Gregory M. Stein, Reverse Exactions
, 26 Wm. & Mary Bill Rts. J.
(forthcoming 2017), available at SSRN
Some exactions are just bad. By this, I mean that they fail to mitigate the harms they were created to internalize. This struck me recently while I was researching privately owned public open spaces (POPOS), which are often exacted in exchange for a density bonus. Through my research, I determined that POPOS often fail to achieve the goals of good public space, in part because they are often exclusionary. I found myself wondering whether the citizens who were stuck with new dense buildings that block light and air, and who received only a poorly functioning POPOS in exchange, had any legal recourse.
My question, in effect, was whether a neighbor could bring an exactions claim in reverse. I was pleasantly surprised to find that Professor Gregory M. Stein had interrogated this very question in his recent article Reverse Exactions.
Our existing exactions jurisprudence focuses on exactions that are excessive (or, too strong), and thus deprive the project applicant of his or her property rights under the Fifth Amendment. In this creative piece, Professor Stein tackles the opposite situation, wherein a development project is approved subject to exacted concessions, but those exactions are too weak to sufficiently mitigate or internalize the harms associated with the development.
Thus, the project’s negative externalities are inflicted on its neighbors, and those neighbors must bear the costs of the harm. In this case, Stein argues, neighbors should have a right to bring what he calls a “reverse exactions claim.” This claim would enable these third-party community members to challenge the government’s imposition of certain conditions as insufficient, arguing that their property rights have been taken as a result.
Stein begins his article by setting up and critiquing our current exactions jurisprudence. He restates the “essential nexus” and “rough proportionality” tests that the Court has laid out in Nollan and Dolan, but criticizes the application of these tests. According to Stein, the Court has treated governments that exact conditions as entrepreneurs, instead of as representatives or arbitrators.
Specifically, he takes issue with the Koontz Court’s portrayal of governments negotiating exactions as bad actors. The problem, he suggests, is that governments are not always, or even typically, opportunistically looking to enrich their own communities at the expense of the property owner who is seeking discretionary permits. Rather, governments are more often “functioning as mediators and referees.” (P. 19.) Indeed, Stein points out, exactions jurisprudence seems to be unconcerned with the fact that developers often have an incentive to maximize their profits at the expense of their neighbors. Exactions cases are also unique in that they fail to afford the same level of deference to governments that they generally receive in other types of land use decisions.
The problem with current doctrine, posits Stein, is that it leads to governments consenting to development with few or weak conditions that fail to actually mitigate the harms caused by the project. Those governments do this because they are fearful that they will be sued and lose if they propose exactions that are found to be too strong.
Currently, there is no direct way to challenge these overly weak exactions. This leads to an imbalance that favors developers and harms neighbors (and, more broadly, governments). This is where Stein’s proposal comes into play.
While he first suggests that the Court could revisit the Nollan/Dolan/Koontz line of cases to address the imbalance, he admits that this is unlikely. Thus, he proposes that instead, courts recognize a reverse exactions claim.
He defines this proposed claim as one that “neighbors can bring against government officials … [by] argu[ing] that government officials have imposed conditions on an applicant’s development that insufficiently internalize the externalities that the applicant’s project would impose on those neighbors.” (P. 22.) Thus, the neighbors would have a remedy for an “under-exaction,” defined to exist when neighbors are forced to bear those added costs, and thus their property rights are unconstitutionally impaired.
This, it seems, might be the most difficult part of a reverse exactions claim; because it is a type of takings claim, the neighbors must show that they have property rights that are being harmed by the project and its insufficient exactions. For example, Stein suggests that the asserted state interests in Nollan, including protecting the public’s beach views and preventing congestion, might not qualify as neighbors’ protected property rights. Thus, in a hypothetical reverse-Nollan case, while the neighbors might be able to make out a due process claim, they might not be able to raise a reverse exactions claim.
In contrast, Stein imagines a reverse-Dolan situation, wherein the city might allow the Dolans to expand and pave their parking lot while attaching limited exactions that fail to mitigate the increased stormwater runoff that would likely result from the project. In the event that this new impermeable surface directs stormwater onto neighbors’ lots, Stein argues, the neighbors could assert that the city made them give up an easement (allowing the Dolans to flood their land) without compensation. This would constitute the impairment of a property right, and thus the basis of a reverse exactions claim.
Therefore, in order to assert a successful reverse exactions claim—assuming the neighbor can show the taking of a property interest—he or she would first argue (pursuant to Nollan) that the proposed exaction fails to substantially advance the goal of mitigating a certain harm that the project would either create or make worse—here, the stormwater runoff. Second, the neighbor would argue that the condition lacks rough proportionality under Dolan because it fails to go far enough.
If the court finds that such reciprocal rights exist in a project’s neighbors, and finds that the government has imposed too weak an exaction, Stein suggests a scheme for paying just compensation to the neighbors.
Unlike direct exactions compensation claims, which are paid for by taxpayers, “[a]ny compensation that the government is required to pay to the prevailing neighbors [under a reverse exactions claim] would be charged back to the applicant that benefited unfairly from an exaction that did not adequately offset the negative effect of its project.” (P. 22.) Stein would leave the specific procedures for administering reverse exactions claims to be sorted out by courts and state legislatures.
Through this article, Professor Stein joins the ranks of other creative scholars such as Professors Chris Serkin and Tim Mulvaney, who have suggested that we should not always be so defensive when it comes to takings law, and might instead find ways to use it to reach more progressive ends. Stein does that here; the goal of a reverse exactions claim is that the “fear of litigation from neighbors and not just from applicants may lead to more equitable exactions.” (P. 51.)
Transferable development rights (TDRs) are a land-use planning tool that enables regulators to restrict the development of one parcel of property more densely than would otherwise be permitted by applicable land use regulations, while also giving the owners of the restricted property the right to “sell” their property’s development potential to owners of less-restricted land. Ever since the Supreme Court decided Penn Central Transportation v. New York City, a number of legal issues about TDRs have remained unanswered.
