Overall Themes: 1. The Law, Social Institutions and Policy:

a. Why this approach? Why this theory? b. Whose interests are affected? c. Why this decision? Why does it matter?

2. Normative Approaches 3. How do the Results Effect Future Parties?

Some Interesting Questions to think about:

1. Property and its Relationship to Personhood 2. Efficiency and Economic Reasoning 3. Justice and Fairness 4. Distinction Between Property Rules vs. Liability Rules

a. Property Rules: If I own something, I can exclude other people. If they want to buy or want access to it, they have to agree to my price.

i. An entitlement is protected by a property rule to the extent that someone who wishes to remove the entitlement from its holder must buy it from him in a voluntary transaction in which the value of the entitlement is agreed upon by the seller. It is the form of entitlement which gives rise to the least amount of state intervention: once the original entitlement is decided upon, the state does not try to decide its value. It lets each of the parties say how much the entitlement is worth to him, and gives the seller a veto if the buyer does not offer enough. Property rules involve a collective decision as to who is to be given an initial entitlement but not as to the value of the entitlement.

b. Liability Rules: Have to give people access as long as they are willing to pay a “fair” price (as determined by a third party, e.g., a court)

i. Whenever someone may destroy the initial entitlement if he is willing to pay an objectively determined value for it, an entitlement is protected by a liability rule. This value may be what it is thought the original holder of the entitlement would have sold it for. But the holder's complaint that he would have demanded more will not avail him once the objectively determined value is set. Obviously, liability rules involve an additional stage of state intervention: not only are entitlements protected, but their transfer or destruction is allowed on the basis of a value determined by some organ of the state rather than by the parties themselves.

c. Inalienable entitlements: given right that you cannot sell i. Property interests in your body ii. Right to vote, right to your labor, etc. iii. An entitlement is inalienable to the extent that its transfer is not permitted

between a willing buyer and a willing seller. The state intervenes not only to determine who is initially entitled and to determine the compensation that must be paid if the entitlement is taken or destroyed, but also to forbid its sale under some or all circumstances. Inalienability rules are thus quite different from property and liability rules. Unlike those rules, rules of inalienability not only "protect" the entitlement; they may also be viewed as limiting or regulating the grant of the entitlement itself.

d. Why does it matter? i. Figuring out our relationship w/r/t things affects control over self, control over

things, control over others (to prevent you from having access to my stuff, or to act in a way with my stuff that affects you.)

ii. Liberty from the government: self autonomy, self-development, incentives to be productive

5. Rules vs. Standards a. Rules (55MPH)

i. Virtue of certainty, more easily administered, predictability

ii. Reduces strains on the judicial system and judicial competence iii. Knowing the rules makes it easier to K around them

b. Standards (You Must Drive Carefully) i. More flexibility ii. If you do not know the default rule, it is harder to find ways around standards,

or even to know which to choose (K vs. default rules) I. WHAT IS PROPERTY AND HOW IS IT ACQUIRED?

A. Acquisition by Discovery and Capture

1. Discovery vs. Conquest a) Acquisition by discovery: sighting or finding of hitherto unknown or uncharted

territory (1) In Johnson v. M’Intosh, discovery gave the “exclusive right to

extinguish the Indian title of occupancy, either by purchase or by conquest.”

(2) In principle, only a “res nullius” could be discovered; however, prior possession by aboriginal populations was thought not to matter.

b) Acquisition by conquest: taking possession of enemy territory through force, followed by formal annexation of the defeated territory by the conqueror

c) Not necessarily the case that Conquest is preferable to Purchase. Depends on ability to enforce conquest, as well as price of land.

d) Marshall argues that respecting the Law as Settled is reason to follow chain of title from European discovery, handed down to colonies, and from American government to individuals.

(1) Pros: (a) We value order and predictability (b) Eliminates uncertainty in future Ks (discourages people from

entered Ks) (c) Encourages Trade. Providing for easier transfer (better for

economy if trade is enabled and parties benefit; key to economic growth)

(d) Discourages Waste (and also provides incentives to improve the land and invest in it.)

(e) Discourages complaints (if law is thought to be unchangeable, people will complain less)

(f) Don’t have to come up with a better way (and risk disagreement on it)

(2) Cons (a) Provides justification of unjust society (e.g., slavery, segregation,

racism, sexism, etc.) (b) Idea that changes in society should be followed by changes in the

law. The law as a living document that changes to reflect our values and circumstances as they evolve over time.

(c) Those who benefit from the current system are generally the wealthy and powerful who may arguably have less need for protection

2. First in Time

a) Pros: (1) The idea of “first come, first served” has intuitive appeal (2) Sense of clarity: only one person can be first

(3) Decreased litigation: If the claim is easy to resolve, fewer lawsuits will be brought

(4) Scarcity/ Efficiency: Forces people to act quickly and take advantage of resources. Iincentive to be first; encourages competition. Encourages production and development if your right is protected.

(5) Public Peace: Not wasting time and resources trying to protect property. b) Cons:

(1) Nothing ethically self-evident about it; no strong moral claim. Just because you grab it first means that you deserve it, especially when there are others who have not had an equal opportunity to grab.

(2) Competition may come at the expenses of other values (e.g. fairness, justice, distributional concerns)

(3) Privileges rich and powerful. Protects the status quo.

3. Alternative Approaches to First in Time a) Necessity: Greater need determines use b) Leverage: Your professor wants it c) Rights / Distributional Justice d) Personhood

4. Locke’s Ideas about Labor and Property a) Right to property if you put your own labor into it b) Provides incentives for people to add their labor to the fruits of the earth c) Philosophically, he is saying that a man owns himself, and by putting the fruits

of his own body, i.e., his labor, into the land, the man has a claim to that in the same way he has a claim to himself

5. Johnson v. M’Intosh

a) Question is not just who was there first, but who was there first in the right way: Marshall decided that the Native Americans did not have title to the land, in part b/c:

(1) They were not the first “Christian” people (2) They did not put an appropriate amount of labor into the land

b) Marshall argues that you have to consider not only the principles of abstract justice impressed by the Creator, and those principles which our government has adopted and given us as the rule

(1) Major premise (with little reasoning): The law is settled. (2) Idea of precedent

6. Discovery by Capture a) In many ways, capture is just another form of discovery b) Pierson v. Post: Pursuit alone is not enough to confer upon the pursuer

property rights. (1) Pierson’s Argument:

(a) Evidentiary issues: difficult to know who saw or pursued the fox first

(b) Pierson was more efficient in killing the animal (c) Pursuit alone does not guarantee a kill (d) First come, first served (e) Why reward bad hunters?

(2) Post’s Argument: (a) Time and labor spent chasing the fox (b) Customs and norms; unwritten rules of the sport (c) Pierson was acting in bad faith; he knew that Post was pursuing

the fox.

(d) Disincentive to future hunters if they know that someone can come in and take their property right before it is caught and killed (Livingston’s dissent)

(e) May breed violence (3) Livingston’s Dissent

(a) Relies on policy reasoning (providing incentive to hunters) (b) Also believes that this is not an issue that should be decided by

the court, but should rely on Norms and Customs (more on this in Ghen v. Rich

(c) Tempora Mutantur: times change, and the law should change with it.

c) Ghen v. Rich (1) The killer of a whale is its rightful owner. (2) Importance of custom and norms in determining decisions

7. Customs and Norms a) Pros:

(1) More efficient (2) More narrowly tailored to the facts of the case (3) More organic than what is coming from a third-party perspective who

does not deal with the issues on a daily basis; involved parties have more expertise

(4) More flexible; allows for evolution of standards (5) Decreases judicial costs and issues of judicial competency

b) Cons: (1) Whose norms and customs? (2) Norms and customs may lack any ethical or moral grounding (3) Who benefits from the status quo? Are there others we need to protect? (4) Community may take their own interests into account but not the

interests of others: externalities may result

c) Lobster Gangs of Maine, Acheson (1)

8. Reasons to Prohibit Trespass a) Trespass can lead to violence and self-help; general unrest and chaos b) Resources that could be put to better use (time, money, efforts, resources) are

spent on efforts to keep others out c) Incentive Structure: No incentive to buy property if others can come and take it

from you. Creates incentive to trespass; no one wants to work. Security provides incentive to develop land and use efficiently

d) On basis of rights: right to exclude others from use of your property, right to privacy

e) Prevents rewards to wrongdoers

9. Externalities a) Definition: cost or benefit that falls on some third party that the principal actor

does not take account of (1) Negative externalities: pollution, overgrazing of livestock, loud music at

3 a.m. from your neighbor’s stereo; society bears the costs, so the actor does not have to take into account.

(2) Positive externalities: renovations, public school system, concert pianist living next door.

b) Solving Externalities:

(1) Internalize through allocation of property rights to either party bearing cost or party creating externality

(a) One property right in clean air for neighbors (b) One property right in factory owner to pollute

(2) If factory owner has right to pollute, the neighbors will have to pay him not to, up to what having clean air is worth to them

(3) Once the factory owner is notified of the harms to the neighbors, the externality is no longer present; the costs of pollution (i.e., harms to the neighbors) are taken into account in the factory owner’s costs

c) Coase Theorem (1) It does not matter how you allocate property rights; so long as there are

no transaction costs, the outcome will be the same b/c parties have the ability to transact to reallocate them if it is in their best interest to do so.

(2) Transaction Costs: organizational costs, attorney fees, enforcement, information costs, reaching of agreement, holding out, free riders

(3) Bilateral Monopoly: Although window of agreement exists, may never reach it b/c of hard bargaining and bluffing outside of the safety of a competitive market place

d) Outside Coase Theorem (1) Efficiency: Who should be paying whom? What rights are we protecting? (2) Coase theorem assume only constraints are transaction costs, when in

reality budget constraints may exist (3) Distribution concerns w/r/t fairness or equity

e) Alternatives to Property Rights (1) Regulations: legislation, statutes, etc.

(a) Problems: lobbying, enforcement costs, imperfect information (2) Taxes and Subsidies

(a) Does not require knowledge or optimal level; allows for greater flexibility

(b) Factory can decide how much to pollute, with increasing costs to do so

(c) Subsidize the activities we would like people to engage in. 10. Hardin: The Tragedy of the Commons

a) Land is not allocated to an individual, but rather is used by all individuals (no right to exclude), and thus leads to externalities

11. Demsetz: Toward a Theory of Property Rights

a) Externalities resulting from the Commons: (1) Gaining benefits of common land while paying fraction of cost (2) As resources become scarce, there is a bigger rush to use the resources

before others do. We would have a better community outcome if we were able to coordinate

b) Solving the Problem (1) Private property rights: people are more likely to take care of their own

property b/c they bear the entirety of the costs (2) Simplification of Transactions. Knowing who owns what makes it easier

to deal with property owner.

B. Alternative Theories of Property 1. Issues other than what we have discussed (efficiency, incentives to be productive,

security of property rights, first in time) may be at stake when we decide how property rights should be allocated

a) Fairness b) Justice c) Distributional Concerns

2. Goffman’s “Asylums: Essays on the Social Situation of Mental Patients and Other

Inmates” a) People care about property because it provides sense of ownership, control,

autonomy, and power b) Less about what you own; more about the capacity to own and use, to exclude

others

3. Radin’s “Property and Personhood” a) Distinguishes fungible property from personal property and concludes that

personal property rights should be higher in a hierarchy of rights, as the property is a part of one’s own personhood

b) People need to own their own things to become a fully constituted person c) Provides justification for redistribution of wealth – of taking away one’s fungible

property to allow others to gain personal property

4. Friedman’s “Capitalism and Freedom” a) Competitive capitalism separates economic power from political power and

allows one to counterbalance the other b) Is that necessarily the case?

5. Sunstein’s “On Property and Constitutionalism” a) When citizens are dependent on the good will of government officials, everything

is a privilege rather than a right b) A right to private property free from government interference is a prerequisite to

democracy c) This freedom is important, because coupled with economic power, it allows

people to speak out against the government d) Capitalism and the ability to possess money and resources are an important part

of the political process

6. Are Friedman and Sunstein’s claims too strong? a) Soros’ success in the U.S. vs. owner of Yucos (Russian oil company) jailed for

political reasons, specifically opposition to Putin b) Continuum of freedom – political retribution and handouts also exist in the U.S.

(e.g., Halliburton) c) Does the reality of competitive capitalism in the U.S. (e.g., the distribution of

wealth and resources) undercut the arguments made by Friedman and Sunstein?

7. What is Freedom? a) Ability to do whatever you want, within certain limitations imposed by other

values b) Even in nations that claim to protect freedom, does everyone have the same

opportunity set? c) Is there a substantive component to freedom? How should we think about

protection of freedom and property rights if we believe these substantive elements are important?

C. Property in One’s Person

1. Moore v. Board of Regents of California. (text p. 79, notes p. 24)

a) Court found that there was no property right in Moore’s tissue that was used to develop the cell line, and because there was no property interest, there was no cause of action for conversion

b) What’s at stake?

(1) Chilling effect on research (2) If my body is not mine, whose is it? (3) Potential for invasion of privacy and personal autonomy; doctors mining

for useful tissue (4) Moral Issue

c) Who Should Decide? (1) Legislatures (2) Courts (3) Contract

D. Bundle of Rights (text p. 99, notes p. 28)

1. Property rights are a number of rights bundled together a) Right to use b) Right to exclude c) Right to sell or give away

2. Possessing one stick does not necessarily mean you have all of them a) Cannot use (or sell) your own licenses, prescriptions, right to vote b) Cannot sell game or animal obtained with specific hunting licenses c) Cannot give away land or property once you have filed for bankruptcy (must sell

at reasonable price)

3. Right to include and right to exclude are both necessary to have effective power to transfer

4. Jacque v. Steenberg Homes, Inc.: The Jacques had a right to exclude Steenberg

Homes, i.e., to disallow them to drive across their land to deliver their mobile homes, even though through the Jacques’ land was the easiest route.

5. State v. Shack. (text p. 101, notes p. 29)

a) Right to exclude is not absolute. b) D’s entered private property to aid migrant farm workers employed and housed

there. Having refused to depart upon the demand of the owner, Ds were convicted of trespassing. Ds were acquitted; ownership of real property does not include the right to bar access to governmental services available to migrant workers.

c) Farm owner’s argument: even if you have an interest and concern in providing these services, it’s not my problem. There are other options that accommodate my interest as a property owner w/o interfering with the rights of migrant workers that do not do violence to my property interests.

d) Expectations matter. If you have no reasonable expectation that you can keep people off your property, when they enter it, nothing has been taken from you.

e) Debating the scope of State v. Shack: Where do we draw the line?

