Property Law Archives – Southern California Law Review

Property and Prejudice

April 2025April 2025Fatma Marouf* & Vanessa Casado Pérez†

“Alien land laws”—laws restricting noncitizens from owning real property—are back. A dozen states have enacted such laws during the past year, and over thirty states have considered such bills. These new bills are rooted in xenophobia, much like their predecessors, but they also have unique characteristics. They single out governments, citizens, and corporations of specific countries perceived to pose a threat; they impose ownership restrictions based on arbitrary distances to U.S. military bases and critical infrastructure; they inflict particularly harsh penalties; and they try to ferret out foreign control in complex corporate structures. The purported justifications are national defense, food security, and prevention of absentee ownership. But these laws completely fail to achieve their asserted goals. The poor means-end fit, combined with the availability of far less restrictive alternatives, leaves the new laws vulnerable to legal challenges under the Equal Protection Clause and the Fair Housing Act. But century-old Supreme Court precedents and gaps in legal doctrine may still make it difficult for such challenges to prevail. Preemption arguments based on immigration law, the foreign affairs power, and federal laws governing foreign investment, as well as Dormant Commerce Clause arguments, also involve legal hurdles. This Article analyzes these legal arguments, evaluates potential obstacles, and charts possible paths forward. Regardless of the legal viability of these laws, this Article cautions that they will perpetuate prejudice, open the door to a new form of segregation, and limit who can achieve the American Dream.

INTRODUCTION

Sun Guangxin, a Chinese real estate tycoon, owns 140,000 acres of land in Val Verde County, Texas, near an Air Force base close to the border.¹ He spent approximately $110 million on real estate purchases, paying above-market prices for plots that were not on the market.² But Mr. Sun did not buy this land himself. He used a Texan intermediary, who bought the land and transferred it to Mr. Sun’s company, GH America Energy LLC, a subsidiary of the China-based Guanghui Energy Company.³ The plan was to establish a wind farm and produce renewable electricity for the Texas grid.⁴

Environmentalists opposed the wind farm, but their concerns did not gain traction until they framed the wind farm as a threat to national security due to its location.⁵ That got the attention of Senator Ted Cruz and state legislators, who began campaigning against the wind farm.⁶ This campaign became a catalyst for several bills in Texas that restricted foreign ownership of land.⁷ The bill that received the most traction prohibited real property ownership by any businesses headquartered in China, Iran, Russia, and North Korea or owned or controlled by citizens of those countries, as well as by individual citizens and government actors from those countries.⁸

Texas is not alone. In the past year, bills have been proposed in over thirty states that would restrict foreign ownership of land, real estate, and natural resources.⁹ To date, a dozen of them have been enacted into law.¹⁰ Many of these laws single out specific countries perceived to be hostile, including, but not limited to, China, Iran, Russia, and North Korea. Some bills name countries directly, while others reference various federal designations, such as federal lists of “foreign adversaries” and “countries of particular concern.”¹¹ A few bills are a bit more subtle, restricting ownership by “state-controlled enterprises,” which are most common in China,¹² or citing statutes that address only Chinese military companies.¹³

These laws fan the flames of rising anti-Chinese sentiment. Over 80% of the U.S. population currently holds an unfavorable view of China.¹⁴ Fear of China’s economic and military power,¹⁵ disapproval of China’s foreign policies and human rights abuses,¹⁶ media reports blaming China for the COVID-19 pandemic,¹⁷ and angst over espionage,¹⁸ as well as explicit or implicit biases,¹⁹ fuel these views. Of course, most Chinese investors seeking to buy property in the United States are not acting as pawns of the Chinese Communist Party. Instead, they may be families trying to move their money beyond the reach of the Chinese government, investing to ensure that their children get a good education, or hoping to establish themselves in the United States.

Despite the new context, these laws conjure up one of the darkest periods of U.S. immigration history, involving Chinese Exclusion²⁰ and an Asiatic Barred Zone that swept across a continent.²¹ The history of alien land laws is intertwined with racial exclusions from U.S. citizenship and the creation of hierarchies based on race, national origin, and alienage.²² As California’s Attorney General said in 1913 when he championed the state’s alien land law aimed at limiting the presence of Japanese immigrants: “[T]hey will not come in large numbers and long abide with us if they may not acquire land.”²³ A century ago, the U.S. Supreme Court upheld California and Washington’s alien land laws, and it has never revisited the issue.²⁴ These lingering precedents from an unabashedly racist era are now being relied on by states eager to stretch the limits of traditional state powers like regulating the transmission of property and to influence the federal domains of immigration, national security, and foreign affairs.

This new wave of alien land laws differs from prior waves in important respects.²⁵ First, the naming of specific countries and use of certain federal lists reflects a new form of national security creep. This national security slant also appears in the heightened restrictions placed on property located within a certain distance of critical infrastructure, such as military bases and weather stations. While some states have found ten miles to be a safe distance, others require fifty miles, suggesting an arbitrariness to the restrictions imposed. The new laws also seek to ferret out foreign control in more complex corporate structures than ever before. And they punish violators with harsher criminal penalties than in the past.

While the laws purport to protect national security and food security, and to prevent absentee landownership, they are poorly designed to achieve these aims. Foreign ownership of U.S. real property is minimal. Only 2.9% of privately held agricultural land²⁶ and 1.8% of residential real estate²⁷ is foreign-owned. Additionally, the major foreign owners of agricultural land are not from the countries targeted by the new state laws. While China is second only to Canada on the list of foreign countries whose citizens are buying U.S. residential properties,²⁸ their share of US land is very small. Foreigners own 31% of the land in the U.S., but Chinese investors represent only 1% of all foreign-owned land.²⁹

But even assuming there are compelling government interests at stake, the means used to achieve them are ineffective. These laws will not solve the problem of foreign interests and corporate consolidation driving the real estate and agricultural markets, as sophisticated players can easily circumvent the restrictions. For example, because most of the laws do not restrict leases, a foreign-owned business could just lease land from local landowners. The restrictions on landownership will also not increase national security in an era of cyber warfare, drones, and spy balloons. Furthermore, some of these alien land laws target only ownership and not leases. A tenant occupying a property near a military base can be as dangerous as the owner of that land, if not more. This new wave of alien land laws also fail to prevent absentee landownership because they generally exempt noncitizens residing in other U.S. states, along with all U.S. citizens and permanent residents regardless of their location. Less restrictive alternatives to some of the proposed or enacted laws could include simply limiting the amount of land that foreigners may own, requiring owners to reside or work on the land to avoid absentee ownership, or creating exceptions for residences if the main concerns are agriculture and food.

Given the poor means-end fit, the true purpose of the laws appears to be symbolic. These laws may simply be a way for politicians to capitalize on the xenophobic sentiments of their electoral base. Sadly, their nefarious social effects will extend well beyond the real estate market.³⁰ Like racist property restrictions of the past, the new laws will subordinate minorities. Excluding people from home ownership keeps them out of communities, deters immigration, impedes intergenerational transfers of wealth, and obstructs personal flourishing. Even people who are not directly affected by the new laws will suffer due to the chilling effect on the real estate market. Sellers will be hesitant, at best, to engage in transactions with anyone from a targeted country.

This Article examines potential legal challenges to the new wave of alien land laws. Part I provides historical background about prior waves of alien land laws. Part II describes the distinctive characteristics of the current wave. Part III explores possible statutory and constitutional arguments for challenging the new laws. First, Part III explores whether these laws violate the Fair Housing Act, which was enacted as part of the Civil Rights Act of 1968 and prohibits discrimination in housing based on race and national origin.³¹ Second, Part III examines whether the new laws violate the Equal Protection Clause, highlighting the underdeveloped nature of equal protection jurisprudence on alienage and national origin classifications. This Section also stresses the lack of means-end fit, which we argue should result in the laws being struck down under either strict scrutiny or rational basis review.³² Next, this Article analyzes whether the new state laws are preempted by federal immigration law, the federal foreign affairs power, or the federal regulatory framework involving the Committee on Foreign Investment in the United States (“CFIUS”).³³ Finally, this Article analyzes whether the new laws violate the Dormant Commerce Clause with respect to both domestic and foreign commerce.

Legal challenges to the new alien land laws will not be easy. A federal district court has already refused to enjoin Florida’s law, which not only restricts individuals and companies domiciled in certain countries but also singles out those domiciled in China for especially harsh treatment.³⁴ The legal questions raised by alien land laws will likely reverberate in other important contexts as well. States like Texas and Florida are increasingly looking for ways to use well-established state powers, including police and property powers, to challenge the federal government’s authority over international borders and immigration.³⁵ Alien land laws represent one, but by no means the only, way for states to do this. If no restrictions are placed on alien land laws by courts or the federal government, states could use them to create new forms of segregation, excluding immigrants from their territories by denying them a place to live. In short, these laws once again instrumentalize property for racial prejudice.

I. A BRIEF HISTORY OF ALIEN LAND LAWS

Alien land laws in the United States date back to colonial times and to the influence of the English feudal system.³⁶ English feudal laws were designed to secure allegiance to the Crown and initially prohibited aliens from purchasing land; then, the laws prohibited them from inheriting it.³⁷ England eventually abolished those restrictions by statute in 1870.³⁸ But alien land laws continued in the United States, sanctioned by common law.³⁹ Some early land laws were incorporated into state constitutions in explicitly racial terms. For example, in 1859, Oregon amended its constitution to prevent any “Chinaman” from owning property in the state and granted only “white foreigners” the same property rights as citizens, a provision that was not repealed for over one hundred years.⁴⁰

Scholars have previously categorized alien land laws into several waves.⁴¹ During the first wave, which extended from approximately 1880 to 1900, eleven states restricted alien ownership of real property in response to a depressed agricultural economy and concerns over absentee landowners.⁴² Congress also passed the Territorial Land Act of 1887, which “forbade extensive alien landholding in the organized territories, except by immigrant farmers who had applied for citizenship.”⁴³ The federal law aimed to prevent large, foreign-owned ranches from jeopardizing statehood for the territories.

The second wave of alien land laws were passed in the 1920s, as a result of resentment toward Japanese immigrants engaged in farming in California, Oregon, and Washington.⁴⁴ California’s law “was enacted and . . . enforced solely as a discriminatory law directed against the Japanese.”⁴⁵ California’s Attorney General at the time, Ulysses S. Webb, was transparent about its purpose, framing the central issue as “race undesirability.”⁴⁶ The California law carried criminal penalties and resulted in successful prosecutions;⁴⁷ it also led to severe financial losses with over 30,000 Japanese farmers abandoning “nearly 500,000 acres of California’s richest crop lands.”⁴⁸ Beyond these penalties, the law had a severe psychological impact, demoralizing and subordinating Japanese Americans.⁴⁹

Alien land laws passed at this time often excluded Japanese and other Asians by precluding noncitizens “ineligible for citizenship” from owning land.⁵⁰ As Keith Aoki observed, “ ‘aliens ineligible to citizenship’ was a disingenuous euphemism designed to disguise the fact that the targets of such laws were [Japanese].”⁵¹ Laws dating back to 1790 and 1870 excluded Asians from naturalizing.⁵² In 1922, the U.S. Supreme Court confirmed that a Japanese person could not be naturalized because he was not “white.”⁵³ The following year, the Court reached the same conclusion regarding someone from India.⁵⁴

That same year—1923—the U.S. Supreme Court upheld Washington’s and California’s alien land laws.⁵⁵ Both cases involved U.S. citizens who wanted to lease land to Japanese farmers. In Terrace v. Thompson, the Court reasoned that Washington had “wide discretion in determining its own public policy and what measures are necessary for its own protection and properly to promote the safety, peace and good order of its people.”⁵⁶ The Court explained that “in the absence of any treaty provision to the contrary, [a state] has power to deny to aliens the right to own land within its borders.”⁵⁷ Similarly, in Porterfield v. Webb, the Court found California’s law limiting property rights to those “eligible to citizenship” to be constitutional.⁵⁸ Two other U.S. Supreme Court cases decided that year upheld laws restricting the transfer of shares of a landowning corporation to aliens⁵⁹ and prohibiting food crop contracts with aliens.⁶⁰

But Supreme Court decisions issued in 1948 cast doubt on whether Terrace and Porterfield remained good law. In Oyama v. California, the Court invalidated a provision of California’s alien land law that deprived a U.S. citizen of Japanese descent of agricultural land paid for by his father.⁶¹ The Court found that the state had failed to offer any compelling justification for discriminating against a citizen “based solely on his parents’ country of origin.”⁶² The Court recognized that restrictions based on ineligibility for citizenship constituted discrimination based on “racial descent.”⁶³ That same year, in Takahashi v. Fish and Game Commission, the Court declared unconstitutional a California law that allowed only U.S. citizens to get fishing licenses, which was aimed at discouraging Japanese immigrants from returning to the state after their exclusion from the West Coast and internment.⁶⁴ Justice Black, writing for the Court, explained that “the power of a state to apply its laws exclusively to its alien inhabitants as a class is confined within narrow limits.”⁶⁵

In the years following Takahashi, the supreme courts of Oregon, California, and Montana invalidated those states’ alien land laws, recognizing their racist nature and finding them unconstitutional.⁶⁶ The Supreme Court of California opined that the law imposed on noncitizens “an economic status inferior to that of all other persons living in the state. ”⁶⁷ Other states decided to simply repeal their laws.⁶⁸ The Immigration and Nationality Act of 1952, which made naturalization race-neutral, rendered meaningless any remaining state laws that still tied property ownership to eligibility for citizenship.⁶⁹ But various other types of alien land laws remained. For example, in 1943, Wyoming had enacted an alien land law that prohibited Japanese Americans who had been in internment camps from buying land in the state, which was not repealed until 2001.⁷⁰

During the Cold War, a third wave of state laws emerged limiting the rights of foreigners to receive land by inheritance.⁷¹ The purpose of these laws was to keep U.S. wealth from communist regimes rather than to prevent noncitizens from owning land.⁷² This practice ended after the U.S. Supreme Court’s 1968 decision in Zschernig v. Miller, which invalidated an Oregon statute that conditioned a noncitizen’s inheritance right on reciprocal rights being granted to U.S. citizens.⁷³ The Court found that the Oregon law was preempted because it intruded on the federal government’s authority over foreign affairs.

A fourth wave of alien land laws occurred during the 1970s in response to media reports of increased foreign investment in U.S. farmland.⁷⁴ These laws generally restricted the type and amount of land that noncitizens could purchase. Media reports stoked fears that family farmers in the U.S. were threatened by foreign investment.⁷⁵ In 1972, the Wisconsin Supreme Court upheld an alien land law with “no racial implications” that restricted only the amount of land that could be owned by foreign investors, finding the law “sufficiently related to the state’s asserted desire to limit possibly detrimental absentee land ownership.”⁷⁶

The current wave of land laws has much in common with these prior waves. Anti-immigrant biases, xenophobia, and fears regarding the fate of family farmers all appear to be playing a role. But as discussed below, the new bills and law also have their own distinct characteristics.

II. RECENT BILLS AND LAWS: THE FIFTH WAVE

The fifth wave of alien land laws began around 2020 and rapidly gained momentum. In 2022 and 2023, dozens of bills were proposed across the country restricting the ownership of real property by individual noncitizens, foreign companies, and foreign governments.⁷⁷ To date, twelve of those bills have been enacted into law in Alabama, Arkansas, Florida, Idaho, Indiana, Louisiana, Montana, North Dakota, Oklahoma, Tennessee, Utah, and Virginia. These laws, like their predecessors, vary widely, both in terms of whom they restrict and what is restricted.

Some of the newly enacted laws focus on foreign governments and businesses rather than individuals.⁷⁸ Among the laws that apply to individual noncitizens, most restrict only “non-resident aliens,” while exempting “resident aliens.” Residence in this context generally refers to domicile in the United States,⁷⁹ but a couple of laws define a “resident alien” to mean a noncitizen who lives in the state.⁸⁰ Some of the laws require “resident aliens” to dispose of their real property within a certain amount of time if they no longer qualify as residents of the state.⁸¹

Other laws turn on immigration status rather than residence. For example, Louisiana’s law exempts anyone “lawfully present” in the U.S.⁸² Tennessee’s definition of a “sanctioned nonresident alien” explicitly excludes legal permanent residents.⁸³ North Dakota, like Minnesota, exempts not only legal permanent residents but also noncitizens who enter with certain types of temporary investor or trader visas that are available only to citizens of specific countries that have special treaties with the United States.⁸⁴

Like prior waves, many of the new laws place restrictions specifically on agricultural land and other natural resources.⁸⁵ Some are even more specific. Indiana, for example, has prohibited foreign business entities from owning agricultural land for the purpose of crop farming or timber production.⁸⁶ However, there are also novel types of restrictions. Notably, many of the new laws restrict ownership of land within a certain distance of a military installation or other “critical infrastructure.”⁸⁷ Other bills and laws apply broadly to any type of land or real property.⁸⁸

The following Sections take a closer look at some of the distinct characteristics of the new wave of alien land laws and proposed bills. These include singling out specific countries or nationalities by name, focusing on foreign adversaries, prohibiting landownership within a certain distance of military installations or critical infrastructure, focusing on agricultural land, imposing more severe penalties for violations, and targeting all types of foreign control in complex corporate structures.

A. Singling Out Specific Countries

Bills proposed in at least a dozen states (including Alabama, Arkansas, Colorado, Iowa, Florida, Georgia, Maryland, Mississippi, South Carolina, Texas, West Virginia, and Wyoming) singled out specific countries for property restrictions.

For example, Alabama enacted a law that defines a “foreign country of concern” as “China, Iran, North Korea, and Russia.”⁸⁹ Bills considered in Arkansas,⁹⁰ Georgia,⁹¹ and Texas⁹² similarly placed restrictions on citizens of these four countries. In Colorado, West Virginia, and Wyoming, proposed bills placed restrictions on citizens of China, Russia, or any country designated as a “state sponsor of terrorism.”⁹³

Florida enacted an alien land law that defined a “foreign country of concern” to mean China, Iran, North Korea, Russia, Cuba, the Venezuelan regime of Nicolás Maduro, and Syria.⁹⁴ Florida’s law is harshest, however, on citizens of China, placing more severe restrictions on them and subjecting them to stiffer penalties for violating the law.⁹⁵ A bill proposed in Arizona included the same seven countries on Florida’s list plus Saudi Arabia.⁹⁶ The Arizona bill emerged after a Saudi Arabian company made headlines for leasing Arizona public lands and pumping exorbitant amounts of groundwater to grow alfalfa for export to Saudi Arabia.⁹⁷

Many other bills singled out China alone, including bills proposed in Iowa,⁹⁸ Maryland,⁹⁹ Mississippi,¹⁰⁰ South Carolina,¹⁰¹ and Washington.¹⁰² Two Arizona bills,¹⁰³ as well as a bill proposed in Hawaii,¹⁰⁴ refer specifically to the Chinese Communist Party and its members. A Utah bill indirectly references Chinese companies by defining a “restricted foreign entity” as a company that the Secretary of Defense is required to report as a military company, which includes only Chinese military companies.¹⁰⁵ The intense focus on China across so many of these bills and laws is reminiscent of the anti-Asian sentiment that fueled alien land laws long ago. Alien land laws singling out specific countries are less likely to pass constitutional muster than more evenhanded laws.¹⁰⁶

B. Targeting Foreign Adversaries

Prior to the most recent wave, only five states had alien land laws that restricted land ownership by citizens of foreign adversaries.¹⁰⁷ None of those laws explicitly referred to foreign adversaries, much less attempted to name them. Instead, they benignly extended equal property rights to “alien friends” (New Jersey),¹⁰⁸ “[a]liens who are subjects of governments at peace with the United States and this state” (Georgia),¹⁰⁹ or any alien who is “not an enemy” (Kentucky, Maryland, and Virginia).¹¹⁰

In 2023, however, numerous state legislatures considered or passed laws restricting property ownership rights of citizens and companies of countries designated by the federal government as hostile to the U.S. or its values in some way. These bills and laws use various federal lists that were created for completely different purposes.

Laws enacted in Louisiana,¹¹¹ North Carolina,¹¹² and Virginia,¹¹³ as well as bills proposed in Kansas,¹¹⁴ Montana,¹¹⁵ Ohio,¹¹⁶ South Carolina,¹¹⁷ and Wisconsin,¹¹⁸ refer to the Secretary of Commerce’s designation of certain countries as “foreign adversaries” in the Code of Federal Regulations.¹¹⁹ This designation is based on the Secretary’s determination that a foreign government or foreign nongovernment person has “engaged in a long-term pattern or serious instances of conduct significantly adverse to the national security of the United States or security and safety of United States persons.”¹²⁰ Currently, this designation applies to six countries: China (including Hong Kong), Cuba, Iran, North Korea, Russia, and “Venezuelan politician Nicolás Maduro (Maduro Regime).”¹²¹

The Ohio bill and Louisiana law restrict not only “foreign adversaries” as defined by Secretary of Commerce but also the much longer list of foreign governments sanctioned by the Office of Foreign Assets Control (“OFAC”), which adds Afghanistan, Belarus, Burma, Central African Republic, Democratic Republic of Congo, Ethiopia, Iraq, Lebanon, Libya, Mali, Nicaragua, Somalia, Sudan, South Sudan, Syria, Yemen, and Zimbabwe.¹²² A law enacted in Tennessee, on the other hand, refers to citizens of foreign governments sanctioned by OFAC but does not include “foreign adversaries” designated by the Secretary of Commerce.¹²³

Other bills and laws refer to various U.S. State Department designations. For example, a bill proposed in New York¹²⁴ refers to a “foreign country of particular concern,” which currently includes twelve countries designated by the State Department: Burma, China, Cuba, Eritrea, Iran, North Korea, Nicaragua, Pakistan, Russia, Saudi Arabia, Tajikistan, and Turkmenistan. Bills proposed in Colorado, West Virginia, and Wyoming reference a completely different U.S. State Department designation—“state sponsors of terrorism”—a list that currently includes only four countries: Cuba, Iran, North Korea, and Syria.¹²⁵

States have also incorporated other federal definitions into their bills and laws. For example, the law passed in Arkansas references not only foreign countries of “particular concern” but also includes citizens or residents of countries subject to the International Traffic in Arms Regulations.¹²⁶ Meanwhile, a bill proposed in Texas referred to countries identified by the United States Director of National Intelligence as posing a risk to the national security of the United States in each of the three most recent Annual Threat Assessments of the U.S. Intelligence Community.¹²⁷ At least one law, enacted in Indiana, does not refer to federal definitions at all and instead allows the governor to designate certain countries as a threat to critical infrastructure.¹²⁸

A few of the proposed bills simply make vague references to “hostile” countries without providing a clear definition of the term. For instance, a Mississippi bill restricts ownership by “citizens of a country that is hostile to the interests of the United States or a country that is a known violator of human rights,” without explaining how such countries should be identified.¹²⁹ Similarly, a Hawaii bill that restricts land ownership by members of the Chinese Communist Party also refers to “other hostile foreign influence,” providing only a vague definition of this term.¹³⁰

C. Proximity to Military Installations and Critical Infrastructure

Additionally, many of the recent bills and laws limit landownership near military installations or other critical infrastructure. Considerable variation exists among the bills regarding what types of facilities are included under these terms as well as what constitutes an acceptable distance from them.