In his recent engaging essay, Penn Central Take Two, Christopher Serkin tackles the most important of these issues: Whether TDRs are themselves protected by the Fifth Amendment’s Takings Clause.
To contextualize the question, a word about Penn Central and its aftermath is in order. The facts of the original litigation are well known. In Penn Central, which Professor Serkin correctly characterizes as the “most important regulatory takings case of all time,” the Supreme Court rejected a takings challenge to a historical preservation regulation that prevented the construction of a massive high-rise structure above New York’s Grand Central Station. One of the reasons why the Court held that the “landmarking” of Grand Central did not effect a taking was that, at that time, New York City gave the terminal’s owner (Penn Central Transportation Company) TDRs enabling them to transfer at least some of the landmarked parcel’s development potential to adjacent lots.
To simplify a long story about the later developments, in 2006, the current owners of Grand Central Station—Midtown TDR Ventures (“Midtown”)—purchased the terminal in large part to acquire the TDRs granted at the time of landmarking. Midtown thereafter entered into negotiations to sell the TDRs to an adjacent landowner for $475 million, to enable the construction of one of the tallest buildings in New York City. (As a rule, TDRs are particularly valuable in NYC because they permit the construction of extra stories on buildings.) But, before the sale was finalized, the city rezoned the property to permit the construction of the skyscraper without the TDRs.
Midtown then filed a lawsuit asserting, among other things, that the rezoning of the “receiving” parcel was tantamount to a taking of Midtown’s TDRs. For a variety of reasons, the case settled before any court had the opportunity to opine on the issue.
As Serkin convincingly argues, the question posed in the litigation is a critical one, and its import extends beyond land use policy. As Serkin points out, if TDRs are protected by the Takings Clause, then other regulatory entitlements with “property-like” characteristics, such as emission allowances in cap and trade regimes, tradable fishing quotas, and taxi medallions, presumably are as well.
If the Takings Clause locks these regulatory promises into place, then there is a serious risk of regulatory entrenchment—with potentially negative consequences for both regulators and the regulated. On the other hand, if the government’s pre-commitments are too easily modified or even abandoned, then the value of devices like TDRs and emissions allowances is dramatically undermined for both regulators and property owners.
Serkin’s solution to these difficulties is to permit the government to make binding promises to entitlement holders, provided that these commitments are transparent and impermanent. This is probably the right answer as a matter of regulatory policy, and is in fact analogous to the “amortization” of nonconforming uses in zoning law, which is constitutionally permitted in most (but not all) states.
Serkin’s regulatory proposal, however, leaves many of the constitutional questions raised in the recent TDR litigation unanswered: To begin, are TDRs property at all? TDRs do have property-like characteristics (e.g., they are subject to market transfer). Serkin assumes, citing Charles A. Reich, that certain kinds of regulatory entitlements are property, but the concept of regulatory property remains contested and its contours remain amorphous at best.
Second, if TDRs are subject to takings protection, what is the “denominator” against which the impact of the devaluing regulation is to be measured? Serkin suggests that the “denominator” in the Midtown litigation ought perhaps to be the Grand Central parcel as a whole, but Midtown argued, à la Horne v. USDA, that the regulation devaluing their TDRs was a total taking of the amount of their loss. This is, as Serkin argues, somewhat circular since the government’s regulatory actions are a significant determinant of the value of TDRs, but there is a certain logic to Midtown’s argument since TDRs are intangible financial “property” if they are property at all.
And, finally, if TDRs serve the purpose of mitigating takings risks—as opposed to, as Chief Justice Rehnquist and Justice Scalia both argued, compensating owners whose property had been taken—then should regulatory actions devaluing them trigger a reassessment of whether the original regulation, sans TDRs, would have been a taking?
These questions—each of which has far-reaching implications—persist, and will undoubtedly return in subsequent litigation.
A queue, whether it takes the form of a line or a list, is one of the simplest and most familiar algorithms for allocating scarce resources. It is also a tool of social control, a metaphor, and a powerful framing device, as Katharine Young incisively demonstrates in Rights and Queues: On Distributive Contests in the Modern State.
Young focuses on the way that the queue interacts with rights or—more broadly—entitlements. One of her central examples involves the allocation of public housing in South Africa. Though highly contextualized, Young’s analysis resonates with concerns about housing and social welfare policy elsewhere, including in the United States. Young’s emphasis on the political and rhetorical work performed by the queue is an eye-opening complement to other recent treatments of queues in property law.
By choosing the queue as the mechanism for delivering an entitlement such as housing, the government makes—and at the same time partially obscures—three important moves. First, it defers fulfillment of the entitlement for at least some subset of the eligible claimants. Second, it defuses discontent by channeling claimants into an ostensibly fair and ordered process. Third, it divides claimants based on their positions in the line, thereby transforming resource conflicts that might otherwise unite claimants against the state into mere skirmishes among claimants. Young shows how these moves effectively stigmatize efforts to secure rights as “queue jumping.” In this way, support for the queue’s ineluctable normative force is secured from the very claimants whose entitlements are simultaneously being eroded and even potentially denied by the queue.
Consider how queues both delay entitlement delivery and (by their very existence) purport to justify the delay. A queue renders scarcity visible and in the process normalizes it—we will, it appears, simply have to wait our turn. If there is a long waiting list for subsidized housing, then that is that—the wait becomes the focus, not the reasons behind the scarcity that produces it.
At the same time, the queue deflects attention away from competing claims that are not represented in this particular line. For example, Young notes how a queue for public housing might deflect attention away from mortgage subsidies—a competing claim in the housing domain that does not appear in the same (or any) queue, and is instead treated as a fixed element of the background against which the queue is formed. The existence and apparently fair operation of the queue thus works to defuse broader opposition to the policies that created the queue-frame.
