III. Property
D. Conflicting property rights
2. Takings
a. basic analysis (cont'd.)
(iii) "for public use"
Private parties face the holdout problem too.
Ex: "the developers of a new baseball stadium in Denver purchased
all the land except for the property or one 'holdout,' whom the newspaper called 'the guy
who owns first base.'" (CU177)
1994: A trust held by the
Cowperthwaite family was awarded total compensation of $ 2,375,036. The decision by
arbitrator Mitchel B. Johns, a former Denver judge, is binding and cannot be appealed.
Why not for private use too?
Risk of rent seeking
(iv) requires "just compensation"
"fair market value"
to finance just compensation requires "the government must take, without compensation, from the taxpayer." (P59)
So what is the net efficiency gain of requiring just compensation?
"[T]he requirement of compensation can be viewed
as a device to channel government finance into taxes and away from takings." (CU175)
Advantages: Government
internalizes policy costs and spreads risks (CU178)
Disadvantage: Reduces
private sector incentives for careful investment planning
Poletown Neighborhood
Council v. City of Detroit 410 Mich. 616 (1981)
What are the facts of the
case?
Illustrates taking for a debatable public purpose
Father-in-law as city attorney for Santa Fe Springs did the same for
city redevelopment but expressed discomfort about doing it
b. Regulation versus taking
Ex: Taking: government takes 10% of your property for
a drainage ditch
Regulation: Government blocks your residential development of wetlands property and your
property value falls 10%.
Pennsylvania Coal
Co. v. Mahon 260 U.S. 393 (1922) --
Justice Holmes: The general rule at least is, that while property may be regulated to a
certain extent, if regulation goes too far it will be recognized as a taking. (LEA226)
Only says that such a line might exist without saying where it goes, or
why it matters." (LEA220)
Prior, physical invasion was necessary for such a 'taking' to occur.
(LEA226)
What are the facts of the
case?
Extends takings to include regulation
Keystone
Bituminous Coal Association v. DeBenedictis 480 U.S. 470 (1987)
What are the facts of the
case?
Exempts substantial regulation from compensation requirement
present status: compensation is not paid for regulations (CU178)
regulation takings are costly to compensate because
of broad impact.
Also, gov't does not charge landowners for beneficial impacts
from regulations. (P58)
Advantage: incentive for cautious
private investments
Disadvantage: incentive for excessive government regulation (CU181)
Zoning
In theory, zoning reduces a nuisance
Zoning is not
compensated--which avoids an incentive to create nuisances. (P59)
"[I]n reality, zoning is a highly political
institution"--lots of rent seeking. (CU186)
3. Divided and common ownership
a. Divided ownership
landlord-tenant: do not always get optimal investment
by tenants. "tenant customary rights" in Ireland arose to prohibit eviction
(including by higher rents) to ensure longer tenancy so that tenant could get return on
improvements. But customary rights made it harder for landlords to pay for improvements
since it impeded rent increases. (P72)
lease: may contain a development clause because if lessor is paid a
royalty on receipts, lessee may underdevelop property since lessee pays all of development
costs (oil wells). (P73)
Property lines: often bilateral monopoly in divided ownership cases.
Law sometimes allows suit for 1/2 of fence costs. (P74)
b. Common ownership
Ex: "land owned in common": "joint tenancy, common tenancy, tenancy by the entirety, and life interest with reversion" (F116)
Conflict of interest --> Voting rules
Ex: Corporations: Conflicts of
interest among owners --> legal rules requiring equal treatment. (F114)
Rules forbid a majority group of stockholders in a corporation from
transferring the firm's assets to themselves at the expense of the minority
stockholders." (F114)
"controlling property by
majority vote. . . . [t]urns out to be a common, and arguably efficient, rule for
controlling the use of fugitive resources: oil and gas."
Example: pool of oil; pumped "too fast."
Remedy: unitization--typically requires a 2/3 vote. "The
landowners as a group then agree on how the oil is to be extracted and share the resulting
income. Conflicts of interest among the landowners are reduced by legal rules requiring
equal treatment; a majority group cannot simply vote to pump all the oil and give the
income to its members." (F114)
Homeowner associations--have
increasingly replaced restrictive covenants (P66)
Restrictive covenants may be specified to be renewed by majority vote
after stipulated time, and may be ruled obsolete by courts.
III. Property
E. Intellectual property
The single most important
current area in property law assignment--most real estate is owned but idea
space is still wide open
1. Economic analysis
a. The economics of intellectual property (IP)
Recall the goal of property rights: improve allocation of resourcesIntellectual property has the characteristics of a pure public good
Characteristics of a pure public good:
(i) non-depletable and (ii) non-excludable
=> (i) MC of
permitting another user to consume existing public goods is about zero and (ii)
difficult to exclude free riders