and we have a nice discount rate, its worth a lot less i. Numerus Clausus i. Merrill and Smith idea is that reducing the categories of property ownership lower measurement costs, even at the expense of frustration costs. ii. This is because difficult property arrangements impose externalities associated with discovering those relationships on third parties. iii. The cost of hiring lawyers to stack the property interests in complicated fashions amount to a tax, forcing the makers to internalize the costs of their complex arrangements. iv. Point: Someone is more likely to undertake investment if there are a limited means of property interest arrangements. j. Rule Against Perpetuities i. Statement: No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest. ii. Does not apply to interests retained by grantors, but only remainders and executory interests. iii. Does not transform fee simple defeasibles into fee simple absolutes, but rather only results in possibilities of reverter for the grantor. (See Klamath Falls case.) iv. Designed to deal with ambitious efforts to give away property through time. v. Efficiency reasons: Dont permit the dead hand to control forever, especially as their interest in doing so increases in distance from later generations. vi. Distributive reasons: Break up old estates

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vii. Recent Development: Authorization of perpetual trusts to allow rich people tax shelters in which to tie up their properties forever. 14. Co-Ownership a. A pervasive means of property ownership, analogous in many ways to business organizations, whereby the owners are residual claimants on the profit streams that incur to the entity. This idea originates, of course, within the household. b. The Forms of Co-Ownership (Numerus Clausus) i. All involve undivided interests in land ii. Joint Tenancy: 1. Requires unities of time, title, interest and possession, the severance of any one of which will convert the joint tenancy into a tenancy in common. 2. Comes with rights of survivorship, i.e. upon the death of a tenant, his interest is extinguished, and the other tenants interests grow. 3. Severance is permitted unilaterally (right to exit preserved), and may even occur without notice (but see Riddle Case, whereby severance by self-deeding requires notice). a. Whether a lien on an interest constitutes severance is a close question, which courts have differed on, but have generally concluded that it isnt severance (Harms v. Sprague). 4. Tenancy by the Entirety is a special form of joint tenancy, except it is available only to married couples. a. It contains additional protections against creditors of the other tenant. b. It is also not unilaterally severable. c. May be severed only by divorce or by mutual agreement. d. This is more common in the Eastern U.S. In the West, there are common property schemes in marriages. 5. Advantages of joint tenancies: a. Avoid probate b. Avoid the estate tax (although <1% of American worry about this) c. Positive signals to intimates regarding the availability of social insurance. 6. In joint tenancies, we may restrict other tenants ability to transfer their interests, but only if such restrictions are found to be reasonable. (Of course, greater restrictions on rights to transfer/sever are attended by disincentive to get into the relationship in the first place.) 7. Joint tenancies may be highly problematic if we hold them with other people, especially non-intimates, and we are

33

trying to govern alongside them. It may lead to questions of ouster if one party effectively prevents another from effective use of the land at all (Gillmor v. Gillmor). (See Partition, infra) iii. Tenancy in Common 1. Same as a joint tenancy, except (crucially), there is no survivorship feature. iv. Beyond this, we would have partition leading to separate interests. c. Partition (unilateral): i. Free exit is the opposite of forced cooperation notions such as unitization, and comports more with our ideas about individual liberty. ii. In general, we are suspicious of the dangers of social clusters, and want to preserve means of getting out. iii. Courts will tend to favor in-kind partitions, unless there is a compelling reason why such a partition is unfair or impossible, in which case courts may order the sale of the land and dividing of the assets (Delfino v. Vealencis). This is because courts will worry about undercompensating for subjective valuations. 1. In this case, under the strongest version of the Coase Theorem, we should get the same result regardless of the legal rule, but there are likely massive transaction costs in these bilateral monopoly situations. iv. In the context of Indian reservations, which are often not transferable, interests are greatly broken up mammoth partition and transaction costs problems over highly atomized land (Hodel v. Irving). 1. The statute allowing property under a certain value to escheat to the tribe was judged to be a taking, but it was (under a non-lobby capture theory) an attempted solution at the problem of highly fractured ownership of the same land. d. Chain of Title and Recording Systems i. In complex chains of title over time, nemo dat (i.e. you cannot transfer what you do not own) may run into problems with adverse possession (Kunstsammlungen Case), with people arguing over when a statute of limitations should begin to run in the case of stolen property, when its first stolen (over-incentivizing stealing and hiding) or when its discovered and requested (underincentivizing protection against theft. ii. Under the UCC, a bona fide purchaser from a 2nd party purchaser with faulty title (not a thief, but perhaps a forger) may still acquire good title, as an exception to nemo dat (Kotis v. Nowlin). 1. Generally, there is an exception for property acquired via faulty/false transaction because those who sold the property

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have some opportunity to make sure that the transfer of title and payment is good. iii. This concept wouldnt exist in the case of a transfer of real property, where a purchaser is assumed to have notice and knowledge of the information regarding title that appears in land recording systems. Buyers are also thought to have a duty to inspect their land, and find any potential adverse possessors, who must be open and notorious. iv. We have recording systems for land transfers and title because: 1. The high stakes involved with very expensive assets 2. The immobility of land, making it both definable and unique 3. The utility of land as an asset to secure a debt, requiring a means of providing lenders with assurances regarding the propertys title (the same concern also gives rise to a large title insurance industry). v. Land Records and Chains of Title: 1. If A sells Blackacre to both B and C, and then flees, B must record his sale before C does. This gives buyers tremendous incentives to record their purchases instantly. 2. C is disqualified if he receives actual notice of the sale to B. a. In this way, the system is predicated on notice, either actual or constructive/inquiry. 3. In a notice system, the last good-faith purchaser has title. Of course, that individual still has an incentive to record based on a later buyers potential to usurp his property rights. e. Marriage Law i. Regimes: 1. Common Law (Generally in the East): Spouses own earned assets separately. a. This system, however, is moving toward a community property-like system, as legislatures and courts are more likely to recognize spousal contributions to each others assets (OBrien v. OBrien). i. Enormous debates in divorce law: Do spouses hold debt or equity interests in each others assets? Are spouses due the opportunity costs associated with their contributions to each others assets? Is someone a cause in fact of the others assets? 1. The answers to these questions are quite contested, and have enormous