For example, a bill proposed in California prohibits foreign actors from owning or leasing land within fifty miles of a U.S. military base or California National Guard Base.¹³¹ A bill proposed in Louisiana restricts foreign ownership of “immovable property located within [fifty] miles of any federal or state military land, . . . weather station[], . . . or any facility operated by the Civil Air Patrol.”¹³² A bill proposed in Mississippi prohibits nonresident aliens from owning land within fifty miles of a military installation under the jurisdiction of the Department of Defense, the U.S. Coast Guard, or the Mississippi National Guard.¹³³ A South Carolina bill prohibits companies owned by China or the Chinese Communist Party, or whose principal place of business is in China, from controlling any land or real estate “within fifty miles of a state or federal military base or installation for the purpose of installing or erecting any type of telecommunications or broadcasting tower.”¹³⁴

Bills proposed elsewhere specify shorter distances from military installations. For example, a Georgia bill prohibits nonresident aliens from possessing any land within twenty-five miles of any military base, military installation, or military airport.¹³⁵ A North Carolina bill prohibits adversarial foreign governments from purchasing or holding land within twenty-five miles of a military base or airport.¹³⁶ The law enacted in Florida generally prohibits foreign land ownership within ten miles of a military installation or critical infrastructure facility.¹³⁷ Florida’s choice of ten miles is particularly interesting given that the legislative history indicates that a major concern was a Chinese company’s purchase of land located twelve miles from an air force base in North Dakota.¹³⁸ Meanwhile, a bill proposed in Hawaii considered just two miles from federal land or critical infrastructure to be a safe distance.¹³⁹

D. Harsh Penalties

Criminal penalties and prosecutions for violations of alien land laws are not new. In California and Arizona, such criminal prosecutions were common during the 1920s and 1930s, but those laws were subsequently repealed.¹⁴⁰ Penalties for violating a state’s alien land laws have generally been civil. Forfeiture of the property or sale at auction with proceeds escheating to the state were commonly specified as penalties in state laws. Under some laws, such as Wisconsin’s, a civil fine could be imposed, ranging from $500 to $5,000.¹⁴¹ Criminal penalties existed but were rare.¹⁴²

In the most recent wave of bills, criminal penalties have gained popularity, and civil fines are steeper. Additionally, some of the new bills and laws impose penalties on the sellers as well as the buyers. For example, the alien land law enacted in Arkansas makes a violation a felony punishable by two years in jail and a $15,000 fine.¹⁴³ Being a “resident alien” is mentioned as an “affirmative defense” to the charge.¹⁴⁴ Florida has also made it a criminal offense to violate its new law, which imposes harsher criminal consequences on Chinese purchasers of land than purchasers of other nationalities.¹⁴⁵ Violators who are domiciled in China may be charged with a third-degree felony, punishable by up to five years in jail and a $5,000 fine, while violators domiciled in the other countries named in Florida’s law may be charged with only a second-degree misdemeanor, punishable by sixty days in jail and a $500 fine.¹⁴⁶ This disparity extends to sellers. Selling real property to individuals or companies domiciled in China is a first-degree misdemeanor, punishable by one year in prison and a $1,000 fine, while selling property to individuals or companies domiciled in other countries is only a second-degree misdemeanor.¹⁴⁷

E. Targeting Corporations

Finally, the current wave of alien land laws targets all forms of foreign control in complex corporate structures. The laws restrict not only foreign corporations but also companies incorporated in the U.S. if they are controlled by noncitizens who would not be allowed to purchase the real estate themselves. The expansive language used in some of these laws reflects an attempt to close the loopholes in previous laws that allowed foreigners to acquire land simply by channeling their investments through the veil of a U.S. corporation. This was one of the main drivers behind the recent alien land law passed in Oklahoma, which specified that “[n]o alien or any person who is not a citizen of the United States shall acquire title to or own land in this state either directly or indirectly through a business entity or trust.” ¹⁴⁸

Similarly, a Tennessee bill defined a “foreign business” as “a corporation incorporated under the laws of a foreign country, or a business entity whether or not incorporated, in which a majority interest is owned directly or indirectly by nonresident aliens.”¹⁴⁹ The bill further explained, “Legal entities, including, but not limited to, trusts, holding companies, multiple corporations, and other business arrangements, do not affect the determination of ownership or control of a foreign business.”¹⁵⁰ But this bill still has a major loophole—its definition of a foreign business is limited to owning a majority interest and does not address control. Nonresident aliens could control a corporation based on voting power, even if they do not own a majority of the stock.¹⁵¹

Many other bills closed that loophole. A Washington bill, for example, prohibited acquisition of agricultural land by a foreign-controlled enterprise and defined a controlling interest to mean “possession of more than [fifty] percent of the ownership interests in an entity, or an ownership interest of [fifty] percent or less if the persons holding such interest actually direct the business and affairs of the entity without the consent of any other party.”¹⁵² A law enacted in North Dakota adopts a nearly identical definition.¹⁵³

While the definitions in the new bills and laws vary and are not perfect, they clearly seek to capture all kinds of businesses in which noncitizens play a decisive role. Of course, if a corporation is forty-nine percent owned by U.S. citizens and fifty-one percent owned by noncitizens, the U.S. citizen owners are also likely to suffer financial setbacks as a result of such laws.

III. ARE ALIEN LAND LAWS LEGAL?

Commentators have taken different perspectives on the legality of alien land laws in the past.¹⁵⁴ Some have argued that alien land laws would violate the Equal Protection Clause if they singled out specific countries.¹⁵⁵ Others contend that only restrictions on lawful permanent residents would raise equal protection concerns, and even those may be permissible.¹⁵⁶ Preemption concerns and Dormant Commerce Clause concerns have also been raised.¹⁵⁷ Because of significant variations among the laws, it is difficult to analyze these legal issues for the laws as a whole. Nevertheless, this Part attempts to parse some of the legal challenges that the new wave of alien land laws may face.

A. Statutory Violations

Alien land laws may conflict with federal statutes that prohibit discrimination such as the Fair Housing Act (“FHA”)¹⁵⁸ and the Civil Rights Acts of 1866¹⁵⁹ and 1870.¹⁶⁰

1. The Fair Housing Act

The FHA, enacted as part of the Civil Rights Act of 1968, seeks to prohibit unlawful discrimination by landlords. Under the FHA, it is discriminatory “[t]o refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.”¹⁶¹ Although alienage is not specifically mentioned, the U.S. Department of Housing and Urban Development (“HUD”) has stated that “[a] requirement involving citizenship or immigration status will violate the [FHA] when it has the purpose or [unjustified] effect of discriminating on the basis of national origin.”¹⁶² Private parties would be violating the FHA if they comply with state laws that restrict who can buy or lease real estate based on national origin. States may enhance the protections of the FHA but cannot reduce them. Section 816 of the FHA declares invalid any state law that requires or permits any action that would be a discriminatory housing practice under the FHA.¹⁶³

One aspect of the FHA that makes the inquiry different from an equal protection claim is that claimants do not need to prove discriminatory intent. A facially neutral law may violate the FHA if it has “discriminatory effects.”¹⁶⁴ This is useful in challenging a law like Florida’s, which may be perceived as discriminating based on domicile rather than national origin. By prohibiting sales of real estate to individuals and companies domiciled in China, Florida’s law clearly has discriminatory effects related to national origin: China has over one billion inhabitants, of whom only .05% are not Chinese.¹⁶⁵ Similarly, other countries identified as “foreign adversaries” under Florida’s law have a very small percentage of foreigners. Less than 0.1% of Cuba’s population are immigrants, for instance.¹⁶⁶

A law that has a discriminatory effect on a protected class is unlawful if it is not necessary to achieve a substantial, legitimate, nondiscriminatory interest, or if a less discriminatory alternative could serve that interest.¹⁶⁷ As discussed further under equal protection below, alien land laws are not necessary to achieve the asserted interests, and less discriminatory alternatives are, in fact, available.

An important limitation of the FHA, however, is that it only applies to “dwellings,” that is, to real estate capable of being used as a residence.¹⁶⁸ Thus, while broadly written alien land laws that restrict real estate (or real property in general) remain vulnerable to FHA challenges,¹⁶⁹ those that restrict only agricultural land cannot be challenged under the Fair Housing Act.¹⁷⁰ The Civil Rights Acts of 1866 and 1870 may help fill this gap, although, as explained below, these laws have their own limitations.

2. Civil Rights Acts of 1866 and 1870

The Civil Rights Act of 1866 provided that “citizens . . . shall have the same right, in every State and Territory in the United States, to make and enforce contracts . . . as is enjoyed by white citizens.”¹⁷¹ The Civil Rights Act of 1870 made a significant revision by changing “citizens” to “persons.”¹⁷² This language is now codified in 42 U.S.C. § 1981 (“section 1981”). The revised language made it clear that noncitizens, as well as citizens, are protected by the law’s equality mandate.¹⁷³ Courts have also construed section 1981 as prohibiting discrimination based on alienage.¹⁷⁴ Alien land laws may therefore run afoul of section 1981.¹⁷⁵

One limitation of section 1981 is that it applies only to individuals “within the jurisdiction of the United States.” While this phrase includes noncitizens in the United States,¹⁷⁶ it would likely exclude noncitizens residing abroad, the group most affected by alien land laws. Corporations headquartered abroad that are “foreign adversaries” under Montana’s law therefore may not be able to bring challenges under section 1981, although if they have U.S.-based subsidiaries, such challenges may still be possible. Other states, like Indiana, have broad definitions of “qualified entities.”¹⁷⁷ Many alien land laws tackle corporations controlled by foreigners. Any qualified entities based in the U.S. should be able to bring section 1981 challenges, even if they are owned or controlled by citizens of Iran, North Korea, or China.

Another potential limitation of section 1981 is that a separate provision of the Civil Rights Act of 1866, now codified at 42 U.S.C. § 1982 (“section 1982”), specifically addresses property and extends equal protection only to U.S. citizens.¹⁷⁸ Specifically, section 1982 provides: “All citizens of the United States shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property.”¹⁷⁹ That language was not altered by the Civil Rights Act of 1870. Courts could therefore interpret section 1982 as a limited exception to section 1981’s more general rule about contracts, excluding contracts pertaining to property from the alienage equality principle found in section 1981.

Even under this interpretation, however, section 1981 is still relevant, since some of the recently enacted laws not only prohibit buying and selling real property, but also prohibit forming other types of contracts. For example, Indiana’s, Montana’s, and Texas’s new alien land laws prohibit certain foreign entities from countries like China from entering into agreements regarding critical infrastructure (energy grid, water treatment plants, and so on).¹⁸⁰

Additionally, one could argue that section 1982 prohibits the restrictions that alien land laws place on U.S. citizen sellers and landlords, as well as U.S. citizen-owned or controlled realty and title companies. From the perspective of U.S. citizens who want to sell properties, the restrictions imposed by states are restraints on alienation.¹⁸¹ The laws shrink their market, and if the claims about Chinese investors flooding the market and paying exorbitant prices are true,¹⁸² then real estate owners and companies who cater to this population will lose a profitable share of potential buyers. One complication with this argument is that U.S. citizen sellers are not necessarily being treated differently from other “white citizens” under the language of section 1982. For the argument to work, the focus would likely have to be on non-white U.S. citizen sellers, for example, U.S. citizen sellers of Chinese descent whose clientele potentially include a substantial number of Chinese citizens or companies domiciled in China. These U.S. citizen sellers of Chinese descent could argue that they are being deprived of the same opportunities to sell real property that are enjoyed by white citizens who do not have clientele in China.

Another possible legal hurdle is that a disparate impact claim under section 1981 or section 1982 requires showing that the disparate impact is traceable to a discriminatory purpose.¹⁸³ This is more limiting than a disparate impact claim under the FHA. Nevertheless, the legislative history and rhetoric surrounding the passage of some of the laws may help demonstrate a discriminatory purpose. State legislators and executive officials discussing alien land laws have used inflammatory rhetoric coated with national security concerns. Feeding on the anti-Asian sentiment fueled by dubious theories about the origin of COVID-19 and compounded by economic fears concerning China’s influence, their statements are reminiscent of the language used in the era of the “Yellow Peril.”¹⁸⁴ Although alien land laws may seem somewhat removed from the original purpose of the Civil Rights Acts, which was to prevent discrimination against African Americans in the wake of the Civil War, the rhetoric surrounding these laws reflects a form of racial discrimination.

B. Equal Protection Concerns

The Equal Protection Clause applies to all persons within the United States, including all noncitizens.¹⁸⁵ But noncitizens abroad generally are not regarded as having a right to equal protection,¹⁸⁶ although open questions about extraterritorial rights certainly remain.¹⁸⁷ This may be a threshold hurdle for bringing an equal protection challenge, since many of the alien land laws apply only to “nonresident aliens” and define “resident aliens” as noncitizens living anywhere in the U.S.¹⁸⁸ If an alien land law restricts only foreigners abroad, an equal protection challenge would likely need to be brought by the individuals and companies based in the U.S. that are prohibited from selling or leasing real property to foreigners abroad.¹⁸⁹

Another major challenge in bringing an equal protection claim will be the century-old Supreme Court precedents in Terrace and Porterfield upholding alien land laws, which have never been overruled.¹⁹⁰ Of course, in the 1920s, equal protection jurisprudence was quite different than it is today. Segregation, Jim Crow, and racially restrictive covenants were all legal.¹⁹¹ Levels of judicial scrutiny were not introduced until 1938, in the famous footnote four of United States v. Carolene Products, in which Justice Stone mentioned certain circumstances that may call for a “more searching judicial inquiry,” including cases involving “prejudice against discrete and insular minorities.”¹⁹²

In 1948, when the Supreme Court applied this type of searching judicial inquiry in Oyama, it invalidated as racially discriminatory a part of California’s alien land law that deprived U.S. citizens of Japanese descent of property rights.¹⁹³ But the Court stopped short of invalidating the law altogether.¹⁹⁴ That same year, in Takahashi, when the Court struck down a California law that prohibited those “ineligible for citizenship” from obtaining fishing licenses, it rejected California’s reliance on the Terrace and Porterfield cases, finding them not controlling even “[a]ssuming the[ir] continued validity.”¹⁹⁵

The modern strict scrutiny test did not emerge until the 1960s.¹⁹⁶ And it was not until 1971 that the Supreme Court applied strict scrutiny to alienage classifications.¹⁹⁷ In a watershed decision, Graham v. Richardson, the Court found that “[a]liens as a class are a prime example of a ‘discrete and insular’ minority . . . for whom such heightened judicial solicitude is appropriate.”¹⁹⁸ Applying this new, rigorous standard of review, the Court struck down Arizona and Pennsylvania statutes that favored citizens over noncitizens in welfare benefits.¹⁹⁹ Richardson rejected the states’ argument that the restrictions were justified by “a State’s ‘special public interest’ in favoring its own citizens over aliens in the distribution of limited resources such as welfare benefits.”²⁰⁰ The Court also flatly rejected “fiscal integrity” as a compelling justification, stating that “aliens lawfully within this country have a right to enter and abide in any State in the Union ‘on an equality of legal privileges with all citizens under non-discriminatory laws.’ ”²⁰¹

The Supreme Court continued to apply strict scrutiny to strike down state laws that discriminated against noncitizens in employment. The Court invalidated a New York law that permitted only U.S. citizens to be eligible for state employment,²⁰² a Connecticut law that permitted only U.S. citizens to become lawyers,²⁰³ and a Texas law that permitted only U.S. citizens to be notary publics.²⁰⁴

However, the Court has also recognized an exception to strict scrutiny in cases where alienage classifications are related to a state’s political function.²⁰⁵ In Bernal v. Fainter, the Court described this as a “narrow exception” that “applies to laws that exclude aliens from positions intimately related to the process of democratic self-government.”²⁰⁶ Under the political function exception, the Court has applied rational basis review to uphold laws that require police officers,²⁰⁷ probation officers,²⁰⁸ and public school teachers²⁰⁹ to be U.S. citizens.

If strict scrutiny applies to an alien land law, then the law must be narrowly tailored to a compelling government interest, a test that is generally difficult to pass. If rational basis applies, the law must merely be related to a legitimate government interest. Determining which level of scrutiny applies is therefore a critical threshold question in assessing the likelihood of prevailing with an equal protection claim.

1. Does Strict Scrutiny Apply?

There are at least three important legal questions that must be answered in order to determine if alien land laws are subject to strict scrutiny. First, do all alienage classifications receive strict scrutiny or only those affecting lawful permanent residents? Second, does the “political function” exception to strict scrutiny for alienage classifications apply to alien land laws? Third, do restrictions that turn on being domiciled (or headquartered, for a corporation) in particular countries discriminate based on national origin?

i. Do All Alienage Classifications Receive Strict Scrutiny, or Only Classifications Affecting Lawful Permanent Residents?

The Supreme Court’s decision in Richardson broadly stated that “[a]liens as a class are a prime example of a ‘discrete and insular’ minority” and that “classifications based on alienage, like those based on nationality or race, are inherently suspect and subject to close judicial scrutiny.”²¹⁰ This language does not distinguish between legal permanent residents and other noncitizens. Subsequently, in Nyquist v. Mauclet, the Supreme Court also applied strict scrutiny in striking down a New York statute that barred a heterogeneous group of noncitizens (not just permanent residents) from state financial aid for higher education, stressing that “[t]he important points are that [the statute] is directed at aliens and that only aliens are harmed by it.”²¹¹

While the Court has never limited the application of strict scrutiny to lawful permanent residents, its use of the term “resident aliens” has created confusion. The term “resident alien” can easily be misconstrued as shorthand for a permanent resident, although it simply refers to an alien residing in the United States.²¹² Asylum applicants, refugees, and noncitizens with a variety of temporary visas, among others, are permitted to reside in the United States, even though they are not lawful permanent residents.

In Toll v. Moreno, the Supreme Court had an opportunity to clarify what level of scrutiny applies to classifications involving temporary immigrants (technically called “nonimmigrants”) when evaluating a University of Maryland policy that prohibited individuals with G-4 visas from receiving in-state tuition.²¹³ But the Court ultimately found that the university policy was preempted and declined to address the equal protection claim.²¹⁴ A circuit split has since emerged regarding what level of scrutiny applies to state classifications involving temporary immigrants.

The Fifth Circuit has held that temporary immigrants are not a suspect class, applying rational basis review in upholding Louisiana laws that prohibit temporary immigrants from taking the bar exam²¹⁵ and obtaining a nursing license.²¹⁶ In explaining why classifications affecting temporary immigrants receive rational basis review, the Fifth Circuit stressed the ways that temporary immigrants are different from permanent residents, noting that “nonimmigrant aliens may not serve in the U.S. military, are subject to strict employment restrictions, incur differential tax treatment, and may be denied federal welfare benefits.”²¹⁷ The Sixth Circuit followed the Fifth Circuit’s rationale, applying rational basis review in upholding a Tennessee statute that conditions issuance of a driver’s license on being a U.S. citizen or permanent resident.²¹⁸

The Second Circuit, on the other hand, has held that temporary immigrants are a suspect class and applied strict scrutiny in striking down a New York statute that prohibited them from a obtaining a pharmacist’s license.²¹⁹ The court refused to create an exception to strict scrutiny for temporary immigrants that the Supreme Court never recognized.²²⁰ Additionally, the court reasoned that the factual similarities between U.S. citizens and permanent residents recognized in Richardson were never intended to be a test for triggering strict scrutiny.²²¹ The court correctly recognized that Richardson’s recognition of aliens as a “discrete and insular minority” was premised on their minority status within the community, not their similarity to citizens.

The only class of noncitizens that the Supreme Court has ever treated differently in terms of the level of scrutiny that applies are undocumented individuals. But even in Plyler v. Doe, in which the Court refused to recognize undocumented children as a suspect class, the Court struck down the Texas statute that denied them a basic education.²²² There, the Court applied a form of intermediate scrutiny by requiring Texas to show that it had a “substantial” interest in excluding undocumented children from public schools.²²³ This heightened scrutiny may have been unique to a case that stressed the importance of education and the innocence of children.²²⁴ Still, if undocumented children received heightened scrutiny, it is difficult to argue that lawfully present noncitizens should receive rational basis review simply because they are not permanent residents.²²⁵

ii. Does the “Political Functions” Exception to Strict Scrutiny for State Alienage Classifications Extend to Ownership of Real Property?

Courts have not yet addressed whether state alien land laws fall under the “political functions” exception to strict scrutiny. If the exception applies, a state’s alienage classifications would receive only rational basis review. In Shen v. Simpson, the case challenging Florida’s 2023 alien land law, Florida argued that the political function exception applies, triggering only rational basis review.²²⁶ Thus far, however, the Supreme Court has only applied the political functions exception to certain state jobs.

The Supreme Court set forth a two-part test for determining “whether a restriction based on alienage fits within the narrow political-function exception.”²²⁷ First, a court examines the specificity of the classification: “[A] classification that is substantially overinclusive or underinclusive tends to undercut the governmental claim that the classification serves legitimate political ends.”²²⁸ As explained further below in the application of the strict scrutiny test, alien land laws are substantially over- and under-inclusive. That alone undercuts the relevance of the political function exception.

Additionally, the second part of the test provides that:

[E]ven if the classification is sufficiently tailored, it may be applied in the particular case only to “persons holding state elective or important nonelective executive, legislative, and judicial positions,” those officers who “participate directly in the formulation, execution, or review of broad public policy” and hence “perform functions that go to the heart of representative government.”²²⁹

The plain language of the second prong indicates that the exception applies only to certain public positions. Owning real property is not a public position. Nor does being a property owner require any involvement in the formulation, execution, or review of public policies. Restricting property ownership is different from “limit[ing] the right to govern to those who are full-fledged members of the political community.”²³⁰

One way to view the issue is to consider whether real property ownership is more closely related to Supreme Court cases protecting noncitizens’ rights to equal economic opportunity,²³¹ or to cases that allow states to limit certain public positions to U.S. citizens.²³² Land is often connected to economic opportunity—agricultural land provides a livelihood through farming and raising livestock; commercial property supports businesses that provide livelihoods; and even residential property is often necessary to work in an area. In fact, in cases striking down state laws that discriminated against noncitizens in employment, the Supreme Court has connected the right to work to the right to “entrance and abode,” stating “they cannot live where they cannot work.”²³³

Furthermore, real property ownership has little in common with the public positions that have fallen under the exception to strict scrutiny. Landowners are not “clothed with authority to exercise an almost infinite variety of discretionary powers,”²³⁴ they do not fulfill “a basic governmental obligation,”²³⁵ and they are not “in a position of direct authority over other individuals.”²³⁶ Under this analysis, if any type of restriction on real property qualifies for the political functions exception, it would only be ownership of state land.