E. Acquisition by Find (text p. 107-11, 118-25; notes p. 31 1. Relativity of Title

a) Finder may have better title than third party, but does not have superior title to owner.

b) Hearkens back to idea that property rights are defined in relation of person to person rather than person to thing

2. Lost Property

a) Where an owner unintentionally parted with his property (i.e., has not idea where it might be)

b) Owner has right over finder; finder has right over third party c) If we had a different rule saying that finder beat true owner?

(1) Incentive to owner to keep better watch over belongings (a) Spend more time and resources “guarding” (b) Less time being productive (c) Decreased incentive to own property

(2) Increases incentive to “find” things d) Premise Owner’s Right

(1) Sense of control over premises; feeling of entitlement to things found on your own property; reasonable expectations

(2) Argument for finder: “but for” cause of property’s discovery (3) Distinction between public and private matters; difficult to determine

where line is drawn (a) Public: general agreement that finder beats premise owner (b) Private: some courts hold that premise owner trumps finder

3. Abandoned Property

a) Property that the owner intentionally abandoned, as opposed to losing or mislaying.

b) INTENT is important, showing rights to the property have been given up; difficult to determine intent

c) Finder always has right to abandoned property; owner cannot reclaim title

4. Mislaid Property a) Property that has been intentionally placed somewhere and mistakenly left

there. b) Owner always has interest that trumps finder c) Premise owner has interest that trumps finder (Theory that premise owner is in

a better position to return it to the person who mislaid it; if it was intentionally left there, person will retrace steps to recover. Query whether it is the case that a person who loses property approaches the finding different than mislaid treatment? Is there a difference that matters? Why are they treated differently?)

5. Statutory law deals with many of these issues speaking to obligations for finders

w/r/t mislaid, lost, and abandoned property 6. Armory v. Delamirie (1722)(text p. 108, notes p. 34)

a) P chimney sweep boy found a jewel, took it to a jeweler, who kept the jewel. Court held that P could keep the jewel, as finder, he does not acquire absolute property right, but can keep it against all but the rightful owner.

7. McAvoy v. Medina (1866)(text p. 118, notes p. 34) a) Court agrees that finder of lost property has a valid claim against all except the

true owner, but that this property (pocket-book lying in barber’s shop) was not lost property, but mislaid. P did not have right to take property from the shop, but it was the duty of D to hold it until the owner should call for it.

8. Employees and other agents

a) Jackson v. Steinburg, 186 Or. 140 (1948) - $ found by chambermaid under paper lining in dresser drawer was awarded to hotel owner on theory that it was mislaid property that the maid had a duty to deliver to her employer

b) Erickson v. Sinykin, 223 Minn. 232 (1947) - $ found by an interior decorator, unlike a maid or janitor, had no duty to report find to employer

c) Kalyvakis v. The T.S.S. Olympia, 181 F.Supp. 32 (S.D.N.Y. 1960) - $ found by ship steward on floor of ship’s public men’s room awarded to finder on ground that it was lost or abandoned.

d) Police Officers – Hoel v. Powell, 904 P.3d 153 (Okla. App. 1995) - $ found scattered on road that was reported to and taken possession of by Sheriff’s Office and unclaimed should be given to the Hoel family because they were the finders

9. Treasure Trove.

a) At English common law, money and treasure hidden in the earth with intent to reclaim were to be handed over to the king

b) Tendency today is to treat treasure trove like any other found property (classified either as lost, mislaid, or abandoned)

c) Two laborers building driveway found gold coins while working. Court held that the coins, like the dirt the men were excavating, belonged to property owner.

d) Benjamin v. Lindner Aviation, Inc.: $18K found in wing of airplane by inspector removing screws was deemed mislaid property possessed by owner of airplane (not concealed long enough to be treasure trove, obviously not lost)

e) In re Seizure: Money found in gas tank of a car seized by the government and sold to buyer. Mechanic found $ when fixing car for gas problem. Court held for buyer on ground $ had been abandoned

10. Shipwrecks:

a) English CL: “wreck” or cargo washed ashore went to the crown; under traditional maritime law, ship lost at sea and settling on ocean floor remained the owner’s property unless title to the vessel had been abandoned – but anyone subsequently reducing the ship or its cargo to possession was entitled to a salvage award

b) U.S. – law of finders has usually been applied to ships lost in territorial waters, and the finder held entitled to an abandoned shipwreck unless the wreck was embedded in land owned or possessed by another.

c) U.S. and individual states have successfully claimed shipwrecks embedded in their territorial waters and thus constructive possessed

d) Maritime law and principle of salvage awards contrast sharply with property law, which awards a finder all or nothing, subject to the rights of the true owner

F. Adverse Possession

1. Definition: Something owned by A; subsequently and without A’s consent, comes

into the possession of B. B might become the owner, if certain requirements are met 2. Five Elements:

a) Actual entry onto the property giving exclusive possession to adverse possessor.

(1) Provides notice that someone is using the property. (2) Informs extent of adverse possessor’s claim (3) Not until entry does right arise in owner to bring action for trespass or

ejectment b) Possession must be open and notorious

(1) Provides notice (law does not require actual notice) (2) If you are diligent property owner, you would have seen someone

claiming possession to your property c) Possession has to be adverse or hostile to original owner

(1) Cannot be a guest (2) Cannot have been granted permission

d) Use must be continuous (1) Must be used in way a normal property owner would use (2) Purpose: if you are using property in unnatural manner, true owner may

never have opportunity to find out. (3) Continuous requirement may also be justified by endowment effect;

once I own it, I value it more. e) Statute of Limitations must have run

(1) Until it has run, owner has right to seek legal resource to eject you from the property

3. Avoiding Adverse Possession

a) Monitor b) Give Permission

4. Why do we have Adverse Possession? a) Land use is good. We want to encourage people to use it productively and

continuously. Provides incentives for owner to use land she owns; encourages adverse possessor to use land in productive manner.

b) Clarification of Title. Quieting of title promotes alienability. c) Expectation. If adverse possessor has been there a reasonable amount of time

and invested in property, should be allowed security of the belief that this use can continue.

d) Radin and Personhood. If property is not being used, it is not closely tied to the owner’s personhood (fungible); whereas to the adverse possessor using it, the property is much more personal.

e) Endowment Effect. People value things more when they have them. f) Creation of Incentive Structure. Reward those who work diligently and

punish those who sleep on their rights. g) First in Time. Although owner makes this claim, adverse possessor claims

owner was only first nominally, and that he instead was the first to put it to productive use and lay claim in a meaningful way.

5. Adverse Property Protection Rules

a) Protected by property rule: once title transfers to adverse possessor, he has right to exclude; all transfers are voluntary

b) Liability rule would force adverse possessor to pay a fair price in order to effect title transfer. If he was not willing to pay, no transfer.

6. Van Valkenburgh v. Lutz, (N.Y. 1952)(text p. 129)(notes p. 39)

a) Used statutory law to determine that requirements of adverse possession were not met. Elements of proof: (1) premises were protected by substantial inclosure, or are (2) usually cultivated or improved (Civ Prac Act § 40).

b) Court determined that there was no enclosure, and that the land was not sufficiently cultivated or improved to satisfy the statute.

c) Dissent: There is evidence in the record that premises were occupied by Charlie and cultivation occurred, and to find otherwise is to ignore constitutional provision limiting court’s jurisdiction to the review of questions of law. Also notes that neighbors recognized Lutzes as owners.

d) Coasian bargaining: Question of whether it matters who is given title to the property. In the absence of transaction costs, the parties will bargain and the property will go to the person who values it the most.

(1) Here there are obvious transactions costs (2) Bilateral monopoly problem – spite

7. Mannillo v. Gorski, (N.J. 1969)(text p. 147)(notes p. 42)

a) Issue of whether sidewalk encroaching on neighbor’s property meets requirements of adverse possession. Is it open and notorious? Is it adverse and hostile?

b) Court discards the requirement that the entry and continued possession must be accompanied by a knowing intentional hostility. State of mind does not matter. Any possession for the required time which is exclusive, continuous, uninterrupted, visible and notorious, even though under mistaken claim of title, is sufficient to support a claim of title by adverse possession.

c) Remanded for decision of whether true owner had actual knowledge of the encroachment; whether P should be obliged to convey disputed tract to D; if yes,what consideration should be paid for conveyance

d) Difference in results between property rule vs. liability rule (court sets price) e) Treatment of mistakes depends on agreement, acquiescence, and estoppel.

Early CL was harsh and anything built mistakenly became landowner’s property. Modern tendency is to force conveyance at market value from owner to improver.

8. Howard v. Kunto (Wash. Ct. App. 1970)(text p. 153)(notes p. 45)

a) Deeds were all screwed up b) Continuity requirement only entails using the property as a normal owner would

(e.g., living in a summer home in the summer). c) Tacking: where there is sufficient privity of estate, one’s period of possession

and occupation can be tacked on to the successive owner’s period of possession and occupation in order to overcome statute of limitations.

II. THE SYSTEM OF ESTATES (EXCLUDING LEASEHOLDS)

A. Possessory Estates

1. Introduction

a) Interest in land can be divided over time; can have the right to occupy the property today, or can have rights to possess upon condition happening in the future

(1) If you have a future interest, the rights exist today, even if you are not currently in possession.

b) Cannot transfer what you do not have. (1) E.g., FSD owner can only transfer FSD (2) Can obtain fee simple by obtaining both the present and future interest

c) No new estates in land can be created. (1) There is still flexibility: Can allocate refined interests to different people

over time (2) Can create a trust (3) Can use K law to do what property law will not allow

d) General concerns in law dealing with estates in land: (1) Ensuring autonomy of owners to do with the property what they want;

keeping control out of “dead hands of the past” (2) Protecting alienability.

(a) Three types of restraints: (i) Disabling: withholds power of transfer (ii) Forfeiture: if grantee attempts transfer, it is forfeited to

another person (iii) Promissory: grantee promises not to transfer

(b) Four objections to restraints: (i) Make property unmarketable (not available for highest and

best use)

(ii) Perpetuate concentration of wealth by making it impossible to sell and consume proceeds of sale

(iii) Discourage improvements on land (iv) Prevent owner’s creditors from reaching the property

(c) RST 2d (i) Treats all three above restraints alike when imposed on fee

simple (ii) Provides that absolute restraint on fee simple is void. More

tolerant to partial restraints, if reasonable in duration, purpose, and effect

(iii) Provides that absolute disabling restraint on life estate is void; forfeiture restraint is valid

e) Concerns in Drafting (1) This is a place where clarity and proper word choice is extremely

important (2) Judges often use canons of construction to help them reach outcomes

where wording is unclear, e.g., construe provisions against the drafter f) The Law of Waste

(1) Whenever two or more persons have rights to possess property at the same time or consecutively.

(2) A should not be able to use the property in a manner that unreasonably interferes with the expectations of B

(3) Designed to avoid uses of property that fail to maximize the property’s value (T and remainderman would be unable to negotiate an optimal plan because of the bilateral monopoly between them); transaction costs may be high

(a) Affirmative waste: Arises from voluntary acts (injurious damage decreases property value)

(b) Negative waste: Arises from failure to act with reasonable care

2. Fee Simple Absolute a) Largest estate in property law and largest possible aggregation of rights in real

property. b) Full ownership, lasts forever, can be transferred or assigned, can be alienated c) O to A

3. Life Estate a) Estate that lasts as long as the person is alive b) Goal: ensure that grantor can continue to exert control over property c) Followed by future interest (either reversion in grantor, or remainder in some

third party) d) Transferring life estates is generally not successful since the estate only belongs

to the transferee for the life of the transferor e) White v. Brown (Tenn. 1997)(text p. 221, notes p. 56)

(1) Because there was no specific language granting the house as a life estate, statutory and CL provide that the estate should be passed as fee simple. The restriction on alienation is void b/c it conflicts with the nature of the estate and is contrary to public policy.

f) Possible Problems resulting from Life Estate (1) Life tenant cannot sell unless all persons with an interest in the property

consent (2) May be advantageous for life T to lease property for period extending

beyond life T’s death (3) Banks ordinary do not lend money for home improvements if the security

is a life estate rather than fee simple

(4) Waste liability (5) No duty to insure. If T does insure and buildings are destroyed by fire,

life T has been held entitled to whole proceeds g) Protecting a life T by creating a trust

(1) Trust is more flexible and desirable than legal life estate (2) Trustee holds legal fee simple, and as “manager” of the property, may be

directed to pay all the income to life T or let the life T into possession (3) As manager, trustee has powers spelled out in instrument creating trust

to administer the trust for the benefit of the life T and remainderman. (4) Life T can be made trustee

4. Defeasible Estates

a) May last forever; may end as the result of some condition in future b) Generally devisable, transferable, alienable. Future interests are generally

transferable as well. c) Three Types

(1) Fee Simple Determinable (FSD) (a) Ends automatically upon happening of certain event and

possession transfers automatically to grantor or grantor’s heirs or assignees

(b) Telltale signs: during, while, unless, so long as (c) Blackacre from O to A, so long as property is used for school

purposes. (i) A had FSD (ii) O has possibility of reverter

(2) Fee Simple Subject to Condition Subsequent (FSSCS) (a) Future interest is a right of entry or power of termination

belonging to the grantor (b) Does not end automatically; grantor has to retake (c) From O to A, so long as no store is built on the premises and O

retakes property within 30 days of the start of construction (i) A has FSSCS (ii) O has right of entry. In order to reclaim property, he has to

assert that right. (d) O to A, but if property is ever used for anything other than school

purposes, O shall have right to retake (i) A has FSSCS (can transfer this right, but buyer would pay

discounted rate b/c of uncertainty inherent in the condition) (ii) O has right of entry.

(3) Fee Simple Subject to Executory Interest (FSSEI) (a) Future interest (the executory interest) is held by some third party

and not the grantor. (b) O to A, so long as A uses property as a baseball field, and if not to

B. (i) O has FSSEI (ii) Condition on A’s use of property does NOT XT to B

(c) There is no future interest that gives 3d party a right to retake (no analog to FSSCS)

d) Mahrenholz v. County Board of School Trustees, (Ill. App. 1981)(text p. 242)(notes p. 57)

(1) The Huttons died intestate leaving son Harry as only heir. The Huttons had conveyed land to school district providing “this land to be used for school purposes only; otherwise to revert to Grantors herein.” The Huttons transferred the rest of their land, along with their reversionary interest to the Jacqmains (who sold it to the Mahrenholzes). Harry

meanwhile disclaimed and released any possibility of reverter or right of entry for condition broken to the School Board.

(2) Issue presented: whether the trial court correctly concluded that the Ps could not have acquired any interest in the school property from the Jacqmains and Harry. Holding: NO. Reversed and remanded.

(3) What kind of interest matters here: (a) If school had FSD and if they were no longer using for school

purposes, then Huttons and Harry had possibility of reverter. (Court determines school had FSD)

(b) If school had FSSCS, when the school ceased using the property it gave Harry the right to retake. Since he did not attempt to retake, he could not have passed his interest to Ps b/c he never claimed it.