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implications for influencing parties behavior ex ante and parties outlays ex post. 2. Community Property (Generally in the West): All assets owned by both spouses, including any previously-owned property commingled with spousal community property. a. Exception only for special gifts received by one spouse or the other. 3. The trend in recent times is that, in the context of a divorce, fault is not considered when distributing assets, unless the fault is egregious. ii. Question: Of what effect is the law? 1. Will probably find the same number of bank accounts held in joint tenancy in community property states (where it matters less, because spouses own half of each others assets anyway) than in common law states. 15. Landlord-Tenant Law a. Institutions that separate ownership/management from use/enjoyment of land: i. Leaseholds (focus here) ii. Trusts iii. Corporations b. Advantages of the Lease > Ownership i. Risk-Spreading 1. Management can diversify 2. Homeowners can have a landlord who has expertise in owning and managing land 3. Particularly good for renters of mall space or farm space to negotiate a lease that involves a payout of a percentage of outputs. This gives owners incentive to provide a good environment, perform good services, and support the enterprise. ii. Ease (i.e. Low TC) iii. Tax benefits, such as deducting a lease as business expenses (although there are generally more tax benefits associated with ownership). c. Types of Leases (subject to Numerus Clausus as a means of reducting TC, measurement costs, etc.) i. Term of Years 1. Has a set end date, with no automatic rollover. 2. Can be terminated at end date without notice ii. Periodic Tenancy 1. Automatic rollover at termination date. 2. Notice required for termination a. Often set by statute

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b. At common law, 6 months notice required for termination of a tenancy with periods of one year. c. Question: What notice is required for a non-natural termination, and how will payment for that period be prorated? 3. Often set up for rentals of farmland iii. Tenancy at Will 1. May be terminated at any time, by either party iv. Tenancy at Sufferance 1. May occur when a tenant overstays a lease, whereby a landlord may terminate the tenancy, even without notice (as the tenant is now more of a trespasser). v. Due to the numerus clausus, courts may try to squeeze rental contracts into certain categories, at the same time trying to honor the wishes of the contracting parties (Garner v. Gerrish the asymmetric tenancy at will case, where the only party with the right to terminate was the renter). d. Power in the Landlord-Tenant Relationship (see pp. 161-79 of big outline) i. Landlords often have comparative advantages at finding documents ii. Tenants often do not negotiate for rentals, but they probably could. iii. At common law, repeated, regular tenancies at will may turn into periodic tenancies. iv. Commercial landlords often have the best understanding of neighborhood trends, for they need to price their units accordingly. v. However, lots of empirical research demonstrates that landlords are as poor and powerless as tenants. vi. Ayres: Jigger default rules in order to place bargaining incentive on the least-cost avoider. e. Landlords Constraints in Selecting Tenants: i. Ability to regulate where people live implicates ideas about monopoly power, freedom of contract, and permissibility of quotas ii. Population Served (Anti-Discrimination Law) 1. The Fair Housing Act (FHA), passed in 1968 (after MLK assassination), is the most significant constraint on landlords in tenant selection (covers race, sex, religion, color, family status, roommates.com case held that FHA applies to advertisements for roommates). a. This is a move away from the freedom of contract model, and toward the regulated industry model. 2. Prohibits discrimination by landlords owning >3 units, and even discriminatory advertising by exempted landlords 3. Exceptions: a. Single-family home sold/rented by owner, provided owns 3 or less and uses no commercial entity to help in the sale/rental

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b. Rooms in dwellings containing quarters to be occupied by 4 or fewer people, if the landlord will be one of the residents. c. Religious organizations and private clubs d. These are important exceptions because, in some areas, a large percentage of rental housing is owned by very small-time landlords. 4. An 1866 Act forbids racially discriminatory advertising. 5. Violations make one subject both to monetary damages and injunctive relief in a civil suit. 6. Advertising restrictions: a. Yes: Credit check required, no drugs (not no alcohol), reference to school district, senior citizens discount b. Maybe: Gay, lesbian, prestigious, secure, quality neighborhood c. No: Able-bodied, bachelor, near a church, couples only, exclusive, empty-nesters, no smokers, responsible 7. FHA probably covers impact, as well as intent 8. Other restrictions: a. 14th Amendment b. Civil Rights Act of 1866 covers only real property sales and rentals, and only regarding race (and probably only intent, and not impact) i. However, it doesnt have any of the FHAs exceptions (broader). ii. It also probably doesnt apply to advertising (narrower). 9. More on the FHA: a. Primarily prohibits discrimination today based on familial status. b. Many statuses may be discriminated against under the FHA, but are correlated with variables against which there can be no discrimination. c. Can discriminate against those with Sec. 8 housing vouchers, but not once you start to accept them. d. Most mutable categories are the last to receive protections, but the most immutable categories are generally those that people choose to associate most with. e. Testers employed to check landlords behavior, and Act provides for attorneys fees to permit Private Attorneys General to pursue claims. 10. Critiques and Problems of Segregated Cities

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a. Even without intentional discrimination, it is quite possible to achieve the result of segregated cities (see Schelling article). b. Segregation persists because of slight desires to live with people like yourself, because of income disparities, and because the FHA can control only the supply side, and not the demand side. c. Generally, cities with highest segregation (measured by Taubeur Index) are in the Midwest 11. Possible responses: a. Address demand side (e.g. get Sec. 8 only if you move to integrate, but this violates freedom of association) b. Subsidize entry of under-represented groups (see Schelling) c. Preference to applicants of certain racial groups (struck down under 14th Amendment) i. This type of solution is based on a Putnamesque understanding of bridging social capital. 12. Tension in this discussion, e.g. freedom of religion, association, etc. against freedom in the housing market and right not to be discriminated against based on familial status, revealed in state v. individual interest debate in Attorney General v. Desilets. iii. Price (Rent Control) iv. Terms of Service (Certain immutable duties of landlords) v. General trend is toward greater freedom of contract in commercial leases, but more regulation in residential leases, except regarding rent controls. 1. Of course, this is a struggle between our values associated with regulation and our desire to have more freedom 2. Also concerned with encouraging Putnam-esque social capital, but crowing out certain landlord activity altogether. f. Independent Covenants Model: i. The risk of unforeseen events was, at common law, allocated to the tenant, as the covenants to provide a place to rent and to pay the rent were viewed as independent of each other (Paradine v. Jane). 1. In the present day, risks of natural disasters are allocated to landlords (immutably) (See Conn Statutes). 2. This is in a world where tenants have more powers vis-vis landlords. 3. Furthermore, landlords may now evict tenants, whereas they couldnt under the ICM. 4. In general, this reflects the notion of facilitating exit/dynamism in the modern world.