However, if the political functions exception is more broadly construed as encompassing “the process of democratic self-determination” and “the community’s process of political self-definition,” courts may consider land ownership to be relevant.²³⁷ Land can be seen as providing “the basis for political organization.”²³⁸ States’ historical restrictions on foreign land ownership, going back centuries, could also be viewed as reflecting an understanding that such restrictions are somehow inherent to state sovereignty and self-determination.

But choosing who gets to live in a state has not traditionally been part of a state’s right to self-definition. Due to the constitutional right to migrate, the Supreme Court has stressed that “[s]tates . . . do not have any right to select their citizens.”²³⁹ A state law aimed at deterring a particular class of people from migrating to the state is impermissible whether that class consists of welfare applicants, as in Richardson, Japanese immigrants, as in Takahashi, or other noncitizens. Similarly, the Supreme Court has found that a “[s]tate’s objective of reducing population turnover” would “encounter[] insurmountable constitutional difficulties.”²⁴⁰ The political functions exception allows a state to “limit the right to govern to those who are full-fledged members of the political community,”²⁴¹ but it has never allowed a state to limit who lives in the community.

In short, the political functions exception should not apply to alien land laws, and strict scrutiny would be the proper standard of review for their alienage classification.

iii. Do Restrictions Discriminate Based on National Origin if They Draw Distinctions Based on Where a Person or Entity Is Domiciled or Headquartered?

National origin discrimination is distinct from discrimination based on alienage. While alienage discrimination refers to distinctions between citizens and noncitizens,²⁴² national origin discrimination is broadly understood to include discrimination based on an individual’s place of origin, or their ancestors’ place of origin.²⁴³ Laws that place restrictions on citizens or corporations of specific countries ought to trigger strict scrutiny based on national origin.

States may argue, however, that their laws do not discriminate based on national origin but instead draw distinctions based on place of “residence” or “domicile.” For example, Florida’s law restricts only noncitizens who are “domiciled” in certain foreign countries, rather than restricting citizens of those countries outright.²⁴⁴ A federal district court found that the Florida law does not discriminate based on Chinese national origin because Chinese individuals domiciled in the United States are not restricted; only individuals domiciled in China are restricted, and they need not be Chinese.²⁴⁵ Similarly, Montana’s law applies to corporations that are “domiciled or headquartered” in a country identified as a “foreign adversary.”²⁴⁶

A law like Florida’s would clearly have a disparate impact on individuals of Chinese national origin, since over 99% of people living in China are Chinese. But equal protection principles require a showing of intentional discrimination; classifications that merely result in a disparate impact are not subject to strict scrutiny.²⁴⁷ In Village of Arlington Heights v. Metropolitan Housing Development Corp., however, the Court found that discriminatory intent could be evidenced by factors that include “disproportionate impact, the historical background of the challenged decision, the specific antecedent events, departures from normal procedures, and contemporary statements of the decisionmakers.”²⁴⁸ These factors must be assessed cumulatively.²⁴⁹ In Shen, the Florida case, the clearly disproportionate impact on Chinese individuals, along with the legislative history, would support a finding of discriminatory intent under Arlington Heights.

Because the Arlington Heights factors are non-exhaustive, some appellate courts have mentioned other considerations. For example, a “consistent pattern” of actions of decisionmakers that have a much greater harm on minorities than on non-minorities could help establish discriminatory intent.²⁵⁰ In a state like Florida or Texas, where the governors have taken numerous actions to try to prevent immigrants from coming to the state, this may be a relevant consideration.²⁵¹ Courts have also found that applying different, less favorable processes or substantive standards to requests by members of a suspect class may raise an inference of discriminatory intent. Some alien land laws impose special procedures for buyers from certain countries, such as requiring buyers to sign affidavits attesting that they are not principals of China and to register existing properties with the state.²⁵² These types of procedures could further help establish discriminatory intent.²⁵³

2. Analyzing Alien Land Laws Under Strict Scrutiny

In order to survive strict scrutiny, a law must be narrowly tailored to serve a compelling government interest. When strict scrutiny is applied, the government “must show that it cannot achieve its objective through any less discriminatory alternative.”²⁵⁴ The main reasons offered for the new wave of alien land laws are national security, food security, and preventing absentee landownership. As explained below, even assuming these are all compelling government interests, alien land laws are unlikely to survive strict scrutiny because they are not narrowly tailored to achieve these objectives. There are also less restrictive alternatives available.

i. National Security

In explaining the need for Alabama’s newly enacted alien land law, Governor Ivey said, “Across the United States, we have seen alarming instances of foreign entities purchasing large tracts of land, which could have severe consequences for our country’s national defense and economy, if no action is taken.” ²⁵⁵ As discussed above, many of the proposed and enacted laws forbid foreign ownership of land within a certain distance of military installations or critical infrastructure. Such restrictions are highly unlikely to prevent espionage or other national security attacks. The Chinese balloon that hovered over Montana did not need to be launched from land near a military base.²⁵⁶ Neither do drones or cyberattacks gathering U.S. data.²⁵⁷

Furthermore, the “safe” distances from military installations or critical infrastructure are arbitrary in this new wave of alien land laws. As noted above, these distances range from two to fifty miles. The best illustration of this arbitrariness is Florida’s law, which bans ownership by “foreign principals” within ten miles of military installations even though the legislation was triggered by a Chinese company’s purchase of land twelve miles from a military based in North Dakota.²⁵⁸

Nationality-based restrictions on ownership of real property are also easily circumvented. Straw men can be used to purchase the land. A Chinese tycoon can easily have someone purchase it for him, as Mr. Sun did in Texas.²⁵⁹ As commentators have previously noted, alien land laws do not really pose an impediment to acquiring real property.²⁶⁰

A less restrictive alternative would be for states to establish or expand existing reporting requirements for foreign investment in land. Several states have already implemented reporting requirements for foreign investments in agricultural land.²⁶¹ Extending the reporting requirements to all real estate and subjecting those transactions to a review process to identify risky transactions would be less restrictive and potentially more effective than a blanket ban. Once the state has information about a potential transaction, it can decide if the transaction can go forward or if it involves too many risks from a national security perspective. This process imposes less of a restriction on individuals who want to sell their land and is less likely to be perceived as aggressive by foreign countries. It is an approach similar to the one used at the federal level by the Committee on Foreign Investment in the United States (“CFIUS”). However, this approach, like the current one banning transactions, may be preempted by the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”).²⁶² Another way to discourage transactions involving noncitizens abroad is taxation. A tax would increase the cost of real estate transactions, ensuring that only those bringing a large benefit move forward. Taxation, though, could violate the Dormant Foreign Commerce Clause.²⁶³

In short, banning land ownership within certain distances of military installations or critical infrastructure is not going to bring large gains in national security. It will, however, impose significant costs by barring potential good faith purchasers from accessing land, introducing tensions in the United States’ relationship with certain countries, and perpetuating negative sentiments towards people from countries like China.

ii. Food Security

The idea of food security has had a central role in farmland regulation for a long time.²⁶⁴ There is a fear that foreign companies will control U.S. food production and either let Americans suffer if certain products are unavailable or make them pay a higher cost by importing them. The fear is not new: for decades, foreign owners of agricultural land have been required to report to the U.S. Department of Agriculture.²⁶⁵

But this fear is misplaced. The United States has a surplus of agricultural products.²⁶⁶ Furthermore, the bills deal with land ownership as a proxy for agricultural production, but the current structure of agricultural markets may make that an inadequate proxy. Eight of the twenty largest food and beverage companies in the United States are foreign companies, but none are from the countries deemed foreign countries of concern in the new wave of alien land laws.²⁶⁷ Control of agricultural land neither results in automatic control of the food supply, nor does it lead to control of agricultural production. In Iowa, for example, where roughly all non-family corporations are prevented from owning agricultural land, large agribusinesses simply lease the land from several owners, subverting the goal of the ownership prohibition.²⁶⁸ A similar subterfuge could be used by foreign companies in response to state alien land laws.

If the concern is foreign control of agricultural land and absentee ownership, focusing on the “who” by targeting specific countries’ nationals would be a partial solution if the countries singled out were the ones that most foreign owners come from. If that were the case, then instead of banning China, Iran, North Korea, or Russia, states should ban Canada, Netherlands, Italy, the U.K. and Germany, in that order, because each of them owns far more agricultural land than China.²⁶⁹ Even a measure like Washington’s—a blanket prohibition on foreign investment in agricultural land—is not automatically going to slow down the consolidation of land and reduce land prices because domestic companies may still accumulate large amounts of natural resources.

A less restrictive alternative to address concerns about foreign control of resources is to limit the amount of these resources that foreigners can own. This approach recognizes that size matters and that small investments give foreign actors less leverage against federal, state, and local governments.²⁷⁰ Restricting the amount of land that noncitizens can own would also discourage financial investors seeking market control who need a certain scale for the investment to be profitable.

iii. Absentee Ownership

A third motivation for the new wave of alien land laws is concern over absentee ownership.²⁷¹ Absentee ownership is problematic because property is treated as an investment, and the owner generally lacks interest in what role the property could fulfill in the community,²⁷² civically and economically.²⁷³ This concern applies to both agricultural lands and dwellings. Alien land laws that distinguish between “resident aliens” and “nonresident aliens” reflect a desire to preserve property for residents. But because most state laws usually define a “resident alien” as living anywhere in the United States, limiting property ownership to resident aliens would not necessarily prevent absentee ownership. An owner of agricultural land in the Central Valley living in Shanghai is no different than an owner living in Rhode Island. Both will lack the local knowledge and the community involvement.

A more narrowly tailored alternative to address absentee ownership would be to impose a requirement of occupancy or production, or both, like the requirements for establishing a homestead.²⁷⁴ Alternatively, a state could tax land that is not in production at a higher rate, no matter where the owner resides.

A few alien land laws do impose stricter residency requirements to prevent absentee ownership.²⁷⁵ For example, Oklahoma’s newly enacted law has an exception for noncitizens who “take up bona fide residence in this state,” but if they leave the state, they must dispose of the land within five years.²⁷⁶ These requirements likely violate the Commerce Clause.

iv. Real Estate Market Prices

Although not explicitly mentioned by legislators proposing alien land laws, another motivation is fear of foreign investors driving up the prices of real estate.

In the agricultural sector, the fear is that it may displace American farmers who will not have access to land. Alabama’s Senate Bill (“S.B.”) 14 banning foreign ownership of agricultural land illustrates these concerns.²⁷⁷ Although the problem of access to farmland for small family farmers is real, the culprit is not necessarily foreigners but rather investors and consolidation.²⁷⁸ Furthermore, agribusinesses have been dominating the market.²⁷⁹ These alien land laws focus on the “who,” instead of on the “what”—in other words, they do not tackle the issue of corporate consolidation plundering natural resources.²⁸⁰

In the residential market, even if the overall Chinese investment in land is not large, it may have significant effects in certain local markets. While Chinese investment in land may drive prices up, it is necessary to consider a more nuanced picture. In some areas of the Midwest, Chinese investment has helped revitalize crisis-stricken areas, such as the Stonewater Community in a suburb of Detroit.²⁸¹ Many municipalities have welcomed the new developments targeting Chinese buyers. Corinth, near Dallas, readily approved new developments in its jurisdiction.²⁸² The situation may be different in Manhattan or San Francisco and other big cities where Chinese investments may be driving up home values.²⁸³ However, targeting the demand side will not solve the housing crisis because it is a supply-side problem.

The poor fit between alien land laws and their objectives, combined with the availability of less restrictive alternatives, means such laws are likely to be struck down under strict scrutiny.

3. Rational Basis Analysis

If rational basis review applies instead of strict scrutiny, then a court need only inquire if the law is rationally related to a legitimate government purpose. There is no analysis of less restrictive alternatives for rational basis review.²⁸⁴ While laws generally survive rational basis review, courts have invalidated laws motivated by animus by applying rational basis with bite, a heightened form of scrutiny. Both types of rational basis review are discussed below.

i. Regular Rational Basis Review

The poor means-end fit discussed above arguably fails not only strict scrutiny, but also rational basis review. There is simply no rational relationship between the asserted objectives and the means being used to achieve them, since the restrictions imposed will be completely ineffective in addressing the problems identified. First, the problems of access and prices of real estate are mostly supply problems, not demand. Second, the countries that are singled out in the new wave of alien land laws completely fail to reflect the nationalities of the largest foreign landowners. Third, these laws are argued as ways to ensure food security, but food security is not a problem in the United States. To the extent that food security embodies consolidation in the agricultural sector and absentee ownership, alien land laws do not solve the food security problem because the real culprits are domestic corporations and corporations from countries that are not mentioned in any of the alien land laws. Fourth, from a national security perspective, foreign adversaries who want to spy on the U.S. are likely to use methods that do not require a land base near the target.

The few cases where courts have upheld alien land laws under rational basis review are distinguishable from many of the current laws because those laws were different in scope and did not single out specific nationalities. For example, the Eighth Circuit upheld a Nebraska constitutional provision prohibiting agricultural land ownership by non-family corporations.²⁸⁵ In addition, the Wisconsin Supreme Court upheld a law that limited ownership of land by “nonresident aliens” to 640 acres.²⁸⁶ The court found the law to be rationally related to the legitimate goal of preventing absentee ownership, stating that “limiting the benefits of land ownership to those who share in the responsibilities and interests of residency is not an unreasonable exercise of legislative choice.”²⁸⁷

The fate of the new laws may be different, especially if they single out specific countries. Laws targeting citizens, corporations, and governments of China, Iran, North Korea, Russia, and other countries on various federal lists are much more ineffective (and more insidious) than the laws considered in these prior decisions, which treated all nonresident aliens equally. If the targeted countries’ citizens and corporations own little to no real property in the state, legislators cannot rationally think that prohibiting them from owning real estate will make a dent in the problems they want to tackle. Additionally, absentee ownership is already pervasive in the agricultural sector. Targeting foreign owners as a potential solution would affect only 3% of the land in the United States if all countries were restricted. Legislators are aware that there is little overlap between the problem of absentee ownership and foreign ownership.²⁸⁸ As for statutes that prohibit landownership within a certain distance of military bases or critical infrastructure, this will do nothing to prevent cyberattacks, which pose the main threat to national security, as noted above.²⁸⁹

Another reason for questioning the rationality of the new wave of alien land laws is that availability bias appears to play a major role in legislators’ decisions. Availability bias is the human tendency to use information that comes to mind quickly and easily when making decisions.²⁹⁰ It is an unconscious mental shortcut that circumvents taking all evidence into consideration. Because a few incidents that involved foreign investors made national news, the new wave of alien land laws was spurred.

In addition to the wind farm project planned by Mr. Sun in Texas, there were two other prominent incidents. One involved a Saudi-owned company called Fondomonte that was leasing public land in Arizona and draining the groundwater supply to grow alfalfa for export back to Saudi Arabia, where alfalfa farming was prohibited due to water scarcity. The company paid relatively little to lease the land in Arizona and got the water for free, while Americans in the surrounding area paid extremely high costs for water.

The other case involved a Chinese food manufacturer that tried to purchase 300 acres of agricultural land in North Dakota located twelve miles from the Grand Forks Air Force Base.²⁹¹ The federal government’s CFIUS reviewed this case and determined that it did not have jurisdiction over the transaction because the Grand Forks Air Force Base was not on its list of military installations.²⁹² This led people to believe that the federal government’s process was inadequate and that states needed to take more action. The Grand Forks incident was relied on not only by legislators in North Dakota, but also by other states including Florida.²⁹³ Yet, as previously noted, the law that Florida ultimately passed would not have stopped such an investment, since it prohibited Chinese foreign investment within ten miles of military installations. The arbitrariness and ineffectiveness of the laws suggest that decisions were driven by implicit biases rather than carefully studied facts. Worse yet, they may have been motivated by animus, as discussed below.

ii. Rational Basis with Bite

To the extent that recent alien land laws are motivated by animus toward China or another country, courts may apply “second order” rational review, also known as rational basis “with bite.”²⁹⁴ In such cases, the Supreme Court has found the government’s interest to be illegitimate because it is motivated by prejudice. The Court has considered a poor means-end fit to be a signal that an illegitimate interest may be motivating the law.²⁹⁵

Comments made by politicians around the time that the recent wave of alien land laws started being proposed certainly suggest that anti-Chinese animus played a role. For example, in 2022, a candidate who competed in the Republican primary for a Texas House seat tweeted, “China created a virus that killed hundreds of thousands of Americans.”²⁹⁶ Former President Trump also continued to call COVID-19 the “China virus” throughout 2022.²⁹⁷ Each tweet from Trump that mentioned “China” and “COVID” together resulted in an 8% increase in anti-Asian hate incidents and tweets with racial slurs.²⁹⁸

Politicians further fanned the flames of anti-Chinese animus by presenting China as a threat to the American way of life. A U.S. Representative from Indiana accused President Biden of “turning a blind eye to CCP spies abusing our visa system.”²⁹⁹ A U.S. Senator from Tennessee warned that “[t]he CCP is attempting to take over the USA across all industries—pushing spies into U.S. universities and buying U.S. farmland.”³⁰⁰ Vice President J.D. Vance, a former Senator from Ohio, analogized U.S. economic dependence on China to slavery when he was running for his Senate seat, stating: “When our farmers go bankrupt the Chinese who sell the fertilizer will happily buy up their land. This is the pathway to national slavery.”³⁰¹ The Washington Post and other outlets have also highlighted how “anti-Asian bigotry” is behind the new alien land laws targeting China.³⁰²

In City of Cleburne v. Cleburne Living Center, Inc., a classic case on rational basis with bite, the Court focused on the lack of “fit” between the language of a zoning ordinance and a town’s asserted objectives for denying a special permit to a group home for people with mental disabilities.³⁰³ The town claimed that the purpose of the ordinance and permit process was to avoid congestion and ensure safety in the event of a fire or flood, but the Court pointed out that the permit process did not apply to hospitals, nursing homes, dormitories, and other uses that could be expected to pose greater problems than a group home.³⁰⁴ This poor means-end fit supported the Court’s conclusion that the ordinance had an illegitimate purpose based on animus.

Similarly, the underinclusive nature of alien land laws that target countries with minimal investments in U.S. land, while omitting the countries with the largest investments, demonstrates a poor means-end fit if the asserted objectives are to protect food security and prevent absentee landownership. These laws also generally “grandfather” in ownership of existing properties, which some commentators have identified as another signal of underinclusiveness that can trigger heightened “rational basis” review.³⁰⁵

In sum, regardless of whether strict scrutiny or rational basis review applies, alien land laws targeting specific countries should be struck down. They are not rationally related to a legitimate government interest, much less narrowly tailored to a compelling government purpose, and they appear to be motivated, at least in part, by impermissible animus.

C. Preemption Concerns

Whether alien land laws are preempted by federal law is another important constitutional question. This Section explores whether alien land laws are preempted by federal immigration laws, the federal government’s national security and foreign affairs powers, and the CFIUS and USDA reporting regimes.

1. Immigration Preemption

The Immigration Act of 1952 established “a comprehensive federal statutory scheme for regulation of immigration and naturalization” and set “the terms and conditions of admission to the country and the subsequent treatment of aliens lawfully in the country.”³⁰⁶ Supreme Court precedents indicate that alien land laws restricting noncitizens who have already been admitted to the U.S. may be preempted by federal immigration law. In Takahashi, the Supreme Court explained that “[s]tate laws which impose discriminatory burdens upon the entrance or residence of aliens lawfully within the United States conflict with [the] federal power to regulate immigration, and have accordingly been held invalid.”³⁰⁷ Both Takahashi, and an earlier case, Truax v. Raich, struck down state laws limiting the employment of lawfully present noncitizens by reasoning that federal immigration law granted a “privilege to enter and abide in ‘any state in the Union,’ ” and that denying the right to work would be “tantamount to . . . deny[ing] them entrance and abode.”³⁰⁸

In Richardson, the Supreme Court confirmed that states may not impose an “auxiliary burden[] upon the entrance or residence of aliens” that Congress had never contemplated.³⁰⁹ Restrictions on ownership of real property impose precisely this type of auxiliary burden. Certainly, Congress never contemplated that lawful permanent residents would be encumbered by ownership restrictions. With respect to temporary immigrants (i.e., “nonimmigrants”), Congress required certain classes, such as tourists, students, and crewman, to maintain a residence abroad that they had no intent of abandoning.³¹⁰ But for other classes of temporary immigrants, Congress did not impose any such requirement.³¹¹ The Supreme Court has interpreted this silence “to mean that Congress . . . was willing to allow nonrestricted nonimmigrant aliens to adopt the United States as their domicile.”³¹² If every state could prohibit temporary immigrants from buying—or potentially even leasing—property, the doors of the United States would effectively be closed to when Congress permitted them to establish domicile here.³¹³ As a federal court in Texas recognized, “[r]estrictions on residence directly impact immigration in a way that restrictions on employment or public benefits do not.”³¹⁴

While lawfully admitted immigrants may have the strongest argument for immigration preemption, courts have also struck down state laws that discriminate against undocumented individuals in housing as preempted by federal immigration law.³¹⁵ For example, in Villas at Parkside Partners v. City of Farmers Branch, the Fifth Circuit found that immigration law preempted a local ordinance that prohibited renting to individuals who are not “lawfully present.”³¹⁶ The court reasoned that Congress contemplated that such individuals would reside in the United States until potential deportation and even required them to provide a reliable address to the federal government.³¹⁷ Additionally, the court noted that deciding whether someone is “lawfully present” requires a complex analysis and should be made only by federal immigration officials.³¹⁸ The same reasoning would support striking down Louisiana’s newly enacted alien land law, which exempts noncitizens who are “lawfully present in the United States” and would therefore require a state official to make a determination about someone’s legal status.³¹⁹

Additionally, in City of Farmers Branch, the court was concerned about the immigration classification in the local ordinance being “at odds” with a much more nuanced federal regime.³²⁰ Some of the proposed and enacted alien land laws raise similar concerns by using terms that conflict with immigration law. For example, Minnesota’s law defines a “permanent resident alien” to include not only someone who is a lawful permanent resident, but also a nonimmigrant treaty investor.³²¹ A bill proposed in West Virginia defined a “nonresident alien” as someone who is neither a U.S. citizen nor a lawful permanent resident. Under that definition, all sorts of noncitizens would be swept into the restriction, even if they live in West Virginia.