(4) At CL possibility of reverter and right of entry descended to heirs upon death of owner but neither were transferable during life. They were not things, but a possibility of becoming an estate, and a possibility of forfeiture.

(5) Today most states allow transfer between living persons but some states follow CL rule.

e) Mountain Brow Lodge v. Toscano (Cal. Ct. App. 1968)(text p. 251, notes p. 58)

(1) Facts: Toscano left the Lodge real property with a habendum clause restricting property to the use and benefit of the lodge, and specifying that if it fails to be used by them or is sold or transferred, ownership reverts back to the heirs. The Lodge argued that the clause was invalid because it puts an absolute restraint on alienation.

(2) Holding: Although the alienation restriction is void, it can be separated from the use condition, which is valid. The habendum created a defeasible estate that will revert back to the heirs if the property is not used for the benefit of the Lodge.

(3) Court made a mistake here by construing deed as FSSCS with title to revert to the grantor; no such estate exists

B. Future Interests

1. Introduction

a) Future interest is an expectancy that gives a LEGAL RIGHT to owner. It is a presently existing property interest protected by courts.

b) Life estates followed by future interests are the foundation blocks of wills and estate planning.

2. Future Interests in the Transferor

a) Reversion (1) Interest remaining in the grantor who transfers a vested estate of a

lesser quantum than that of the vested estate which he has (2) O to A for life. The land reverts to O at A’s death. (3) O’s right to future possession is called a reversion.

b) Possibility of Reverter (1) When owner carves out of his estate a determinable estate of the same

quantum. (2) Future interest remaining in the transferor or his heirs when a FSD is

created. (3) O to A, so long as used for library purposes. O has possibility of reverter.

c) Right of entry (Power of termination)

(1) When owner transfers an estate subject to condition subsequent and retains the power to cut short or terminate the estate, transferor has a right of entry.

(2) E.g. O conveys Whiteacre “to Town Library Board, but if it ceases to use the land for library purposes, O has the right to reenter and retake the premises.”

3. Future Interests in the Transferee

a) Vested Remainder (1) If it is given to an ascertained person and it is not subject to a condition

precedent (other than natural termination of preceding estates) (2) May be indefeasibly vested (certain of becoming possessory) or may be

uncertain (subject to being divested if event happens) (a) O conveys “to A for life, then to B and her heirs, but if B does not

survive A to C and his heirs.” N.B. B does NOT have a contingent remainder. B has a vested remainder in fee simple subject to divestment; C has a shifting executory interest which can become possessory only by divesting B’s remainder.

(3) Remainder may be vested subject to open or vested subject to partial divestment if later-born children are entitled to share

(a) e.g. O conveys “to A for life, then to A’s children and their heirs.” A has one child, B. The remainder is vested in B subject to let in later-born children. B’s exact share cannot be known until A dies. If A has no child at the time of the conveyance, the remainder is contingent because no taker is ascertained.

b) Contingent Remainder (1) If it is given to an unascertained person or it is made condition upon

some event occurring other than natural termination of preceding estates (2) O conveys “to A for life, then to the heirs of B.” B is alive. The

remainder is contingent because the heirs of B cannot be ascertained until B dies. No living person has heirs, only heirs apparent. If B’s heirs do not survive B, they will not be B’s heirs. The words “heirs of B” refer only to persons who survive B and are designated as B’s intestate successors by the applicable statute of intestate succession.

(3) O conveys “to A for life, then to B and her heirs if B survives A.” B’s remainder is subject to a condition precedent.

c) Vesting Subject to Divestment (1) You must classify interests in sequence as they are written; whether a

remainder is vested or contingent depends on words (2) If the conditional element is incorporated into the description of, or into

the gift to, the remainderman, then the remainder is contingent; but (3) If, after the words giving a vested interest, a clause is added divesting it,

the remainder is vested. d) Why do we care whether an interest is vested or contingent?

(1) VR accelerates into possession whenever and however the preceding estate ends. CR cannot become possessory so long as it is contingent. (see notes p. 65 for example)

(2) Early CL: CR was not assignable during the remainderman’s life (unreachable by creditors). Today most states allow access to CRs.

(3) At CL: CRs were destroyed if they did not vest upon termination of the preceding life estate, whereas VR were not

(4) CRs subject to Rule Against Perpetuities, while VRs are not e) Executory Interest

(1) Future interest in a transferee that must, in order to become possessory:

(a) Divest or cut short some interest in other transferee (shifting executory interest); or

(b) Divest the transferor in the future (springing executory interest) (2) Executory Interests are generally treated as contingent interests b/c they

are subject to condition precedent and do not vest until they become possessory

C. Concurrent Estates (notes p. )

1. Tenancy in Common (TIC) a) Separate but undivided interests b) Interest in descendible and can be conveyed by deed or will

2. Joint Tenancy (JT) a) English CL had presumption toward JT; all states have abolished this

presumption in favor of TIC b) Jt Ts have right of survivorship (which is NOT transferable) c) Each T owns the undivided whole of the property, and when one T dies, nothing

passes; the estate continues in survivors freed from the participation of the decedent, whose interest is extinguished

d) Four essential unities (1) Time: interest must be acquired or vest at the same time (2) Title: Must acquire title by same instrument or by joint adverse

possession (no intestate succession) (3) Interest: Must have equal undivided shares (4) Possession: Each must have a right to possess the whole. After joint

tenancy is created, one T can voluntarily give exclusive possession to the others.

e) Statutes in some jurisdictions have abolished requirement of unities f) If four unities are later severed, JT becomes TIC (no notice required) g) Reason JT exists: avoid probate process b/c technically no interest transfers h) Generally a lease is not understood to sever a JT relationship. (p. 75)

3. Tenancy by the Entirety a) Requires four unities, plus fifth unity of marriage b) Only about half of the states still have this type of JT c) Distinguished by the fact that neither partner alone can defeat the right of

survivorship by transferring the interest; must transfer jointly d) Only ended at divorce

4. Riddle v. Harmon (Severing of JT)(text p. 345, notes p. 62) a) Frances Riddle did not want the land in her JT with her husband to go to her

husband by survivorship after her death, so her attorney wrote up deeds, granting to herself an undivided one-half interest in the property and stipulating that the purpose was to sever the JT.

b) The court held that transfer to herself was valid; pointing out that rule mandating a middle man was obsolete, and arguing that transfer to self just eliminates what is unnecessary (decreasing transaction costs)

c) Query whether we have rules at all, if people can just find ways around them. If people can hire good lawyers to get them out of paying taxes, e.g., doesn’t it make the system less fair and less efficient? Response: Doesn’t mean we should not have rules; just means we should develop rules that cannot be structured around.

5. Sharing Benefits and Burdens in Concurrent Ownership

a) Each T is entitled to possession of the entire parcel, yet cannot exercise possession w/o coming into conflict w/ reciprocal right of co-T

b) Common ownership encourages inefficient use of resources c) CoT may try to recoup costs of expenditures for jointly owned property,

including taxes, maintenance, repairs, improvements (1) Must account for rents and profits received (2) Right to collect taxes, mortagage payments, up to the value of their

share in property (3) Cannot generally collect for repairs and improvements, but may be

considered in partition or accounting actions d) Spiller v. Mackareth (Al. 1976)(text p. 369)(notes p. 63)

(a) After lessee vacated jointly owned property, Spiller started using that part of the building as a warehouse.

(b) Reverse trial court’s judgment awarding Mackereth rental money for Spiller’s use of their jointly owned building. Holds that where a cotenant does not exclude other cotenants from use of jointly owned property, he is not liable for rent even where there is a demand to vacate or pay rent.

(c) If there was ouster and one T tried to keep co-owner out, T in possession would have to pay rent to ousted

e) Partition: privilege of each co-owner to transform concurrent interest into estates held in severalty

(1) Delfino v. Vealencis (Conn. 1980)(text p. 359, notes p. 64) (a) Vealancis and the Delfinos owned property as tenants in common.

The Delfinos wanted partition in order to develop the property into building lots. Trial court found that partition by sale was preferable b/c it served parties’ best interest (partition in kind would hurt Ps’ economic interests).

(b) Holding: S.C. set aside judgment for partition by sale, noting that both parties’ interests must be considered, and partition by sale would rob D of her home and livelihood.

(c) RULE OF LAW: Courts prefer partition in kind to partition by sale, except where (1) it is physically impracticable or (2) it is in the best interest of the tenants.

(d) Although the rule of law in Delfino is to prefer partition in kind, modern practice is often to decree a sale in partition actions, either b/c the parties all wish it or b/c courts are convinced that sale is the fairest method of resolving conflict.

(e) From Coasian perspective, w/o transaction costs, the land would end up in Delfino’s hands b/c he values it the most

(f) Not just an issue of fair market value when partition in kind occurs. Vealencis ends up paying for nuisance.

(2) Johnson v. Hendrickson (1946): Court held that because partition in kind would require division into four parcels, it would materially depreciate the valueof the land in terms of both salability and use for agriculture. Court gave no weight to interests of D and sons in remaining on family homestead

(3) Gray v. Crotts (1982): Court held that property was divided into four parcels and lots drawn even where one co-T argued upon partition that he should be awarded part adjacent to his home

III. LEASEHOLDS: LANDLORD-TENANT LAW A. Leasehold Estates

1. Note how lease are thought of today more in terms of K than property

rights. Discussion of bargaining power is important. 2. Term of Years

a) Estate that lasts for some fixed period of time or for period computable by a formula that results in fixing dates for beginning and ending

b) Some states have enacted limits to years c) May terminate upon happening of certain event d) If T refuses to leave, generally do not have self-help remedy to physically

remove the T. More likely recourse is seeking of court order for trespass; call police to enforce

e) No notice of termination is necessary to bring estate to an end

3. The Periodic Tenancy a) Lasts for period of fixed duration that continues for succeeding periods until

either L or T gives notice of termination b) Under CL: half a year’s notice for year-to-year tenancy; for less than a year,

notice must be given equal to the length of the period, not to exceed six months c) In case of year-to-year lease, if you’re a month late, L has option to say that

you’re on for another year, or has option to let you out. (1) If he does not let you out, you may have to pay for right to terminate.

Question is whether you are willing to pay what L is willing to accept (2) L has duty to mitigate damages

d) Notice of termination: must end lease at end of period (e.g., if lease is 1st –31st, must end on the 31st.

e) Rules are softening. CL approach is more rigid than modern tendencies

4. The Tenancy at Will (TAW) a) No fixed period – endures so long as both landlord and tenant desire; ends when

one party terminates it b) Generally requires some notice of termination (e.g., 30 days) c) By CL: if TAW gave power to one party to terminate, power necessarily was

given to both parties. Erosion of this requirement in modern law. (e.g., Garner case)

d) If L or T dies, TAW ends; generally not transferable. e) Garner v. Gerrish (N.Y. 1984)(text p. 447, notes p. 66)

(1) Issue: Does a lease which grants the T the right to terminate the agreement at a date of his choice create a determinable life tenancy on behalf of the T or does it merely establish a TAW?

(2) Court says it establishes a determinable life tenancy on behalf of the T. He can life there as long as he chooses.

5. Tenancy at Sufferance

a) Concerns holdovers. When T wrongfully remains in possession after period of lease is over.

b) L can seek ejectment or give consent to creation of new tenancy (1) If L consents, prior relationship XTs for same period originally K’d and on

same terms (2) Exception: maximum length of holdover tenancy is one year

c) Crechale & Polles, Inc. v. Smith (Miss. 1974)(text p451, notes p67)

(1) L would not agree to month-to-month lease renewal; T stayed anyway; T paid rent first month past; L accepted; T paid second month and L refused; T moved out; L sued for payment of entire year, arguing that lessor’s holdover was renewal of lease terms for the year.

(2) Court held that he could not have it both ways; cannot refuse renewal and treat T as trespasser then charge him for another year’s renewal. Key point: L had cashed checks for rent after period of lease ended; implicitly agreed to renewal.

B. The Lease (text p. 456)(notes p. 68)

1. Existence of lease

a) Arrangement resembling a lease or even declaring itself a lease may be held by courts to be something else (e.g., a license or life estate)

b) It matters b/c lease carry certain rights, duties, liabilities, remedies that do not attach to other relationships

2. Conveyance vs. Contract

a) A lease is both: transfers possessory interest in land – making it a conveyance creating property rights

b) A lease contains a number or promises (or covenants) such as promise to pay rent or promise to provide utilities – making it a K w/ K rights

c) Historically courts emphasized conveyance aspect, but increasingly are favoring contractual nature

d) Attempts to reform the “property law” of L/T and import it into modern law of K (although some find it unnecessary and counterproductive)

e) K principles relied on by courts in L/T law (1) Are covenants “mutually dependent” such that material breach by one

party excused further performance by the other party? (2) If leased premises are destroyed, is T still liable for rent? (3) If T wrongfully abandons, must L mitigate damages? (4) If warranty of quality implied in lease?

3. Statute of Frauds a) Lease for more than a year must be in writing b) Most jurisdictions allow oral K for period of less than a year

4. Form Leases and the Question of Bargaining Power a) L generally use form leases to decrease transaction costs b) Assertion that form Ks mean Ts have no bargaining power assumes that there is

no competition. T can bargain w/ L w/ better terms. c) Underlying problem is not form leases but monopoly power created by shortage

of rental housing. d) Courts sometimes police leases on basis of “unequal bargaining power”; some

say statutory reform is necessary setting out rights, duties, remedies, etc.

C. Subleases and Assignments 1. Right to Transfer

a) Generally both T and L can transfer ownership in leasehold interests b) T may not wish L to sell, but cannot have express provision forbidding sale b/c of

laws protecting right to alienate c) Lease may allow for termination if sale occurs d) T may generally transfer through sublease or assignment; default rule may

require L consent

(1) Limits to withhold consent: unless lease provides for absolute discretion, generally only reasonable reasons to withhold consent are acceptable

2. Assignment

a) Where T transfers entire interest for entirety of unexpired term to T2 b) All of the covenants and terms of the original lease now bind assignee c) Assignee T2 is now in privity of estate with L, and L can sue him d) Assignor T remains in privity of K with L, and L can sue him as well

3. Sublease a) Where T has transferred less than the entirety of his interest (e.g., shorter

amount of time, retained right to reenter) to T2 b) L and T remain in privity of estate and privity of K c) L and T2 have no privity relationship; L cannot sue T2 d) T can sue T2 e) T2 may expressly assume certain obligations under lease, creating privity, but

under vanilla sublease this would not occur f) If T wants to get off the hook, cannot sublease or assign; must convince L to

release him from the lease

4. Ernst v. Conditt (Tenn. Ct. App. 1964)(text p. 482, notes p. 70) a) The Ernsts leased land to Rogers, who entered negotiation with D for sale of

business. Lease was amended; result of which was assignment or sublet to D. D did not pay all of his rent; quit premises before lease period ended. P sued for unpaid rent, rent for following year, removal of improvements on property (as stipulated by lease).

b) Holding: Agreement created assignment of the lease. D has to pay and remove improvements (if it had been declared a sublease, D would not have had to pay)

c) Modern rule of courts is attempt to discern intent of K’ing parties d) Requiring default rule of consent forces conversation between L and T to

discuss.