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5. The ICM was based on a non-liberal conception of static social relations whereby, in exchange for quiet enjoyment of land, one would pay rent come hell or high water. g. Dependant Covenants Model i. Constructive Eviction Doctrine/Implied Covenant of Quiet Enjoyment: If a tenant is deprived of the ability to enjoy his property by the landlords willful or negligent act or omission, then the tenant need no longer pay rent (Smith v. McEnany; Blackett v. Olanoff). ii. Possible remedies: 1. Damages 2. Specific performance 3. Declaratory Relief 4. Refuse to Pay/Rescind the Lease 5. Seek Restitution iii. Under Connecticut law, even if the force causing the eviction is an act of G-d, paying rent is often excused. h. Implied Warranty of Habitability (IWH) i. At common law, the traditional doctrine was caveat lessee (lessee beware, i.e. lessee responsible for latent defects) (Sutton v. Temple). ii. Demsetz Story: In the context of urban, interchangeable housing, the landlord is now the least-cost avoider burden on landlord to warrant the habitability of a home and to protect against latent defects (Javins v. First National Realty). 1. Landlords also have better incentives to make repairs, as they are the long-term party of interest. 2. While waivers can occur, this rule is generally immutable in the context of health and safety concerns. a. If the waiver is found to be a contract of adhesion, then it might be overturned on unconscionability grounds (this is where property law is merging into contract law). b. Also, perhaps the rule is immutable because we dont want to have massive externalities imposed on third parties. iii. Having an immutable IWH for latent defects is strong. It is less strong for patent defects, whereby the tenant can select different housing, negotiate down the price, etc., and there is already an incentive on the landlord not to have such awful defects anyway. Including such an immutable IWH might raise rental prices such that low-end rentals become unavailable and homelessness would increase. iv. IWH Remedies: 1. Declaratory judgments 2. Specific performance

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3. Refuse to Pay Rent/Leave 4. Reduce Rent/Set-off a. Determined by different formulas in different jurisdictions. v. Doctrine of Retaliatory Eviction: 1. If an eviction is in response to a tenants invocation of rights, it is ineffective. 2. Especially important in the context of periodic (i.e. monthto-month tenancies). 3. By legislation in many jurisdictions, there are limits on evictions within certain time periods after tenants have made complaints (e.g. 6 month presumptive period in CT). vi. All in all, this is a conversation about freedom of contract (emphasis on ex ante) vs. distributive justice (emphasis on ex post). 1. In France and N.J., the focus is more ex post, with landlords facing difficulties in evictions and presumptive re-leasing. i. Tenant Exit When Landlord Not in Breach i. Surrender Doctrine: If tenant effectively gives up the apartment, and that surrender is accepted via the landlords behavior, then tenant no longer obligated to pay rent (Statute of Frauds notwithstanding) 1. This is a default rule that may be contracted around ii. Duty to Mitigate Damages (Sommer v. Kridel). 1. This is a contract law, not a property law, concept (see contract market damages and duty to mitigate). iii. Tenant Transfer 1. Sublease: Relationship between tenant and subtenant 2. Assignment: Relationship between landlord and new tenant (transfer of entire interest) 3. Majority rule is that landlord can refuse assignment arbitrarily, while minority rule is that such refusal must be reasonable. iv. These are all means of dealing with the unpredictability of the future. Tenants might decide they do not want the apartment for as long as they rented it for, and attempt exit (although this is relatively rare). v. In the alternative, the tenant might want to stay for longer, in which case they face problems of bilateral monopoly, as the landlord generally has property rule protection (but see France, N.J. laws presuming re-upping by tenants). vi. Generally, however, with everyone worried about reputational concerns (and costs of finding new apartments and/or tenants), landlords and tenants contact each other and attempt to renegotiate when a term of years is about to expire.

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j. Social Control Theory i. Tit-for-Tat is the most successful approach to social interaction. 1. Characteristics: a. Nice, i.e. dont be first to defect b. Punish immediately c. Forgive once scores are settled ii. Landlord-Tenant Application: 1. In the context of midgame relationships, landlords and tenants tend to cooperate due to the known ability to retaliate, e.g.: a. Failure of IWH Rent withholding b. Nuisance/Late Rent Late fees 2. Greatest problems tend to arise near the ends of relationships. a. For this reason, endgame relationships buttressed by law, although Mom and Pop landlords (majority) may not know these laws. b. Furthermore, landlords/tenants never really in endgame due to ongoing reputational concerns. iii. Sources of Social Control 1. 1st Party: Controls on oneself via personal ethics, natural reciprocation tendency 2. 2nd Party: Sanctioning, e.g. tit for tat, gossip a. Problem: Often, two parties have different views of the same situation. b. Analysis changes greatly in the short term (see above). 3. 3rd Party: a. Diffuse social forces b. Organizations c. Law i. Ellickson: This matters less than lawyers tend to think. ii. Most important when stakes are high, and in endgame situations. iii. E.g. law governing security deposit default (double damages). k. Self-Help i. A form of 2nd party social control ii. Some jurisdictions have a flat rule of no self-help regarding tenant evictions (Berg v. Wiley) due to inherent risk of violence 1. Ex Post distributive justice 2. Ex Ante raises rents? 3. Ease of eviction ability (i.e. exit) has huge implications for housing costs, e.g. relatively easy in the U.S.)