The queue also divides claimants. It continually announces that what stands between you and the resource (sometimes quite literally) are other claimants. Young emphasizes the accompanying corrosive effect on solidarity as attention turns to one’s position in the line and to concerns about those who have gotten ahead of oneself, rather than (for example) the fact that the state has chosen to put inadequate resources toward fulfilling the entitlement in question.
The line thus directs discourse inward to the line itself and to questions of line management. Attention turns to the difficult tradeoffs that determine the speed with which the line moves forward, such as how to balance the depth of each housing subsidy with the number of households that can be served. Focusing on these tradeoffs is an entirely appropriate response to resource scarcity, but queues for entitlements characteristically involve scarcity that is socially and politically constructed and may also be endogenous to the way particular tradeoffs are made.
Decisions about ending access to benefits like housing also seem vulnerable to the logic of the queue—people are waiting, after all. (Justice Black’s dissent in Goldberg v. Kelly, 397 U.S. 254 (1970), employed a similar rationale, maintaining that people would never make it onto the welfare rolls in the first place if removal were made too difficult). Here, however, we confront a potential distinction between the negative rights that might attach to someone who is already in possession of an entitlement (and is trying to keep the state from wresting it away) and the positive rights that the queue-standers patiently seek but do not yet possess.
In this connection, Young examines the case of residents of informal settlements in South Africa who cite a right to housing in their efforts to stave off eviction. In one frame, these residents might be cast as queue-jumpers, but in another frame they are entitlement holders—indeed, property holders—who seek to keep the state from unwinding their rights. These competing frames reveal the disconnect between the language and logic of the queue and the larger normative commitments that a state might make surrounding entitlements. Lines may be able to distribute certain affirmative rights over time, but they are ineffective at distributing shields with which to stop rights violations in progress.
Queues do have benefits, as Young recognizes. They are administratively simple, easy for everyone to understand, and can immediately replace a chaotic scene with a workable sense of order. But when they are used to dole out entitlements, their rhetorical force deserves scrutiny. The fact of the queue fundamentally alters the nature of the entitlement being provided through it, as well as the discourse surrounding that entitlement. The queue purports to provide an allocative answer, but the questions that it implicitly poses also require our attention.
Cite as: Lee Anne Fennell, Questioning the Queue
(October 17, 2017) (reviewing Katharine G. Young, Rights and Queues: On Distributive Contests in the Modern State
, 55 Colum. J. of Transnat’l L.
65 (2016)), https://property.jotwell.com/questioning-the-queue/
David Schleicher, Stuck! The Law and Economics of Residential Stability
, 127 Yale L.J.
(forthcoming, 2017), available at SSRN
The principal goal of local zoning has been to assure existing residents a stable and comfortable community in which, above all, home values would be protected. In recent years, scholars have focused on whether this cozy arrangement fosters class-based and racial exclusion, and whether it detracts from a sustainable environment. Yet, some leading economists suggest an additional concern—that restrictive local land use and other regulations harm the national economy. In a new article, David Schleicher performs an important service in analyzing, from a legal and public policy perspective, why people are “stuck” in place.
Schleicher’s title reflects his main points that rates of interstate mobility are falling even though people often get better job opportunities when they move, and that this lack of mobility harms the national economy as well as the individuals involved.
We often ignore the interstate consequences of government regulations and subsidies. However, the actions of government at all levels affect the ability of people and industries to adjust in a dynamic and intertwined economy.
In 2001, economist Bill Fischel referred to people casting their ballots so as to protect the value of their houses as “homevoters.” By 2016, Fischel was warning that homevoters had seized upon 1970s and 80s concerns about the stability of inflation-driven increases in housing prices, and also newly heightened environmental awareness. The result was these homevoters derailing the pro-development “growth machine” coalition through the enactment of stringent local land use regulations in prosperous cities and affluent suburbs. Also in 2016, economists Peter Ganong and Daniel Shoag published a landmark article analyzing how the decline in the historic convergence of income in poor and wealthy parts of the county coincided with rising housing prices in the most productive areas.
Some of the path breaking work on which Schleicher builds was done by international trade economists like as Robert Mundell, who asked how price inflation and unemployment are related in areas sharing a common currency. We are fortunate being in a continental dollar zone, but, as Schleicher put it: “State and local laws that limit labor mobility clearly reduce the degree to which the U.S. is an OCA [Optimal Currency Area]. These policies can prevent monetary policy from matching the needs of tight markets with rising prices (like San Francisco) and slack ones with falling prices and high employment (like Atlantic City).” (P. 13.)
In discussing what makes certain cities highly productive, Schleicher is guided by work, including his own, in the fairly new field of agglomeration economics. The basic insights are that some favorable condition leads an industry to develop first in one area or another and that thereafter, firms and individuals specializing in that industry, flock to that location, each building upon the supply of potential employers, employees, and, above all, ideas that are present.
While earlier examples of agglomeration in America include the auto industry in Detroit, areas that are the focus of finance, science, and engineering have become the leaders today. Schleicher notes that “[t]he cities and metro areas that have thrived in the last forty years have been those with advantages rooted in other agglomeration economies, particularly deep labor markets in high-end service industries, deep consumption markets, attractive amenities, and useful information spillovers both inside and between industries.” (P. 16.)
Why, then, are people so rooted in unproductive places? Why don’t they move to cities where they might do their best work? Schleicher notes that there has been little scholarship on the advantages of moving to distant cities. A principal reason why people find it hard to leave depressed areas is that officials have great incentives to keep safety net expenditures local. Also, many workers, especially public employees, are locked in by defined benefit pension plans that impose great costs on workers who move in mid-career. Many are impeded from moving because housing prices in declining areas have decreased, and especially if their mortgage balances exceed the value of their homes.
On the receiving end, government mandates that make the labor market “sticky” bar many potential residents. These include state occupational licensing regulations that sometimes impose vastly different and complex requirements for training, education, and examinations.