5. Kendall v. Ernest Pestana, Inc. (Cal. 1985)(text p. 490, notes p. 71) a) L would not allow subleasing of airport hangar w/o increased rent and other

onerous terms. T argues this constrains alienability. L has no provision of absolute discretion w/r/t consent.

b) Court agrees with minority of jurisdictions who have held that consent may only be withheld where the lessor has a commercially reasonable objection to assignee or proposed use

c) Majoritarian default rules: set up as default what majority of parties would do in the circumstances. Reduces transactions costs; can opt out of default.

d) Should the rule apply to residential leases? (1) Massachusetts court held that there was not as great a “necessity of

alienability of residential building space” that they ought to impose on residential L a reasonableness requirement to which they have not agreed.

(2) Policy reason: create plethora of litigation about reasonableness (3) Legislatures in several states have spoken on this issue.

D. Tenant Who Defaults 1. T in Possession

a) Berg v. Wiley (Minn. 1978)(text p. 500, notes p. 72) (1) Was T wrongfully evicted from her commercial premises when she

violated terms of her lease and was locked out of the premises by her L?

(2) YES. T may recover for wrongful eviction where (1) L is not legally entitled to possession; or (2) L’s means of reentry are not peaceable. L was legally entitled to possession (b/c T breached terms) but L’s means of reentry were not peaceable.

(3) Modern trend is to require L to get order of eviction rather than resorting to self-help.

b) Court’s reasoning here would apply to all residential and commercial leases alike. Why might we want to treat them differently? (loss of home has greater psychological impact, less likely for parties to have equal bargaining power, need for immediate replacement is greater, Radin’s arguments about personal property and personhood).

c) Summary Proceedings. (1) Legislative provisions for summary proceedings are intended to be quick

and efficient means to recover possession (2) Reason to abrogate CL remedy of self-help (3) Summary eviction procedures can be time-consuming and $$$

d) Remedies available to L in addition to eviction (1) Back rent (2) Future rent in case of lease default (3) Damages for harm done to property

e) General distaste for self-help (1) Leads to violence, lack of order (2) Lack of due process (3) Court is best equipped to determine whether there was breach (4) Are there some breaches that are so clear-cut we are willing to allow L to

be judge, jury, and executioner? (e.g., Berg, where D was making undesirable modifications to property?)

(5) Should we allow T to be able to K around prohibition on L’s use of self-help (and pay lower rent)? Paternalism concerns of protection and ease of administration vs. market determinations of prices, freedom to K.

2. T Who Has Abandoned Possession

a) Clear trend is that there is a duty to mitigate damages; one instance where leases are approached from K perspective.

b) Sommer v. Kridel (text p. 509, notes p. 74) (1) D rented apt. from P; was unable to move in and sent letter releasing

interest in apt. He forfeited 2 months paid rent. Third party inquired about apt, but P denied its availability.

(2) Court held L had duty to mitigate loss by renting apt to T. c) Justifications for no obligation to mitigate (CL rule)

(1) T cannot by his own wrongdoing impose duty on L (2) T has purchased an interest in real estate and is stuck (3) L should not be forced into relationship with new T he does not wish to

accept (4) RST: law should not encourage abandonment (invitation to vandalism) by

putting duty of mitigation on L (5) Efforts on the part of L to mitigate damages by reletting may be held to

constitute unwilling acceptance of the surrender offered by defaulting T. d) Support for Duty to Mitigate

(1) 42 states and D.C. hold that L have duty to mitigate damages, at least in some circumstances

(2) Prevent waste; return property to productive use (3) Abandoned property more likely to experience vandalism

e) Burden of Proof in Duty to Mitigate

(1) Impt where burden lies: Does L have to show he satisfied the duty or does T bear responsibility to show he did not?

(2) What are reasonable efforts? f) L’s Security Devices

(1) Selection of Ts (2) Security Deposits

(a) Protects L in case T defaults in rent or damages premises; problem: L’s want to keep it

(b) Statutes: tend to limit amt, deposits must be placed in a trust or escrow acct, T’s claim to deposit is made prior to other creditors, L must pay interest on deposits,

(3) Other techniques: (a) Payment as “consideration” or “bonus” for execution of lease (b) Requiring rent in advance (c) Deposit may be characterized as “liquidated damages,” which may

be allowed when amount is reasonable (d) Rent acceleration: upon T’s default, remaining rent for the term is

due and payable (e) May try to K out of duty to mitigate in lease agreements

g) Commercial Ts and Duty to Mitigate (1) Do commercial Ts need less protection? Residential Ts may be less

sophisticated and have less bargaining power. (2) May have stronger incentive for duty to mitigate w/ commercial Ts: trying

to get assets back into stream of commerce, best interest of the community to have property rented

E. Landlord’s Duties 1. Problem of “Moral Hazard”

a) L has incentive to neglect everyday repairs b/c costs of neglect are borne primarily by Ts.

b) T has incentive to neglect maintenance, especially at end of term, b/c costs of neglect will be shifted to L

2. L’s Duties; T’s Rights and Remedies a) Quiet Enjoyment and Constructive Eviction

(1) Actual eviction: T is locked out or kept out of premises physically; T is relieved from duty to pay rent and can escape lease. T can also sue for damages (property damage, costs to move or relocate, sue for injunctive relief or court order saying L cannot prevent you from entering.

(2) Constructive Eviction: (a) Certain acts by L or failed obligations that so substantially

interfere with quiet enjoyment of the property that it justifies T abandoning premises, not paying rent, terminating lease. If you can no longer use premises for purpose you rented, it is tantamount to eviction

(b) Most courts requires that T vacate premises within a reasonable period of time if suing for breach of covenant of quiet enjoyment as proof that there was constructive eviction and the premises are not livable.

(i) Risk of leaving is of course that court will not find in your favor, and you will be held liable for the rent in the place you abandoned, and the rent under your new lease

(3) Reste Realty Corp. v. Cooper (N.J. 1969)(text p522, notes p77) (a) Where rain resulted in flooding of T’s rental premises, and T had

signed lease in reliance of promise to fix the problem, T was allowed to vacate as result of constructive eviction and was no

longer liable for rent, even where T knew of problem before signing new lease

(b) RULE: T’s right to complain of constructive eviction will be lost if he does not vacate the premises within a reasonable time after the right comes into existence.

(c) RULE: doctrine of constructive eviction; any act or omission of the landlord (or agent) which renders the premises substantially unsuitable for the purposes for which they are leased, or which seriously interferes with the beneficial enjoyment of the premises is a breach of the covenant of quiet enjoyment and constitutes a constructive eviction of the tenant.

(4) Partial eviction – actual and constructive. IF there is an actual eviction, even though from a part of the premises only, T is relieved of all liability for rent notwithstanding continued RST 2d rejects this rule and provides the T may receive an abatement in the rent but may not withhold all rent. Most jurisdictions hold that constructive partial eviction (making part of the premises uninhabitable), generally does not excuse obligation to pay rent

(5) T’s Remedies (a) For breach of covenant of quiet enjoyment, T should be able to

stay in possession and sue for damages equal to the difference between the value of the property with and w/o the breach.

(b) If breach is substantial, the T may leave on theory of constructive eviction, in which event he is relieved of any liability for future rent and entitled (presumably) to recover damages to compensate both for losses realized while in possession and losses resulting from a higher rent for equivalent replacement premises.

(6) Extent of harm required for breach of covenant of quiet enjoyment or constructive eviction is difficult. What about T with phobia of spiders? What if L had notice of phobia? Does L have obligation to remedy at all costs or merely make reasonable efforts to solve problems (i.e., is it more like negligence or SL?)

b) Implied Warranty of Habitability (IWH) (1) Under traditional CL, no implied warranties in lease. Although you could

have express warranties, there was no obligation where lease was silent. (2) Today, there is an implied warranty, particularly when it comes to

residential leases, and it is generally non-waiveable (a) Originated out of concern for protection of Ts (b) Residential lease: T is less likely to be able to K around

(3) IWH mandates adequate standard of habitability, which is considered breached if premises are considered uninhabitable by a reasonable person

(a) Person w/ Park Ave apt will have dift expectations. “Extras” are priced into rent; may have colorable claim if the spa breaks, excessive lines for treadmills

(b) Breaches in lease representations may constitute violation of IWH (c) Question best addressed from standpoint of individual alleging

inhabitability (d) Heater is broken – does this count?

(i) Health & safety concerns, cannot work, sleep, interferes w/ enjoyment of premises

(ii) L’s argument will be get wear jacket, gloves, extra blanket, space heater

(4) Remedies: (a) Termination of lease, vacate premises

(b) T stays and sues for reduction of rent, abatement (c) Withholding rent (d) T sues for damages (annoyances, discomfort) (e) Some courts have awarded punitive damages for wanton and

willful misconduct (f) T can make repairs and deduct cost from rent

(5) Why do we have IWH? (a) Protects Ts, who are largely uninformed, unsophisticated, lack

bargaining power, (b) Efficiency: Try to make law look like resulting outcome between

parties of equal bargaining power (c) Solve for negative externalities

(i) While Ts may be able to bargain for their best interests, there may be other parties involved

(ii) If fire breaks out b/c of unsafe conditions or deteriorating property decreases surrounding property value, other interests are at stake

(6) Hilder v. St Peter (Vt. 1984)(text p. 533, notes p. 81) (a) Court awarded damages to P b/c of breach of IWH. (b) Rule: Measure of damages = difference between the value of the

dwelling as warranted and value of dwelling in defective condition. T seeking compensatory damages for rent paid (and not escaping of rent liability) does not require abandonment.

(c) Damages were awarded for T’s discomfort and annoyance. T may deduct repairs made from the rent.

(d) Court concerns: shortage of safe, decent housing puts T in inferior bargaining position

(e) Court suggests that punitive damages may have been allowed, but since P did not appeal court’s denial, issue is not discussed

(7) IWH does NOT render pointless doctrines of quiet enjoyment and constructive eviction. Not all jurisdictions have adopted the warranty; not all types of leases are included

c) Retaliatory Eviction (1) Conventional CL doctrine gave L virtually unlimited freedom to terminate

tenancies w/ proper notice and to refuse to renew expired terms of years (2) Most jurisdictions today, either by statute of judicial decision, forbid

retaliatory action by L (3) Anti-discrimination laws and rent control measures may also limit L’s

freedom to terminate tenancies. F. Tenant’s Duties

1. Law of waste: a) Whenever property ownership is divided such that two or more persons have

consecutive rights to possession b) Duty is breached where T makes “such a change as to affect a vital and

substantial portion of the premises; as would change its characteristic appearance; the fundamental purpose of the erection; or the uses contemplated, or a change of such a nature, as would affect the very realty itself, extraordinary in scope and effect, or unusual in expenditure.”

c) No bright line distinguishing waste from lawful activities (1) Rumiche Corp. v. Eisenreich (1976) found no waste where T replaced

defective ceiling w/ sheetrock that did not meet code requirements, installed a light fixture and light switch, attached a wooden closet to a wall, and put a frame around the window. Dissenting opinion argued that substantial and material changes in the structure amounted to waste, particularly where at least one change was not up to code.

(2) Permissive waste: T’s implied duty to repair no longer makes sense since today’s Ls are in best position to maintain property

2. Must a T continue to pay rent after the leased premises have been destroyed? a) CL usually answered in affirmative, unless leave provided otherwise (rent is for

“interest in the soil”) b) Many jurisdictions have case law or statutes changing law to not require

payment of rent when the “purpose of the lease w/r/t/ the T was frustrated.” G. Rent Control (The Problem of Affordable Housing)

1. In response to reforms intended to increase quality of housing, many Ls increase the rent to make up for costs imposed on them by the reforms

2. Would rent controls allay this problem? Large and contentious question. 3. Chicago Board of Realtors, Inc. v. City of Chicago (7th Cir. 1987)(text p. 549,

notes p. 82) a) Chicago City Council enacted a Residential L and T Ordinance that codified IWH

and established new L responsibilities and T rights. b) Property owners brought action about constitutionality, but 7th Cir. affirmed.

Posner & Easterbrook wrote a separate opinion affirming decision but arguing that the legislation will not have desired effects

4. Different kinds of RC: a) Ceilings on rent, caps on how much rents can rise b) Passing of RC prices to heirs c) These are artificial caps (not market-driven) d) Intended to provide affordable housing, but often works out differently

(1) L may stop renting, switch property into condos for sale (2) L may reduces services and maintenance (within the housing code and

IWH) (3) May charge larger safety deposits and return more stingily (4) May try to buy out T to be able to raise price (5) More selective in choosing Ts (6) Finders fees

e) Criticisms of RC (1) RC apts often go to those who do not need it (2) Reduction in quantity and quality of housing (3) Reduced renting in short-run, and reduced investment in rental property

in the long-run (dynamic side of it) (4) Setting aside disagreements about markets, why are we forcing L to

subsidize T’s housing? (a) Why not subside L to provide more affordable housing? (b) If RC is so impt, why don’t we force controls on prices for other

impt services (food, health care, clothing, attorney fees)? We may have subsidy, but not rule that stores cannot charge more for clothing

f) Arguments in favor of RC (p. 552) (1) Economists unreliably represent the market in asserting that quality and

quantity of rental housing will decrease (2) Other values: impt non-utilitarian considerations that may “trump”

conventional analysis. RC make it possible for Ts to stay where they are. IV. NUISANCE (JUDICIAL LAND USE CONTROLS)

A. Introduction (text p. 747, 750; notes p. 83) 1. Law of nuisance is part torts (negligent or otherwise wrongful activity) and part

property (liability is for interference w/ use and enjoyment of land) 2. Nuisance law is a means by which CL judges resolve conflicting land use, with

guide that one should use one’s own property in such a way as not to injure the property of another

3. Unreasonableness a) Interference w/ use and enjoyment of land, in order to give rise to liability must

be substantial; it must also be either intentional and unreasonable, or the unintentional result of negligent, reckless, or abnormally dangerous activity

(1) Must determine whether it is substantial before reaching reasonableness factor

(2) Courts are in the business of making choices in making these determinations. Do we want courts balancing interests or is this a question for legislature?

b) Most modern day nuisance is intentional: air and water pollution, noise, odors, vibrations, flooding, excessive or inadequate light

c) Two views: either (1) threshold marking point of liability; or (2) cost-benefit analysis (whether “Gravity of the harm o/w utility of actor’s conduct” RST 2d). Which view dominates is unclear

4. Examples of Nuisance law at work a) Halfway houses: some courts have found nuisance (fear of criminal activity,

decreased property value); some have not b) Toxic waste dump: Where fear of contamination was unfounded and property

value declined, no nuisance was found c) Light and Air: No nuisance in amusement park’s interference with drive-in movie

theater (due to theater’s abnormally sensitive nature) d) Blocked light to solar panels: mixed results e) Spite: Cts commonly find nuisance liability where landowner builds structure out

of spite for neighbor f) Plain old ugly: Most courts hold that unsightliness alone does not make a

nuisance; but junkyard in residential area may be nuisance if unreasonably operated and unduly offensive.

g) Lateral and Subjacent support (p. 754) 5. Private Nuisance: Unreasonable interference in use and enjoyment of land by some

property owner. A uses land in way that interferes w/ B’s use. a) Reasonable is vague term and requires some balancing of interest b) What is the use of conduct giving rise to harm? Must look case facts

6. Public Nuisance a) Not our focus. b) Some act that interferes w/ general interest of community, or comfort of public

at large (e.g., air pollution, noise, harboring vicious animals) 7. The Balancing Act

a) Extent and character of activity (Playing stereo loudly at 1pm is different from playing it at 3am)

b) Harm (Does oil refinery kill your orchids or make you ill?) c) Social Value of harmful land use d) Suitability of the parties’ use of land in particular locality (pig farm in central MO

vs downtown Clayton) e) Burden of avoiding harm (who is least cost-avoider) f) Who was there first? g) What is social value of D’s conduct (only oil refinery in town employing half the

town’s population)

B. Remedies and Substantive Law 1. Two Main Questions

a) Who has what right? b) How is it protected?