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4. Problems of cognitive psychology: We want to help the people in front of us, and often consider ex post concerns more often. iii. Some courts, jurisdictions, and legislatures (e.g. UCC) have rules limiting the use of self-help to situations wherein there is default, if there is no potential for breach of peace (Williams v. FMCC). 1. Most courts treat this as an immutable rule, i.e. one that cannot be waived via contract. 2. Some ex ante/ex post considerations iv. Because self-help isnt state action, due process doesnt apply (see Fuentes Mitchell Di-Chem Doehr line) l. Standard Form Leases i. Most tenants do not negotiate provisions, even unfavorable ones ii. Reasons for lack of negotiation: 1. Concern over relationship with the landlord 2. Depend on common law doctrines (e.g. IWH, unconscionabiity) 3. Failure to read might make our procedural unconscionability case easier 4. Depend on landlords to modify in our favor 5. Depend on landlords, with better comparative advantage, to determine proper mix of provisions, prices, etc. m. Housing Codes i. Justifications 1. Paternalism 2. Reducing externality imposition ii. Standard Debate 1. Posnerian Analysis a. Making landlords make units nicer shifts demand curve out, but also shits supply curve in more, reducing housing supply and raising prices. b. Therefore, housing codes and doctrines such as the IWH hurt poor people overall. 2. Ackerman Analysis a. Housing is relatively inelastic b. Furthermore, marginal tenants place no value on quantity, whereas infra-marginal demand curve shifts out IWH produces benefits for inframarginal tenants. 3. Ellickson Analysis a. This is a debate about philosophies, theories, and assumptions, rather than empirical evidence b. This analysis isnt even important until we get to the endgame, because in midstream, parties behavior tends not to be governed by law and doctrine.

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i. Norms, such as landlords responsible for latent defects, emerge because they efficiently place risks on the least-cost avoider. ii. Super conclusion that IWH produced little effect in rental housing markets. n. Rent Control i. Generally restricted to liberal jurisdictions, and necessarily abolishes the terms of years. ii. Often takes the form of vacancy decontrol, as landlords cannot raise rent for a particular tenant. iii. Consensus is that rent control, over time, reduces quantity and quality of rental housing. iv. This limits the ability of exit to serve as a controlling force on behavior much more contentious landlord-tenant relationships. 1. Tends to lead to enormous volumes of litigation in landlord-tenant courts in place of highest rent control, NYC. v. Economic critique 1. Artificially deflated prices 2. Underprovision of quality public housing vi. Non-economic views 1. Promote stable communities 2. Promote personhood, i.e. connection with the property (see Radin) 3. Hurt landlord-tenant relationships by removing exit option (directly contrary to Radins thesis). 4. Rent Control and the Constitution: a. The U.S. Supreme Court has never held that rent controls violate the takings clause. b. The CA Supreme Court, however, has struck down Berkeley rent controls. c. This represents the notion that the U.S. Constitution plays out differently state to state, and the Ellickson view that states should have some flexibility to deal with their idiosyncratic circumstances efficiently. o. Federal Housing Assistance Policy i. Not an entitlement, but a major part of the American welfare state nonetheless. ii. Policy Vectors: 1. Landlord-Tenant Law (Housing codes, IHW, Rent Control) 2. Assistance Policies 3. Land Use Regulation iii. Housing Policy History

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1. Little organization before the 1920s, with filtering permitting formerly higher-end housing to descend to lower classes. 2. Le Corbusier Public housing and Urban Renewal 3. 1970s Mixed-Use Neighborhoods influenced by Jane Jacobs and post-Renewal backlash. 4. HOPE VI private sector solutions tend to replace public housing projects. iv. Policy Questions: 1. Supply-Side v. Demand-Side Solutions? a. Most economists favor demand side 2. Even demand side (e.g. Section 8) tends not to promote integration. Is this something we should think about (think bridging vs. bonding social capital)? 3. In the U.S., we tend to have relatively good housing, even for the very poor. Do we over-incentive housing construction via tax benefits? 16. Alternate Property Governance Mechanisms a. Forms i. Cooperative: Occupant owns shares in building, with proprietary lease in the unit occupied. Lessee can sell lease and share in the coop for whatever the market will bear. ii. Condominium: Occupants own air space of unit in fee simple; own common areas as joint tenants in common (without rights of survivorship) with other condo owners. b. Cooperatives/Condominiums v. Landlords i. Hansmann: More efficient to have dictatorships (i.e. landlords) govern common spaces. Democratic governance tends to be full of friction, transaction costs, and ii. Ellickson: Coops and Condos provide for better decision-making in apartment interiors iii. Both are arguments in favor of unitized ownership (constant theme, see, e.g., fee simple > usufruct) c. Cooperatives v. Condominiums i. Move recently in favor of condominiums, due to tax breaks and desire for ownership 1. Exception: High-end NYC cooperatives associated with high status, exclusivity ii. Cooperatives involve more tying together of neighbors fortunes much more intensive screening (similar to partnerships vs. corporations debate). d. Doctrine i. Generally courts will honor terms in founding agreements of these organizations (Nahrstedt Case), although some courts require that such terms be reasonable.

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1. Legislatures can, and do, act to limit this freedom of contract. 2. Question: Should courts be less deferential to by-laws than charters? ii. Voting: 1. In general, rules tend to be one-person, one-vote in politics, but one-unit, one-vote in these associations. 2. In certain associations, more votes come with a greater ownership stake. In general, the more benefits and costs are capitalized into the value of what you own, the more people will demand control (i.e. voting) commensurate with their ownership. a. While we might sacrifice equality, we gain the ability to ensure that decision-making is best in line with everyones economic interest this way. iii. Courts even permit a good deal of freedom in creating provisions for ejecting owners, and will apply the BJR to decisions that are taken with the cooperatives interest in mind, although theyre more likely to be subject to a reasonableness analysis (Pullman Case) 1. We might be concerned, however, about the ability to kick people out (thereby, we might favor bridging over bonding social capital). 2. Again, empowering adjudicatory decision-making might have ex ante effects that we like, but ex post effects that we dont. e. Homeowners Associations: i. These are governance mechanisms that charge a mandatory premium for membership. ii. These associations favor bonding over bridging social capital, especially in gated communities. iii. Municipalities might encourage homeowners associations because they can assume some of the burdens of local services. iv. However, these communities may also disrupt civic life, cause people to distrust government even more, and impose negative externalities on outsiders. f. Other Forms of Property-Owning Entities i. Trusts 1. In trusts, a settlor conveys a corpus to a trustee to manage/disburse for a beneficiary 2. Under the doctrine of cy pres, courts may amend terms of a charitable trust as near as possible to the intentions of the settlor when a stated purpose becomes impossible, wasteful, impractical, or unlawful (Wilber v. Owens). 3. In general, courts give greater freedom to the living than to the dead. When the dead hands desire becomes not