As Schleicher explains, “[T]he difficulty in transferring licenses across states makes moving to opportunity harder, harming the national economy.” (P. 25.) Ironically, “research suggests that such positive effects of licensing requirements remain uncertain at best and are often minimal to non-existent.” (P. 30.)
Perhaps the most important barrier to moving to better opportunities is the high cost of housing in prosperous areas, including as a result of restrictions on new housing construction.
He cites research by Chang-Tai Hsieh and Enrico Moretti, who estimated that America’s gross domestic product (GDP) would be 13.5 percent higher if workers could move to productive areas, and that GDP would go up by 9.5 percent if they could move to just three such areas, Silicon Valley, San Francisco and New York.
Schleicher concludes by offering thoughts about solutions, such as tying federal tax incentives such as the home mortgage interest deduction to less restrictive zoning, providing federal assistance to interstate moves by workers, or facilitating the shrinking of distressed cities through more enlightened municipal bankruptcy laws. (P. 50–54.)
All of these are good ideas, but unlikely to be fruitful in the short term. Americans treasure local control of land uses, and inner-city residents who resist “gentrification,” like affluent suburbanites who resist “densification,” will fight to preserve their communities and ways of life.
Similarly, those who value the ethos (and incomes) of their trades and professions are not apt to submit readily to centralized occupational controls. While federal regimes such as those in the U.S. and Europe find it hard to remove impediments to mobility and prosperity, even highly centralized nations such as France (the cradle of dirigisme), do not do notably better.
None of this is to take away from the power of Professor Schleicher’s cogent observations. We have little chance of dealing with contemporary problems unless we see their patterns and interactions, and Stuck! is a notable achievement in defining the issues we must face.
Lee Anne Fennell, Fee Simple Obsolete
, 91 N.Y.U. L. Rev.
1457 (2016), available at SSRN
“And don’t throw the past away. You might need it some other rainy day.” These lyrics to Peter Allen’s song, Everything Old is New Again, sum up the fee simple absolute (“fee simple”) perfectly. This antiquated doctrine that is the backbone of our real property system, the most adored and alienable of the estates in land, receives new life, a new purpose even, in Lee Anne Fennell’s compelling article, Fee Simple Obsolete.
Fennell gives the reader just enough history about the development and context of the fee simple to lay the foundation for a discussion with the reader about the ways in which the old fee simple has become an anachronism in a largely urban society. With eighty percent of Americans living in urban centers, the need for flexibility in reconfiguring precious urban land is at a premium.
According to Fennell, the problem of the fee simple, as originally conceptualized, is that such “[s]patially rooted estates of endless duration deal poorly with the problem of optimizing urban land use because they scatter everlasting vetoes among individual landowners over the most critical source of value in a metropolitan environment.” (P. 1461.)
Flexibility in reconfiguring land uses is optimal, and Fennell offers a clear and compelling proposal for rethinking the most foundational of the present estates in land. And so, she argues for the emergence of alternative tenure forms that would pivot away from the temporal infinity and physical rootedness of the fee simple to more nimble forms of property ownership.
To make her case, Fennell offers two proposals for modernizing the fee simple – first, a callable fee and second, the floating fee. Fennell proposes an expressly callable fee, a possessory estate that would be subject to a call option if pre-set conditions are not met. Fennell notes that the present fee simple is, in fact, a callable fee because of eminent domain which allows government to convey the fee simple to itself (or even another private entity) upon payment of just compensation and the articulation of a public purpose. (P. 1482.)
But, political limitations on the use of eminent domain are tighter than the legal restriction Fennell envisions being imposed on the callable fee. Thus, the expressly callable fee could address impediments to value-optimizing reconfigurations while simultaneously reducing reliance on government’s use of eminent domain which is often viewed as unfair and over-reaching. (P. 1483.)
Under Fennell’s floating fee model, the possessory estate is not permanently attached, or moored, to a particular legal description. Rather, the estate would represent “a portable claim over equivalent property in other locations.” (P. 1490.)
As with the expressly callable fee, Fennell points to a variation of the floating fee as an exemplar that addresses the feasibility of her proposal. Land readjustment is an approach that has been used domestically, though more extensively in other countries, to develop and/or improve urban infrastructure while simultaneously increasing the value and utility of real property. It is a form of land consolidation rather than a method of land acquisition. And, while land readjustment could be pursued through legislative means, resort to the floating fee would permit individuals to affirmatively opt into a system of land tenure that is specifically designed to be subject to redevelopment in this type of way. (P. 1491.)
The benefit of both options is that they allow real property to be more readily adapted to achieve value-maximizing uses. Through the lens of these two alternatives, Fennell analyzes the comparative strengths and weaknesses of the design features of the fee simple.
She argues, convincingly, that the foundational structure of the fee simple limits its ability to adapt and align with the real property demands of an increasingly interdependent society where the ability to reconfigure property uses is critical.
Fennell also identifies two categories of external impacts that once were appropriately ignored by the fee simple but that have emerged as too important to put to the side. What was needed in the past is different from what is needed now. The first is the holdout situation and the attendant assembly costs associated with holding out. The second externality pertains to the costs of coordinating governance mechanisms that reach “positive spillovers” that flow from the beneficial and nonreciprocal contributions of proximate land users. (P.1473.)
So, let’s put an end to the endlessness is what Fennell says. Let’s end the “forever” estate with its prized holdout entitlements and make the old fee simple new again by shifting it in favor of time-limited estates that facilitate agglomeration, collective management, and “adaptive fluidity.” (P. 1504.)
Fennell is very realistic about what she is proposing to her reader. She knows that change can be difficult and that hers is a very bold proposal. After all, she is advocating the “retrofitting of property for modern conditions” and such ideas are not for everyone. (P. 1494.) As the saying goes, many people are most comfortable with the devil they know.