2. Why balance interests in determining remedy? a) Argument against balancing deal with the substantial harm that is being done

to the neighbor.

b) Some courts approach the problem from substantial harm rather than looking at competing interests

c) Why do we balance in this context but not others? We do not say this man killed someone but he is really a good guy (his factory employs a lot of people, he donates $ to the church, good father, etc.). Are there different stakes involved here?

3. How to deal with nuisance cases: a) Abate the activity by granting right-holders an injunction, which they may sell

voluntarily at whatever price they choose, if they choose (Grant the neighbors right to clean air protected by property rule,).

b) Let activity continue if the factory owner pays the neighbors damages at amount set by the court. (Right to neighbors protected by a liability rule)

c) Let activity continue by denying neighbors all relief. Granting factory owner right to pollute protected by a property rule

d) Abate the activity giving rise to nuisance if neighbors pay the factory damages, i.e., the cost of ending activity. (Right to factory protected by a liability rule).

e) Which rule do we choose? (1) Transaction costs: Which will also for post-injunction bargaining? (2) Distribution costs: Do we care who pays whom? (3) Who is the least cost-avoider? Who can avoid the harm at the lowest

cost? f) Choosing a liability rule

(1) When high transaction costs may get in the way of post-injunction bargaining

(2) When there are larger social interests at stake (don’t want factory to shut down)

(3) General distribution concerns g) Choosing a property rule

(1) To decrease violence (under liability rule people may be more likely to take stuff)

(2) So we do not expend too many resources protecting our stuff (3) Hard to calculate damages under liability rules (4) Encourages investment and production

4. Estancias v. Schultz (Tex. 1973)(text p. 755, notes p. 85) a) Court found that injunction was proper remedy where air conditioning system on

complex next door to P was a nuisance. The court balanced the equities, placing great emphasis on public interest (no public benefit in allowing apts to keep that particular air conditioner)

b) If remedy had been limited to damages, presumably the D would abate the noise if it were cheaper than paying damages, or pay damages and continue with present system if that cost less.

c) Post-injunctive bargaining (1) Mechanical transaction costs are low b/c they know other party (2) Other costs include bilateral monopoly, spite from previous interaction,

endowment effect, property as personhood (Schultz may not want to leave)

d) Distributional Concerns. What if this was a group home instead of apt. bldg? What if group home does not have $ to fix the problem? Is there more public interest in protecting the group home?

e) Least-Cost Avoider. Who is it? Why would that matter? f) If Estancias has to spend $150K to prevent harm of $30K to Schultz, this is

waste of resources 5. Boomer v. Atlantic Cement Co. (N.Y. App. 1970)(text p759, notes p87)

a) P brought action against D for injunction and damages alleging injury to property from dirt, smoke and vibration emanating from the plant, which reduced property value

b) P was awarded an injunction with the option for the injunction to be vacated if Cement Co agreed to pay permanent damages to P. LIABILITY RULE PROTECTION. Problem with the court setting damages is that it may not properly determine value.

6. Spur Industries, Inc. v. Del E. Webb Develpmt Co. (Ariz. 1972)(text p. 766, notes p. 88):

a) Development company built next to existing feedlot found to be a public and private nuisance (out of no personal fault except that neighbors moved in surrounding the area); development company had to indemnify Spur for relocation costs

b) “Coming to the nuisance” as defense (1) P should have assumed the risk. If you came to the nuisance, you were

in the best position to solve the problem (a) Don’t come (b) Do certain things to your property to mitigate the interference

(2) P interfering w/ D’s property, too. Idea of reciprocity. The only reason there is a feedlot problem is b/c of the neighbors; only reason there is a neighbor problem is b/c of the feedlot.

(3) If you came to the nuisance, you have already been compensated by paying a lower price (or at least having the opportunity to pay a lower price if you negotiated for it.

(4) Idea that first in time justifies use of land c) What does coming to the nuisance even mean?

(1) It is a consideration, but NOT DISPOSITIVE in determining remedy for problem.

(2) What if the cement factory expands? Did I come to the nuisance if I did not mind the small factory and did not know it would expand?

(3) What if I knew that people who have cows generally also have horses and sheep? Should I assume that the cattle rancher will eventually expand his ranch?

(4) What if I already owned the land, the rancher comes in, and then I decide to build a house?

(5) Answer to the question looks at both the parties’ expectations and the expectations of a reasonable person.

V. SERVITUDES (PRIVATE LAND USE CONTROLS)

A. Introduction 1. Generally private land use agreements involve two or more parcels of land, where

the purpose is to increase the total value of all the parcels involved. Generally the effect of the agreement is to burden one parcel of land for the benefit of another.

2. Law of Servitudes: a study of how urbanization and market demands for efficient control of externalities swept around the artificial barriers limiting one form of servitude and forced courts to recognize and develop other forms.

B. Easements 1. Definition: An interest in land (not just contractual relationship or right) that

consists of the privilege to use land by a person who is not the owner (e.g., a right of way to cross someone’s land, electric companies right to place lines over real property)

2. Types of Easements

a) Easements Appurtenant: Benefits the owner of the easement by allowing use of land (e.g., allowing neighbor to cross your property to get to an access road)

b) Easements In Gross: benefit the holder of the easement w/o regard to whether the holder of easement owns any parcel of land (e.g., right to bicyclers to ride on your property)

c) Presumption if there is ambiguity is to find an easement appurtenant. 3. How easements are created

a) Express agreement. b) Estoppel: where one party has reasonably reliance on his privilege to use the

land c) Prescription (analogue of adverse possession)

(1) Actual use (court tend to relax this requirement in the sense that the same particular path doesn’t have to be exactly the same, as long as it is substantially the same pathway. This is different from AdPo, where you cannot claim a beach house by using different area of land.)

(2) Exclusivity (courts tend to relax or excuse this standard, reflecting the reality that of the situation where other people could be making use of this pathway. Meaningfully scaled back as compared to AdPo)

(3) Open and Notorious (same requirement as in AdPo. Difficult question: What if the pathway is in the forest? What if you use it at night? What if it is in an undeveloped area? What if you don’t use it every day?)

(4) Continuous (the use has to be continuous, with no substantial interruption in use. Doesn’t mean you need to walk back and forth incessantly; just used continuously in a way a normal owner would use)

(5) Adverse and Hostile (If you are using it with permission, doesn’t count as adverse and hostile. Idea of gate – could either be implicit permission or trying to keep someone out.)

(6) Must make use of period for relevant period (Statute of limitations for owner to bring action for ejectment).

d) Implication: Necessity (notes and diagram p. 94) (1) Used to be united as one piece of property (2) Must be strictly necessary, not just useful or convenient (3) Necessity had to exist at time of severance of parcels (usually occurs

when parcel of land becomes landlocked) (4) We allow easements by necessity for efficiency (land cannot be put to

most productive use if it is landlocked) and intent (did seller really intend land to be landlocked? With the kickback, of course, that if it was not intended it should have been in the deal)

(5) Some states loosen requirements for necessity by statute, allowing condemnation under judicial proceeding for portion of land for easement, and requiring payment of damages to owner

e) Implication: Prior existing use (notes and diagram p. 94): (1) Dominant and servient tracts must have originated from common grantor (2) At the time the tracts were separated, one tract was used to benefit the

other (quasi-easement) (3) The use must be apparent, continuous, and reasonably necessary for the

enjoyment of the dominant tract 4. Easement Distinguished from License

a) License is oral or written permission given by occupant of land allowing licensee to do some act that otherwise would be a trespass.

b) License is revocable whereas easement is not. c) License can become irrevocable under rules of estoppel

5. Holbrook v. Taylor, (Ky. 1976)(text p. 791, notes p. 92) a) Court found Taylor had an easement through estoppel where Holbrook watched

him develop his property using H’s roadway until H blocked off the road to keep T from using it.

b) Estoppel depends on reasonable reliance. When party has relied on a license and in reliance has made substantial investments, there is an easement by estoppel.

c) Not clear who would have been the least-cost avoider in this case. Maybe we want a rule that forces the discussion between the two.

d) Here the Taylors paid all of these litigation costs to avoid paying the fee of $500 requested by the Holbrooks. Sometimes it makes more sense to pay a small fee that to risk the uncertainty of litigation: what if you are wrong?

6. Van Sandt v. Royster, (Kan. 1938)(text p. 796, notes p. 95) a) Court found an easement implied from prior existing use where sewer lines

had been constructed underneath land eventually sold to P, arguing it would have been easy for P to find out about the easement. It was apparent, even though it was not visible.

b) Considerations included how costly it would be to avoid the use, extent to which the use is necessary, notice.

c) The reason we do not require dominant tenement to make payment to the servient tenement when we find there to be an easement from prior use or implication is that we assume this factor was priced into the purchase.

7. Othen v. Rosier, (Tex. 1950)(text p. 802, notes p. 96) a) D built levee which flooded pathway used by P b) No easement by necessity b/c the parcel of land was not landlocked; use of

easement was merely convenient c) No easement by prescription b/c P had permission to use the pathway d) Where A acquires a prescriptive easement over O’s land, should A have to pay O

damages? (1) YES: Allowing persons to acquire prescriptive rights w/o compensation

has no justification. (2) NO: Prescription protected a long use or possession against largely

unmeritorious claims of an “alleged owner”; rule reduced litigation; land use historically has been favored over disuse

e) Public Prescriptive Easements (1) Long continuous use by public under claim of right. Landowner must be

put on notice, as well as other requirements of prescription. (2) Every year Rockefeller shuts off private street to vehicles and pedestrians

for one day to prevent acquisition of permanent right of way in the street f) Beach Access

(1) Prescriptive easement doctrine has not been notably successful in providing public access, largely b/c most courts presume that public use of beaches is w/ permission of owner and burden of proving adverse use cannot be proven

(2) Some lawsuits have been successful (3) Idea of “customary rights”: uses that existed so long that “the memory of

man runneth not to the contrary” 8. Brown v. Voss (Wash. 1986)(text p. 833, notes p. 98)

a) Scope of Easements: black letter law – you cannot extend the scope of an easement to get to non-dominant property.

b) Although there is no increase in burden to D if P uses easement to reach not only the original dominant estate but a subsequently acquired parcel, there is misuse of the easement, but the proper remedy is not an injunction.

c) Dissent: Misuse of an easement is trespass, and appropriate remedy for continued trespass is an injunction.

d) What if dominant tenement wants to divide her land into 100 subdivision tracts? Will each be allowed to use the easement?

(1) RST 3d: “the holder of an easement … is entitled to use the servient estate in a manner that is reasonably necessary for the convenient

enjoyment of the servitude. The manner, frequency, and intensity of the use may change over time to take advantage of developments in technology and to accommodate normal development of the dominant estate…”

(2) What may be abnormal at one time may become normal at a later time e) The location of an easement cannot be changed by the servient owners w/o

permission of dominant owner (established rule). RST 3d Comment grants servient owner the right to change the location at his own expense if the change does not lessen utility of easement or burden owner of easement in use.

9. 4 Ways to Terminate Easements a) By agreement in writing by the parties b) By terms of the grant c) By merger d) By abandonment (but much engage in conduct showing abandonment; non-use

is not sufficient proof)

C. Covenants 1. Covenants in General

a) Landowner turned to law of K seeking judicial recognition of K right respecting land use enforceable not only the promisor landowner, but against his successors in title as well.

b) Why put restrictions on land? (1) If you own all of the land, you are able to maximize the value of the

entire tract while using it for the purposes you choose (2) Bargaining among neighbors allows for the same minimization of harmful

impacts arising from conflicting use. (a) Bargains are only likely to be struck if successors are not bound to

the agreements made (b) K right is not enough: need a property right that is enforceable

against people beyond original promisor and promisee.

2. Covenants Enforceable at Law: Real Covenants a) K based: actual written agreement b/t owners of the properties b) Cannot arise by estoppel, prescription, implication, etc. c) Requirements to Run with the Land (examples in notes pp. 101-03)

(1) Intent for burden to run with the land. Can usually determine by looking at K.

(2) Touch and Concern. Must benefit or burden the property itself, not a person.

(3) Privity: (diagram notes p. 101) (a) Horizontal: A and B must have mutual interest in same land.

(i) Requires some sort of privity of estate b/t original K’ing parties.

(ii) Party must have some original interest in the land (grantor/grantee relationship; L/T relationship, concurrent owners, dominant/servient tenement)

(b) Vertical: runs w/ estate in land (not to adverse possessor) (i) Classic view – successor-in-interest had to take entire interest

of successor’s property. (ii) Standards have softened.

(4) For benefit to run with the land, need only VERTICAL privity. (5) For burden to run with the land, need BOTH. (6) RST: Draws a distinction between affirmative and negative easements

(a) All negative covenants run

(b) Affirmative covenants run only w/ vertical privity (e.g., not to adverse possessors)

3. Covenants Enforceable in Equity: Equitable Servitudes

a) Requirements to Run with the Land (1) Intent (2) Touch and Concern (3) NOTICE (replaces requirement of privity)

(a) Actual: (b) Constructive: Whether successor knew or should have known of

the restriction. Gets at the idea of land records, which are filed w/ country recording office.