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practicable, courts will tend to exercise greater scrutiny, and invoke this doctrine (see Barnes Case). ii. Corporations 1. Plusses: Limited liability, ability to raise capital, two-tiered ownership structure ability to specialize functions. 2. Minuses: Two-tiered tax, agency costs, etc. 3. For more information, see a Business Organizations course. 17. Nuisance Law a. This is the primary common law approach to land use regulation, i.e. the effort to limit the negative externalities that neighbors impose on each other. This problem tends to persist in the context of large-scale events, because private owners can figure out property right arrangements among themselves for smaller-scale events. This notion of governing larger events is one area where nuisance law comes in. b. Nuisance definition: Unreasonable interference with the use and/or (quiet) enjoyment of land. c. Areas outside of nuisance i. Nonfeasance (generally) ii. Aesthetics iii. Interference with light/air access iv. When uses are thought of as, overall, socially beneficial v. Physical interferences, as that is the law of trespass (Adams v. Cleveland-Cliffs Iron Co.). vi. Locality Rule: As long as land uses in an area are relatively uniform, users can behave in a manner that would otherwise be considered a nuisance, because they get in-kind compensation from others by being permitted to nuisance away (St. Helens Smelting v. Tipping). d. Possible definitions i. The 5% worst uses ii. Any worsening use iii. Any use for which the social harm outweighs the social benefit (i.e. nuisance as negligence, and this is generally what has been selected). e. Nuisance and Remedies: i. Rule 1: Property Rule Protection for Resident ii. Rule 2: Liability Rule Protection for Resident 1. Favored when there are a lot of neighbors and the goal would be to break potential collective action problems (Boomer v. Atlantic Cement). 2. Objection: Permanent damages somehow sanctions polluting, and gives polluters the right to buy bad behavior. iii. Rule 3: Property Rule Protection for User iv. Rule 4: Liability Rule Protection for User

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1. Applied often when someone moves to a nuisance, making application of Rule 1 inequitable (Spur v. Del Webb). f. Nuisance and Global Warming: i. Global warming is too large-scale of an event to be dealt with by nuisance law. ii. Often, our national policy on this issue is driven by the fact that existing users lobbies are favored (e.g. by cap-and-trade, which gives property rights to existing polluters). This also demonstrates the loss aversion effect noted by behavioral psychologists. 18. Law of Servitudes: a. This law allows people to govern land use privately, often via contractual arrangements. b. Easements: i. Characteristics 1. Creates property rights in rem 2. Generally run with the land 3. Owners waive rights to exclude certain intrusions ii. Easements in gross are tied to individuals, while easements appurtenant are tied to specific pieces of land, but both are considered property rights, for which specific performance is available (Baseball Publishing Co. v. Bruton). iii. Easements may be public or private, and affirmative or negative. iv. Creation: 1. Explicit: a. It is important that parties buying either servient or dominant tenements not be surprised by easements The simplest way to do it is to explicitly negotiate for an easement and place it in the recording deed. 2. Implicit from Previous Use (Schwab v. Timmons) a. Common ownership Conveyance separates ownership b. Before severance, the common owner used part of the property for the benefit of the other part in a continuous, apparent, and obvious manner c. Claimed easement is necessary/beneficial to the enjoyment of the proposed dominant tenement. 3. Implicit from Necessity (Schwab v. Timmons) a. Exist to prevent the problem of landlocked property owners. b. Factors militating against use of these doctrines: i. When a landowner knowingly landlocks himself ii. When there is no real necessity

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iii. When the existence of the easement might surprise a purchaser of either tenement. 4. Prescriptive Easement (Warsaw v. Chicago Metallic Ceilings) a. Differences from adverse possession: i. No exclusivity requirement ii. In some (mostly western) states, one must have paid property taxes for AP no such requirements for prescriptive easement b. Preventing prescriptive easement i. File a suit for declaratory judgment ii. Erect a barrier iii. Send a letter permitting the use iv. Post a sign (by statute) 1. Might be especially useful in preventing public prescriptive easements. 5. Easement by Estoppel (Holbrook v. Taylor) a. Most states that arent pro-squatter like Kentucky dont have this doctrine because they dont want to penalize people for being quietly neighborly. v. American courts tend not to recognize easements of any kind regarding access to light and air (Fontainebleau Hotel Case). vi. Termination of Easements: 1. Express/Via Quitclaim Deed 2. Common Ownership 3. Adverse Possession 4. Abandonment a. Cannot abandon fee simple (Pocono Springs Case) b. It is easier to abandon an easement, however, as there is no res nullius wasteful race for resources. c. This is in line with courts not favoring forfeiture doctrines (e.g. adverse possession and defeasible fees) 5. Obsolete Purpose: Generally not recognized unless expressly contemplated in creation, e.g. railroads, perhaps, although abandonment via an affirmative act, such as tearing up the railroad, is usually required. 6. Overuse/Misuse of Easements: a. Not favored by courts as a reason for termination, as courts are more likely to use a kicker penalty instead. b. Even when holders of easements use them to serve non-dominant tenements, courts tend not to go the forfeiture route (Penn Bowling v. Hot Shoppes).

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c. Covenants i. These are, fundamentally, limits on rights of use. ii. These are almost always express, i.e. governed by contract (e.g. Statute of Frauds applies). iii. Most commonly, covenants are negative, but they may be positive. iv. Whereas easement law is fundamentally about creation, covenant law is fundamentally about running with the land and termination. v. Requirements for Covenants to Run with the Land: 1. Privity of Contract a. Horizontal b. Vertical 2. Touch and Concern the property interest a. Cases that go off on the difference in how much a covenant touches and concerns land are probably better justified on different termination doctrines, such as changed circumstances (Neponsit Case; Eagle Enterprises Case) 3. Intention of contracting parties for covenants to run with the land 4. Notice requirement 5. Restatement (Third) a. Outmoded requirements i. Horizontal privity ii. Touch and concern b. Objections: i. These requirements made more sense in a place (England) without recordation statutes, such that they provided notice to purchasers of covenants running with the land. ii. The desire is for greater freedom of contract. 6. Benefit: a. Burdened (Servient) Property: Existence of covenant will be capitalized into a lower purchase price, and lack of running with the land would allow for pure arbitrageurs to benefit from burdens of which they had notice but for which they had no responsibility (Tulk v. Moxhay). b. Benefited (Dominant) Property: Existence of covenant will be capitalized into a higher purchase price c. This capitalization is why knowledge is so important, but more minimal doctrinal requirements are necessary to ensure that purchasers have knowledge in the modern US. vi. Termination of Covenant: 1. Possible times to terminate covenants:

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a. Creation i. Might invoke contract invalidation doctrines, such as void as against public policy, unconscionability, Statute of Frauds, etc. ii. Might also create new reasons for contract invalidity, such as racially-restrictive covenants can be entered into, but not enforced by any government apparatus, including the judiciary (Shelley v. Kraemer). iii. Might create statutes, such as the Civil Rights Act or state statutes preventing restrictive covenants prohibiting sales to owners of mental institutions, schools, churches, etc. 1. If a land-use is not excluded from restrictive covenants, however, courts are generally favorable to efforts to exclude those uses via covenant (Peckham v. Milroy). b. At transfer i. Again, this approach is disfavored in the American context, where covenants are more likely to run with the land (see above). c. At obsolescence i. Terminating covenants is more difficult than terminating easements, because covenants are more likely to involve more people search for ways of reducing transaction costs of both creation (by standard form contract created by developer) and termination. ii. Many covenants contain sunset provisions in awareness of the fact that they will eventually become obsolete. iii. Other covenants contain provisions whereby they will need to be re-upped by majority vote (see Epstein on similarities between covenants and constitutions). iv. Options: 1. A robust changed conditions doctrine, but courts are often reluctant to say that old covenants are completely obsolete, as courts have little ability to get the covenants

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more right than the negotiating parties (Bolotin v. Rindge). 2. Sunset provisions 3. Legislatively-imposed sunset provisions 4. Pliability Rules allowing people to violate covenants for damages over time, without imposing injunctions. vii. Conservation Easements 1. These are really covenants, and a fast-growing area in which nearly all states have created some form of enabling statute. 2. Benefits a. Peace of mind to current landowners about land-use b. Resisting commercial development c. Significant tax advantages from land donations to charitable trusts 3. Criticisms a. More of a tax haven for the wealthy than any real environmental benefit b. Excessive dead hand control when allowed to exist in perpetuity 19. Zoning a. Whereas covenants/easements are private land-use controls, an nuisance law is the common law of courts, zoning is the representative governments attempt at land-use controls. b. Goals i. Prevent incompatible uses ii. Increase property values iii. Channel development into patterns c. Mechanics i. States usually delegate this power to municipalities via enabling statute ii. Localities enact comprehensive plans (no spot zoning permitted, as thats a violation of due process) iii. Permits are required for building projects, with appeal to iv. Zoning Board of Appeals, which also hears 1. Variance applications (discretionary) 2. Exemption applications (mandatory) v. Much of local zoning today is less of the Euclidian version, and looks more like deal-making between developers and municipalities d. Critiques i. Positives 1. Reduces burdens on local services (e.g. schools and roads) 2. Prevents incompatible land uses

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3. Protects poor people from having unattractive land uses concentrate near their housing 4. Gives local communities the ability to differentiate themselves from each other, thereby allowing residents to vote with their feet by selecting different communities incentive on communities to develop efficient zoning regimes 5. Promotes community engagement in political process 6. Increases home prices ii. Negatives 1. Interferes with the market a. Not just building markets, but also distorts ancillary markets, such as labor markets b. This lowers qualities of life, as people must spend more time in their cars, e.g. 2. Huge transaction costs (i.e. administrative expenses) 3. Favors the wealthy and politically influential (and promotes NIMBYism) 4. Allows for exclusion of poor and minorities 5. Binds future generations without anticipating their needs 6. New Urbanists criticize much of zoning as they favor mixed-use 7. How much effect does it have overall (see Cappel v. Clowney debate)? Does zoning have the same positive effect on home prices as privately entered easements and covenants? a. See similarities between zoned Dallas and unzoned Houston. b. However, home prices in Houston are quite low compared with home prices in large cities with more zoning/growth controls: Is this a net good? 8. Even inclusionary zoning may have ex ante exclusionary effects, as developers might stay out altogether. e. Constitutionality i. As long as a general and genuine state interest is being pursued by the municipality, federal courts give municipalities a lot of latitude to develop zoning schemes as they see fit via their police powers (Euclid v. Ambler). 1. This case is a move away from the substantive due process review of the post-Lochner era. ii. State courts are more likely to strike down zoning decisions on due process grounds, or, perhaps, based on the state constitution. iii. This is an example of an area where the federal Constitution is permitted to apply differently in different states. iv. Deal-Making

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1. Generally, municipalities can require conditions of developers to earn variances (Greek Orthodox Church v. New Berlin). a. Case highlights the fact that many municipalities try to zone out religious buildings, which brings down property values rare federal zoning statute (RLUIPA) protects religious institutions from exclusions in zoning schemes, requiring municipalities to show compelling justifications for doing so 2. However, any exactions must be related to the goals of the zoning scheme, and must also be in rough proportion with the proposed variance from the zoning scheme. Otherwise, it is a taking (Dolan v. Tigard). f. Exclusionary Zoning Debates i. Some courts (all state courts) do step in, primarily on state constitutional grounds, when municipalities engage in exclusionary zoning that effectively excludes certain uses, especially housing for low-income people, from their municipality (NAACP v. Mount Laurel). 1. In this case, the court required Mount Laurels zoning scheme to permit the municipalitys fair share of lowincome residents to live there. 2. Furthermore, maintaining the tax base is not a legitimate reason to deviate from the inclusionary model. ii. This case is an outlier, however, as most places allow for various forms of exclusionary zoning (see Woodbridge, CT). 1. This is a discussion that touches on issues of education and tax base, race and class, bridging and bonding social capital, and aesthetics, taste, and the environment. iii. Under PA law, all municipalities must include some percentage of non-nuisance land uses iv. Critiques of Exclusion 1. Promotes inefficient land use 2. Imposes externalities on outsiders 3. Reifies social stratification v. Critiques of Inclusion 1. Ex ante, developers might be less likely to come into town. g. Growth Controls i. Zoning is not only about land use, but also lot size, height regulation, etc. ii. Like zoning, growth controls reduce the use stick in the property rights bundle. iii. The expansion of zoning and land use controls has to do with changing economic ideas over the course of 20th century, but also changing social ideas and regulatory trends.