Fennell acknowledges the objections that attend the shift in tenure forms and entitlements of the majority of real property owners from the fee simple to a form of defeasible fee. (P. 1498.) She confronts the objections to her proposal in the same convincing and clear manner in which she lays out her ideas: (1) We already have some iterations of these ideas in place. (2) The nonexistence of these forms of property does not support the argument that they lack value. (3) The need for agglomeration and flexibility in urban spaces cannot be fully addressed with the current fee simple and ordinary market solutions do not help achieve the optimal amount of agglomeration and flexibility. (4) The uniqueness of the challenge – “repeatedly assembling and reassembling” valuable urban land uses requires a unique approach. (5) The ability to reconfigure and readapt urban spaces does not have to lead to displacement and dispossession; the system could be made flexible to offer long-term options for those who desire more tenure security.
Fennell’s article is a joy to read. It is a fresh look at the fee simple and proof (which I unashamedly share with my first year property students) that grappling with the fee simple remains a worthy and honorable task. Only by understanding the fee simple, what it is and why it was created, can we imagine the next iteration of the fee simple in our increasingly urban society.
When comparing common law and civil law in the area of property, the trust is always presented as a legal institution of ownership typical for the common law and absent in the civil law. The trust, then, represents one of the major differences between these two legal traditions. While such a formal differentiation might be justifiable, the civil law indeed, like the common law, often generates institutions with some of the attributes of the common law trust but with varying characterizations of interest.
Alexandra Popovici’s article discusses the unique characteristics of instruments with trust-like qualities in civil systems, and she reveals the drafting history around the Québec Civil Code treatment of the issue.
Since the French Revolution (1789), and the ensuing abolition of the feudal system with its “ownership” of the feudal lord (“dominium directum”) and “ownership” of the person in possession (“dominium utile”), the civil law made a rigorous choice for a unified approach to ownership.
The French Declaration of Human and Civic Rights of 26 August 1789 stated in article 17 that the “right to property is inviolable and sacred.” This was reflected in article 544 of the French Civil Code, which defines ownership as “the right to enjoy and dispose of things in the most absolute manner, provided they are not used in a way prohibited by statutes or regulations.” The consequence of this approach is that an object can only have one subject as owner (although several subjects can be co-owners, but they then share full ownership rights). All others who claim property entitlements are seen as having only a limited property right.
In the case of a trust, however, the trustee is entitled (“owner”) at common law and the beneficiary has an entitlement (“ownership”) in equity.
From a civil law perspective, this is a – forbidden – split ownership. Still, civil lawyers also accept the great advantages of trust law and have devised ways to achieve them: permitting someone to manage property (which is separate from the manager’s other property) for the benefit of another, who is also seen as having a property entitlement. In order not to go against the basic premise of the unity of ownership, the solution chosen was that the “trustee” concluded a contract with either the “settlor” or the “beneficiary” under which the trustee agreed to use her property rights only for the benefit of the beneficiary. The beneficiary, however, is not given any property right.
Civil law systems differ in their approach as to how far they are willing to protect the beneficiary. Québec, a leading civil law jurisdiction in North America, has chosen its own, rather fascinating, solution. The trust property is owned by no one, so the unitary concept of ownership is not violated, whereas at the same time both trustee and beneficiary seem to exercise what looks like property rights. In other words, exercise of property rights is separated from entitlement to property rights.
The Québec Civil Code (Article 1261) states that “(t)he trust patrimony, consisting of the property transferred in trust, constitutes a patrimony by appropriation, autonomous and distinct from that of the settlor, trustee or beneficiary and in which none of them has any real right.” In other words: according to Québec law, no one “owns” the trust property. It is a patrimony (in civil law the term for the whole of a person’s assets and debts) managed by the trustee as a non-owner. Also, the beneficiaries are non-owners.
This approach to trust law was, until recently, very specific for Québec, but has now reached the European continent. The new Civil Code of the Czech Republic states in Article 1448, paragraph 3: “The rights arising from the right of ownership in the property in a trust are exercised by the trustee in his own name and on the account of the trust; however, the property in a trust is not owned by the administrator or the founder, or the person entitled to receive a performance from the trust.” The text is clearly based upon the Québec model.
In her article, Alexandra Popovici gives an overview of the Québec Civil Code’s drafting history, which is very intriguing. It appears that approaching the trust property as an “affected patrimony” is derived from ideas developed by the French author Pierre Lepaulle. His ideas were almost forgotten on the continent of Europe, partly because at the end of his career he came back on his earlier views and began to consider the trust as a legal person, but not in Québec.
Popovici explains that, in the final draft of the Québec Civil Code (as presented by the Québec Ministry of Justice), Lepaulle’s older ideas suddenly resurfaced. It seems that this happened under the influence of a rather theoretical article by Pierre Charbonneau, a Québec notary, published in 1983, which was based upon German pandectist writings from the 19th century. The approach taken earlier by the Supreme Court of Canada in Royal Trust Co. v. Tucker, in which the court (Beetz, J.) qualified the trust as “a sui generis property right”, was set aside.
The Québec approach, although now followed in the Czech Republic, is not followed in the two leading civil jurisdictions in Europe: France and Germany. Their trust law is far more pragmatic and less based upon what seems an ideological desire, having its roots in anti-feudalism so characteristic of the French Revolution, to keep the civil law unaffected by the common law’s fragmented ownership.
Shitong Qiao, The Evolution of Chinese Property Law: Stick by Stick?
, in Private Law in China and Taiwan: Legal and Economic Analyses
(Yun-chien Chang et al. eds., Cambridge University Press, forthcoming 2017), available at SSRN
There is ongoing disagreement among Western scholars as to whether property rights are in personam or in rem rights, and scholars’ views have evolved over time. Blackstone emphasized dominion and exclusion. Scholars in the twentieth century shifted the focus to the “bundle of rights.” More recently, some property law scholars have emphasized the view that property is a “law of things.”
