III. Property
C. Exercising property rights (cont'd.)

    (5) absolute privileges to use and abuse the land

    relatively few restrictions in use under common law aside from noninterference (externalities) (F110)
    "children are difficult to pen" so landowners must fence dangerous property (P53)

    limitations on land use:
    Restrictive covenants (F125)
    Zoning regulations

    Restrictions are inefficient unless they make aggregate property values rise.
    (an externality)

    (6) absolute powers to transfer in whole or in part (any part carved out by use, space, or time) by sale, gift, descent, or otherwise

    transferable => "alienable" (LEA190)
    alienability may not extend to outsiders, to preserve close-knittedness   (LEA190)
    Ex: CA invading NZ
    Ex: bequest: feudal/tribal world, law typically specifies heirs--primogenitre. (CU157)
    Ex: mortgage: "The power to mortgage, which is essentially a conditional promise to transfer, may enable an individual with little capital to acquire land and help a current landowner to obtain credit." (LEA190)

    transfer in part = unbundling
    "as long as parties understand what they are purchasing, the law should generally enforce agreements to unbundled property rights and sell them." (CU164)

    land has more rebundling options because "Ownership of land is controlled by an elaborate recording system, involving title deeds, land registries, and the like." (F125)

    Sanborn v. McLean 233 Mich. 227 (1925) -- Defendant's deed contained no restrictions nor did the subdivision map. Defendant still could not open a commercial business on his plot. The original owner of the subdivision sold the first set of plots with restrictions against commercial development. Although other plots were later sold without the commercial development restriction, the owners of these plots were held to the restriction because there was a implied negative easement at the time those lots were sold. The defendant had constructive notice of the negative easement because the recorded deeds to other lots in the subdivision contained the restriction. (F126)

1. What are the facts of the case?
2. What did the Supreme Court of Michigan decide?
3. Did the McLean's deed specify any relevant use restrictions?
4. Then how can the court justify its finding of a binding 'negative easement'?
5. Would the restriction have been binding if the buyers had no reasonable way of knowing about the restriction?
6. What ways were available to them in this case?
7. How can a use restriction of this sort promote efficiency?

    Lesson: use rights may be implicitly restricted subject to reasonable search costs.

    Rebundling is limited by ability of 3d parties to find out via inspection or record search. (F125)

    Rebundling "runs with the land" only for burdens or benefits which "touch and concern the land" See cases (F126)
    (Example: a fireworod delivery promise would not carry forward) (P67) 
    Ex: easement stays with the property. (F124)
    Ex: restrictive covenant: (1) generally apply only to the "initial single ownership of a large area" and (2) are inflexible.
    courts tend to enforce covenants if they are reasonable, replacing the old "touch and concern" rule which may have been too vague to be a useful "bright line" rule. (F126)
    requirements about how obvious covenants must be "in order for it to be binding on a new owner are stricter for passing burdens than for passing benefits." Since benefits are more likely to be disclosed voluntarily. See cases (F126)

    English common law has "rules against perpetuities"
    Typical limit on perpetuities: "lives-in-being plus 21 years" (CU158)
    It's a generation-skipping rule. Helps curb abuses by foolish heirs. (CU159)

    Inalienability:
    Rationales:
    "Self paternalism may cause us to require certain conditions to exist before we allow a sale of an entitlement; and it may help to explain many situations of inalienability" (such as sales while drunk) (LEA197)
    True paternalism: based on the notion that others may know better. (LEA197)
    Externalities: Bankrupt giving away assets while in bankruptcy proceedings (LEA202)

    Moralisms:
    Examples: adoptions, blood, human organs (LEA203)
    "Many forms of inalienability express conventional morality." For blood, argument is based on more accuracy of medical history when given away. But purchases could co-exist, as long as they don't drive out voluntary donations. (CU162)
    Body organs. 40K on organ lists; 4,500 Qs per year. Uniform Anatomical Gift Act in 1968, "makes contracts for the purchase and sale of bodily organs illegal. Also illegal under the 1994 National Organ Transplant Act, 42 U.S.C. Section 274. <20% of US driving-age population has filled out cards, but 85% say they "are willing to make an donation." Could substitute "presumed consent." (CU163)

D. Conflicting property rights

    1. Incompatible uses (externalities)

    External cost = "nuisance" in law

    The market solution: assign property rights & allow bargaining
    The market problem: transaction costs
      Coase applies as long as TC < value of transaction (P51)

    a. In theory

    Two decisions for the court:
    (1) What right to assign?
    (2) Which party to assign the right to?

   Decision 1: What right to assign?

    Common types of rights:
    common law remedies: legal or equitable (payment of compensatory damages vs. injunction) (CU100)
    "an injunction . . . is said to "enjoin" the defendant to do or to refrain from doing a specific act." (CU100)
    (1) Property right: cannot be taken without an ex ante bargain
        example: your car--someone wants to use it
        Can --> transactions where market determines cost

    Easement: Right to encroach on someone else's property rights
            Ex: Aircraft: Permission to fly over your land (F125)
                Trains: Permssion to throw sparks (F125)

    Injunction: Right to block someone's encroachment on your property rights
        Ex: Sturges v. Bridgman: doctor's injunction against confectioner operating his machinery

    (2) Liability right: can be taken for ex post compensation
        example: your personal space--someone "wants to" run into your car
        Can --> litigation where court determines costs

    These rights can be used in combination

    Decision 2: Which party to assign the right to?

    The party that values the right the highest
    => place the adjustment burden on the lowest-cost avoider of damages

    Coase principle: minimize the costs of generating highest-valued uses

    b. In practice

    Alternative approaches to handling incompatible uses - worksheet