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iv. May have many of the same positives and negatives of zoning. v. May also have ambiguous effects on home prices, especially with regard to whether or not people want more open space (higher prices) or not (lower prices), and also generate externalities on other areas. vi. Might also artificially restrict the supply of housing monopoly problems. 20. Government Forbearance and Takings a. Conflicting Values (Taney v. Story in Charles River Bridge Case): i. People make investments because they expect returns on those investments Government interference with those expected returns might dissuade anyone from making investments. ii. Governments also, however, need to be responsive to changed conditions. For this reason, we might not want to live in a world of entirely fixed property rights (think Hinman). 1. Leads to a generally more expansive interpretation of public use as public purpose, i.e. contrary to the view advocated by Epstein. a. At minimum, there is often great deference to (state) legislatures in determining whether something amounts to a public use, as 2. This is especially true in the face of modern TC economics. iii. These questions raise issues of the dividing line between exercise of the police power and exercise of the eminent domain power. iv. They also raise issues about the ability of past legislatures to bind future legislatures (see conversations about dead hand control in Eyerman, cy pres in Wilber, and the Rule Against Perpetuities). b. Due Process requirements protecting property deprivations process requirements for takings. c. Eminent Domain i. The 5th Amendments Takings Clause requires that private property shall not be taken except for public use and with the government providing just compensation (typically interpreted as fair market value). ii. This is a shift from property rule liability rule protection for property owners when we think transaction costs arising either from anti-commons or bilateral monopoly problems might prevent efficient transactions from occurring (similar to Mill Acts, certain easement doctrines/statutes, Boomer, and compulsory licensing of intellectual property). iii. Justifications for eminent domain: 1. Inherent attribute of the sovereign 2. Allows for more flexible land-use 3. Breaks TC problems iv. Justifications for just compensation

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1. Allows for investment in property by providing a means of insurance if that property is taken. 2. Forces government to internalize the costs of takings, thereby promoting more efficient application of the eminent domain power. 3. Limits holding out for higher prices, subjective values, and TCs associated with those subjective values. 4. Prevents utter exploitation of politically powerless individuals. v. Kelo v. City of New London: 1. Praise: a. Takings with the end being a beneficial public purpose have long been permitted. b. The Takings Clause focuses on end points, rather than starting points c. Nothing prevents state legislatures, or perhaps judges, from holding higher public use standards for governmental takings (therefore, the permissiveness of the U.S. Supreme Court simply provides space for states to enact what measures they think are most appropriate). 2. Criticism: a. This permitted the taking of As property, and giving it to B, thereby violating the public use requirements of the Takings Clause. Any economic development rationale is an insufficiently public use to justify a takings. b. The people who will be hurt the most by this permissive reading of the Takings Clause are the urban poor, who are unable to fight back (see Berman and blight), i.e. a distributive criticism. i. The efficiency corollary to this is that politically powerful groups will be able to get what they want via eminent domain, and therefore many takings may be economically inefficient. c. Past delegations of the eminent domain power have been to entities with some public duties (such as common carriers). d. Past takings have focused on harm prevention (e.g. correcting blight), as well as benefit creation. This must be a part of the public use. 3. Response: a. Many states have passed more stringent public use legislation

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b. Even a state court in Ohio authored a more stringent standard in favor of the landowner. c. Is this case more pro-landowner than Head v. Amoskaeg? d. Overall, however, the public use doctrine has been interpreted to be quite a limited restriction on local applications of the eminent domain power good because room for state and local governments to maneuver? (Reflects Ellickons view.) e. Whereas Smith favors a stricter definition of public use, Merrill favors a looser definition, because hed rather have states use the eminent domain power, and compensate, than regulate, where making out a case for compensation is much more difficult. vi. Eminent Domain in New Haven 1. Most eminently domained city in the nation 2. Eminent domain most necessary where there are streets, because private developers wont be able to buy them, but perhaps less necessary when there are fewer, privately owned parcels greater efficiency associated with private bargaining (if low TCs). d. Problems of Just compensation i. Generally, the standard is lowering of the fair market value of the parcel where the takings occurred at the time of the taking (i.e. you cant get added compensation for the added value of the project to the land, although such added value can be used to offset how much compensation you receive) (United States v. Miller). ii. More just compensation will tend to cause us to favor takings more often, as governments will have internalized the costs of activities better (i.e. acted more efficiently), and land owners will be less disaffected iii. Many states compensate beyond what is constitutionally required for political economy reasons (i.e. trying to reduce demoralization costs), see Head v. Amoskaeg and statute requiring 150% compensation for owners of condemned, flooded lands. (Perhaps require more compensation when the applications of liability rules are for increasingly private purposes?) e. Regulatory Takings: i. Reasons for great interest: 1. Discussion about relationship between the individual and society and the individual and government 2. Lack of resolution of issues 3. Deep split in U.S. Supreme Court ii. Differentiation from substantive due process 1. SDP: No rational basis for action action invalidated

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2. Takings Clause: Perhaps a rational basis, but question is whether to award some compensation regardless, based on the injustice of having one person bear societys burdens. iii. PA Coal v. Mahon (1922) 1. Holmes offers no compensation in Euclid, but demands compensation here: Probably because the risk associated with subsidence has been explicitly allocated to the surface owners in the deed contract notion that the coal companies had a legally cognizable right to mine the property underneath that was interfered with when the PA legislature passed the Kohler Act preventing such mining. 2. This regulation may be objectionable because of a singular burden placed on the coal company. 3. Brandeis, in dissent, worries about such compensation requirements handcuffing the state legislatures ability to regulate in response to changed circumstances (same debate as between Taney and Story in Charles River Bridge). 4. Interestingly, the coal companies almost always compensated in these cases, even without the legislative requirement (based on a different calculus based on reputation and, probably, caring for workers) Why did they sue for compensation from passage of the Kohler Act if they face the costs of compensating anyway? Does the Kohler Act give the homeowner an inalienable protection, i.e. handcuff them into paying higher prices? 5. We also might worry about skewed politics in these cases, and their implications for parties dissatisfaction with an outcome. 6. Both majority and dissent leave some room for government to regulate nuisances without executing a taking. iv. Penn Central Case: 1. Brennans ad hoc takings factors: a. Diminution of value b. Interference with reasonable investment-backed expectations c. Character of government action i. Probably includes factors considered by the Court in Mahon, such as reciprocity of benefits (which is where this case is decided), unique burdens, regulation of nuisance, and evidence of majoritarian excess. 2. Contrast with Michelmans factors: a. Physical invasion b. Diminution of value