As Shitong Qiao, a law professor at the University of Hong Kong, observes in a recent book chapter, most of these scholars adopt a Western perspective. Consequently, these scholars have overlooked the relevance of this discussion to the evolution of property law in developing countries, including China.
Professor Qiao contends that the “sticks in the bundle” approach is best suited to an examination of Chinese property law given how that law has evolved in the past quarter-century. For practical reasons and for internal political reasons, China has had to deal with property rights on a piecemeal basis – what he refers to as a “stick by stick” approach – rather than all at once. As China and its people have experimented, different forms of property have developed in which different groups of sticks are arranged in different ways.
At first glance, China might seem to have adopted an in rem approach. Most notably, the Chinese Constitution and the Property Rights Law of 2007 both appear to treat law as primary, with property rights differing from contract rights. But this in rem view is not entirely accurate. China’s recent land reform is not simply a series of privatization transfers by the state and by agricultural collectives to individual ownership.
To begin with, no land in China has actually been privatized. The right to use land and the legal title to that land have been separated in both the urban and rural settings, though in somewhat different ways. The Chinese state continues to own all urban land while agricultural collectives still own all rural land. This public and collective ownership is an ongoing manifestation of Communist ideology and is seen as necessary for the government to maintain a certain level of credibility.
Meanwhile, the state has sold off the right to use urban land that it continues to own. This system of land use rights arose as property norms began to evolve in the 1980s and 1990s, informally ratifying the separation of ownership and use. These dynamically evolving norms led to changes in law that formally authorized these ongoing transfers of the right to use land.
Chinese land use rights today are a hybrid of contract rights and property rights. Technically, those who acquire land use rights in China obtain only personal contract rights, which are not analogous to the rights in land that are found in common law jurisdictions. In this way, the state has managed to retain considerable control over land while expanding private use of land.
Similar events occurred in rural areas, where farmers created rights in property that changed over time and were later ratified by the government. These rights, too, are personal in nature, and the alienability of rural land is restricted considerably. Meanwhile, as China has urbanized, the government has converted much rural land to urban uses, to the detriment of the former occupants of that agricultural land. The government has statutorily capped the compensation to which the rural land’s former occupants are entitled.
As a result, farmers enjoy little of the massive profit that typically results from the development of their land for urban purposes, with most of that profit going to government bodies and to real estate development entities. In property terminology, the government has retained the “stick” of non-agricultural use, a reality that has led to considerable illegal urban use of land that is still technically designated for agricultural purposes only. This means that rural rights are not rights in rem.
Professor Qiao concludes by noting that “Chinese policymakers have taken the … pragmatic approach of adjusting the bundle of property rights cautiously and carefully while keeping land ownership public.” (P. 32.) Although there is considerable enthusiasm in China for private ownership of land, there are practical constraints to complete privatization. The government has opted instead to allow private experimentation, which it then ratifies if the experiments are successful. During the past three decades, this has meant that ownership and use have been severed and that sticks in the property bundle have been rearranged in different manners to reflect gradual changes in attitude toward private property rights.
Professor Qiao’s chapter contributes to property scholarship in several important and meaningful ways. He reminds his readers that scholarship focusing on Western attitudes toward property can easily overlook non-Western cultures and legal systems. He emphasizes how cultural context influences social and legal attitudes toward property rights. He reminds the reader that China is still in an experimental phase in which private parties test out new approaches and the government endorses the ones that seem to work best.
Thus, when Chinese policymakers “try to accommodate new changes in reality in their daily work through gradual policy and legal reforms, they do not take property as an undivided concept but adjust the rights and obligations of the related parties with great care.” (Id.) In sum, Chinese property law is not evolving in a unitary fashion but rather is changing “stick by stick.”
Cite as: Gregory M. Stein, The Sticks in the Chinese Property Rights Bundle
(June 15, 2017) (reviewing Shitong Qiao, The Evolution of Chinese Property Law: Stick by Stick?
, in Private Law in China and Taiwan: Legal and Economic Analyses
(Yun-chien Chang et al. eds., Cambridge University Press, forthcoming 2017), available at SSRN), https://property.jotwell.com/the-sticks-in-the-chinese-property-rights-bundle/
Troy A. Rule, Drone Zoning
, 95 N.C. L. Rev.
133 (2016), available at SSRN
My family was enjoying a sunny Southern California day in our new expansive backyard with a sparkling pool and secluded privacy when, all of a sudden, a drone hovered overhead. It appeared to be watching and taunting us as one of my sons-in-law made a lewd gesture skyward and we all yelled at it to go away.
I’m not a gun owner, but the feeling of having no control over the invasion of my property made me appreciate how someone (such as my older brother who does own guns) might feel compelled to shoot down the unmanned aircraft. How can such a trespass be allowed? As a property professor, the concept of owning the air rights above my property in addition to my surface rights seems to be debatably sacrosanct – cujus est solum ejus usque ad coelum – other than as limited by federal aviation requirements or other police power necessities.
Professor Troy A. Rule in his article Drone Zoning identifies the wide variety of complex regulatory challenges engendered by the increasing attractiveness of civilian drones. He addresses questions as to whether drone activity should be regulated at the state or local level rather than at the federal level and how municipal governments should develop drone policies for their communities.
In thinking of a title for this jot about Professor Rule’s thought-provoking article, I was reminded of the phrase “Zoning for Dollars” (a not-so-subtle take off of the 1970s television show Bowling for Dollars), which Jerold S. Kayden used to describe “incentive zoning.” With incentive zoning, municipalities grant developers the right to avoid certain zoning restrictions in return for the developer’s voluntary agreement to provide needed community infrastructure and amenities.
Professor Rule explains how to design an efficient drone zoning law at the local level, and he provides charts to illustrate the use of principles of economics to develop these laws. For example, a cost-benefit analysis would show that “drone use should be legally permissible only when and where its net social benefits are greater than zero.” (P. 186.)