(c) Inquiry: Had you looked around the neighborhood, you would have known that there were limits to the use of property.

b) Doctrine of Implied Reciprocal Servitudes (1) Where a common grantor develops land for sale in lots and includes a

common scheme or plan of restrictions on each of the parcels for the benefit of all the parcels.

(2) Grantees acquire by implication the right to enforce the same restrictions on the lots retailed by the grantor subsequently sold w/o restrictions to a purchaser w/o notice of restrictions.

c) Tulk v. Moxhay, Court of Chancery, England (text p864, notes p104) (1) In P’s deed of conveyance, he designated that the land around Leicester

Square never be changed from its open state. D acquired property from Elms, who had acquired it from P.

(2) Injunction was granted to restrain D from converting or using property for any purposed other than that to which P originally designated.

(3) Assumption that the price D paid for the property reflected the restrictions on it. D cannot be allowed to benefit from discounted price and then violate K.

4. Creation of Covenants

a) A real covenant must be created by a written instrument signed by the covenantor. (Cannot arise by estoppel, implication, prescription).

b) An equitable servitude may be implied in equity under certain limited circumstances, but cannot be obtained by prescription, since equitable servitude arises out of promise.

c) Sanborn v. McLean (Mich. 1925)(text p870, notes p 105) (1) Facts: Subdivision planned to be strict residential area. McLeans started

to erect a gasoline filling station at the end of their lot and were enjoined by decree from doing so.

(2) Holding: B/c D’s lot was burdened by this negative easement from past owners, D remained burdened. Although D was told the lot was unrestricted, the court holds that D should have known (strictly uniform residence character, inquiry into the fact would have made it known, etc.)

d) A majority of courts imply negative restrictions, as done in Sanborn v. McLean. A few jurisdictions take the Statute of Frauds more seriously

(1) CA: equitable servitude must be created by a written instrument identifying the burdened lot and it will not be implied from the existence of restrictions on other lots.

(2) MA: Covenants will not be implied form a general plan, but if the covenants on the burdened lot are in writing a general plan may be used to show that the neighbors in the subdivision were intended as beneficiaries and may enforce the covenants

5. Touch and Concern a) Neponsit Property Owners’ Association, Inc. v. Emigrant Industrial

Savings Bank (N.Y. 1938)(text p875, notes p107) (1) Expanded meaning of touch and concern. A provision requiring

landowner to pay fixed sum of $ was found to touch & concern the land. (2) Found privity of estate existed, in substance if not in form, b/t P and D.

When P association was formed, property owners looked to organization as the medium through which enjoyment of their common right might be preserved equally for all.

b) Why does Touch & Concern matter? (a) One might think that restrictions that touch and concern the land

are important are that they are agreements that are likely to go to greater value of the parcels.

(b) Might make sense for covenant to run with the land, because there is no need for landowners’ to incur transaction cost of negotiation over and over. (Large number of people = higher transaction costs).

(c) Most of the time that’s majoritarian preference. We’ll make that the default rule. If people do not like that they can K around it.

(2) Touch & Concern: Affirmative Covenants (a) No problem enforcing negative covenants directly affecting uses to

which the land can be put (b) Courts have been wary of enforcing affirmative covenants against

successors (i) Reluctant to issue order to perform series of acts requiring

continuing judicial supervision (ii) Enforcing an affirmative covenant, which requires the

covenantor to maintain property or pay $ may impose large personal liability on a successor

(iii) Affirmative obligation unlimited in time resembles feudal service or perpetual rent.

c) Pros of Touch & Concern (1) Wards off economic inefficiencies (decreases transactions costs by

assuming that future parties would have agreed to the same terms) (2) Permits courts to allocate efficiently the burden between the promisor

and his successor and the benefit between the promisee and his successor

(3) Checks against externalities, inadequate foresight, and intergenerational imposition

d) Cons of Touch & Concern (1) Denies original parties their contractual freedom by subordinating their

desires to the interests of future 3d parties (2) Produces high transaction costs when the servitude is created, b/c of

unpredictability e) RST 3d on Touch & Concern (text p. 885-86)

(1) “Supercedes” the touch & concern requirement w/ other tests for enforceability against successors.

(2) Drafters believed that decision labeling a servitude as failing to touch & concern the land frequently means that the servitude should not be enforced b/c of events taking place after the servitude was created, not that the servitude was invalid and its inception. RST therefore provides separate grounds fro refusing to enforce a servitude at its inception and for refusing to enforce servitudes on account of subsequent events.

6. Termination of Covenants a) Methods of Termination

(1) By Common Ownership: benefited and burdened property come under same owner

(2) Release: Parties agree that burdened party is released (where there are increased number of parties, this negotiation becomes more difficult)

(3) By its own terms: is limited in duration (e.g., covenant ends at particular date or under particular condition)

(4) Abandonment: idea of estoppel, the general idea that the P pay be violating the covenant himself, or that P may be allowing others to breach the covenant w/o bringing cause of action; if P has allowed D to invest substantial resources in reliance of covenant not being enforced

(5) Changed Circumstances: As a result of changed circumstances, covenant is no longer enforceable.

b) Western Land Co. v. Truskolaski (Nev. 1972)(book p911, notes p109) (1) Although area had become more trafficked, restrictive covenant limited

property to single-family residences was still enforceable (could not build supermarket in a subdivision) b/c single family residential character of the neighborhood had not been adversely affected and covenant was still of real and substantial benefit to residents.

(2) No bright line rule for determining whether the covenant still served a significant purpose, just evaluates circumstances. No express balancing as there is in nuisance, just looking at substantial benefit from view of intended covenant beneficiary.

c) Rick v. West (Westchester County 1962)(text p916, notes p 110) (1) P wanted to sell land to a hospital, but D would not allow release from

covenant limiting it to residential use. P sued, claiming covenant was no longer valid b/c of change of conditions, but court held for D and enforced covenant.

(2) Classic Hold-Out problem. Why might she not want to sell? (a) Transaction costs (b) Bilateral monopoly (c) Spite (d) Radin’s idea of property as personhood. West may have personal

idiosyncratic value to the land such that no amount is worthwhile for her to sell

(e) Might not want to move (f) Endowment effect: value it more once you have it.

(3) Court makes it clear that they do not care about changed circumstances, stressing the importance of freedom to K

(a) Only enforcing covenants when it is socially beneficial to do so takes away certainty allowing individuals to rely on right to K

(b) If courts can come in and rewrite agreements, it provides a disincentive to striking bargains

(4) Court protects West’s rights with a PROPERTY RULE

VI. ZONING (LEGISLATIVE LAND USE CONTROLS) A. Background

1. Zoning a) Government has power to regulate, which is exercised in part through zoning

(definition: process of setting up zones that identify that the property is to be used or NOT used for certain purposes)

b) Difference set of concerns in zoning b/c of the different relationship between government and private citizens

c) Government has power to unilaterally regulate your use of property, which is significantly different from private citizens forming covenants and easements

2. Need for Zoning/ Problems with Use of Covenants Exclusively a) Enforcement b) Transaction costs c) Third party effects may be unaccounted for when setting up covenants; zoning

may take into account a broader set of interests

3. Need for Zoning / Problems with Use of Nuisance Law Exclusively a) Certainty: zoning precisely lays out rules, reducing risk of making investment

and developing; easier to order your affairs if you know of restrictions b) Administrative/ judicial efficiency: puts undue strain on enforcement

mechanisms. c) Zoning is preventive (whereas nuisance is after the fact) d) Zoning does not rely on court’s efforts to balance the equities. May prefer to

have legislative bodies making decision about what is in the best interest of the community, rather than courts

e) Zoning does not rely on private individuals to enforce the claim in the way that nuisance does; also relies on individuals to bring suit, many of whom do not for reasons of expense, timeliness, and that it requires too much effort

f) Hard to tell what will be considered a nuisance (b/c nuisance results as an interaction of two property uses). There are some things that may not be a nuisance that we may want to prohibit by zoning laws.

g) Defense of coming to the nuisance does not necessarily mean that we want the factory to be there

4. Arguments against zoning

a) Constitutional arguments (although, zoning ordinances are routinely upheld in the face of takings allegations, especially if they are controlling nuisance-like conditions or so long as they leave the property owner w/ some reasonable use)

(1) More about this with regulatory takings (2) Restrictions of the way you use property can amount to a takings

b) Zoning = taking of property w/o just compensation c) Zoning responds to special influences. Corruption is a large part of the process

(e.g., large gifts from private corporation) influences decisions, rather than looking to best interest of all citizens

d) Zoning works unfair distribution of wealth e) Zoning promotes economic and racial segregation

5. Euclidean Zoning (not all zoning is Euclidean) a) Important S.C. case held that zoning was constitutional (Village of Euclid v.

Ambler Realty Co.) in 1926 to maintain public safety, health, and welfare b) In a given zone, a lighter use than the one zoned for is generally allowed

(commercial zones can be used for all residential purposes; industrial zones can be used for residential and commercial purposes)

(1) Highest use = residential (2) Lowest use = industrial (3) Does NOT refer to economic value; generally industrial use is more

valuable than residential

6. Zoning is virtually universal in metropolitan areas of the US, where more than 97% of cities having population over 5K employ it. Of cities with over 250K population, only Houston has not enacted a zoning ordinance.

B. Structure of Authority Underlying Zoning

1. Enabling Legislation a) Generally police power resides in the state

b) Enabling acts have delegated zoning authority to local governments c) Standard State Zoning Enabling Act: was adopted at one time or another in all

50 states and is still in effect (w/modifications) in many of them (1) Empowers municipalities to regulate and restrict height, number of

stories, size of buildings and other structures, % of lot that may be occupied, size of yards, courts, and other open spaces, density of population, location and use of buildings, structures, and land for trade, industry, residence, or other purposes

(2) Regulations must be “made in accordance w/ a comprehensive plan and designed to”:

(a) Lessen congestion in the streets (b) To secure safety, promote health and general welfare (c) To prevent overcrowding of land, (d) To provide adequate light and air (e) To avoid undue concentration of population (f) To facilitate the adequate provision of transportation, water,

sewerage, schools, parks, and other public requirements d) Zoning boards derive power from state legislatures. e) Process of Zoning

(1) Some enabling act (statute, etc.) (a) Authorizes cities to zone (b) Authorizes cities to create local administrative agencies to create

zoning (e.g., planning commission, zoning commission) (2) Passing of Zoning Ordinance

(a) Says what kinds of uses properties can be put to (b) Creates planning commission to administer the ordinance

(approving or disapproving proposals for new developments) (c) Creates comprehensive plan

(3) Proposer can appeal ordinance if it displeases him (a) Board of appeals in the city (b) Can go to court (c) Can get administrative remedies (d) Have to argue that the decision was capricious, violated

constitutional rights, etc.

2. The Comprehensive Plan (text p. 972) a) Statement of local govt’s objectives and standards for development, usually

made up of maps, charts, and descriptive text b) Shows in a general way the boundaries of height, area, bulk, and use zones, and

the location of streets, bridges, parks, etc. c) Based on surveys and studies of the city’s present situation and future needs,

the idea being to anticipate change and promote harmonious development d) Only about half of the states require comprehensive plans, and sometimes only

in the weakest of terms. e) Judges have been easygoing about comprehensive plans requirements, zoning

regulations inconsistent with plan are ok if they are considered reasonable and in the public interest

(1) Judicial skepticism about planning enterprise (2) Future is too unpredictable for long-term planning; short-term and mid-

term plans with flexibility are a better approach (3) Future is not only unpredictable but local authorities have limited capacity

to control it

C. The Non-Conforming Use 1. Definition: Lawful, preexisting use used prior to the adoption of the zoning

ordinance that does not comply with the subsequently adopted zoning requirements. a) Use, although previously lawful, is no longer so b) As a result of non-compliance, will have to change use or shut down so whatever

it ends up doing will not be the preferred use (and probably not the most efficient use, assuming it was being used in the most efficient manner)

2. Amortization:

a) Period of phasing out use (limited to actual current use of property; no need for amortization for something you hoped or planned to do)

b) Addressed the concern that the taking of this stick of out my bundle may result in an illegitimate taking; can keep all of the sticks for a while

c) Reasonable amount of time for amortization period may depend on: (1) Nature of the use (2) Amount of investment owner has made in the property (3) Number and kinds of improvements that have been made (4) Public detriment caused by the use (5) Character of the surrounding neighborhood (6) How long will it take to amortize or depreciate the useful life of the

investment (the fiction we engage in, an accounting principle, that at the end of the period there is no useful life left for the purposes of an accounting fiction)????

3. Arguments that you should retain right to engage in the activity

a) You are doing it now b) Vested right: proposed use might be protected under this doctrine if sufficient

commitments have been made in reliance on existing zoning requirements that are changed in a way that invalidates proposed use (rules vary depending on jurisdiction)

c) Estoppel: govt should be estopped from prohibiting me or my use or my property once I have made a reasonable investments on reliance on previously existing permission for use

(1) Developer cannot rely on a permit unless he proceeds in good fatih, making all the inquiries as to the permits validity as are expected of a reasonable person

(2) Parkview Assocs. v. City of New York (1988)(text p. 984): Where Dept of Bldg erroneously issued a permit for a 31-story bldg in a 19-story district, developer’s estoppel claim was rejected b/c he should have used reasonable diligence to learn the existence of limitations. (Parkview was required to remove top 12 stories at cost of $1 million)

4. Alternatives to Amortization

a) At some point the use will go away anyway, why not just ignore it? (1) It could take decades or it might never happen; may just pass down from

owner to owner. This option may be desirable if, for example, you are the only gas station in an area that is zoned purely residential. No competition is allowed in after the zoning.

(2) Non-conforming use runs with the land. b) Forbid maintenance and repair (the community may believe that the proprietor

will give up if he cannot maintain the property, but may instead end up with shabby NC uses)

c) If owner terminates use, NC use is terminated (1) Question of what is required for abandonment: stopping for two years?

Mothballing (setting aside while you decide what to do)?