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c.

d.

e.

f.

g.

i. Absolute or percentage? ii. Probably permitting setoff iii. With courts focusing on percentage denominator problem, i.e. how much of the claimants property should we count? All the taken piece? The taken parcel? Property in the neighborhood? All assets, worldwide? Balancing Test: i. B > C (or, more detailed, B C S/D > 0) act ii. D > S compensate iii. However, if B > C, then evidence of majoritarian excess is less, D is lower, and were probably less likely to compensate iv. On the other hand, if B >>C, then skewness might raise D more likely to compensate Factors contributing to S (costs of compensating): i. Costs of litigation ii. Moral Hazard Factors contributing to D (costs of not compensating): i. Close call on efficiency (i.e. doubtful whether B > C) ii. S low iii. Skewed benefits iv. Majoritarian politics v. Lack of reciprocal benefits (of this particular type of regulation, or perhaps of a policy of non-compensation) Preventing Harms vs. Creating Benefits: i. Courts recognize the difficulty associated with this, because it is largely in the eye of the beholder (explicit in Rehnquists dissent) ii. Ellickson would contend that we can do this, because we have a sense of what uses are above normal, or the worst 5% iii. Sax: When government regulates problems among individuals, it is simply doing what government does via the police power no compensation without physical invasion. Michelmans genius is that, to a certain extent, he incorporates a Rawlsian concern with the individual into a more utilitarian calculus, although the tradeoff is that his variables, especially S and D, are often very difficult to quantify.

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3. Note: It seems in many of these cases that the political process has some intuitive sensibilities about when it is fair to compensate. This is why so many regulations are attended with some compensation for disaffected property owners whose interests may be interfered with. This also reflects political economy realities, whereby governments must weigh burdening taxpayers with compensation obligations, but also about creating backlash associated with placing excessive burdens on certain individuals without compensating them. v. Loretto Case: 1. Reason for bringing such a cheap claim a. Strong Radin property as personhood values b. Class action by the a member of the plaintiffs bar, seeking attorneys fees. 2. Rule: Permanent physical invasions are per se takings, demanding compensation 3. TC problem: If the amount of payment needed to reduce D is very small, then S > D, because the process of meting out compensation is more than the compensation itself necessary to satisfy a land owner who has been put out so little Conclusion that its better not to compensate (because compensation is more expense than noncompensation)? 4. This is one exception to the Penn Central ad hoc line regarding compensation for regulatory takings, i.e. those regulations that require some species of physical invasion. vi. Lucas v. South Carolina Coastal Commission 1. Establishes a second per se takings line, that in which a regulation results in total diminution of property value, unless the regulation is pursuant to the common law of nuisance, which cannot represent a takings, for it was never in the owners property bundle of stick to begin with. 2. Conversely, this can also be thought of as an exception to the no compensation associated with nuisance line of regulation. 3. Key questions: a. Why 100% burdens treated differently from 99% burdens? b. Does the lack of reciprocal benefit, or evidence of majoritarian excess, analysis play into the compensation decision under Lucas, like it would under the ad hoc analysis of Penn Central? i. Probably not, unless it affects what we might consider to be a part of the common law of nuisance, i.e. those set of

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understanding with which all property owners buy their parcel.s 4. Scalia notes the problematic question of denominators. Its not an issue here, because were only dealing with a fee simple interest, but what if Lucas owned another parcel farther back? Would this only be a 50% diminution no compensation? 5. Cause of small effect (despite Blackmuns warning that the Court launches a missle to kill a mouse) a. Rarely is the existence of a 100% diminution in value going to be stipulated. b. Aware of the potential for demoralization costs without compensation, many burdensome regulations will have compensation mechanisms built into them to appease property owners. vii. Fleshing out the Regulatory Takings Doctrine 1. Miller v. Schoene: a. Not treated as a property case, but rather due process. b. Raises interesting questions about harm-prevention vs. benefit-provision, and what should be considered a nuisance. c. Is a rule that prices make rights acceptable? If we compensate the cedar owners for the burdensome regulation, is the rule acceptable? d. If we compensate cedar owners, might we promote over-claiming of compensation, i.e. illustrating the moral hazard problem of compensation (i.e. a factor in Michelmans settlement costs) highlighted by Fischel and Shapiro? 2. Palazzolo v. Rhode Island: a. Case raises issues of ownership across time and privity (for a similar discussion, see requirements for when covenants should and should not run with the land). b. The notion that we dont want to compensate Y for a previously existing regulation makes instinctive sense, because he has come to the regulation, and we think the price of the burden was capitalized into the price Y paid for the property. c. If, when X sells a parcel to Y after the effectuation of a burdensome regulation, Y loses the ability to seek compensation, we hurt X, not Y, for by making the ability to state a compensation claim inalienable, he loses significant potential value from the sale. For this reason, many scholars say that the ability to

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bring a claim cannot only lie with those who own property at the time a regulation is enacted, but must run with the land, although most courts dont get this concept. i. Leads to problems such a redevelopment blight, when people in areas of urban renewal are unable to sell their properties accelerates abandonment in the area. ii. But, as with all Statutes of Limitations, might we want to give incentives to bring claims sooner, rather than later? 3. First English: a. Raises question of the effect of remedies in enforcing constitutional norms. b. This case stands for the notion that temporary regulatory takings must be compensable in money damages, even if the final order is for injunctive relief, i.e. invalidation of the statute. c. In many constitutional law circumstances, however (e.g. Brown v. Board), the prospect of paying temporary damages while a successful plaintiff waits to receive final judgment may help spur government to action. i. This case provides a direct, constitutional basis for seeking damages under the Takings Clause, rather than waiting for a statute (such as 28 U.S.C. 1983) to provide such relief, in the event the government decides to keep passing unconstitutional statutes. viii. Criticisms of Regulatory Takings Doctrine: 1. Messiness (i.e. Many doctrinal paths and multi-factor balancing tests) 2. Seemingly arbitrary rules 3. No articulated prima facie cases for plaintiffs or defendants 4. The degree of required spreading out of costs before something is not considered a compensable takings is unspecified. a. Of course, the degree to which we can make someone bear societys burdens is one of the great puzzles of democratic governance.

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