However, couldn’t a municipality permit drones where the net social benefits of the drone activity are less than zero so long as the person or company is willing to provide community benefits in the form of “incentive zoning” for drones? Such an approach could allow municipalities to “supply the flexibility and local participation needed to optimally balance drone use with landowner safety and privacy in communities” (P. 200), while at the same time obtaining community amenities to offset the social costs of permitting drones.
State and local governments need to be proactive nationally to ensure that they have a strong and unified voice as to the regulatory framework needed to control civilian drone use. As Professor Rule so crucially points out, the Federal Aviation Administration has, so far, chosen to regulate drones on its own instead of “actively inviting state and local governments to join in forming a coordinated drone regulatory system.” (P. 143.) Federal regulation is important for restricting drone activity near sensitive areas such as airports, military facilities, and higher-altitude airspace; managing nationwide drone registration programs; and establishing uniform drone manufacturing and performance standards.
Nevertheless, the potential for local impacts as well as national benefits makes drone regulation ripe for a combined regulation framework at the federal, state, and local levels. A similar longstanding debate about the division of authority among federal, state, and local governments over communications services has resulted in national regulation under the Federal Communications Commission with very limited state and local control. However, communication services, which are now wireless in many geographic areas, are not as locally intrusive as low-flying drones and may not serve as a viable model of federalism.
Drone zoning is certainly a local function if viewed from a land use zoning model founded on the state’s delegation of its police power. Professor Rule’s writings on drones and local government should spur state and local action to address the increasing use of civilian drones in our communities.
Other models of regulation should be considered in addition to local zoning, national preemptive authority, and common law actions such as nuisance and trespass. Perhaps we should restrict drones to overflight of public roads and highways to avoid trespass claims and maintain residential privacy? Individual, temporary permits could be granted to private owners wishing to fly drones over their own property for purposes such as wedding photos or real estate marketing videos.
This permitting method for individual flexibility is the same as Professor Rule’s suggestion for drone zoning exceptions in residential areas. Commercial operations may also consider granting easements over their private properties in exchange for payment by civilian drone users such as Amazon and the newly announced Google X.
Yes, property rules are ancient and convoluted at times, but they should be explored for purposes of regulating civilian drone use in the same way that they have been used for other new ideas and technologies such as intellectual property and “cyberspace.”
Taisu Zhang, Cultural Paradigms in Property Institutions
, 41 Yale J. Int’l L.
347 (2016), available at SSRN
Can we bring preferred legal norms to culture, asking culture to adapt, or do we bring culture to the formation of legal norms, asking law to adapt? This is not just a normative question causing consideration of moral or consequentialist choices. It is also an empirical one. Regardless of what we think we ought to do or might want to do, the real world may very well be constructed to preordain the sequence. Indeed, the embeddedness of culture in societal architecture may limit the bandwidth of available opportunities for law to act as an influence exogenous to culture.
To understand the interplay between culture and the law, it is useful to evaluate historical developments of legal doctrines from a comparative perspective. That is the eminently valuable project undertaken by Professor Taisu Zhang in his article, Cultural Paradigms in Property Institutions.
Zhang exposes the sometimes “muted” perspective regarding the strong cultural influence and sociological concerns in property law’s development and its theoretical understanding. By comparing and contrasting his project against many of the other influential comparative property theory endeavors, Zhang identifies both the alignments his study has with previous literature but also where his richer understanding of culture’s role fills gaps or omissions in the existing body of analysis.
There is little doubt that property theory has been dominated by economic analysis, especially in recent years, with our definition of utility most often correlated with wealth enhancement. Zhang does a great service by forcing property scholars to question whether that focus has too greatly marginalized the study of culture as a factor in property law’s development. According to Zhang, we may very well need to “re-culturalize” property theory.
The article makes a convincing point that social culture is a critical ingredient in the creation and evolution of property law institutions. Even where the same base of interactive arrangements and concerns necessitates the development of legal institutions, the content of laws and norms nonetheless takes on different tastes depending on the cultural ingredients added to the base.
To test his hypothesis, Zhang conducts rigorous country studies—comparatively studying the evolution of land mortgage law and related legal institutions in China, England, and Japan during the two centuries before large-scale industrialization. His descriptive account is vital to making an informed normative and comparative assessment of the relative advantages and disadvantages of divergent property norms within and between different societies.
Zhang’s study reveals that, “[a]lthough the negotiation of mortgage norms tended to be a rich-versus-poor process almost everywhere, the actual laws and customs that emerged from this process were profoundly different from country to country.” (P. 351.) For example, England developed a pro-creditor and pro-rich set of land mortgage norms, while China developed a pro-debtor and pro-smallholder set of land mortgage norms (with Japan similar to England but with some variations). He traces this divergence to cultural difference, including, for example, that England placed a premium on land wealth while Chinese culture was more concerned with age and generational seniority as drivers of status privileges.
Zhang explains that social status in some societies is chosen, or “distributed,” based on cultural factors, such that those with the highest status might not favor predominately wealth-enhancing or principally materialist-based norms. Furthermore, there is often a link between social status and political status within a culture.
Property “winners” are often chosen by the political process, so that status-based power (which is often defined by culture) can drive political choices designed to preserve status for the winners. If they are winners in the political process based on some non-material calculus, then we should expect that the political choices of property norms might also be based on some non-material calculus.
Consequently, those with status-based power, no matter how attained, may choose property norms that reinforce or enhance a status norm that may in fact be non-material. In fact, some status norms can become culturally sustaining “despite having strongly negative material consequences.” (P. 349.)
But how is what Zhang describes more than just elites protecting their economic self-interest? He argues that position is not necessarily distributed culturally based on economic considerations, so the maintenance of status similarly will not necessarily involve perpetuating one’s own economic self-interest. In fact, pursuing economic ends might not be the controlling value in a particular culture, and such pursuit might even threaten one’s ability to maintain his or her cultural social status.