(2) NC use generally cannot be expanded or changed, although some jurisdictions allow small changes due to increased demand, etc. (p. 980)

(a) Toys R Us v. Silva (1996): Where zoning ordinance provided that either abandonment with intent or discontinuance of the NC use for two years forfeited NC use status, warehouse lost NC status when deal for sale fell through and only a small amount of goods were transferred back into the warehouse after 19 months

(b) Stokes v. Board of Permit Appeals (1997): Owners of gay bathhouse which closed at the beginning of the AIDS epidemic and remained vacant for seven years were held to have intentionally abandoned the NC status when the filed application to convert bathhouse into a homeless shelter

d) Destruction of NC use (by act of God or otherwise) generally terminates it

5. Key Question: To what extent have the parties’ expectations been frustrated? a) Reasonable investment backed expectations (RIBE) are key. These

expectations generally define our property interest b) Future rights vs. current rights (notes p. 117)

(1) If A bought lot for $50K; B bought lot for $10K plus invested $40K; and a change in zoning scheme makes A’s land worth $10K, and B can no longer engage in the business in which he has invested. Each has lost $40K, but only B has a good takings claim

(2) Why treat them differently? (a) Expectation and reliance interests (B made an investment rather

than retaining undeveloped land) (b) Incentives for production and investment (c) Endowment effect: once I have invested and built a business I

have a stronger attachment to it (d) First-in-time (first to build)

(3) Why NOT treat them differently? (a) Is there really a meaningful difference between A and B? A has

lost the same amount of money (b) Perhaps A knows best when the right time for A to invest would

be; perhaps it is in the best interest of society if he waits until the proper time

(4) Who should bear the risk? (a) We engage in risks all the time (market demands, economic

stability); why shouldn’t both A and B assume this risk? (b) To what extent should risk of regulation be assumed? Does this

mean that the entire line of jurisprudence goes to the wayside?

6. PA Northwestern Distrib, Inc. v. Zoning Hearing Bd (text p965, notes p115) a) Facts: Adult bookshop opened and four days later Zoning Bd. posted public

notice of intention to amend the zoning ordinance to regulate “adult commercial enterprises,” providing amortization period of 90 days

b) Holding: Amortization is NEVER sufficient to remedy the constitutional concerns of takings (Concurring opinion believes that 90 days is insufficient, but that per se classification of amortization periods as unconstitutional is wrong).

(1) Majority: Problem with amortization is not that it undercuts the zoning scheme, but that there is a competing interest of property rights that must be taken into account; amortization does not solve the takings problem

(2) We should not ask someone to forfeit his property in order to serve some other good.

c) Is the City stuck with the bookshop? Not necessarily

(1) Can buy them out (2) Use Eminent domain to condemn the property for “just compensation”

D. Variances and Special Exceptions

1. In General a) Different safety valves to what zoning ordinances and comprehensive plan

expressly allows b) Allows flexibility to allow for better decisions for the community (although having

flexibility and allowing exceptions also leaves room for more corruption).

2. Variances a) Administrative agencies at the local level can impose reasonable conditions on

granting a variance to an owner after the fact so long as it does not have too much adverse impact; the board CANNOT limit the variance to the original owner; it must run with the land

b) Two categories (p. 992) (1) Use Variance: Right to use the area in a way not allowed (2) Area Variances: Exceptions as to lot size, frontages, etc.

c) Burden of proof is greater from use variance than for an area variance d) Hertzberg v. Zoning Bd. of Adjustment of Pittsburgh: Appellant was seeking an

area variance for a “lodging house” of about 3400 square feet in area where lodging houses were permitted only if there were at least 5000 square feet. Lodging house was to be used for up to 20 resident women suffering from emotional disabilities with basic needs, counseling, and life skills training. Court treated case as one involving area variance, but dissenting justices saw it as a “disguised use variance.”

e) Changing burden: Some jurisdictions require “unnecessary hardship” for use variances but only “practical difficulties” for area variances. Different burden may not mean much; judges tend to look at the same factors:

(1) Unnecessary hardship test: (a) Land cannot earn reasonable return w/o variance (b) Owner’s plight results from unique circumstances and not general

neighborhood change (c) Granting variance will not alter character of neighborhood

(2) Practical Difficulties Test (a) Whether property can earn reasonable return w/o variance (b) Whether variance is substantial and would have significant impact

on the neighborhood and on provision of govt services (c) Whether method other than variance might serve (d) Whether variance would be consistent with the spirit and intent of

the zoning ordinance

3. Special Exceptions: a) Uses contemplated by the zoning ordinance itself b) e.g., hospitals in residential areas, gas stations in light commercial area c) Things residents want but are monitored to a higher extent d) Different practices under the theory

(1) Effort by zoners to use special exceptions as essentially discretionary device (Zoners have leverage over applicants, inviting abuse)

(2) Reduces discretion by listing detailed criteria. If proposed use meets criteria, exception must be granted (p. 999)

4. Differences between Variances and Exceptions: a) Variance: administratively-authorized departure from the terms of the zoning

ordinance, granted in cases of unique and individual hardship in which strict application of the terms of the ordinance would be unconstitutional

b) Exception: Use permitted by the ordinance ina district in which it is not necessarily incompatible, but whether it might cause harm if not watched.

5. Commons v. Westwood Zoning Bd of Adjustment (text p985, notes p118))

a) K’or wanted to buy P’s lot on the condition that he could build a one-family residence, which required a variance b/c of zoning requirements for one-family residences to be located on lots w/ frontage of at least 75 feet and on area of 7500 feet. Zoning board thought this house would impair value of neighborhood b/c it would be aesthetically displeasing.

b) Reversed denial of variance, remanded for clearer finding of facts. c) Holding: A variance should be granted where the strict application of the zoning

ordinance would result in undue hardship on the developer of the land. P must also show that allowing the variance would not substantially impair the public good and undermine the zoning plan or ordinance.

(1) Did he try to remedy the problem? Did he ask the neighbors if he could buy portions of their land?

(2) Was this a self-imposed problem?

6. Coasian Bargaining in Zoning Schemes a) If a person was issued a variance, and the neighbors preferred that he did not

build, they could try to buy him out. (Right to vary, protected by property rule) b) Transaction costs: lawyers, negotiation costs, bilateral monopoly, spite,

endowment effect, budget constraints, free rider problems (may be solved in a situation like this, by norms, customs, fear of not being invited to dinner)

c) Generally do not see a liability rule for these rights, but if we did… (1) Court would say that you have the right to vary unless the neighbors pay

a judicially determined price. (2) Price might be the value of property with the variance issued, since if the

neighbors had financed the acquisition and were willing to buy it at market price with the variance or more, the neighbors may value the variance NOT issuing more than the property owner values the variance issuing.

(3) Liability rule avoids problem of bilateral monopoly, but does nothing to address the free-rider problem to figure out how to get people to pay

(4) LR forces sale – left with problem of determining price. (5) LR could work the other way and grant the variance if the buyer paid

damages to the neighbors.

7. What constitutes practical difficulty or unnecessary hardship? (p. 992) a) Aronson v. Bd. of Appeals of Stoneham: existing violations cannot be made a

basis for further violations; “Hardship” does not include personal infirmity b) Crossley v. Town of Pelham: holding irrelevant hardships that are a product of

personal circumstances

VII. EMINENT DOMAIN AND TAKINGS A. Eminent Domain (text p. 1093, notes p. 119)

1. Definition a) Power of the govt to force transfers of property from owners to itself b) 5th Amendment recognizes this right “… nor shall private property be taken fro

private use w/o just compensation.” c) Two key phrases in the Takings Clause: Public Use, Just Compensation

d) Govt taking property w/o just compensation is problematic b/c it deals with the relationship b/t citizens and the state, which is dift from relationships b/t private individuals. Runs afoul of idea of property rights, civil and economic liberties if govt can take your property at any time.

2. Power of ED: Sources and Rationales

a) To explain taking (not just compensation): Sovereign states had original and absolute ownership of property; individuals were granted land by the state, and the state implicitly reserved the right to resume ownership (Grotius and Pufendorf)

b) Remnant of feudal tenancy c) Inherent attribute of sovereignty necessary to the very existence of govt

3. ED as a Liability Rule a) If there is sufficient public use, and if the govt is willing to pay just

compensation, I have to allow them to buy it (essence of a liability rule)

4. Limits on the Govt’s Power to Take a) Has to be for public use: otherwise I do not have to sell, b) Public Accountability c) Limited funds, requirement of just compensation

5. Posner on the Power to Take a) Functional justification for taking power, stressing efficiency b) ED necessary to prevent monopoly and hold outs. c) For uses such as railways, people may be tempted to hold out on selling right-of-

way (bilateral monopoly problems), resulting in increased prices in RR services d) Land that would have been more valuable to a RR than to its present owners will

remain in existing, less valuable uses, which is inefficient e) Where there are high transaction costs (large number of people involved,

bilateral monopoly concerns resulting in failed deal), the court must shift resources to more valuable use b/c the market by its nature is unable to perform this function in those settings

6. Concept of Public Use

a) Hawaii Housing Authority v. Midkiff (U.S. 1984)(text p. 1098, notes p. 120) (1) Few landowners owned majority of land; state claimed it was in its best

interest to divide the land since it skewed state’s residential fee simple market, inflating land prices and injuring public tranquility and welfare.

(2) Legislation created mechanism for Hawaii Housing Authority (HHA) to condemn residential tracts and transfer ownership of the condemned fee simple to existing lessees.

(3) S.C. found that the state’s goal of regulating oligopoly and evils associated with it is a classic exercise of state power, and that the Act’s approach to dealing with the problem is rational way to correct market failure. The act was found to be constitutional b/c it met the public use requirement, which was found to be coterminous with the scope of the sovereign’s police powers. The govt did not have to use the property it takes; the purpose must merely pass scrutiny of the public use clause

(4) So long as the state’s actions are rationally related to the public purpose articulated, the S.C. says it will not second-guess the legislative determinations of benefit to the state

(5) BROAD INTERPRETATION, JUDICIAL DEFERENCE b) Under Midkiff, would a program taking cars (w/ just compensation) from each

family in Ladue to give to each family in East St Louis be constitutional?

(1) No, no public use. (2) Yes. It would benefit the public for ppl in ESL to have cars (transportation

allows people to get to work more easily, helps economy, etc.). We should defer to legislature as best decision maker.

(3) What is the difference? Why can you take land for redistribution but not cars?

(a) Limited amount of land (b) HI legislature was attempting to correct market failures and solve

monopoly problems, whereas the problem here relates to distribution of wealth

(4) Why should we solve through the supply side? If car redistribution is framed as someone who has an asset demanding a price that another person is unwilling or unable to pay, is the car distribution so different from Midkiff?

c) Do we want courts to be in the position of engaging in analysis of market structures, fair price, etc. in determining whether public use standard is satisfied or should they defer to the legislature on these issues?

d) Public Use Test (1) Narrow definition: actual use or right to use the condemned property by

the public (2) Broad definition: advantage or benefit to public (3) Type of definition used varies by jurisdiction

e) Poletown Neighborhood Council v. City of Detroit (text p1108, notes p122) (1) Site for GM assembly plant in Detroit, Michigan, was condemned by City,

and residents complained it would be for private, not public, use. (2) Court ruled it was for public benefit, since it would be used to alleviate

and prevent conditions of unemployment and fiscal distress (3) Dissenting opinions: Differentiates this instance from slum clearances.

Here, transfer to GM was not incidental to the taking. Only through use of property by GM is the “public purpose” achieved. Thus, economic benefits of the project are incidental to the private use of the property. Decision severely jeopardizes the security of all private property ownership.

(4) Concern in Poletown: effect is taking private land and giving it to another private entity

(5) What if this had been a well-off community and the private land was desired for a third shopping complex in five years?

(a) Developer’s Arguments: Deference to local authorities decision that there is public use b/c of improvements to the economy, increased jobs, shopping, restaurants, etc. There will be more employment, increased tax-base, increased entertainment, economic benefits, happier people, etc., all of which speak to public use

(b) Arguments of Property Owners: (i) Necessity (not part of analysis in Midkiff or Poletown; should it

be? Could it be?) (ii) Corruption/special influence: concern that govt is passing this

off as a public use as a result of influence. Why might we want to police these situations where there is private/public benefit? Court may be able to look at documents that may show patronage, special influence, or corruption. Here, we may not want to grant as much deference to the legislature, since they are the ones who are affected by the corruption.

(iii) Dependence on companies like GM and other high-powered corporations and acquiescence to their demands may allow

them to act as monopolists, going wherever they want and seeking concessions to stay.

(c) Having a public use concept so broad is Rent-Seeking. Creates incentive for person to get land at a good rate. Encourages corruption and special influence. If companies know that they have a broad standard; they know that they may be able to have more sway. If standard is narrow, companies will know that this behavior is not effective.

(i) Rent-seeking: Comes up when you are trying to extract rent or value from a system for yourself.

(ii) Where I might decide to bring pressure to legislature to bring forth benefits on me and my interests.

(iii) In the context of public use and the Takings Clause – if you have wide open public use requirement – either where there is a predominant private benefit – creates opportunities for private entities to go to government to try to seek rents – to ask legislature for benefits for you – even where they may not be best for the community as a whole. SELF-SEEKING BEHAVIOR, private interests.

(6) Is Poletown an abuse of the Takings Clause? (a) This term we have an issue in front of the S.C. on the same issue:

Kelo v. City of New London (i) City of New London had condemned property of a number of

homeowners and transferred the property to Pfizer. Question is whether or not the economic development which was supposed to result from Pfizer’s development satisfied the public use requirement of the Takings Clause

(ii) Not just that Pfizer is developing a new plant for research; this also includes office buildings, hotel for business associates; upscale housing for employees, offices for its contractors

(iii) CT S.C. found sufficient public use using Poletown, and the issue is up in front of the S.C, this term.

f) City of Oakland v. Oakland Raiders (Cal. 1982)(p. 1112, notes p. 123) (1) Although cities have used ED to take property for stadiums and other

public purposes, the Court concludes that respondents have not provided a valid legal basis for the conclusion that the difference is legally substantial, but remands to trial court to reach conclusion either way.

(2) S.C. concluded that there was sufficient public benefit in public ownership of a football team to satisfy the public use requirement, citing older case for proposition that “anything calculated to promote … the recreation or the pleasure of the public is to be included within the legitimate domain of public purposes.

7. Duty to Compensate

a) Posner suggests economic rationale for compensation: (1) Substantial measure of protection to private entitlements (otherwise

people would be scared to invest, if the govt could come in and any time and snatch away their ventures

(2) Disciplines power of the state. Otherwise govt would have an incentive to over expand, if it did not have to pay for the resources it consumes. This would also result in incentive to substitute land for other inputs that were cheaper to society as a whole but more expensive to the govt.

b) Fairness: Michelman – is it fair to effectual this social measure w/o granting this claim to compensation for private loss thereby inflicted?

c) Protection against exploitation of relatively powerless groups and individuals. Protects people without a meaningful voice, sot that their property is not taken w/o just compensation

d) Protects the powerful and wealthy. Helps avoid the risk that govt would use ED authority to redistribute wealth from those who have it to those who do not.

e) Efficiency: Ensures that the govt values the property it is taking more than the person it is taking it from. Puts the property at its highest valued use. (This of course depends on whether we get the just compensation value correct)

f) Incentives to be productive: If there is no compensation requirement, people may be afraid to made investments in their property, b/c the govt can take it at will. (A property rule may be better than a liability rule, but a LR is better than no rule at all).

g) JC may not be enough. Reasons person value may be more than market value: (1) JC may not take into account subjective valuation and idiosyncratic

preferences. If I was not willing to sell at market price, it may be b/c I do not value it AT market price, but at a higher value.