Finally, the registration and reporting requirements found in some alien land laws may be preempted by immigration law. In Hines v. Davidowitz, the Supreme Court found that immigration law preempted a Pennsylvania statute requiring adult aliens to register with the state, pay a fee, and carry an ID.³²² Likewise, in Arizona v. United States, the Court stressed that “the Federal Government has occupied the field of alien registration.”³²³ The Court explained that “[t]he federal statutory directives provide a full set of standards governing alien registration, including the punishment for noncompliance.”³²⁴ A state law that requires certain noncitizens to register their property, and penalizes them for failing to do so, is not far afield from one requiring noncitizens to register themselves, especially since the same personal information must be provided.

The arguments presented above all involve noncitizens who are in the United States. The major group omitted from this analysis of preemption by federal immigration laws are noncitizens abroad. But the other bases for preemption, discussed below, would apply to that group.

2. Foreign Affairs Preemption

The Constitution entrusts foreign affairs powers exclusively to the federal government.³²⁵ Foreign affairs preemption serves several purposes: it constrains a state’s ability to offend a foreign country, which could lead to hostilities; it promotes unity in the nation’s external affairs; and it furthers the effective exercise of foreign policy.³²⁶ Yet, as the history of alien land laws shows, states have long engaged with issues that affect foreign nationals.³²⁷

The Supreme Court has provided different versions of the test for determining whether a state law impermissibly interferes in foreign affairs. In American Insurance Ass’n v. Garamendi, which struck down California’s “Holocaust-era” insurance legislation, the Court framed the issue as whether the state law is likely to produce “more than [an] incidental effect in conflict with express foreign policy.”³²⁸ In Zschernig, the Supreme Court invalidated an Oregon probate law that permitted states courts to withhold remittances to nonresident aliens residing in Communist countries.³²⁹ Even though states traditionally have the power to regulate estates and probate, the Court found that the Oregon law “affect[ed] international relations in a persistent and subtle way.”³³⁰ There, the Court framed the test as whether the state law “impair[s] the effective exercise of the Nation’s foreign policy.”³³¹ And in Crosby v. National Foreign Trade Council, which struck down a Massachusetts law that barred state agencies from purchasing goods or services from companies doing business with Burma, the Court considered whether the state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of [federal policy].”³³²

Applying these cases to alien land laws, the question is whether, or to what degree, they conflict with U.S. foreign policy or pose an obstacle to the objectives of foreign policy. Do they merely have an incidental impact on foreign affairs, or is the effect more material? While the answer will likely depend on the specifics of a particular law, it is also worth considering the cumulative impact of these alien land laws on foreign affairs. If every state prohibited citizens of China from buying property, the impact on foreign relations would be far more significant than if only a few did so.

State laws that unilaterally identify certain nations as “countries of concern” or “foreign adversaries,” with no reference to a federal law, are particularly likely to raise foreign affairs preemption concerns. Like the Massachusetts law struck down in Crosby, these state laws are making a judgment about the conduct of a foreign country that is “apart from the federal government’s own announced judgment.”³³³ Even if the countries identified by the state law are currently consistent with a federal designation, federal law expressly contemplates those designations changing over time, and state laws may not keep up with them.³³⁴ Some lower courts have already expressed preemption concerns about state laws that are directed at particular nations, noting that they can be perceived as a unilateral declaration of “economic war,”³³⁵ or a “political statement” about the country.³³⁶ As one court recognized, the potential effect on international relations is greater when a state targets a specific country instead of regulating all noncitizens regardless of nationality.³³⁷

Additionally, the countries identified by name in the new wave of alien land laws are already subject to individualized sanctions by the federal government. Several Presidents have issued Executive Orders and Congress has passed laws imposing unique sanctions against China,³³⁸ Iran,³³⁹ North Korea,³⁴⁰ and Russia,³⁴¹ among other countries. Just like the sanctions against Burma discussed in Crosby, the laws addressing sanctions against these countries give the President flexible authority over what sanctions to impose and empower the President to waive any sanctions in the interest of national security. In Crosby, the Court reasoned that Congress would not have “gone to such lengths to empower the President if it had been willing to compromise his effectiveness by deference to every provision of state statute or local ordinance that might, if enforced, blunt the consequences of discretionary Presidential action.”³⁴²

Like the Massachusetts law in Crosby, alien land laws that target countries subject to federal sanctions “impos[e] a different, state system of economic pressure,” “penalize[] some private action that the federal [laws] . . . may allow, and pull[] levers of influence that the federal [law] does not reach.”³⁴³ The restrictions imposed by the alien land laws also make it impossible for the President “to restrain fully the coercive power of the national economy” by lifting or promising to lift sanctions, which leaves the President with “less to offer and less economic and diplomatic leverage as a consequence.”³⁴⁴ These state laws could also conflict with the federal sanctions scheme by flatly prohibiting financial transactions that the OFAC might permit with a license.³⁴⁵

When Congress wanted state and local governments to play a role in sanctioning a country such as Iran, Congress explicitly authorized them to do so.³⁴⁶ The 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act specified what form such state sanctions could take (divestment from companies that invest $20 million or more in Iran’s energy section), stated that such laws were not preempted, and protected due process by requiring notice and the opportunity for a hearing.³⁴⁷ Without this explicit congressional authorization, however, such sub-federal sanctions would likely be preempted by either the statute or executive action.³⁴⁸

Alien land laws that avoid naming specific countries but rely on various federal designations raise similar preemption concerns. The federal government has already determined the unique purposes and consequences of each of these designations. Adding restrictions involving real property ownership to whatever consequences the federal government has already imposed interferes with the federal scheme. For example, if the Secretary of State designates a country as “of particular concern,” Congress has authorized fifteen specific “Presidential Actions” that may be imposed on such designated countries, as well as any “commensurate action.”³⁴⁹ The President is also authorized to waive the application of any action.³⁵⁰ State laws that restrict real property ownership by citizens or entities of these “countries of particular concern” add consequences that were never contemplated by Congress and that can undermine the President’s decisions.

The variation among the countries included in each federal list underscores the deliberate decisions made by federal actors about how each country should be classified based on specific foreign policy objectives. State laws that use these classifications in a completely different context distort their purpose. This preemption argument is especially strong where the federal law constrains the context in which a particular term may be used. For example, federal regulations specify that the Secretary of Commerce’s classification of certain countries as “foreign adversaries” is “solely for the purposes of ” a particular executive order.³⁵¹

Individually and collectively, alien land laws that target specific countries, either by name or based on a federal list developed for another context, “compromise the very capacity of the President to speak for the Nation with one voice in dealing with other governments.”³⁵² As the Court explained in Crosby, “the President’s maximum power to persuade rests on his capacity to bargain for the benefits of access to the entire national economy without exception for enclaves fenced off willy-nilly by inconsistent political tactics.”³⁵³

Although the argument for foreign affairs preemptions seems strong based on these Supreme Court precedents, the U.S. Department of Justice surprisingly did not assert preemption in a Statement of Interest that it submitted in the case challenging Florida’s alien land law.³⁵⁴ Its failure to do so was noted by the district court in rejecting the plaintiffs’ preemption argument.³⁵⁵ Given the weight that courts give to the federal government’s own position on preemption, the Department of Justice’s position could prove fatal to preemption arguments in other cases as well. However, in the recent Shen case, even with the silence of the federal government, the Eleventh Circuit Court of Appeals granted a preliminary injunction based on CFIUS regulation of real estate transactions.³⁵⁶

3. The CFIUS and USDA Regimes

Concerns about foreign interests in real property are not unique to States. At the federal level, there are two avenues to rein in foreign investment: data collection on foreign interests in agricultural lands by the USDA and the review of certain transactions via CFIUS. These federal regimes may preempt state restrictions on foreign investment.

i. Reporting to USDA

The Agricultural Foreign Investment Disclosure Act of 1978 (“AFIDA”) established a framework to collect reported data on foreign ownership of agricultural land.³⁵⁷ Unfortunately, the system has not been properly implemented. Inaccuracies and underreporting have been pointed out.³⁵⁸ These critiques of the incompleteness and lack of transparency of the USDA reporting system have prompted Congress to include in the Consolidated Appropriations Act for the 2023 Fiscal Year (“FY”) a mandate to USDA to report on the impact that foreign investment has on family farms, rural communities, and the domestic food supply.³⁵⁹ The Government Accountability Office is expected to issue a report on the AFIDA and USDA reporting frameworks. There are several bills being discussed in the 2023–2024 congressional term seeking to ensure compliance with AFIDA. The Not One More Inch or Acre Act would ensure higher penalties for not complying with AFIDA.³⁶⁰ Under current law, persons who have violated AFIDA are subject to a fine of up to twenty-five percent of the foreign person’s interest in the agricultural land. This bill would make the minimum fine to be ten percent. House Resolution (“H.R.”) 1789 would require the penalty to be “at least [fifty] percent” of the market value of the land.³⁶¹ S.B. 2060 (Foreign Agricultural Restrictions to Maintain Local Agriculture and National Defense Act)³⁶² would require USDA to investigate efforts to steal agricultural knowledge and technology and to disrupt the U.S. agricultural sector. S.B. 2060 would also made the Secretary of Agriculture a member of CFIUS.

ii. CFIUS

CFIUS is a system for monitoring and, if necessary, blocking foreign investments that threaten national security.³⁶³ Established by President Ford in 1975, CFIUS is an interagency committee, chaired by the U.S. Department of Treasury.³⁶⁴ If CFIUS determines that an investment poses a threat to national security, the President can block or unwind the transaction. National security is not defined for CFIUS’s purposes, leaving it open to discretion.³⁶⁵

CFIUS originally focused only on foreign investment in U.S. businesses, without reviewing any real estate transactions. But in 2018, the Foreign Investment Risk Review Modernization Act (“FIRRMA”) expanded CFIUS and the President’s authority to review and block “certain types of real estate transactions involving the purchase or lease by, or a concession to, a foreign person.”³⁶⁶ CFIUS only has authority over real estate transactions that are in or around airports and maritime ports, or that are close to certain designated military installations. FIRRMA recognized that the President may want to consider factors such as “the relationship of [the investor’s] country with the United States” and “the adherence of the subject country to nonproliferation control regimes” in deciding whether to block a transaction.³⁶⁷

CFIUS’s jurisdiction also excludes transactions involving a single housing unit or real estate in urbanized areas.³⁶⁸ Small real estate investments are not expected to have a significant impact on national security and may not encourage large investments. Certain transactions must be reported, such as those involving a foreign government or any other transaction that CFIUS’s regulation mandates, while others fall under voluntary reporting. Real estate transactions so far have not been subject to mandatory reporting, suggesting that Congress did not consider them a national security threat. Control of critical infrastructure does trigger an investigation by CFIUS,³⁶⁹ but agriculture and food systems are not specifically identified as critical infrastructure. Bills that Congress considered but did not pass would have made that connection clear.³⁷⁰ In 2022, President Biden instructed CFIUS to consider the implications of foreign investment for food security.³⁷¹

For transactions under the purview of CFIUS, CFIUS is a ceiling and states cannot strengthen the regime by imposing additional obstacles. Hence, the provisions of new alien land laws overlapping with CFIUS are preempted because they could constitute an obstacle for federal enforcement.³⁷² Because of its limited jurisdiction, CFIUS would not have the authority to review many of the individual real estate transactions prohibited by state alien land laws. For example, as noted above, CFIUS found that it did not have jurisdiction to review a Chinese food manufacturing company’s purchase of 370 acres located twelve miles from the Grand Forks Air Force Base in North Dakota.³⁷³ That air force base was not on CFIUS’s list of designated military installations. Additionally, as a practical matter, CFIUS’s review of real estate transactions is negligible. In 2022, CFIUS reviewed 285 notices of non-real estate transactions, and only one notice of a real estate transaction.³⁷⁴ But still CFIUS may operate as a deterrent.

One could argue that Congress steered clear of ordinary real estate transactions in order to allow states to exercise their traditional control over land and property.³⁷⁵ On the other hand, Congress’s decision to include certain transactions while omitting others may reflect a carefully calibrated consideration of national security and economic interests, in which case states should not be allowed to disturb the delicate balance struck by Congress.³⁷⁶ Of course, if Congress had perceived alien land laws as conflicting with federal law (the CFIUS regime), it could have taken some action. So far, however, Congress has done nothing to impede states from implementing such laws. When Congress amended FIRRMA in 2018, at least fifteen states had alien land laws,³⁷⁷ and Congress did not indicate any intent to displace those laws in the amended Act. However, in past years, bills were introduced at the federal level that would have expanded CFIUS’s jurisdiction over real estate transactions,³⁷⁸ or outright prohibited citizens of China, Russia, North Korea, or Iran from purchasing land.³⁷⁹ While the CFIUS regime is limited, states’ unilateral actions singling out certain countries threaten the unified position that CFIUS enshrines with respect to both adversaries and allies.³⁸⁰

The Eleventh Circuit Court of Appeals in the case challenging Florida’s S.B. 264 granted a preliminary injunction in favor of two of the plaintiffs and based the “likelihood of success” on the merits on the potential preemption of S.B. 264 by the carefully crafted balance of CFIUS review under FIRRMA for real estate transactions, including those near military installations.³⁸¹

D. Dormant Commerce Clause

1. Interstate Commerce

While the Commerce Clause gives power to the federal government to regulate commerce between the states, it has also been interpreted as a limit on state action. Unlike preemption doctrine, which asks whether a state law conflicts with a federal law or whether Congress has occupied the field, the Dormant Commerce Clause prohibits state or local action that restricts interstate commerce even in the absence of congressional action. The goal of the Dormant Commerce Clause doctrine is to prevent “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.”³⁸²

Some alien land laws violate the Dormant Commerce Clause by treating out-of-state actors differently than in-state actors in ways that have a negative impact on interstate commerce. The disparate treatment between in-state and out-of-state residents in North Dakota’s new law is the clearest example. North Dakota’s law disadvantages noncitizens who are either abroad or in another state. It requires noncitizens who are not permanent residents or otherwise exempted to reside in the state for ten months a year. It also exempts those who actively participate in the management of the agricultural operation, which could allow someone to comply with the restrictions without being present in the state.³⁸³ A noncitizen who stops fulfilling these requirements must dispose of the property. A foreign person who moves to another state then cannot hold land while a similarly situated foreign person in North Dakota can.

Another example is the initial version of an Oklahoma bill, which exempted “any alien who is or shall become a bona fide resident of the State of Oklahoma” from the restrictions on ownership.³⁸⁴ Such a provision explicitly treats noncitizens living in another state differently than noncitizens residing in Oklahoma, which would trigger strict scrutiny under the Dormant Commerce Clause.³⁸⁵ Oklahoma likely recognized the Dormant Commerce Clause issue, because the final version of its rule pronounced that “the requirements of this subsection shall not apply to a business entity that is engaged in regulated interstate commerce in accordance with federal law.”³⁸⁶

Courts have struck down similar restrictions on landownership that favor in-state residents. For example, in Jones v. Gale, the Eighth Circuit invalidated a Nebraska initiative that amended the state constitution to ban corporations from owning farmland, with an exception for family farm businesses in which at least one family member resided or worked on the farm.³⁸⁷ The court found that this amendment favored Nebraska residents in violation of the Dormant Commerce Clause.³⁸⁸ Alien land laws that apply restrictions without differentiating based on residence in the state are much more likely to survive a Dormant Commerce Clause analysis.

2. Foreign Commerce

Restrictions on foreign ownership of land have a more obvious effect on international trade than they do on interstate commerce because noncitizens abroad are clearly targeted.³⁸⁹ North Dakota’s law, for example, allows noncitizens to buy agricultural land only if they reside in the state, while U.S. citizens and permanent residents can own agricultural land there regardless of where they live. While no country is singled out in North Dakota’s law, those countries without a treaty of friendship with the United States will be the ones whose citizens will be most affected.³⁹⁰

The Dormant Foreign Commerce Clause operates similarly to the interstate Dormant Commerce Clause, but state laws burdening foreign commerce are subjected to more demanding scrutiny.³⁹¹ When it comes to regulating foreign commerce, the Supreme Court has stressed that state laws should not “prevent this Nation from ‘speaking with one voice.’ ”³⁹² In the seminal case Japan Line, Ltd. v. County of Los Angeles, the Court highlighted the “acute” risk of retaliation by Japan for California’s imposition of a tax rule that deviated from international practice, observing that such retaliation “would be felt by the Nation as a whole,” not just by California.³⁹³

In subsequent cases, however, the Court has acknowledged the difficulty in determining “precisely when foreign nations will be offended by [a] particular act[]” or whether they might retaliate.³⁹⁴ The Court has also upheld state taxes on foreign entities by reasoning that no coherent federal policy exists.³⁹⁵

Under the Dormant Foreign Commerce Clause, it may be hard to demonstrate a uniform federal policy on foreign land ownership, since the federal government has traditionally entered into bilateral treaties with specific countries when it wanted to override state restrictions on foreign ownership of land.³⁹⁶ Additionally, in Barclays, the Supreme Court suggested that congressional inaction indicates acquiescence to differing state laws.³⁹⁷

Alternatively, courts may rely on the Supreme Court’s position in South-Central Timber Development, Inc. v. Wunnicke,³⁹⁸ which allows states to escape scrutiny under the Dormant Commerce Clause only if they are market participants themselves. For example, states could be acting as market participants when they are regulating state public lands, or when Congress has expressly excluded a state law from Dormant Commerce Clause scrutiny.³⁹⁹ In some cases, the Court has not considered references to state power over a resource, like water, in federal laws⁴⁰⁰ or in treaties⁴⁰¹ enough to conclude that Congress has excluded the application of the Dormant Commerce Clause to states. Accordingly, acknowledgement of state power to regulate property is an inadequate basis for refusing to apply the Dormant Foreign Commerce Clause when state laws discriminate against noncitizens abroad.

CONCLUSION

While each wave of alien land laws has responded to unique historical events, xenophobia of some kind undergirds them all. The current wave is no different. The dominant narratives that have fueled such bills involve members of the Chinese Community Party buying land to either spy on U.S. military bases or to “undermine American agriculture and control the global food supply.”⁴⁰² These narratives reflect a few salient examples of Chinese investments near military bases, but they have nothing to do with most foreign investment in the U.S. This Article has argued that one of the most significant weaknesses of these new laws is the complete lack of fit between the objectives asserted and the means being used to achieve them. This lack of means-end fit, combined with the availability of less restrictive alternatives, is highly relevant to both the equal protection analysis and the Fair Housing Act disparate impact analysis.

As legal cases challenging these new laws start percolating through the court system, the Supreme Court may eventually need to decide whether it will stand by hundred-year-old precedents upholding alien land laws that were based on explicitly racist naturalization eligibility criteria—rules that prohibited Asians from becoming U.S. citizens. The time has come for those cases to be overturned. But overturning them will likely require the Court to clarify certain unanswered questions in equal protection doctrine regarding alienage discrimination, such as whether strict scrutiny applies to all classes of noncitizens and whether the political functions exception to strict scrutiny can be extended to landownership.

Courts may also decide to avoid the thorny equal protection questions by striking down alien land laws on preemption grounds instead. However, the various arguments for preemption discussed here involve their own hurdles. Preemption under immigration law would likely be limited to noncitizens who have already been admitted to the U.S. Foreign affairs preemption seems particularly promising, but the federal government’s decision not to argue preemption in the recent Florida case to date may undermine that claim. A Dormant Foreign Commerce Clause argument is also strong, but courts may still be reluctant to invalidate a law related to traditional state powers over property based on interference with commerce.

There is also a chance that Congress will enact new laws in the near future addressing foreign ownership of land, as several such bills have already been proposed.⁴⁰³ Depending on the substance of a federal law, this could either make it harder or easier to challenge property restrictions related to national origin. In FY 2024, the House proposed a bill that would “prohibit the purchase of agricultural land located in the United States by nonresident aliens, foreign businesses, or any agent, trustee, or fiduciary associated with Russia, North Korea, Iran, or the Communist Party of China.”⁴⁰⁴ If the federal government decides to pass a law like this that singles out certain countries, it would be harder to challenge than a similar state law, as rational basis review, rather than strict scrutiny, applies to alienage classifications by the federal government.⁴⁰⁵ Additionally, the Dormant Commerce Clause and preemption arguments would disappear, since they only constrain states.

The enactment of federal legislation would, however, bolster arguments that state laws are preempted. A federal law that did not single out specific countries and instead set some general limits on foreign land ownership across the board, such as a limit on the amount of U.S. land that a noncitizen abroad or foreign business may own, could have a positive effect by displacing state laws that impose much more discriminatory restrictions.

A third possibility is that Congress could explicitly embrace a cooperative approach, specifying that the newly enacted federal legislation does not prohibit states from passing their own laws on foreign ownership of real property. Because this approach would potentially permit discriminatory state laws, it would be wise for Congress to at least set some constraints regarding what types of state restrictions would be permissible to prevent a race to the bottom.

At the end of the day, states and the federal government should be wary of the harm that exclusionary laws inflict. Laws that draw distinctions based on national origin or citizenship are likely to lead to racial or ethnic profiling by realtors, lenders, and others involved in real property transactions, as well as to subordinate minorities more generally. These laws are especially apt to exacerbate discrimination against Asian Americans, Iranians, and others who are already subject to discrimination. Long ago, the Supreme Court recognized that if states were allowed to deny immigrants the right or live and work in their borders, immigrants “would be segregated in such of those States as chose to offer hospitality.”⁴⁰⁶ Alien land laws open the door to this type of segregation.

Property ownership is a crucial means of achieving both financial and social mobility; it provides access to schools, jobs, culture, and community. Restricting property rights has therefore been used as a tool throughout history to disempower certain groups, including women and racial minorities. When we deprive noncitizens of property rights, we prevent hardworking immigrants from achieving the American Dream.

98 S. Cal. L. Rev. 305

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Fatma Marouf*

* Professor of Law, Texas A&M University School of Law. I would like to thank the participants of the Asian American Pacific Islander (AAPI) and Middle Eastern North African (MENA) Women in the Legal Academy Workshop, hosted by CUNY School of Law, as well as the participants of the Clinical Writers’ Workshop hosted by NYU School of Law, for their valuable feedback on a draft of this piece.

Vanessa Casado Pérez†

† Professor of Law, Texas A&M University School of Law, Research Professor, Texas A&M Department of Agricultural Economics. I would like to thank the participants at the Rural West Workshop and Grayson Ford for his research assistance. We are grateful for the hard work of the Southern California Law Review editors.