Zhang ultimately concludes that his cultural theory “is particularly powerful—perhaps indispensable—in explaining large-scale institutional differences between societies” (P. 348) regarding how they regulate the use and transfer of property. The article is rich with revelations about various country-level differences in property institutions that “deserve country-level explanations.” (P. 352.)
Zhang’s work helps us understand why shared social cultural values, particularly regarding sociopolitical status distribution, help explain the divergent legal and institutional property-based choices made between these societies. Indeed, he concludes that culture is better than utilitarian bargaining, self-interest, wealth maximization, or other functionalist theories of norm formation at explaining why different societies might choose to structure their law to favor different status distribution norms.
Given culture’s empirically proven influence on the historical development of property institutions, we should continue to expect that local cultural factors might very well be influencing property use and regulation today. By recognizing that influence, property theorists can better contextualize and compare property norms across jurisdictions. Zhang’s work helps us understand why culture is an explanation of the property norms we have, how culture is a driver of the property norms that develop in a given society, why culture can present opportunities for law’s development, how culture can be a barrier or limitation on the alteration of property norms, and how navigating culture becomes necessary whenever one is operating within a legal system of property institutions.
William Blackstone’s Commentaries on the Laws of England bifurcated the physical universe into persons and property. In Blackstone’s description of English law, there were categories of persons (just as there were categories of property)—freemen, slaves, and wives “protected” by coverture. But each of those categories of persons consisted of whole, living natural persons. Blackstone recited the prevailing scientific and theological view of the day, that life began upon the “quickening” of “an infant … in the mother’s womb.” Blackstone similarly recited the prevailing legal view of when personhood ended—upon death. But while Blackstone clearly set forth the parameters of personhood, he failed to acknowledge that the borders of “property” did not neatly correspond, leaving the possibility of physical objects that were neither persons nor property.
This gap in English and American common law first caused problems when medical schools began to teach through anatomical study. Medical students needed cadavers to dissect, but prevailing Christian belief in literal resurrection discouraged voluntary donation. As a result, a market in fresh cadavers, rudely disinterred from their graves, emerged. Although these corpses had a market value, English and American authorities were frustrated that grave robbers could not be prosecuted for conversion and related crimes because of the clear common law doctrine, articulated by Blackstone, that human remains are not property.
Medical and scientific advances in the past century have expanded our understanding of the common law gap between persons and property and challenged us to reassess those boundaries, particularly with respect to human tissue with value for transplantation, therapy, or research. Professor Browne Lewis, The Leon and Gloria Plevin Professor of Law at Cleveland-Marshall College of Law, adds to this emerging niche of scholarship at the intersection of property law and bioethics by analyzing the legal status of frozen human eggs.
Lewis notes that the legal status of biological materials is important because “the ability of people to recover damages may be impacted by whether they have any legally recognized property interests” in them. (P. 651.) She explains that in the event of a dispute between a fertility clinic and a customer, the “owner” of the frozen eggs may receive damages for a conversion or bailment claim only if the eggs are legally protected property.
One of the most provocative and interesting sections of Lewis’ article discusses surrogacy contracts and what the nature of those transactions suggests about the legal status of “babies conceived using assisted reproductive technology.” (P. 652.) Lewis argues that these children are “treated like market place goods.” (Id.)
Lewis cites several cases where surrogacy agreements were analyzed in accordance with contract law principles rather than family law. In a 1993 California case, Lewis argues, “the court enforced the terms of the surrogacy contract in order to give the [parties procuring the surrogacy services] the benefit of their bargain,” and in so doing “the court appeared to treat the baby like any other subject of a contract.” (P. 654.)
Lewis cites these cases as evidence that “society has accepted babies being treated like property.” (P. 656.) If babies are essentially treated as property, Lewis implicitly argues, surely frozen eggs should be treated as such. These arguments, uncomfortable as they may be, are undoubtedly worthy of engagement.
When I first read Lewis’ article, I was disturbed by her casual use of the concept of “ownership.” She asserts, for example, that parents have “an ownership interest” in their children “against everyone but the other parent.” (P. 686.) She also asserts that “when eggs are inside of a woman’s body, it seems clear that she has an ownership interest in them.” (P. 666.)
In fact, though, at least since Blackstone’s time, the common law has treated human tissue attached to or within the human body as part of the person itself, and once separated from the body as part of the gray space between persons and property. There is certainly no clear and established legal precedent holding that human tissue is ever property that can be owned, even when part of one’s own body.
But these statements by Lewis—a respected bioethics scholar who is obviously quite familiar with the cases and relevant scholarship—are useful because they reveal the disconnect and tension between social and legal conceptions of personhood and ownership. They also illustrate the problems courts face in trying to navigate in the void between persons and property.
For example, Lewis discusses the landmark case of Moore v. Regents of the University of California, 793 P.2d 479 (Cal. 1990). In that case, the Supreme Court of California held that Moore could not assert a conversion claim against the doctor that removed and retained his rare and valuable cells because he had no expectation in exerting control over those cells after they were removed from his body.
Significantly, though, the court skillfully avoided stating that Moore “owned” his cells while they were still in his body. The Court also explicitly dodged the question of whether human biological material could never be considered personal property. The passionate dissent of Justice Arabian perhaps reveals why the majority thought it wise to sidestep those questions:
Plaintiff has asked us to recognize and enforce a right to sell one’s own body tissue for profit. He entreats us to regard the human vessel—the single most venerated and protected subject in any civilized society—as equal with the basest commercial commodity. He urges us to commingle the sacred with the profane. He asks much.
Moore, 51 Cal. 3d at 148.
There are arguments in favor of treating biological materials, like frozen eggs, like property. There are also arguments against. The common law will obviously be of little help in resolving this quagmire. Lewis’ article gives the reader a useful framework for thinking about these sensitive issues at the intersection of bioethics and law, while also offering some provocative insights for this ongoing debate.