(2) Endowment effect (3) Relocation costs (4) Property owner may be putting property to special use that is more

valuable in his hands than in the govt’s or someone else’s (5) Radin: Property as personhood

h) Why don’t we award personal value? (1) Administrative problems: too hard from an evidentiary perspective to try

to calculate; not that we do not recognize differences in value; just hard to calculate

(2) Possibility of fraud; inflating costs (3) May cost taxpayers more $

i) Possible solutions to administrative problem (1) Give some sort of bonus awarding more than market value (2) When it is likely for there to be high personal value, heighten the public

use test; just not any public purpose, but meaningful public use

ED; Physical Total Regulatory No Regulation Take title Occupation Wipe-out Taking No Taking (Loretto) (Lucas)

B. Physical Occupation (Takings)

1. Introduction a) At some point, government regulation of property becomes so extensive that it

amounts to a de facto taking, even though the government denies that it is taking the property. Regulations may interfere with an owner’s right to use, dispose, or possess property.

b) Per Se Rule: When a government regulation permanently dispossess an owner of her property, the regulation is a taking

2. Loretto v. Teleprompter Manhattan CATC Corp. (U.S. 1982)(p1117, notes p124)

a) Loretto bought an apartment building where Teleprompter had installed cable boxes on the building, and sued the company for damages and injunctive relief under § 828(1) of the Executive Law

b) Justice Marshall: A minor but permanent physical occupation of an owner’s property authorized by the govt constitutes a taking of property for which just compensation is due.

(1) Permanent physical occupation authorized by government is a taking without regard to the public interests that it may serve.

(2) Permanent physical occupation differentiated from temporary invasion. (3) Fact that it is a minor intrusion speaks ultimately to appropriate

determination of compensation ($1 in this case) c) Dissent (Blackmun): Court’s anachronistic decision makes silly distinction

between permanent and temporary invasions, rather than balancing interests involved

d) Recognition of harm merely by virtue of the fact that there has been govt intrusion. This is about the relationship between ppl and the govt

e) Also recognition of property rights. Physical intrusion negates some of the sticks in my bundle (right to occupy, use, exclude that portion)

f) Administrative ease: By saying that it is a categorical taking, we do not have to start drawing lines to determine how far is too far.

3. Permanent vs. Temporary Invasion

a) Permanent occupation is per se categorical taking, whereas temporary requires use of the balancing test

4. Is Rent Control a Taking? (notes p125)

a) One view: RC is not physical occupation; all it does is set prices, which may raise problems from regulatory takings perspective, but does not fall under Loretto

b) Another view: RC is like occupation (1) People are in your bldg that you might not have rented to previously. (2) Property owner cannot exclude ppl willing to pay certain amount of

money determined by regulation. (3) My property is occupied by someone I do not like under govt sanction. (4) If essence of physical occupation is that the right to exclude is taken

away, you can see the similarity (5) Maybe the pushback is to use Lucas (total wipeout) rather than Loretto

c) Public policy: It is regulation in some sense, but arguable it forces L to take T he would not have taken, at a reduced price

d) RC is not a taking, but that is not self-evident. Courts have held that RC is not impermissible taking requiring JC b/c price caps are viewed as type of regulation. Courts tend to be reluctant to find that regulations constitute taking.

C. Regulatory Takings

1. Introduction a) Key Question: When does regulation constitute an impermissible taking of

property requiring just compensation? b) Key Point: Even if regulation is found to be a taking, it does NOT mean that the

govt cannot adopt that regulatory regime; it just means they have to pay JC c) Examples of regulation that may be considered a taking:

(1) Zoning (2) Rent Control (3) Warranties of habitability; other burdens and obligations on L (4) Environmental regulation (e.g. no development on wetlands)

d) Options in dealing with regulation (1) Regulation always constitutes taking. Regulation is to place limits on use

of property; if it takes away any sticks, it is a taking. (a) Problems with this rule:

(i) Govt could not exist

(ii) Govt passes costs on through taxes (iii) Govt doesn’t regulate (iv) To the extent that there is something good that comes out of

regulation, we would like for it to exist. Either we cut back on regulations or we tax ourselves to finance it.

(v) Pushback to that: Exactly. Article from WSJ: govt should not be the business of regulating to subsidize greater public good. If there is a public good, pay for it. If you aren’t willing to pay, it tells us something about its value. (LRs do something to ensure that the benefits of encroachments on some property rights exceeds harm done to owner)

(2) Regulation is never a taking (a) Unfair to landowners b/c govt would wipe out value of property

w/o any recourse (b) If you cannot do anything with your property, no sticks remaining,

how is that any different than in you came in and took title through ED?

(3) Line down the middle: (a) At some point, you go too far (b) Key question: when???

2. Rules Based on Measuring and Balancing a) A regulation is not a taking if it substantially advances a legitimate state

objective. To determine whether this test has been met at least the following conditions must exist:

(1) Public benefits from the regulation must o/w the private costs of the regulation

(2) The regulation must not be arbitrary (3) The property owner must be permitted to earn a reasonable return on

investment in the property b) Pennsylvania Coal Co. v. Mahon, (1922)(text p. 1140, notes p. 126)

(1) Majority (Holmes) (a) Kohler Act went too far – destroyed the economic viability of PA

Coal’s property – by requiring the coal to be left in place, the law effectively destroyed the right to mine coal

(b) Balancing Test: Holmes says that public interest as advanced by the Kohler Act is not very consequential; extent of taking is great b/c it destroys estate in land. Balancing test persists today.

(c) Diminution in Value: Once diminution has reached a certain magnitude there must be an exercise of ED and compensation. DIV is based on reasonable investment-backed expectations. The expectations are impt b/c they define one’ s property interest. Need to know what you have before you can determine whether a regulatory regime impinges on your rights.

(i) Property is not about things themselves, but about your relationship to things

(ii) Now we are going a step further: what are your expectations as to your ability to use, exclude, etc.

(d) Average Reciprocity of Advantage: Party that bears the burden of the regulation may also receive some benefit from it. To the extent that ARA exists, it is a factor to consider in determining whether the regulation goes too far. If there is sufficient ARA, even if you are burdened, it may preclude claim of impermissible takings. (Keystone case: Penn Coal w/ dift outcome)

(i) NOTE: Expansive approach to ARA may negate the point of regulatory takings altogether. Of course we all benefit in some ways from having regulation. If ARA is expanded to mean that the particular burdening legislation does not have to benefit you, but that you are benefited by other existing legislation, then there’s no point in regulatory takings jurisprudence.

(e) Critical Question: To what extent should we expect that a person’s reasonable expectations include the possibility that the govt will regulate? (see discussion in Palazzolo, below)

(f) Another key point: Don’t take for granted that the property was taken. We need to know what the property interest was before we can know if it was taken.

(2) Dissent (Brandeis): (a) Act prohibited a “noxious use” and that the diminution in value

was not absolute – appropriate measure should not be the decline in value of the coal alone but the value of the whole property

(b) Problem of Conceptual Severance: (i) If you conclude that the denominator is the coal alone, you

have conceptually severed out one portion of the property value. The real denominator should be the total value of the land, of which the coal is only part.

(ii) If you sever, you suffer total wipeout, which is not always appropriate.

(c) Brandeis, through his dissent, has articulated one of the mainstream ideas in takings jurisprudence.

(d) “Average reciprocity of advantage”: suggests that regulation must bestow some public benefits, as between the owner of the property restricted and the rest of the community. Denied that ARA was necessary to regulation’s validity, but conceded that it was “an important consideration.”

c) Penn Central Transp. Co. v. City of New York (U.S. 1978)(p1151, p130) (1) Contemporary statement on balancing test (2) S.C. upheld NYC’s Landmarks Preservation Law (3) Factors considered in balancing test

(a) Nature of govt regulation (invasion is like taking; adjusting benefits and burdens of economic life to promote common good is not taking)

(b) Reasonable expectations of property owner (RIBE and the more thoroughly frustrated they are by the regulation, more likely that a taking will be found

(c) Degree to which regulation is designed to stop uses that cause “substantial indivdiaulized harm” but are not CL nuisances

(d) Degree to which the regulation enables the govt to use the property for “uniquely public functions”

(4) In applying the balancing test, SC held that the law posed no threat of physical invasion, left Penn Central with the ability to earn a “reasonable return” on its “investment-based expectations” and did not raise issues of govt use (see notes p.131-132 for details)

(5) This is an ad hoc factual inquiry. Very much a case to case basis; we have metaphysical question from Holmes asking whether this has gone too far; but no bright line rules “when justice and fairness require that economic injuries caused by public action be compensated by the govt, rather than remain disproportionately concentrated on a few persons…” (p. 1158).

(6) P complains of being singled out: idea that we are burdening a handful of property owners to benefit the rest of the population. Forcing some to subsidize interests to benefit others is a concern. (Idea of property rule) Query whether preserving landmarks protects any public interest.

(7) Latches onto discussion of conceptual severance: Penn Central cannot sever out their air rights above the building and claim that all of their rights have been taken from them. Have to look at property as a whole, and how much the inability to build frustrates economic interests.

(8) No bright line on these issues. Penn Coal, e.g. would have suggested that Keystone come out the opposite way.

3. Deregulation (notes p. 132-33)

a) Telecomm and electric industry: restructuring regulations with aim of increasing competition and reducing regulation, trying to open market

b) Existing companies argued that they were entitled to profits. Before, they were responsible for universal service. They were obligated to make sure the lights went on, regardless of whether it was profitable. For any other good, would have been able to decide what to make, how much to make and charge.

c) The way the regime worked: if you put in all of your capital, you were insured a fixed rate of return by the commissioners (otherwise they may not have had an interest in building the plant)

d) Problem: many of the current plants were inefficient (formed 20 years ago). When competition came in, they would come in with new facilities and greater productivity, and old companies would not be able to recover their costs.

e) Claimed it was a DEREGULATORY TAKING. Taking from us the guaranteed right we had to gain profit from the regulatory regime previously existing.

4. Another Categorical Rule: Total Wipeout

a) Lucas v. South Carolina Coastal Council (U.S. 1992)(p1171, notes p. 133) (1) Intersection of two lines of takings jurisprudence. Something had to give

(a) Economic impact, diminution in value. Courts had said that if there is a total wipeout of value, if you have lost all economically viable use as a result of the regulation, that was a taking (e.g., value of coal in Penn Coal v. Mahon)

(b) Public harm. Number of cases suggesting but never saying explicitly that if govt is simply regulating in a way to prevent public harm, i.e., to bar a nuisance, that sort of regulation is never a taking

(2) Court backs away from public harm approach, saying that if legislation is simply regulating a CL nuisance (narrower notion than broad public harm), it is NOT a taking.

(3) Facts: P bought beachfront residential lots and was planning on building single-family homes on each. Two years after he bought the property, S.C. passed legislation (with goal of preventing beach erosion), rendering properties completely valueless. (N.B. Court says there is no value left to the property, but query whether this is the case. Just b/c you cannot build a house does not mean that you cannot enjoy the beachfront property, have picnics and bbqs).

(4) Holding: Court provides another categorical rule: (like physical occupation sanctioned by govt in Loretto). S.C. says there is a categorical taking when the value of land as the result of a taking is completely wiped out (no viable use left)

b) Lucas does not answer the question of WHY all economically viable use is a taking.

(1) Wipeout is like physical appropriation or physical occupation in effect and should be treated the same way.

(2) ARA: P gets nothing from regulation; it denies ALL use of property. Burdened but NOT benefited.

(3) No concern that this analysis will drain the treasury; total wipeout is very difficult to prove.

c) Conceptual Severance problem from Brandeis’ dissent in Penn Coal (1) What’s the proper denominator? Court does not really have to answer

this, although it is arguably the most important question. (They defer to Ct of Common Pleas finding that the Act left lots w/o economic value, partially based on the fact that Lucas’ fee simple interest is one with a rich tradition of protection at CL

(2) Courts have been resistant to efforts to conceptually sever d) If there is not total wipeout: does not mean there is not a taking, just means

that you need to use a balancing test, BUT COURTS RARELY FIND FOR PROPERTY OWNER WHEN THERE ARE INTERESTS TO BALANCE

e) In all of these takings cases, there is some harm and some interest that we want to protect (beach from erosion, wetlands protection, trees from being cut down). All of these interests require that someone is burdened. Question is who ought to pay? Who should be burdened for society to get the benefit? In some ways, this is a redistribution of wealth. Not necessarily of dollars and cents, but at least in terms of public welfare.

5. Palazzolo: A new line of Takings Jurisprudence?

a) Cases previously discussed rest of theory of takings clause that people should be compensated when their property is taken.

b) Palazzolo: Maybe there is a theory that is less about compensating private individuals that is more about limiting govt.

c) Resists line of analysis that we should expect that the govt will regulate d) Palazzolo v. Rhode Island (2001)(text p. 1193, notes p. 135)

(1) Facts: Palazzolo owns some waterfront property on a wetland. He had some plans to develop, but his plans are refused. He appeals to court that the state regulations preventing him from developing on the wetlands is a taking.

(2) Important Point: P is a post-regulation purchaser. (3) RI SC said: Palazzolo had no right to challenge legislation existing at the

time he took title (regulation could not deny any RIBE, since he knew when he bought it he could not develop it); and property still has value.

(4) Supreme Court Decision: (a) Remanded for decision where the dividing line for total wipeout

should be. (b) CRUX OF DECISION: A party acquiring interest post-regulation

can nonetheless go forward on a takings claim (i) The previous argument was that an individual could not go

forward b/c he had no RIBE. Nothing was taken, b/c the right was not his to begin with.

(ii) SC says that rule goes too far, it is too expansive an approach that allows the state to put so potent a Hobbesian stick into the Lockean bundle. It would allow the state to define what a reasonable property interest was.

(iii) Simply b/c you acquired property after the regulation was effected does not prohibit you from proceeding with a takings claim. Does not mean that you win; regulation still has to “go too far” (Penn Coal)

e) Palazzolo suggests that maybe the takings clause is not only about regulation, but about LIMITING THE GOVERNMENT’S ABILITY TO REGULATE.

(1) Takings clause is no longer merely a shield; it is also a sword to affirmatively fight state action.

(2) The Court does NOT explicitly say this: but we must ask ourselves if there is something else going on.

f) Did the court need to address the issue of whether P was post-regulation acquirer?

(1) No. He had interest in property, in another form, even prior to regulation. The fact that they did bolsters the view that the Takings Clause is about something other than compensation.

(2) Yes. It is still a critical fact of the case.