Common Heritage as Public Trust: A Property Law Approach to Managing Resources Beyond National Jurisdiction

October 2024October 2024Christopher Mirasola*

The search for rare minerals is taking us well beyond the bounds of national jurisdiction, and international law is struggling to keep up. In the 1970s states agreed that the deep seabed beyond national jurisdiction was the “common heritage of mankind,” a doctrine that was ultimately codified in the United Nations Convention on the Law of the Sea. The common heritage doctrine has, from the outset, been something of a chimera. And fears over its association with redistributive economic policies led to the failure of an agreement regulating activities on the moon. Yet the doctrine exists as a going concern in international law. Deep seabed mining is on track to begin in 2024. The United Nations is presently considering international rules for asteroid and lunar mining. And efforts to protect marine biodiversity continue to rely on the idea that certain resources are our common heritage. If states are to deal productively with any of these issues, we need a revitalized approach to the common heritage doctrine.

Instead of embodying a static set of legal precepts, I argue for a flexible understanding of the common heritage doctrine rooted in theories of commons property that is sensitive to the peculiarities of specific natural resources. A fruitful exemplar of such an approach is the public trust doctrine of U.S. property law. Sharing with the common heritage doctrine a common foundation in Roman principles of common property, the public trust doctrine recognizes that governments hold certain natural resources in trust for the beneficial use of their citizens. By imposing this duty, and by limiting the purposes for which governments can use these resources, the public trust doctrine is a prototypical example of property as a set of governance rules. Drawing on the public trust doctrine’s rich common law and scholarly history, I propose a four-part framework for a public trust approach to the common heritage doctrine.

To demonstrate the opportunities made available by this approach, I take outer space mining as a case study and I propose steps that states can take to incrementally govern resource extraction in a manner more likely to attract international consensus.

INTRODUCTION

There is an inconvenient truth to our push towards a renewable energy future—it requires a stupendous amount of hard-to-find minerals. The growing fleet of electric vehicles, for example, all need high-capacity batteries that rely on lithium, nickel, cobalt, manganese, and graphite.¹ To be sure, we already mine for these minerals—the Energizer Bunny has been going for quite some time.² But future demand for them is unprecedented. The International Energy Agency has found that, since 2010, the average amount of rare earth minerals required for a unit of generated power increased fifty percent.³ Based on current energy policies, demand for rare earth minerals will double by 2040.⁴ And if we are to meet the goals of the Paris Climate Agreement to stabilize warming below a two-degree Celsius increase, demand will quadruple over the same timeframe.⁵

There are significant geopolitical ramifications to this shift in energy production. Mining for and refining rare earth minerals is, at present, highly concentrated. Sixty-nine percent of cobalt, for example, is produced in the Democratic Republic of Congo.⁶ Fifty-eight percent of the world’s lithium reserves are in Bolivia, Argentina, and Chile, and just over half of all current production is in Australia.⁷ Other rare earth minerals are disproportionately concentrated within China.⁸ All of which has led U.S. policymakers to prioritize diversifying this supply chain by providing substantial financial incentives to locate and develop domestic mineral production.⁹

This race to secure minerals is leading states and private industry to remote locales—areas “beyond national jurisdiction”—and particularly the deep seabed and celestial bodies. Under the law of the sea, areas of the seabed that are, at a minimum, 350 nautical miles from the coast are beyond national jurisdiction.¹⁰ And in outer space law, all celestial bodies, including asteroids and the moon, are not susceptible to sovereign claims.¹¹ In July 2023, the international organization charged with regulating deep seabed mining¹² began accepting applications that may, by 2024, pave the way for the first commercial mining operation beyond national jurisdiction.¹³ In April 2023, the most recent in a string of outer space mining startups launched a satellite to test equipment designed to refine metals mined from asteroids.¹⁴ Another test, into deep space, is scheduled for late 2024.¹⁵ Many states and private entities have near-term plans for human settlements on the moon.¹⁶ Such settlements will necessarily rely on extracting lunar resources.¹⁷ States take these developments seriously. The United Nations Committee on the Peaceful Uses of Outer Space (“UNCOPUOS”) is in the midst of a five-year program to develop more detailed international rules for exploiting outer space resources.¹⁸

These first steps toward mining in areas beyond national jurisdiction are controversial. A coalition of states and non-profits are calling for a moratorium on deep seabed mining to forestall the attendant probable, and likely irreversible, environmental damage.¹⁹ Similarly, there was significant international condemnation when the United States, in 2015, enacted domestic legislation recognizing the property rights of U.S. entities that extract resources from celestial objects.²⁰

All of this supercharges a decades-old debate in international law—who owns the resources available in areas beyond national jurisdiction? One of the key legal innovations of the 1970s was to characterize such resources as the common heritage of mankind (now often referred to as the common heritage of humankind). Part XI of the 1982 United Nations Convention on the Law of the Sea (“UNCLOS”) provides that resources of the seabed beyond national jurisdiction are the common heritage of mankind.²¹ Similarly, the Outer Space Treaty provides that “[t]he exploration and use of outer space . . . shall be carried out for the benefit and in the interests of all countries . . . and shall be the province of all mankind.”²² More controversially, as no spacefaring nations have acceded to it, the Moon Agreement explicitly provides that “the moon and its natural resources are the common heritage of mankind.”²³

What does it mean for a territory or resource to be the common heritage of humankind? Attempts to pin down the concept as a matter of black letter international law are unsatisfying. At a minimum, it appears to mean that the territory is not susceptible to claims of sovereignty or jurisdiction and that the territory may only be used for peaceful purposes. Yet on myriad other fronts—whether the mining must be undertaken in a manner that particularly benefits developing economies, whether an international organization is required to administer access to resources, the terms on which access may be provided, and so forth—states and scholars have fundamentally disagreed for decades.

I propose rethinking the common heritage of humankind by analogizing to the public trust doctrine, a longstanding principle of U.S. property law. I am not the first to draw international resource management lessons from the public trust doctrine. Hope Babcock, for example, has argued that it is a helpful model for establishing an international legal regime for outer space mining.²⁴ I take this proposal one step further, to flesh out a four-part framework that states can use to adopt property rules sensitive to the particularities of disparate natural resources in areas beyond national jurisdiction.

The public trust doctrine is itself a controversial principle of U.S. property law. As I discuss in Part II, it has also been the subject of significant scholarly criticism and debate. In a nutshell, the doctrine provides that there are certain natural resources that, by sovereign right, State governments hold in a kind of public trust for general use and enjoyment. The doctrine was made famous by Illinois Central Railroad Company v. State of Illinois, wherein the Supreme Court found that the Illinois legislature’s decision to completely alienate a portion of Chicago’s waterfront for private development by the Illinois Central Railroad violated the public trust doctrine.²⁵ Although Illinois Central is often the first case discussed when explaining the public trust doctrine, it was not the first U.S. public trust doctrine case. The New Jersey Supreme Court first noted the State’s trust duties with respect to navigable rivers, the coastline, and riverbeds in the early 1800s, drawing on English common law and principles of Roman property law.²⁶ The scope of the doctrine, however, expanded radically over time, impelled importantly by an intervention from Joseph Sax in 1970.²⁷Although slightly different in each State,²⁸ in its most robust form the public trust doctrine provides citizens standing to object to State governments’ decisions about water use and conservation and use of public lands.

Notwithstanding its variation across State lines, the public trust doctrine is a productive foundation from which to reimagine the common heritage of humankind. First, over the past forty years State supreme courts have productively used the doctrine to manage water consumption, particularly in Hawaii and California.²⁹ Second, and more generally, the public trust doctrine orients us to the range of substantive ends that a legal regime concerned with access to commons resources can achieve. Third, it attunes us to the relationships to which we must attend in creating these property law rules. And fourth, it moves us away from the entrenched debates over process and redistribution that have so stymied broader application of the common heritage doctrine.

My argument proceeds in four parts. Part I explains the problem: What is the common heritage of humankind, and why has it failed to meet the aspirations of its original proponents? Part II justifies using a public trust approach to the common heritage doctrine. I begin by setting out the contours of the public trust doctrine and arguing why a commons approach to managing resources in areas beyond national jurisdiction is appropriate. I go on to explain the shared historical roots of the two doctrines in Roman law, as well as what these shared roots should mean for our understanding of a public trust approach to the common heritage of humankind. I demonstrate the striking similarity in how these doctrines revolutionized their respective areas of law in the middle of the twentieth century. I argue that these similarities speak to a deep theoretical continuity between the doctrines and that a significant body of scholarship concerning commons property justifies using the public trust as a model for a modern common heritage doctrine.

Part III sets out the four-part framework for a public trust approach to the common heritage of humankind. This is a framework for institutional design, and accounts for: (1) the tangible objects to which the trust applies (that is, the res); (2) the beneficiary for whom the res is in trust; (3) the means by which the res is conserved and the entity committed to conserving it (that is, the trustee); and (4) the process by which the beneficiary may vindicate the trust if the trustee fails in its duties. Taken together, this framework moves away from particular normative visions for the common heritage of humankind to show the paths that can be taken to manage resources in areas beyond national jurisdiction. In Part IV, I use outer space mining as a case study to demonstrate how a public trust approach to the common heritage doctrine opens up fresh avenues for resource management. I then offer some brief thoughts for future work in conclusion.

I. DEFINING THE COMMON HERITAGE OF HUMANKIND

The common heritage doctrine, in many ways, persists in spite of itself. Notwithstanding its codification in UNCLOS and the Moon Agreement, the only real consensus on its parameters has been that there is no consensus.³⁰ Indeed, prior to widespread adoption of UNCLOS, many disputed that it was a legal, as opposed to a political, proposition.³¹ In this Section I identify three core commitments we can reasonably ascribe to the common heritage doctrine: (1) common heritage territory is not subject to claims of sovereignty; (2) even in some de minimis way, exploitation of common heritage resources should benefit humanity writ large; and (3) common heritage territories may only be used for peaceful purposes. I show why UNCLOS’s tortured ratification history and the failure of the Moon Agreement prevent us from imputing much else to the doctrine. Finally, I identify three areas of confusion, essential for operationalizing the doctrine, that remain: (1) the territories or things to which the common heritage doctrine should apply; (2) the international mechanism, if any, required to implement it; and (3) the beneficiary of the doctrine and the benefit accruing to them.

The Vienna Convention on the Law of Treaties directs that treaty provisions be interpreted “in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.”³² The Convention provides for an expansive search for a treaty’s context, taking into account all treaty text and any agreements made between all parties regarding the treaty.³³ Further, the Convention directs that treaty interpretation should account for subsequent agreements and state practice in applying the treaty.³⁴

A. Purpose of the Common Heritage Doctrine

There is a strong case that the original object and purpose of the common heritage doctrine was to concretely advance the redistributive economic agenda of the new international economic order. This is evident in what is often credited as the birth of the doctrine, a 1967 speech by Maltese Ambassador Arvid Pardo.³⁵ But even Ambassador Pardo would have admitted that the roots are, in fact, much older. Earlier in 1967, Ambassador Aldo Armando Cocca, in the context of the emerging field of outer space law, argued that “the international community had endowed that new subject of international law—mankind—with the vastest common property (res communis humanitatis) which the human mind could at present conceive of, namely outer space itself, including the Moon and the other celestial bodies.”³⁶ Comments by U.S. officials during the 1960s endorsed a similar view.³⁷ Indeed, in the text of his 1967 speech Pardo noted the work of the 1967 World Peace Through Law Conference,³⁸ which resolved that the General Assembly should issue “[a] proclamation declaring that the non-fishery resources of the high seas, outside the territorial waters of any State, and the bed of the sea beyond the continental shelf, appertain to the United Nations and are subject to its jurisdiction and control.”³⁹

What differentiated these earlier statements from Pardo’s speech, more than anything, was his concern that international law, as it existed, was not sufficient to meet the challenges of decolonization. His speech began by noting in exacting detail the deep seabed’s unrealized commercial potential⁴⁰ and the strategic instability that would result from the unfettered militarization of the seabed.⁴¹ Ambassador Pardo argued that existing international law doctrines concerning territorial acquisition were insufficient to protect newly liberated states.⁴² Specifically, Pardo called for using the “financial benefits . . . derived from the exploitation of the sea-bed and ocean floor for commercial purposes” to assist “poor countries, representing that part of mankind which is most in need of assistance.”⁴³

These concerns were highly resonant of his political environment. The pace of decolonization quickened rapidly in the 1960s, and with it a widespread urgency to restructure basic premises of international politics.⁴⁴ This urgency partly manifested in the “new international economic order,” an important goal of which was to reorient the law of the sea to benefit developing states more directly.⁴⁵ Indeed, a central tenet of the “new international economic order” was to reorient the law of the sea to benefit developing states through the common heritage doctrine.⁴⁶

These overarching objectives continued to inform the doctrine’s earliest textual articulations. General Assembly Resolution 2749, for example, declared that “the sea-bed and ocean floor, and the subsoil thereof, beyond the limits of national jurisdiction . . . as well as the resources of the area, are the common heritage of mankind.”⁴⁷ It went on to provide that this area is not “subject to appropriation by any means” and that “no State shall claim or exercise sovereignty or sovereign rights over any part thereof.”⁴⁸ The resolution also reserved the area “exclusively for peaceful purposes” and noted that resource extraction in the area “be carried out for the benefit of mankind as a whole . . . taking into particular consideration the interests and needs of the developing countries.”⁴⁹

B. Textual Articulations of the Common Heritage Doctrine

We can most vividly see how the common heritage doctrine failed to achieve these redistributive aims in the only two areas of international law in which the doctrine is incorporated into treaty text—the law of the sea and outer space law.

Efforts to codify the law of the sea in treaty form date to the mid-1950s.⁵⁰ We are concerned with the third conference on the law of the sea, which began in 1973 and ended in 1982 with the adoption of UNCLOS.⁵¹ The common heritage doctrine is codified in part XI of UNCLOS, which concerns “the Area”—a region of the seabed beyond a state’s exclusive economic zone and continental shelf.⁵² UNCLOS provides that the “Area and its resources” are the common heritage of mankind.⁵³ It proceeds to track the three commitments noted above. First, activities in the Area must “be carried out for the benefit of mankind as a whole.”⁵⁴ More specifically, hewing closer to the Pardian vision, these benefits must “tak[e] into particular consideration the interests and needs of developing States and of peoples who have not attained full independence.”⁵⁵ Second, part XI prohibits any state from exercising “sovereignty or sovereign rights” over the Area or its resources.⁵⁶ Finally, it provides that the Area may only be used for peaceful purposes.⁵⁷

The treaty then provides, in truly astonishing detail, an international bureaucracy designed to administer the Area for the benefit of humanity, with a particular emphasis on realizing the treaty’s redistributive aims. I will sketch them only in brief. UNCLOS establishes two organizations to realize deep seabed mining—the International Seabed Authority (“the Authority”)⁵⁸ and “the Enterprise.”⁵⁹ While the Authority is charged with generally administering and setting mining regulations, the Enterprise is arranged to operate as an independent mining concern. UNCLOS provides that proceeds from mining approved by the Authority, or undertaken by the Enterprise, be provided to adversely affected land-based mineral producers, geographically disadvantaged states, and developing countries.⁶⁰ To maximize these proceeds, UNCLOS also provides myriad ways in which states must support the Enterprise particularly. Its operating budget comes from fees collected by the Authority,⁶¹ voluntary payments from states parties, and loans.⁶² States and private mining companies are also required to provide any technical support requested by the Enterprise.⁶³ To help the Enterprise identify areas for potential mining operations, UNCLOS establishes a banking system. Each time a state or private entity wants to apply to prospect or mine in the Area, they must provide two locations, one of which is reserved for the Enterprise.⁶⁴ On top of these institutional arrangements are a number of limitations on extraction and required financial distributions to underdeveloped economies. For example, UNCLOS prescribes a detailed mathematical formula for setting production limitations on seabed mining to protect the interests of states that rely on land-based mining.⁶⁵

Developed economies strongly objected to this institutional apparatus.⁶⁶ Although the Nixon Administration had supported characterizing the Area as the common heritage of mankind, prohibiting sovereign claims, and establishing some mechanism for distributing profits “for international community purposes including economic advancement of developing countries,” by the Carter Administration opposition to the regime was solidifying.⁶⁷ By 1983, with President Reagan in office, the United States registered its dissatisfaction with the Authority’s governance structure, perceived preference for developing countries’ interests, production limits, and financial burdens by voting against the convention.⁶⁸ Most other developed economies followed suit.⁶⁹

Recognizing that a deep seabed regime without participation from developed countries would amount to little, and in a moment of renewed interest in neoliberal economics after the fall of the Soviet Union, in 1990 the United Nations began to craft an agreement concerning part XI.⁷⁰ This process culminated in the 1994 Implementation Agreement—in actual fact a rewriting of part XI to convince developed states to join UNCLOS. The changes were significant. They struck out provisions requiring the transfer of technology to the Enterprise.⁷¹ The Enterprise was directed to operate on “sound commercial principles,” deprived of required contributions from states parties, and put in an indefinite “interim” status.⁷² Complex models prescribing the rates that could be charged for mining contracts were replaced with general guidelines requiring “fair” rates comparable to those prevailing in land-based mining.⁷³ Representation on the Authority’s Council was revised to ensure that the United States and other developed countries could stymie any proposed distribution of Authority or Enterprise funds to developing countries.⁷⁴ And the banking system was revised such that the entity applying for a mining permit now had the right of first refusal to enter into a joint venture with the Enterprise.⁷⁵ These changes were effective in getting developed states to adopt UNCLOS. The Convention has been ratified by 165 of 193 UN member states. Yet these changes eviscerated the redistributive aims actualized by the original text of part XI.

The common heritage doctrine’s failure to launch in outer space law draws from these acrimonious UNCLOS debates. There are five international agreements regarding outer space activities: the Outer Space Treaty,⁷⁶ the Rescue and Return Agreement,⁷⁷ the Liability Convention,⁷⁸ the Registration Convention,⁷⁹ and the Moon Agreement.⁸⁰ Of these, the first four have been widely adopted by all spacefaring, and many non-spacefaring, states.⁸¹ The Moon Agreement—the only one with an explicit reference to the common heritage doctrine—has been ratified by eighteen states, none of which have a significant, independent space program.

The Outer Space Treaty provides that the “exploration and use of outer space . . . shall be the province of all mankind.”⁸² There has been much debate as to whether the “province of all mankind” is substantively different from the “common heritage of mankind.”⁸³ But looking to the remaining text of the Outer Space Treaty shows how, regardless of any difference in titles, the “province of all mankind” is strikingly similar to what remains of the common heritage doctrine after the 1994 Implementation Agreement. For example, article I provides that “[o]uter space . . . shall be free for exploration and use by all States without discrimination of any kind.”⁸⁴ Article II similarly establishes that outer space “is not subject to national appropriation by claim of sovereignty, by means of use or occupation, or by any other means.”⁸⁵ And article IV directs that “[t]he Moon and other celestial bodies shall be used by all States Parties . . . exclusively for peaceful purposes.”⁸⁶

At the same time that debates about the common heritage of mankind were dividing states during UNCLOS negotiations, states similarly turned to debate more detailed questions about the permissible uses of celestial objects. How may states use resources located on celestial bodies? What benefits must accrue to humanity through their use? What duties are incumbent on states when using them? With striking similarity to law of the sea debates, some called for the United Nations (or another, specially designed international agency) to be vested with authority over celestial objects, and granted the ability to provide leases or licenses for resource extraction.⁸⁷ But ultimately, just as in UNCLOS negotiations, intense disagreements over the common heritage doctrine⁸⁸ yielded contradictory text unacceptable to states concerned that they were signing up for an incoherent doctrine likely to develop in directions over which they would have little control.⁸⁹

C. Unanswered Questions

This analysis of treaty text leaves three key doctrinal questions unanswered, each the subject of considerable scholarly debate. First, there is a vast volume of writing on the territories or objects to which the common heritage doctrine should apply (that is, the res of the doctrine). Some have identified a “broad” vision, one that applies to “atmospheric air, biodiversity, forests, drinking water margin[s], [and] cultural and natural heritage.”⁹⁰ Efforts to use the common heritage doctrine to protect the environment⁹¹ and the atmosphere (as a tool to combat climate change) date back at least to the 1980s.⁹² Others have called for using the common heritage doctrine to protect rain forests and food systems,⁹³ fauna and flora of the deep seabed,⁹⁴ biodiversity,⁹⁵ and marine genetic resources.⁹⁶ Nearly all of these attempts have been opposed by, at a minimum, developed states in a variety of international contexts.⁹⁷

Many states and scholars proposing a wider definition of the resources to which the common heritage doctrine applies also envision some formal, international enforcement mechanism (that is, the means by which the international community’s interests may be vindicated). This is particularly true for those states animated by a version of the common heritage doctrine born of the new international economic order movement.⁹⁸ The details of this proposed mechanism vary. One of the more inventive, proposed by Malta and endorsed by Kofi Annan during his time as UN Secretary General, is to repurpose the UN Trusteeship Council to be a forum for protecting common heritage resources.⁹⁹ An independent international body, like the Authority, is another option, though a variety of states, across ideological fault lines, have resisted such an approach. In the early days of the law of the sea conferences, for example, communist bloc states opposed the creation of an international organization like the Authority out of concern that it would not be truly democratic and only exacerbate the gaps between developed and developing economies.¹⁰⁰ Other states and scholars have similarly argued that creating a new international organization would be too unwieldy, instead endorsing a model whereby enforcement is left to individual states.¹⁰¹ Certainly neither approach is fool-proof. The issues with international bureaucracy are evident in the fact that it has taken nearly forty years for the Authority to develop rules for deep seabed mining. And the potential for backsliding without a mechanism for international enforcement is readily apparent in many states’ continued inability to meet emissions targets developed during UN climate change negotiations.¹⁰²

How the benefits of the common heritage should, or must, be distributed is perhaps the most controversial aspect of the doctrine. Stepping back, this is part and parcel of a broader question concerning what duties pertain to states as trustees of humanity’s interests. We saw this in the negotiating history of both UNCLOS and the Moon Agreement. The idea that benefits accruing to common heritage resources be distributed through direct payments that favor developing states¹⁰³ and requirements for technology transfer¹⁰⁴ have been particularly contentious. There has been equally vociferous debate about whether the common heritage doctrine creates a duty to conserve heritage resources.¹⁰⁵ At a more fundamental, if slightly metaphysical, level, scholars have also debated what, in fact, constitutes “humankind”—whether it refers to states, states on behalf of all people, or all people without interposition from any state.¹⁰⁶ Practically, it is difficult to imagine in the current international system any practical version of “humankind” that does not include, at least in a representative fashion, states.

The vision of the common heritage of humankind that first animated its inclusion in international treaty law greatly exceeded what remains of the doctrine in treaty text and actual practice today. We have seen the doctrine’s contentious codification in the law of the sea, and we have witnessed how it foundered in outer space law. Taken together, we are left with a vision of the common heritage doctrine that is at once freighted by historical association with redistributive policies, and yet which, in practice, has few concrete hooks to advance these goals. This contradictory status quo does little to foster doctrinal clarity or productive negotiations about methods for managing resources in areas beyond national jurisdiction. In the remaining sections, I set out to sketch a new path.

II. JUSTIFYING A PUBLIC TRUST APPROACH TO THE COMMON HERITAGE DOCTRINE

If the common heritage doctrine is to become a meaningful proposition in international law, we need a new approach. In this Section, I argue why looking to the public trust doctrine is instructive. First, the doctrines share similar normative impulses, evinced over a long history, that make this analogy particularly apt. Proponents of the public trust and common heritage doctrines, for example, both trace their legal arguments back to the same provisions of Roman law. Moreover, the primary innovators of both doctrines in the 1960s and 1970s had a similarly instrumental vision for the legal framework they set out to establish—a vision more fully realized by the public trust doctrine. Second, the public trust doctrine provides a coherent approach to managing common pool resources in a manner that, at a practical and theoretical level, coheres with general principles of property law. And finally, although the public trust doctrine gained prominence primarily in domestic U.S. property law, it has gained international traction. As I propose to use it, the public trust doctrine provides a generalizable heuristic for devising rules to manage international resources.

This argument builds on a 2019 article by Hope Babcock, which discussed briefly the virtues of the public trust doctrine within a broader discussion of the many domestic property law doctrines that might be used to regulate outer space mining.¹⁰⁷ In particular, Babcock noted the practical benefits to adopting a duty to preserve resources, assure public access, and prevent alienation in the absence of a robust international ruleset for outer space mining.¹⁰⁸ I expand on this argument in three ways. First, I show that the public trust doctrine can inform our approach to the common heritage doctrine writ large, in contexts far beyond outer space. Second, I develop the historical and theoretical reasons why this analogy should be attractive to states looking for a more comprehensive approach to international resource management. Third, I explain in detail what a public trust approach to the common heritage means through a four-part framework, detailed in Part III.

A. Why a Commons Approach to International Resource Management

Anyone advocating that we reinvigorate the common heritage doctrine must first justify why resources beyond the bounds of national jurisdiction should be treated as a commons. Why not, instead, simply divvy them up? This, after all, is the compelling insight proffered by Garrett Hardin in his work on the tragedy of the commons.¹⁰⁹ Hardin posits that, in a world of rational herdsmen, each with equal and unfettered access to a pasture, the “only sensible course for him to pursue is to add another animal to his herd. And another; and another.”¹¹⁰ Inexorably, Hardin tells us, “[r]uin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.”¹¹¹ He was not the first to make this point. Aristotle also observed that “what is common to the greatest number has the least care bestowed upon it. Everyone thinks chiefly of his own, hardly at all of the common interest.”¹¹²

But we know that this simple picture of a tragic commons and complete allocation of rights (whether through allocation of private property rights or government management) is incomplete. Michael Heller, for example, warns of the dangers of too much allocation of private rights in resources. In what he terms a tragedy of the anticommons, real property may be underutilized when too many users are granted the right to exclude others from a scarce resource if no hierarchy of privilege exists between these users.¹¹³ Economic modeling has borne out this analysis,¹¹⁴ though some have argued for a more precise articulation of the game theoretic problem appropriately denominated an anticommons.¹¹⁵ But even this represents an overly narrow view of the practical ways in which resources are managed. Elinor Ostrom, for example, has empirically demonstrated how communities have developed private agreements to manage common pool resources, enforced by a variety of institutional mechanisms that go beyond simple division of property rights or government management.¹¹⁶ Specifically, she notes that achieving Pareto-optimal equilibrium in the market for a particular resource through centralized resource management rests on assumptions that the government has completely accurate information about the resource, sophisticated capability to monitor and sanction compliance, and zero administration costs.¹¹⁷ This does not mean that Ostrom denies any role for the government or an external monitor in managing common pool resources. For example, speaking to those who advocate for privatized rights, Ostrom notes that it can be practically infeasible with respect to nonstationary resources, like water and fisheries.¹¹⁸ Instead, she argues that there is no single solution to resource management.¹¹⁹ Institutional design is difficult, time-consuming, and context dependent. More often than not, some mixture of private and public institutions is needed “to achieve productive outcomes in situations where temptations to free-ride and shirk are ever present.”¹²⁰

A commons approach to international resource management in areas beyond national jurisdiction is particularly appropriate for a number of the reasons outlined above. Although the mineral resources of the deep seabed are certainly stationary, the marine life of the high seas that these operations would disturb do not respect jurisdictional boundaries. On any reasonable assessment of the International Seabed Authority’s track record, its role as a centralized arbiter of resource rights is far from cost free. In outer space, given how little we know about the productive uses of asteroids and other celestial objects, there is a real risk of dividing property rights so finely as to create an anticommons. Moreover, at least at present, there is no centralized authority empowered to penalize free riding, and the likelihood of establishing such an authority seems dim in our current geopolitical environment. Before adopting an entirely new system of property rights, it therefore seems reasonable to find a way to make a commons approach to managing resources beyond national jurisdiction work.

B. Defining the Public Trust Doctrine

Perhaps more than many common law principles in U.S. law, the public trust doctrine varies significantly from State to State. Put most simply, it provides that the State holds title to land under tidal waters in a form of trust for the people of that State, who “have the right to use the land and water for navigation, fishing, and recreational uses.”¹²¹ Two of the most far-reaching applications of the public trust doctrine were rendered by the California and Hawaii Supreme Courts. I will treat them both in turn, as demonstrations of the kind of work that the public trust doctrine does in modern U.S. property law.

In National Audubon Society v. Superior Court, the California Supreme Court addressed whether, and how, the public trust doctrine affected the State’s system for prioritizing access to fresh water, with a particular focus on use of water from Mono Lake, a particularly distressed reservoir for fresh water in the Los Angeles County area.¹²² It found that the public trust doctrine did apply to these water resource decisions, and is an articulation of:

[T]he state’s authority as sovereign to exercise a continuous supervision and control over the navigable waters of the state and the lands underlying those waters. This authority applies to the waters tributary to Mono Lake and bars [the City of Los Angeles Department of Water and Power (“DWP”)] or any other party from claiming a vested right to divert waters once it becomes clear that such diversions harm the interests protected by the public trust.¹²³

This application of the public trust doctrine to California’s system of water rights had significant effects on life in California, where, as the court acknowledged, “[t]he prosperity and habitability of much of the state required the diversion of great quantities of water from its streams for purposes unconnected to any navigation, commerce, fishing, recreation, or ecological use relating to the source stream.”¹²⁴ Nevertheless, the court held that “before state courts and agencies approve water diversions they should consider the effect of such diversions upon interests protected by the public trust, and attempt, so far as feasible, to avoid or minimize any harm to those interests.”¹²⁵ Just as significantly, the supreme court also held that California courts and the DWP have “concurrent jurisdiction” in adjudicating these public trust disputes.¹²⁶

This decision had a significant practical effect on Mono Lake, which had experienced rapidly decreasing water levels since the State authorized DWP to divert flows from source streams in the 1940s.¹²⁷ By 2010, implementation of interim measures adopted in 1994 for lake and stream restoration and a final plan published in 1998 raised the lake’s water level by ten feet.¹²⁸ And these regulatory changes established a system of water rights that ensured consideration of public trust interests when adjudicating private water rights in the State.¹²⁹

The Hawaii Supreme Court in In re Water Use Permit Applications faced a similar dispute about allocation of water rights, here between agricultural producers in the central plains of Oahu, down-stream users on the windward side of the island, and the stream’s ecosystems.¹³⁰ The court held that the public trust doctrine, though having independent roots in common law, was a constitutional doctrine and applied to “all water resources without exception or distinction.”¹³¹ It further found that Hawaiian public trust purposes included resource protection,¹³² domestic use (including drinking),¹³³ and “the exercise of Native Hawaiian and traditional and customary rights.”¹³⁴ The court specifically found that the public trust should not consider interests in “private use for ‘economic development.’ ”¹³⁵ Unsurprisingly, the court found that Hawaii had a continuing obligation to “preserve the rights of present and future generations in the waters of the state,” though the courts did not require a one-size-fits-all prioritization of interests.¹³⁶

Although the public trust doctrine is, in many jurisdictions, of rather limited application, the California and Hawaii examples show how it currently serves as a doctrine for resource management.

C. Shared Roots of the Common Heritage and Public Trust Doctrines

In this Section, indebted to the work of J.B. Ruhl and Thomas McGinn, I unpack what the res communis meant.¹³⁷ I trace in brief how the public trust and common heritage doctrines developed this concept of the res communis. And I show how debates over the contours of the res communis demonstrate the necessary role of state action to preserve access to common resources. I do not, however, want to burden this connection with too much normative force. Particularly in the context of the public trust doctrine, some have relied on this Roman pedigree to justify the doctrine’s place in modern property law.¹³⁸ But as we will see below, the modern common heritage and public trust doctrines advertently moved beyond the idea of common property enshrined in Roman law. So, while the Roman origins of both doctrines does not make a public trust approach to the common heritage doctrine legally or normatively required, it is nonetheless useful to show how the doctrines are united by a higher-level conviction that there are certain resources that should be held in some form of trust for common use in a way that is not readily accommodated by private or government ownership.

1. Origins in Roman Property Law

Before we trace the public trust and common heritage doctrines to their Roman roots, a bit of background on the res communis—the Roman concept of common property to which both doctrines refer. The res communis stood for the proposition that certain things (at a minimum, the sea, seashore, and air) should remain accessible to all, primarily for resource extraction, and this access could be vindicated at law.

To understand the res communis we must begin with the restatement of Roman law provided in the Corpus Juris Civilis, promulgated by Emperor Justinian from 529 to 534 CE.¹³⁹ The Corpus has three main parts: the Institutes (an introductory guide to Roman law),¹⁴⁰ the Digest (a detailed guide for more advanced study),¹⁴¹ and the Codex (a compilation of imperial legislative, judicial, and administrative enactments stretching from the reign of Emperor Hadrian to the Codex’s publication).¹⁴² Of the many ways in which the Roman jurists categorized types of property, the Second Book of the Institutes provides, for our purposes, the most important:

Let us now speak of things, which either are in our patrimony, or not in our patrimony. For some things by the law of nature are common to all [i.e., res communis]; some are public [i.e., res publicae]; some belong to corporate bodies [i.e., res universitatis], and some belong to no one [i.e., res nullius]. Most things are the property of individuals, who acquire them in different ways, as will appear hereafter.¹⁴³

Res communis is property outside our patrimony (i.e., extra patrimonium) and therefore incapable of private ownership.¹⁴⁴ The Institutes provides that the res communis includes, by natural law, “the air, running water, the sea, and consequently the shores of the sea.”¹⁴⁵ The Digest attributes this rule to Marcian, a noted Roman jurist from the third century,¹⁴⁶ though Ruhl and McGinn have identified earlier articulations of the same or similar rule as early as the late republic.¹⁴⁷

It is this definition of the res communis in the Institutes which most courts and scholars identify as the roots of the public trust and common heritage doctrines. Take, for example, Arnold v. Mundy,¹⁴⁸ one of the earliest cases in the United States on the public trust doctrine. Here, the New Jersey Supreme Court of Judicature found against a plaintiff’s claim of trespass concerning oyster beds planted below the low-water line in a navigable river.¹⁴⁹ The Chief Justice reproduced this provision of the Institutes nearly verbatim—both in English and Latin.¹⁵⁰ The Supreme Court, over two decades later confronting nearly the same issue in New Jersey, adopted this reference to the Institutes.¹⁵¹

Closer to the present day, Justice Kennedy in Idaho v. Coeur d’Alene Tribe of Idaho and PPL Montana, LLC v. Montana also attributed the public trust doctrine to this portion of the Institutes, as incorporated into English common law.¹⁵² Scholars of the public trust doctrine make similar, even more frequent reference to the same.¹⁵³

In international law, this Roman inheritance was used most famously by Hugo Grotius to argue that the seas, by their nature, were incapable of appropriation and therefore open to all for trade and fishing.¹⁵⁴ This greater emphasis on the freedom enjoyed at sea, rather than the guarantee of land access to the seas, is reflected in the relatively greater ambivalence taken toward the text by proponents of the common heritage doctrine. For example, as early as the 1830s, noted South American lawyer Andres Bello argued that a distinct legal regime was needed for objects that cannot be owned by any nation without harming others, what he called an “indivisible common patrimony” that was susceptible only to limited, non-exclusive use.¹⁵⁵ French jurist A.L. Pradelle came to a similar conclusion in 1898, arguing that the seas were the “patrimoine commun de l’humanité.”¹⁵⁶ These innovations were noteworthy primarily because they rebutted Grotius’s use of the res communis. Nevertheless, Ambassador Pardo, for example, cites this provision of the Institutes specifically in his proposal to establish the common heritage doctrine.¹⁵⁷ And other seminal works on the law of the sea make similar references to these provisions of Roman property law.¹⁵⁸

But what did it mean to designate the air, flowing water, sea, and shores of the sea as res communis, and how are these rights vindicated? There has been considerable debate on the topic; I will begin by discussing relevant provisions of the Digest and Institutes before turning to their interpretation by scholars.

First, various provisions of the Digest and Institutes note how designating territory as res communis guaranteed access to other resources that could be appropriated. So, for example, Florentinius characterizes the seashore as res communis and notes that “pebbles, gems, and so on which we find on the shore forthwith become ours by natural law.”¹⁵⁹ Similarly, the Institutes provides that “[w]ild beasts, birds, fish, and all animals, which live either in the sea, the air, or on the earth, so soon as they are taken by any one, immediately become by the law of nations the property of the captor; for natural reason gives to the first occupant that which had no previous owner.”¹⁶⁰ The Digest supports this proposition with a number of citations to even earlier legal opinion.¹⁶¹

Yet, as Ruhl and McGinn argue, the res communis appears to be about more than just providing unfettered access to the air, sea, and flowing rivers so that individuals can extract resources.¹⁶² To understand why, we must appreciate longstanding doctrinal confusion about the difference between the res communis and res publicae.

Ulpian describes as res publicae “those things . . . that belong to the Roman people.”¹⁶³ Similarly, Ulpian is quoted as providing that “[w]e do not regard as being ‘public’ those things which are sacred or hallowed or designed for public use but those things which are, as it were, the property of communities.”¹⁶⁴ In this way, it seems we might make a rough distinction between property to which all are guaranteed access regardless of their political community (that is, res communis) and property owned and preserved for the benefit of a particular group of peoples (that is, res publicae).

But this easy distinction is complicated by the many parts of the Digest that characterize flowing waters and the seashore (things considered res communis) as res publicae. First, with respect to flowing waters, the Digest in a number of places notes that rivers are public property.¹⁶⁵ And although the right to use riverbanks is said to be public,¹⁶⁶ there is also an admitted private right to privately own and construct private buildings on them.¹⁶⁷ A similar story can be told about the sea and the seashore. For although the sea is common to all, the Digest recounts that “just as a building erected in the sea becomes private property, so too one which has been overrun by the sea becomes public.”¹⁶⁸ Muddying the waters even more, we are told that

What a man erects on the seashore belongs to him; for shores are public, not in the sense that they belong to the community as such but that they are initially provided by nature and have hitherto become no one’s property. Their state is not dissimilar to that of fish and wild animals which, once caught, undoubtedly become the property of those into whose power they have come.¹⁶⁹

As Ruhl and McGinn demonstrate in detail, this overlap has bedeviled scholars since the middle ages.¹⁷⁰ From the eleventh through fifteenth centuries, for example, scholars reconciled these passages by holding that res communis resources were used, and not owned, by humans and animals, while res publicae resources were used only by humans.¹⁷¹ Scholars in the nineteenth century adopted other methods to make this area of law coherent, again mostly aimed at creating more nuanced distinctions between what should truly be considered res communis.¹⁷² Yet others in the twentieth century attribute the incoherence to revisions made by those compiling ancient sources of law.¹⁷³ And many more recent scholars, focusing on the less rigorously legal aspects of Marcian’s work, have discounted the existence of the res communis entirely.¹⁷⁴ In fact, these critiques of the underlying Roman law sources, and their inconsistent application in English and early American case law, is the basis for many academic critiques of the public trust doctrine.¹⁷⁵

Ruhl and McGinn instead reconcile this tension by focusing on Ulpian’s earlier writings on the res communis. They find textual evidence that, as a practical matter, access to res communis property was protected in the same manner as that provided for the res publicae.¹⁷⁶ For this reason, they argue, the rules applicable to res publicae should be seen as equally applicable to res communis.¹⁷⁷

There are important consequences that stem from this practical connection. As Ruhl and McGinn note, there are rules concerning uses of res publicae resonant of the idea of a public trust.¹⁷⁸ For example, the Digest reports that Scaevola opined that although one could build on the seashore, such construction could not impede public use.¹⁷⁹ Likewise, Ulpian wrote at length about the actions that could be taken against individuals who impede public access to res publicae.¹⁸⁰ In an indirect way, these areas of overlap suggest an early recognition of the necessary role that government must play if any property is to be considered common to all, and not just open to access by a particular political community (that is, res communis). It is unsurprising, then, that UNCLOS established an international organization through which states would preserve the deep seabed under the common heritage doctrine. And it suggests that future applications of the common heritage doctrine will be difficult to enforce without a similar international mechanism, or state duty, for vindicating humanity’s interests.

2. Common Twentieth Century Doctrinal Innovation

The middle of the twentieth century was critical to the modern incarnations of the common heritage and public trust doctrines. In this Section, I show how two protagonists—Ambassador Arvid Pardo and Professor Joseph Sax—expanded upon existing conceptions of common heritage and public trust to achieve their normative ends. They were both unabashedly instrumental—both saw these doctrines as convenient procedural vehicles to curing what they saw as deficiencies in their respective political environments. What emerges is a common appreciation of the flexibility that Elinor Ostrom noted as one of the signal characteristics of commons governance.¹⁸¹

We have already canvassed Ambassador Pardo’s revolutionary vision for the common heritage doctrine in Part I. Joseph Sax laid out a similar vision for the public trust doctrine, at around the same time, from the pages of the Michigan Law Review.¹⁸²

To understand the power of this vision, we must understand the public trust doctrine as it developed prior to Sax’s intervention. Up until Illinois Central, the public trust doctrine was a relatively constrained proposition, used chiefly to manage access to navigable rivers and the stationary resources (for example, oysters) on the riverbed. Chief Justice Taney in Martin v. Waddell’s Lessee may have been among the earliest to use the term “public trust” when, in denying a patent to an oyster fishery bed, he found that the kings of England held navigable waters “as a public trust.”¹⁸³ Importantly, he held that derogating from this right required “clear[] indicat[ion] by appropriate terms; and would not have been left for inference from ambiguous language.”¹⁸⁴ Just over a decade later the Supreme Court reaffirmed this approach in The Volant, finding that soil below the low-water mark “is held by the State, not only subject to, but in some sense in trust for, the enjoyment of certain public rights, among which is the common liberty of taking fish.”¹⁸⁵ Again, for this reason, the Court held that states “may forbid all such acts as would render the public right less valuable, or destroy it altogether.”¹⁸⁶

Justice Field, in Illinois Central, expanded the doctrine by articulating a more robust role for the courts to limit the legislature’s discretion to alienate public trust resources. Specifically, Justice Field found that “[t]he control of the State for the purposes of the trust can never be lost, except as to such parcels as are used in promoting the interests of the public therein, or can be disposed of without any substantial impairment of the public interest in the lands and waters remaining.”¹⁸⁷ This standard was controversial, and did not flow naturally from at least some States’ approaches to the public trust doctrine. In the dissent’s words, “if the State of Illinois has the power, by her legislature, to grant private rights and interests in parcels of soil under her navigable waters, the extent of such a grant and its effect upon the public interests in the lands and waters remaining are matters of legislative discretion.”¹⁸⁸

The extent of this shift is most vividly displayed in Morris v. United States.¹⁸⁹ Here, the Supreme Court rejected a claim to land added to the riverbank by a rapid shifting of the course of the Potomac River.¹⁹⁰ In doing so, the Court applied a straightforward understanding of the Illinois Central test that the public trust could not be entirely alienated for private use.¹⁹¹ Yet, as the Court acknowledged, this flatly contradicted the approach taken by Maryland courts dating back to 1821. For example, in Browne v. Kennedy,¹⁹² Chief Justice of the Maryland Court of Appeals Jeremiah Chase held that the Maryland legislature could sell land “covered by a navigable river” so long as the private use did not “interfer[e] with or affect[] the public or common right[s to] . . . navigation and fishing.”¹⁹³ The Supreme Court’s rather startling response to this contradiction was to note the myriad ways in which the Kennedy Court had misinterpreted prior Maryland case law.

Thereafter, the Court was inconsistent in how aggressively it hewed to Justice Field’s approach in Illinois Central. To name just a few, the Court later affirmed an Alabama statute granting tidewater rights to the city of Mobile,¹⁹⁴ upheld a Chicago ordinance requiring that a railroad dismantle a tunnel built pursuant to an earlier ordinance so that the riverbed could be dredged,¹⁹⁵ and upheld a New York Court of Appeals decision to strike down a statute incorporating a development company that did not provide a mechanism for the State to vindicate public trust rights.¹⁹⁶ Indeed, it was only in 1926 that this inconsistent approach to legislative treatment of trust resources was resolved by the Supreme Court determining that, though “the general principle” of Illinois Central had been “recognized the country over,” in its particulars, the holding was “necessarily a statement of Illinois law.”¹⁹⁷

It was into this commercial understanding of the public trust doctrine, rooted in Roman concerns for open access, that Joseph Sax launched his now famous article on the public trust doctrine. It is beyond dispute that Sax’s article sparked a sea change in the way State courts approached the public trust doctrine. From 1970 to 1985 alone there were nearly one hundred cases concerning the public trust doctrine, many of which cited Sax’s article.¹⁹⁸ And States have taken up Sax’s invitation to unshackle the doctrine from its historical roots in concerns over navigability and fisheries.¹⁹⁹ By the mid-1980s, courts had extended the public trust to include marine law, sand and gravel in water beds, dry sand areas of the beach, rural parklands, battlefields, wildlife generally, archaeological remains, and (in Louisiana) all natural resources, including air and water.²⁰⁰ Sax was similarly influential in identifying the mechanisms that State courts have adopted to enforce this expanded public trust. These include requiring that government action satisfy the public trust’s purpose, mandating that government action be preceded by an assessment of any adverse impact on trust resources, and searching for specific legislative authorization for agency actions that affect trust resources.²⁰¹ While some of these had hooks in early public trust case law, many were relatively novel applications of judicial power.

Sax’s role here is substantially similar to that of Ambassador Pardo and his contemporaries, acting only a few years earlier. Like Ambassador Pardo, Professor Sax makes an unabashedly normative argument, and I do not mean this as a critique. This undermines arguments made by later scholars who criticize Sax’s public trust doctrine as disconnected from English and Roman law sources. Sax states that he is in “search for some broad legal approach which would make the opportunity to obtain effective judicial intervention [for environmental protection] more likely.”²⁰² In particular, he is looking for a doctrine that satisfies three criteria: (1) “some concept of a legal right in the general public” that is (2) “enforceable against the government” and (3) “capable of an interpretation consistent with contemporary concerns for environmental quality.”²⁰³ Indeed, Sax owns up to the state of the law as he found it:

[O]nly the most manipulative of historical readers could extract much binding precedent from what happened a few centuries ago in England. But that the doctrine contains the seeds of ideas whose importance is only beginning to be perceived, and that the doctrine might usefully promote needed legal development, can hardly be doubted.²⁰⁴

Like Ambassador Pardo and his contemporaries, Professor Sax treats with, but advertently moves beyond, the res communis²⁰⁵ to achieve his environmental ends.

The bulk of Sax’s article is a detailed review of the public trust doctrine in the States, noting how particular cases might provide a hook for expanding judicial appetite for protecting environmental interests. So he praises Massachusetts courts for requiring that administrative agencies identify a “specific, overt approval of efforts to invade the public trust”²⁰⁶ and lauds Wisconsin courts for asserting the independent authority to assess whether State actions are consistent with public trust interests.²⁰⁷ These various strategies are united by a common desire to root the public trust doctrine in the protection of majority interests (which are asserted to be consistent with environmental protection) from regulatory capture by a powerful minority.²⁰⁸ And here again there is striking similarly between Ambassador Pardo’s call for using the wealth of the common heritage to advance the interests of newly decolonized states and Sax’s argument that “[p]ublic trust problems are found whenever governmental regulation comes into question, and they occur in a wide range of situations in which diffuse public interests need protection against tightly organized groups with clear and immediate goals.”²⁰⁹

Taken together, what emerges from this history is a tale of two doctrines that have much in common, both in their history and their aims. They both emerged from an understanding, rooted in antiquity, that there are certain resources not amenable to private or government ownership that nevertheless are of communal interest. As such, in their deepest past, both doctrines can trace to a common concern about access to resources. Both doctrines were similarly revolutionized by prominent intellectuals of the twentieth century, who themselves built on a growing wave of change that can be traced to the nineteenth century. Each seeking to address inequities in power, Professor Sax and Ambassador Pardo sketched out an instrumental vision for the public trust and common heritage doctrines that gained widespread popularity on an incredibly short timeline. More than sharing a common history, this Section shows that these doctrines are united by a common concern—managing resources seen as necessary for the public in a manner more accountable and more equitable than had thus far been achieved.

D. The Public Trust Doctrine as a Useful Framework for Resource Management

In this Section, I address the most common critiques of the public trust doctrine to show why it provides an approach to managing common pool resources that coheres with general principles of property law. Namely, I show how its substantive flexibility is consistent with scholarly work arguing that the nature (and indeed changing nature) of property rights can be profitably explained through the social values they produce and reproduce.

1. Criticism of the Public Trust Doctrine

Sax’s redefinition of the public trust doctrine has spawned a seemingly endless academic debate. Distilled to the most salient points, scholars contest three issues: (1) whether the public trust doctrine is a necessary, or constructive, tool for environmental protection;²¹⁰ (2) whether the public trust doctrine is sufficiently well-defined, by reference to its historical roots or modern case law;²¹¹ and (3) whether the public trust doctrine comports with democratic and rule of law principles. I will address the last of these debates, as it is most important for our purposes.

Huffman sees the public trust doctrine as an unprincipled property right that, by relying on shifting judicial notions of the res, confounds public expectations and thereby undermines democratic principles.²¹² He is similarly concerned by the fact that the public trust doctrine, by asserting a right incident to State sovereignty that predates any possible private rights, eviscerates protections afforded by the Takings Clause.²¹³

There have been at least three responses to this critique. One flows from what Sax identified as the role of courts in combating agency and legislative capture by minority interests—in effect, an argument that seemingly democratic processes are, in fact, anything but.²¹⁴ A second argues that changes in the scope of the public trust doctrine is quite normal in a common law system.²¹⁵ And a third points to the fact that courts, even when exercising a form of continuing review of State action, rarely impose a substantive outcome. Instead, they use the power afforded by judicial review to require that State instrumentalities meaningfully take into account public trust interests²¹⁶ (though, of course, there may be significant overlap between requiring a substantive outcome and insisting on a method of agency decision-making).

2. The Public Trust Doctrine as a Coherent Approach to Managing Common Pool Resources

These concerns about the changing scope of the public trust doctrine and its use by courts to invalidate State actions point to broader debates about the role of common property doctrines in U.S. property law. Carol Rose addressed this tension most succinctly when she observed that the public trust doctrine and other common property regimes are radical because of “their seeming defiance of classic economic thinking and the common law doctrines so markedly mirroring that theory.”²¹⁷ She points to a few of the most telling tensions—the prioritization of public access over a right to exclude,²¹⁸ and the wholesale withdrawal of some objects from the possibility of private appropriation.²¹⁹ These moves are not easily reconciled by Demsetz’s economic theory for the emergence of property rights (i.e., a process of privatizing the commons made possible when the benefits of internalizing the externalities of using land exceed the costs).²²⁰

But Rose and others show how the public trust and related doctrines are, in fact, consistent with the greater corpus of property law. Henry Smith, for example, has identified two dimensions of property rights: the “compositional” (i.e., the physical resource that is the object of the rights) and the “organizational” (i.e., the range of activities allowed with respect to the resource).²²¹ Conceived along a spectrum, Smith identifies two methods for communicating this information—(1) straightforward rules of exclusion and (2) more informationally-intensive rules of governance.²²² Seen in this light, one defense of the public trust doctrine is that it represents a form of property that just relies more on governance rules than exclusion.²²³

Even this account, however, does little to defend the changing res as a feature of the public trust doctrine. Here, we can look to work arguing that the nature (and indeed changing nature) of property rights can be profitably explained through the social values they produce and reproduce. Rose again provides a useful starting point. She finds that “service to commerce was a central factor in defining as ‘public’ such properties as roads and waterways” and argues that public use of such properties produced significant (even “akin to infinite”) returns to scale.²²⁴ Expanding the categories of resources subject to a common access property rule, therefore, can be consistent with a benefit-maximizing approach to property law. Indeed, Rose notes how private ownership of resources traditionally considered “inherently public,” such as roadways, create holdout and monopoly if privatization is allowed to run free.²²⁵

But Rose also notes how these common access regimes are consistent with an understanding of property law that goes beyond pure economics. She notes, for example, how eighteenth and nineteenth-century scholars viewed the commercial functions enabled by inherently public property as also serving important socializing functions.²²⁶ Taking this as a starting point, Rose argues that substantive visions for what constitutes a socializing function can, and almost certainly will, change. Therefore, it would be quite natural for the nature of “inherently public property” to also change with time.²²⁷ As Rose notes, this account fits quite well with the changing res of the public trust doctrine, particularly if recreational and environmental interests are understood as serving, in modern times, a socializing function similar to that once seen as inherent to commerce.²²⁸

Rose’s socializing account is consistent with the work of Joseph Singer, who argues that property forms (which, particularly in the domain of real property, are notably few)²²⁹ embody “a set of norms and values that defines the legitimate social relationships that can be recognized in a free and democratic society.”²³⁰ As Singer goes on to argue, “the structure, shape, and definition of . . . bundled rights in the property law system must reflect our considered judgments about the legitimate contours of the social order.”²³¹ This work in turn builds on that of Alexander, who has argued that multiple-owner property (which he calls “governance property”²³²) develops virtues (like community, cooperation, trust, and honesty), which in turn promote human flourishing.²³³

The fact, then, that the public trust res has shifted over time is perfectly consistent with a change in the social values that underpin our system of property rights. Of course, questions of institutional competence remain. But in the international system, this challenge to U.S. courts’ roles in shaping the scope of the public trust doctrine just is not germane. There is no world court of common law jurisdiction capable of unilaterally deciding the scope of what comprehends the common heritage doctrine.

There is much that unites the public trust and common heritage doctrines: common roots in Roman property law, doctrinal innovation in the middle of the twentieth century, and heated disagreements about their scope and wisdom as legal doctrines. By understanding how the public trust doctrine coheres with a broader category of inherently public property and an understanding of property rules as conduits for reinforcing social values, we can begin to build a renewed framework for the common heritage doctrine.

E. Realpolitik and a Public Trust Approach to the Common Heritage Doctrine

Finally, I am not advocating for the international community to adopt a substantive vision of U.S. property law. As will be clear by the end of Part III, a public trust approach to the common heritage doctrine provides a framework for devising property rules by focusing on the values that states wish to foster. It does not itself determine what those values should be. We can see the benefits of this approach in the degree to which non–U.S. jurisdictions have adapted Sax’s vision of the public trust doctrine.²³⁴ These effects have been most direct, and most striking, in India.

The Supreme Court of India, in MC Mehta v. Kamal Nath, struck down a ninety-nine year government lease of protected forest to build a motel and declared as incompatible with the public trust a proposal to redirect an adjoining river to prevent the proposed resort from flooding.²³⁵ In its decision, the Court cited Illinois Central, California’s Mono Lake decision, and Sax’s article to establish the common and natural law roots of the public trust doctrine.²³⁶ Indian courts have reaffirmed and, in interesting ways, expanded the public trust doctrine in the years since this decision.²³⁷ For example, they have extended the public trust to include “ensuring a fair distribution of the revenues produced from publicly owned resources, such as natural gas leases,” and a distribution that “includes concerns for intergenerational equity.”²³⁸ The similarities with Pardo’s redistributive vision for the common heritage doctrine are inescapable. But more to the point, we can see how the public trust doctrine suggests a way of thinking about and a process for protecting the public values we want to achieve by preserving certain resources for public use. This approach need not reflect the particular values of any given U.S. State.

III. A PUBLIC TRUST PERSPECTIVE FOR THE COMMON HERITAGE OF HUMANKIND

I propose a four-part framework for this public trust approach to the common heritage of humankind, informed by the structure of common law trusts.²³⁹ The four lines of inquiry consider: (1) the property held in trust (i.e., the res), (2) the beneficiary of the trust, (3) the trustee and the means by which the trustee may treat the trust, and (4) mechanisms by which the beneficiary may vindicate their interests against the trustee.

A. The Res

The rapid pace with which the res considered subject to the public trust has changed suggests that an approach to the common heritage of humankind that takes as a starting point specific resources largely misses the point. Instead, as Rose and others have demonstrated, we should focus on the theory of the res—that is, the social objectives we are trying to achieve by incorporating specific resources into a legal regime of common access. Put another way, the resource matters less than the reason why we think it should be incorporated into a common access regime, and the purposes for which we think such a regime should exist.

We have already seen how these higher-level concerns dominate debates about the common heritage doctrine. Take, for example, opposition to the Moon Agreement. One of the central concerns of the United States and other space powers was how exactly the doctrine would be meted out under the contradictory principles provided in the Moon Agreement.²⁴⁰ The same can be seen in the law of the sea. Industrialized states only acceded to UNCLOS after extracting concessions in the 1994 Implementation Agreement to concentrate power in the International Seabed Authority’s Council through an allocation of seats that ensured their ability to block regulations that implemented a redistributive vision for the common heritage doctrine.²⁴¹ Securing a consensus at this theoretical level can be incredibly difficult in large-scale international negotiations. But, as a matter of negotiation strategy, sticking with such difficult issues can itself be profitable.²⁴² And as I will show in Part IV, in particular negotiation contexts there can be practical ways to refine the scope of this debate to increase the likelihood of success.

There are four theories of the res that we can most immediately discern from our discussion thus far: (1) an access theory; (2) a socializing theory; (3) an ecological theory; and (4) an intergenerational equity theory. I will address each in turn. Of course, these categories represent ideal types—there certainly may be profitable areas of overlap between them.

1. Access Theory

This theory of the res would incorporate those resources for which we expect the economic benefits of general use to be greater than those gained through individual appropriation.

This is the approach most evident in the underlying Roman sources and early U.S. case law. Here, property is characterized as a common heritage to prevent any one entity from monopolizing access to it. So, as was provided in Morris v. United States, land under tide waters is a “public trust for the benefit of the whole community, to be freely used by all for navigation and fishery, and not as private property, to be parceled out and sold for . . . individual emolument.”²⁴³ Another example of this approach is evident in the Supreme Court’s decision in Shively v. Bowlby, where it found that land under tide waters “are of great value to the public for the purposes of commerce, navigation and fishery. Their improvement by individuals, when permitted, is incidental or subordinate to the public use and right.”²⁴⁴

A similar policy sentiment bears forth in the Roman sources. For example, Ulpian finds that a claim may be brought against the owner of a seaside villa where the villa’s owner, in any way, obstructs the public’s right to fish in the seas.²⁴⁵ This is consistent with Rose’s observation that the common law designated properties as “public” where their use by all-comers yields commercial benefits that could not accrue if their use were restricted to a single owner.²⁴⁶

2. Socializing Theory

We might alternatively call this the Rose theory of the res. Here, we characterize as common those properties the use of which advances interactive, social virtues.²⁴⁷ So, for example, Rose identifies free speech, alongside commerce, “as a socializing practice for our society—a practice with infinite returns to scale, whose necessary locations might be subject to a public trust.”²⁴⁸ She likewise argues that the same is true of recreation.²⁴⁹ So, under this theory, resources considered public (or, in our lexicon, common) might be utility poles on which political fliers are posted,²⁵⁰ or beaches on which the public may learn to get along by coming together for recreation.²⁵¹

As Rose admits, notions of what constitutes a socializing activity are nearly infinitely contestable.²⁵² And particularly in an international and multi-cultural setting, developing a consensus about beneficial social interaction may be even more difficult. Yet this kind of inquiry is not unprecedented in international lawmaking. Take, for example, the Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property.²⁵³ This treaty, ratified by 143 states, identifies eleven categories of cultural property for protection through various export and import controls.²⁵⁴ Notable among the policy purposes for the Convention is the belief that “the interchange of cultural property among nations for scientific, cultural and educational purposes increases the knowledge of the civilization of Man, enriches the cultural life of all peoples and inspires mutual respect and appreciation among nations.”²⁵⁵

3. Ecological Theory

An ecological approach to the common heritage doctrine would prioritize protection of the environment to identify resources that should be incorporated into the res. We see this approach most clearly in the work of Sax, who, as we have discussed, focused in a rather utilitarian fashion on the public trust doctrine because of its promise as a procedural means for environmental protection.²⁵⁶ A similar animating principle emerges from scholarship²⁵⁷ and litigation urging courts to identify the atmosphere as another subject of the public trust.²⁵⁸ And so, for example, youth plaintiffs have urged courts to consider the federal government’s failure to curb air pollution as a violation of a public trust that inheres in the atmosphere.²⁵⁹

In some ways, the vociferous disagreement at the International Seabed Authority concerning regulations for extractive mining is a conflict between two theories of the res—the access theory and the ecological theory.²⁶⁰ Both, in a way, have a hook in UNCLOS. Article 140 provides that the financial proceeds of seabed mining will be provided to developing and other disadvantaged states,²⁶¹ which assumes commercialization of seabed resources. Article 145, on the other hand, provides that measures will be taken to “ensure effective protection for the marine environment from harmful effects which may arise from such activities.”²⁶² Yet even these measures presuppose the existence of extractive activities, which may account for the fact that mining operations are set to begin in 2024 notwithstanding significant environmental concern.

4. Intergenerational Equity Theory

The new international economic order movement represents one example of how to conceive of common heritage res in a way that prioritizes equity concerns. We can see this in the words of Ambassador Pardo, who argued that the deep seabed should be characterized as a common heritage primarily as a means for redressing disparities between newly decolonized states and developed economies.²⁶³ And it remains alive in the work of scholars like Egede, who identifies the redistributive potential of the Enterprise’s as a necessary component of the common heritage doctrine in the law of the sea.²⁶⁴ As noted previously, this is also the theory of the res that likely faces the most resistance from developed economies, and which was significantly undermined by the 1994 Implementing Agreement.²⁶⁵

B. The Beneficiary Class

There are at least two primary parts to any inquiry into the common heritage doctrine’s beneficiary population. First is whether the population should be defined as that of a specific political community or humanity writ large. The second is whether the population should be defined as only those persons currently alive or also as including future generations. I will address each in turn.

We have already seen how debate over the first dimension can be traced all the way to the Roman law antecedents of the public trust and common heritage doctrines.²⁶⁶ As Ruhl and McGinn posited, as a practical matter, it may be impossible to enforce a res communis regime without acknowledging some role for the government (i.e., in a manner quite similar to the government’s responsibilities regarding res publicae).²⁶⁷ This approach is implicit in nearly every public trust doctrine case. For example, the Supreme Court in McCready v. Virginia found that “the States own the tide-waters themselves, and the fish in them, so far as they are capable of ownership while running. For this purpose the State represents its people, and the ownership is that of the people in their united sovereignty.”²⁶⁸ Justice Washington made this connection equally clear in what appears to be the earliest public trust case to have reached the bench of a Supreme Court justice.²⁶⁹

Contemporary public trust cases have been most direct in identifying that the beneficiary class should be understood to include future generations. For example, the Supreme Court of India in MC Mehta was clear in identifying the public trust doctrine as one that protected natural heritage in the interest of future generations.²⁷⁰ The Supreme Court of Hawaii has been similarly forthright in its attention to future generations, holding that “the public trust relating to water resources [is] the authority and duty ‘to maintain the purity and flow of our waters for future generations and to assure that the waters of our land are put to reasonable and beneficial uses.’ ”²⁷¹ This does not mean, however, that any conception of the common heritage must include consideration of future generations. There appears to be no such stipulation in any of the federal public trust cases in the years before Illinois Central, for example. And the Roman sources are equally silent on the question of future interests.

C. The Trustee and Means of Protection

1. Trustee

There are three distinct considerations to keep in mind here. First, there is deciding whether the beneficiaries should be identified as members of a political community or humans as an aggregated whole. Second, there is identifying a trustee. Finally, there is deciding whether an institutional actor outside the beneficiary class is empowered to ensure that the trustee is acting in the beneficiary class’s interests. In the domestic public trust cases, this has largely centered around debates over the proper role of the courts in reviewing legislative action. We have seen a wide range of models. On one end are some of the earliest cases from Maryland, wherein the courts entirely deferred to the legislature’s decision to alienate trust property.²⁷² On the other end of the spectrum is the California Supreme Court’s assertion of continuous, coequal jurisdiction to impose something akin to a hard-look review of agency action.²⁷³ As we have discussed, it was this potential for a strong judicial role that most attracted Sax to the public trust doctrine as a means for protecting the interests of a silent, disperse majority.²⁷⁴ These are, of course, ideal types, as the Supreme Court’s inconsistent approach to deferring to legislative actions in the wake of Illinois Central makes abundantly clear.²⁷⁵

2. Means of Protection

One could imagine an almost infinitely long list of the ways by which a trustee might protect the res in the interest of the beneficiary. These means would be in significant degree contingent on answers to the questions posited above. So, for example, the theory of active stewardship required by the California Supreme Court can be seen as a necessary product of an ecological theory of the res where the beneficiary class includes future generations. Looking across the case law we have surveyed, three broad categories emerge. Again, these exist along a spectrum from least to most permissive and should only be seen as ideal types.

First, there is the absolute prohibition on alienation or use. This has the least precedent in American public trust case law, as courts almost always recognize some ability for a legislature to divest of, or allow limited use of, trust resources.²⁷⁶ Expanding our notion of the public trust somewhat, this model would be akin to the protection afforded under the Endangered Species Act.²⁷⁷ A second, less robust, means of protection would be a requirement that the trustee be an active steward of the trust resource. The California Supreme Court adopted something analogous to this approach when it held that the public trust “imposes a duty of continuing supervision over the taking and use of [] appropriated water.”²⁷⁸ A third, and by far most common approach in U.S. case law, is to require that use or alienation of the res be consistent with trust principles. As noted previously, this too exists along a spectrum. In this way, the Supreme Court’s more skeptical approach in Illinois Central and the early approach of Maryland courts are all variations of this same model.²⁷⁹

D. Vindicating the Beneficiary’s Interests

Finally, a public trust framework for the common heritage of humankind considers the means by which the beneficiary class can vindicate its interests if the trustee fails in its duties. This is by far the most difficult to analogize across the domestic and international contexts. In U.S. case law, one of the signal virtues of the public trust doctrine, as told by its proponents, is the fact that it provides standing to sue the government for failure to protect trust resources.²⁸⁰ Yet there currently exists no international tribunal by which any citizen might vindicate rights under UNCLOS, for example. UNCLOS provides something of a proxy in the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea.²⁸¹ Yet even here, the chamber’s jurisdiction is limited to disputes between states parties, entities created by UNCLOS concerning seabed mining, and private parties who have entered into mining contracts with the Authority.²⁸² This is, in actuality, quite a robust mechanism for enforcing the duties imposed by UNCLOS. On the other end of the spectrum would be the norm-based enforcement of climate change goals arrived at under the UN Framework Convention on Climate Change.²⁸³

There are a number of benefits to applying the public trust framework to the common heritage of humankind. First, and perhaps most importantly, it provides a more detailed lexicon for articulating what we mean when we debate the common heritage doctrine. Second, it recognizes that social values are at the core of debates about the common heritage of humankind, and it demonstrates the wide range of values that we might seek to advance. And third, it connects this higher-level debate about values to a more practical discussion of particular governance rules.

IV. CASE STUDY: OUTER SPACE MINING

It is particularly appropriate to assess how a public trust approach to the common heritage doctrine might help the international community develop rules for managing outer space mining. There are many existing proposals, often developed after the United States enacted domestic legislation concerning asteroid mining in 2015. Although promising, these proposals are largely a grab-bag of analogies to existing domestic and international legal regimes. Applying a public trust approach to the common heritage doctrine can help us build on these proposals in a way that is incremental and sensitive to geography and changing technology.

A. Existing Proposals

Member states of the UN Committee on the Peaceful Uses of Outer Space (“UNCOPUOS”) have addressed outer space resource extraction every year since 2015.²⁸⁴ Beginning in 2022, UNCOPUOS has embarked on a more rigorous, five-year process for developing international rules for outer space mining. In significant part, this five-year endeavor was born of the plethora of states enacting domestic laws recognizing the property rights of private parties that extract abiotic resources from celestial objects. This list now includes the United States, Luxembourg, Japan, and the United Arab Emirates.²⁸⁵ A 2022 call for views uncovered a few areas of broad agreement. First, most states agreed to exclude discussion of access to orbits and radio frequencies from these debates, since both issues were already addressed in forums like the International Telecommunications Union.²⁸⁶ Many states likewise looked to develop a framework that would ensure predictability, safety, sustainability, and the peaceful uses of outer space.²⁸⁷

The United States has taken the lead in cultivating a group of like-minded states in favor of outer space mining. Executive Order 13914 propelled this initiative by directing that NASA foster international support for outer space resource extraction.²⁸⁸ NASA has primarily executed on this task through a series of identical bilateral agreements with other states called the Artemis Accords—a set of principles established to encourage cooperation in future lunar activities.²⁸⁹ In relevant part for our purposes, the Artemis Accords provide that “the extraction of space resources does not inherently constitute national appropriation under article II of the Outer Space Treaty.”²⁹⁰

The most-cited proposals for managing such resource extraction are provided by the so-called Hague “Building Blocks.” Developed by a group of leading scholars from 2016 through 2020,²⁹¹ these Building Blocks address a wide range of outer space activities. In pertinent part, they recommend establishing a registry-based system for resource extraction “priority rights.”²⁹² Upon registering the geographic scope and period of time for any given prospecting operation, a safety zone around the activity would also be established commensurate with the type of activity that is proposed.²⁹³ The Hague Building Blocks adopt many of the uncontested elements of the common heritage doctrine—resource extraction would be carried out only for peaceful purposes “for the benefit and in the interests of all countries and humankind irrespective of their degree of economic and scientific development.”²⁹⁴ Although the precise contours of this benefit are left largely undefined, the Building Blocks do provide that states should share benefits by promoting “participation in space resource activities by all countries, in particular developing countries.”²⁹⁵ Such promotion might include, for example, assisting in developing space science and technological capacity, cooperation on training and education, providing open access to scientific information, incentivizing joint ventures, exchanging expertise and technology on a mutually agreeable basis, or establishing an international development fund with the proceeds of mining activities. The Building Blocks also advocate ensuring that rights over extracted resources “can lawfully be acquired through domestic legislation, bilateral agreements and/or multilateral agreements.”²⁹⁶

This approach is typical of a wider range of commentary urging states to adopt an outer space mining regime modeled off the International Telecommunication Union’s first-in-time, first-in-right registration system.²⁹⁷ More libertarian versions of this proposal call for the international community to do nothing—relying instead on a rule of first possession and ad hoc recognition of an entity’s on-the-ground mining operations as they develop.²⁹⁸

Another set of proposals suggests establishing some common baseline of resource entitlements. In this vein, some have recommended partitioning the moon geographically between states and allowing each to develop its own system for prioritizing extraction activities within their respective zones.²⁹⁹ A similar variant would adopt the concept of the exclusive economic zone from the law of the sea to achieve a similar end, while also being in less apparent tension with the Outer Space Treaty’s prohibition on sovereign claims.³⁰⁰ Yet others would establish a system of tradable credits, where each state received some baseline allocation of resource rights that could be sold to other states.³⁰¹

A final group of proposals seek to adapt various doctrines of domestic property law. In this way, some have advocated entrusting an international body with all extraterrestrial property rights and granting to private entities a defeasible fee interest for mining operations.³⁰² Similarly, others propose adopting a condominium model, with each state being granted fee simple to particular territories that are subject to a more general management scheme.³⁰³

This is only a flavor of the wide range of schemes proposed by states, scholars, and activists. All have their benefits and drawbacks, depending on your normative views. But, with the possible exception of the Hague Building Blocks, none provide a holistic framework for thinking about outer space mining.

B. The Public Trust Approach

A public trust approach to the common heritage doctrine does not prescribe a particular vision for outer space mining. Instead, it provides a more structured framework for thinking about the values that we seek to advance in using resources on celestial objects. By employing the public trust framework to outer space mining, two key distinctions emerge—the locations on which mining operations will occur and their probable timelines.

1. Defining the Res

To understand why these distinctions matter, we can begin by considering how states might apply a theory of the res to outer space mining. Take, for example, Rose’s socializing theory. This, again, is the idea that we should treat as common those resources the use of which produces some interactive, social virtues.³⁰⁴ Let us imagine that mining operations were to start tomorrow—there are a few categories of objects that, under this theory, should be characterized as a common heritage. The first might be objects of cultural heritage—the first Apollo landing site, for example, or Neil Armstrong and Buzz Aldrin’s footsteps at Tranquility Base. Even with a relatively minimal presence on the moon, preserving such sites would be a reminder of humanity’s shared journey of exploration and our years of shared, peaceful cooperation in civilian space programs. This is by no means a novel idea—the U.S. government has already expressed an interest in preserving these historical artifacts.³⁰⁵ Another might be locations and communication equipment, whether on the moon or in the moon’s orbit, necessary to relay communications from the far side of the moon to Earth.³⁰⁶ These resources are fundamental to communication in the same way that Rose posited utility poles are a cornerstone of political speech.³⁰⁷

These examples just do not apply to asteroid mining. There are no such cultural heritage sites, and if the asteroid is small enough, they are unlikely to ever exist. Asteroids are also unlikely to be so large as to frustrate ready communication with Earth. All of which is to say that location matters. And an approach to outer space mining that is sensitive to these differences in location may more readily lead to consensus on practical rules of the road.

Returning to our thought experiment about mining on the moon, we could imagine significantly different socializing interests at different time horizons. Let us again take the socializing theory as a heuristic. Aside from the cultural objects and communications sites noted above, if mining were to start tomorrow, there are relatively few other resources the use of which might lead to any kind of interaction—there are likely to just be too few people on the moon. But if we cast our minds some decades down the line, when state and private industry plans to have permanent lunar settlements might be realized, the situation is quite different. Like Rose’s public roadways,³⁰⁸ we could imagine there being commonly used routes connecting settlements the private appropriation of which would frustrate socializing settlements to each other. We could also imagine use of the moon’s limited water resources as another locus of important socialization. NASA has found there to be 1/100th of the amount of water in the lunar soil on the sunlit side of the moon as exists in the Sahara.³⁰⁹ To the extent that permanent human settlements need to rely on these water sources, their private use without some general use scheme could well lead to resource conflicts—certainly not a socializing use of water resources. For those who adopt a socializing theory of the res, therefore, it would be useful to adopt now a precautionary approach to using these resources which, in a foreseeable future, are important to incorporate into the commons. Such a precautionary approach might, for example, limit present use of water resources only to what is necessary to sustain human life for research stations, and not stations established just for mining activities.

Once again, these future concerns are less likely to exist on a relatively small asteroid where there is no practical ability to have a human settlement, even in a future where there are more humans who live or operate in outer space. In this case, there may be fewer practical reasons to adopt a precautionary approach to any water resources that might exist on the asteroid—paving the way to more extensive private use.

Finally, choosing between different theories of the res is largely a normative decision. But as this discussion shows, there is a geographic component that is at play. Over any time horizon, the socializing interests implicated in mining an asteroid are significantly fewer than might pertain on the moon. The same would not be true if we adopt an access theory of the res, which prioritizes opening access to outer space resources. While this does not help us choose between theories, it does help us identify those locations on which there is likely to be less disagreement among states. If we imagine a bilateral negotiation between one state that supports an access theory and another that adopts a socializing theory, they should begin their negotiations by developing a legal regime for mining asteroids. There are likely to be fewer areas of disagreement simply because the possible uses of asteroids, now or in the future, are more limited than the possible uses of different parts of the moon.

Distinctions based on location and timeframe are important to considering each of the remaining lines of inquiry for a public trust approach to outer space mining. In the remaining sections, I will briefly demonstrate why.

2. Defining the Beneficiary

As a general matter we can imagine three possible beneficiary classes. The first are those who live near the mining operation (this necessarily requires imagining a future with a permanent human presence, for example, on the moon). Second are those who live on Earth (the only class we could imagine today, for example). And the third would be to combine these two groups. An approach to the common heritage that benefits only those who live near the mining operation would be fundamentally different from one that also considers the interests of those on Earth. For example, if we adopt an ecological theory of the res, there might be significant environmental effects to mining that are purely local. So, operations that eliminate access to lunar groundwater or destroy a particularly attractive landscape simply wouldn’t matter to an earth-bound beneficiary class. Instead, maximizing the benefits that accrue to the mining (so that the proceeds could be redistributed, for example) would be far more important to this class of beneficiaries.

The question of determining the beneficiary class is largely theoretical for the time being. Presently, it is difficult to imagine any beneficiary class other than all of humanity, politically represented by states as the primary subjects of international law. But this thought experiment does suggest that there will be a difficult future task in determining the degree of preference, if any, that these beneficiary groups should enjoy from extracting resources. Difficult, but not unprecedented. Fundamentally, it is no different than the task faced by the Supreme Court in its early public trust cases: Can we impose regulations on oyster fishing in a manner that benefits the citizens of one state over those of another?³¹⁰ And for those who believe in the virtue of including non-Earth-bound beneficiaries into the common heritage of certain extraterrestrial resources, these distinctions would again counsel in favor of adopting a precautionary approach to mining now.

Together with the theory of the res, defining the beneficiary class will also raise questions about what benefits should accrue to the beneficiaries. Much of the debate about sharing technology, information, and financial proceeds from outer space mining has focused on this question. Fundamentally, like all these inquiries, it is normative and defies any necessary legal answer. Taking this public trust approach as a starting point, those advocating for preferences that would accrue to less developed countries should emphasize theories of the res that prioritize an intergenerational, equity-based approach and an understanding of the beneficiary class that extends beyond the political community of the state that engages in mining activities.

3. Trustee and the Means of Protection

As was the case in negotiations concerning the law of the sea, much of the current debate in outer space law concerns whether, and how, to create an international organization to manage mining operations. A public trust approach to the common heritage doctrine, however, suggests that this debate necessarily depends on decisions made about the theory of the res and the beneficiary class. States would do well to think critically about the history of the International Seabed Authority—the mere existence of a detailed international bureaucracy has guaranteed neither redistributive benefits for less-developed countries nor guaranteed swift access to the ocean floor.

We have already canvassed many of the institutional arrangements that states can develop to constitute a trustee and the associated means by which the trust is protected. Again, differences in location and timeframe are important. For locations where future human habitation is possible, some standing adjudicatory body may one day be necessary. But in the interim, proposals for a registry operated by some entity like the International Telecommunications Union³¹¹ appear to be sufficient. The members of such a body can use the forum to develop regulations that ensure non-interference, prioritize resource rights, and develop safety standards. So long as states can agree on the theory of the res before such a model is adopted, the risks of significant future changes in the scope of the common heritage doctrine would also be meaningfully minimized.

To the extent that states are interested in adopting a precautionary approach to mining for any of the reasons discussed above, a few options exist. One would be to limit prospecting for resources indefinitely or for some period of years. These limits could be tailored to specific locations (for example, applying to particular areas of the moon or the moon writ large), types of resources (for example, water), or the purposes for which the resources are used (for example, to sustain life). States could determine these limits in a variety of consultative fora, whether that be UNCOPUOS or some smaller body of concerned states, much like the Arctic Council.

4. Vindicating the Beneficiary’s Interests

The design choices made in Section IV.B.3 significantly determine the ways in which a beneficiary class might vindicate their rights. In the immediate future, there are two choices for how beneficiaries might vindicate their rights.³¹²

At one end, states might create an international tribunal along the lines of the Seabed Disputes Chamber of the International Tribunal of the Law of the Sea. Much like under UNCLOS, such a tribunal could have jurisdiction over states parties and private entities with mining operations and be empowered to enforce agreed-upon regulations. As a practical matter, I am pessimistic about the likelihood of any major spacefaring state acceding to this kind of jurisdiction. There has been enough action to unilaterally assert mining rights, by the United States and Luxembourg particularly, that establishing such a tribunal would likely be seen as a concession with little apparent benefit.

It seems more likely that states would continue using informal conciliation and negotiation to enforce compliance with mining regulations. This would operate in much the same way as states “enforce” the nationally determined emissions targets agreed upon under the UN Framework Convention on Climate Change.³¹³ Such an approach necessarily entails significant potential for backsliding. Some of this risk, however, could be mitigated if states are able to agree on some of the more fundamental questions discussed earlier in this section, and particularly on the theory of the res pertinent to a particular location. By more narrowly defining the problem set and establishing more detailed consensus, there may be less of an incentive for states to backslide on their commitments.

V. CONCLUSION

The common heritage of humankind contains great promise as a framework for understanding and managing resource challenges in areas beyond national jurisdiction. Its potential, however, has been stymied by its close association with the politics and economic disputes of the Cold War. Taking lessons from the development of the public trust doctrine in domestic U.S. law, the common heritage can be liberated from these political battles and applied to a wide range of contemporary problems. Future work, for example, might use this four-part framework to develop a more detailed mechanism to protect and use marine genetic resources or protect marine biodiversity.³¹⁴ Contemporary international politics has, in many ways, returned to a pattern of Cold War alliances and territorial conflict. Our approach to the international law for managing resources in areas beyond national jurisdiction can remain practical and resist a similar turn to the past.

97 S. Cal. L. Rev. 1469

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Christopher Mirasola*

* Assistant Professor, University of Houston Law Center. I am particularly grateful to Molly Brady, who pointed me in the direction of the public trust doctrine in the early stages of this project. I am also very grateful for helpful feedback from William Alford, Haley Anderson, Stephen Cody, Asaf Lubin, Thomas McGinn, Brian Richardson, Melissa Stewart, Andrea Olson, Carol Rose, and Paul Stephan. All errors are, of course, my own.

Housing Gridlock

September 2024September 2024Brian M. Miller*

The housing crisis dominates much of political and economic life, and it is driven in large part by a lack of housing supply. Recognizing this, many commentators have called for the end of single-family zoning. And some jurisdictions have answered the call. But even if that groundswell grows, the housing shortage likely will persist. One underappreciated reason for that persistence is that a private network of restrictions stands ready to pick up where zoning leaves off. Specifically, restrictive covenants abound nationwide, and, just like zoning, they often cap how much housing can be built without regard to local or regional demand. The aggregate result of these covenants is what this Article calls “housing gridlock,” a side effect of dispersed private ownership rights that prevents property from reaching its full potential in service of both the public good and economic productivity. This Article explores the legal, financial, and, above all, psychological forces that brought about gridlock and further its hold today.

This Article then proposes a solution. Drawing primarily on the psychological phenomena and financial incentives that entrench housing gridlock in the first place, it crafts a two-stage procedural and remedial mechanism to break that gridlock. Critically, that mechanism aims to minimize psychic harm to existing property owners while freeing up additional housing supply. It begins with a lump-sum opt-in mechanism for willing covenant beneficiaries located near a proposed housing project, and an action only for damages within a predefined range for any remaining beneficiaries. This Article describes the finer details of this proposal and explores its potential advantages over other options in the preexisting legal toolkit from economic and (again, especially) psychological perspectives. Accordingly, it provides an asset to the multifront struggle for housing availability.

INTRODUCTION

The affordable housing crisis is well-documented: homelessness abounds;¹ those who live in homes spend a larger portion of their income on housing than in the past;² the rate of homeownership among young adults over the past several years is lower than it has been in much of recent memory.³ At a basic level, it is no mystery why this is the case. We have a severe housing shortage. Freddie Mac estimates a shortage of 3.8 million housing units nationwide.⁴ Though a simple model of supply and demand cannot tell the entire story, it can go far. More people competing for fewer homes means sellers or landlords can command higher prices.⁵ Thus, many people are without homes, and those who secure housing pay more to do so.

Unsurprisingly, then, the majority of the population agrees that the U.S. needs more housing.⁶ But that is where the consensus ends. What kind of housing? Where should it be located? How do we get more of it? These questions confound policymakers and prompt fiery reactions from people across the political and socioeconomic spectrums.⁷

One flashpoint in this contentious ordeal concerns zoning. Single-family zoning is perhaps “[a]s American as apple pie,”⁸ but it and other restrictions with similar practical effects suppress the housing supply. It inflates prices and drives suburban sprawl, disproportionately harming racial minorities and lower-wealth Americans.⁹ Indeed, racial animus likely motivated much of the initial push for single-family restrictions.¹⁰ Today, then, single-family restrictions hoard opportunity on behalf of existing homeowners.

Anyone who keeps their ear to the ground in the world of housing policy, urban governance, or even national politics has heard calls to abolish single-family zoning.¹¹ It’s not just chatter: multiple states and cities across the country, including Oregon,¹² California,¹³ Maine,¹⁴ and Minneapolis, Minnesota,¹⁵ have passed laws to break single-family zoning’s hold on housing development. These are welcome developments, but, of course, they alone are insufficient to solve the housing shortage.¹⁶

This Article targets another legal factor that blocks many cities and regions from meeting housing demand: single-family restrictive covenants. Restrictive covenants are private arrangements attached to property deeds limiting how property can be used, for the benefit of certain surrounding properties.¹⁷ The terms often apply for many decades to the burdened properties and automatically renew afterwards.¹⁸ Covenants thereby can “run with the land” and do not merely bind specific parties to an agreement.¹⁹ On the substance, restrictive covenants can limit property use in various ways.²⁰ One of the most prevalent covenant terms is one that restricts the burdened property to hosting one single-family home.²¹ Other common restrictions include minimum square footage, minimum setbacks from lot lines, and height limits.²² In other words, restrictive covenants, where they exist, often place the same lid on housing development through private rights as single-family zoning does through public regulation. And they often contribute de facto to the same racial segregation and wealth inequality that the now unenforceable racially restrictive covenants once pursued de jure.²³

These covenants are incredibly and increasingly common.²⁴ So, even if zoning restrictions were lifted across the entire nation, a sizeable portion of single-family properties would still be frozen indefinitely, regardless of the demand for housing in that region. And not only that, but there is also reason to suspect that even where such restrictive covenants do not yet exist, homeowners may seek to implement them when faced with the fear, post “upzoning,” that they will lose the “neighborhood character” they have grown accustomed to.²⁵ At the end of the day, policymakers could all get on board with unlocking more housing, but an extensive network of private legal apparatuses can still say no. If we care about finding real and lasting solutions to the housing crisis, we must explore freeing up property from longstanding private rights that often entrench inefficiencies and stand in opposition to the public good. At the same time, to avoid significant demoralization costs and psychic harm to property owners resulting from upended expectations in the short term (and to avoid certain political failure), we must find a path forward that seeks to honor owners’ reasonable expectations.

The legal academy has given this problem limited attention. At a high level of generality, many scholars have commented on some of the problems associated with restrictive covenants and other forms of deadhand control over real property.²⁶ Additionally, a few scholars have noted that restrictive covenants could swoop in where single-family zoning leaves off.²⁷ More specifically, Robert Ellickson recently provided a helpful synopsis of the problem of “stale” restrictive covenants of all forms and of some potential paths forward for those burdened by them to free themselves.²⁸

And, just this year, Gerald Korngold explored the likely prominence and harms of single-family covenants in the wake of zoning reform.²⁹ He evaluates whether invalidating such covenants might run afoul of the Takings Clause, and then urges courts to consider such covenants void as contrary to public policy under certain circumstances.³⁰

But the literature has only just begun to explore the nature and the depth of the problem as it relates to the housing crisis. This Article attempts to do so. It makes multiple new contributions to the discussion on the housing crisis and private law. First, it explains how the abundance of restrictive covenants contributes to housing “gridlock,” a scenario in which fragmented and dispersed ownership of private rights prevent productive and socially beneficial land use. Second, this Article employs an underutilized approach to both describe that problem and explore solutions. Building on the work of Stephanie M. Stern and Daphna Lewinsohn-Zamir, who have provided a general primer on the relationship between psychology and property law,³¹ this Article reviews contemporary psychological research on ownership, possession, and subjective attachment. It then applies that research to, first, suggest why restrictive covenants’ hold may be stronger and more damaging than some commentators have suggested and, second, to evaluate strengths and weaknesses of legal and policy tools to escape that hold. One of the primary insights this Article hopes to convey is that housing gridlock from restrictive covenants is a deeply psychological problem, and that any solution must account for the driving psychological phenomena.

This Article proceeds in two parts. Part I explains how restrictive covenants contribute to gridlock. It evaluates housing gridlock—how we got here—from legal, financial, and especially, psychological perspectives. Part II explores how to break out of that gridlock. It surveys potential paths forward from within the common law of property as well as certain regulatory or legislative approaches. Then, relying on common law, economic, and psychological principles, it constructs a new solution. That solution involves a statutory mechanism, with procedural and remedial components, that facilitates the bypassing of covenants when it would be efficient to do so. Finally, it aims to respect the preexisting interests of covenant beneficiaries along the way. In the process of explaining this proposed solution to housing gridlock, this Article explores the advantages—especially psychological—that the solution presents compared to other options.

I. THE TRAGEDY OF THE HOUSING ANTICOMMONS

This Section describes the housing gridlock that restrictive covenants have helped usher in. Section I.A identifies the concept of the tragedy of the “anticommons” and explains why it applies to the modern housing market generally and residential restrictive covenants specifically. Section I.B explores three interrelated social-scientific explanations of how we arrived at housing gridlock—a legal one, a financial one, and a psychological one—and it explains why the psychological explanation is particularly important. This Article thereby draws in part, but not exclusively, on law & behavioral economics to describe the problem, with a special emphasis on underappreciated psychological forces at play.

A. Gridlock as a Feature of the Modern Housing Market

Few concepts are more influential to the foundations of private property law than that of the “tragedy of the commons.”³² The basic idea is that when a resource (such as a freshwater lake that is useful for drinking and recreation) is unowned and subject to open access, each individual with access to it has a personal incentive to use it heavily and not limit themselves.³³ “Every other person might use it up first,” the thinking goes, “so if I don’t use it now I might never get any.” So, even though it would be in everyone’s interests to preserve the common resource for years and generations to come, the resource is instead spent or spoiled rapidly.³⁴

Theorists traditionally have proposed two main solutions to avoid the tragedy of the commons.³⁵ The first is centralized control by a public or governing body, giving authority and power to a single entity to perhaps allow public access to the resource, but limiting such access as necessary to preserve it.³⁶ The second is privatization, allowing private individuals or entities to own all or portions of the resource.³⁷ Under such an arrangement, the owners theoretically have an incentive to use the resource productively without spoiling it.³⁸

But there’s another tragedy that is far less famous. Michael Heller called it “the tragedy of the anticommons.”³⁹ While the tragedy of the commons describes an undesirable consequence of too much open access, the tragedy of the anticommons sits at the other end of spectrum as an undesirable consequence of, in a sense, too much private ownership.⁴⁰ Here’s the idea: Certain public goods rely on the use of property. And, indeed, some of those goods cannot manifest unless either enough property is pooled together, or a smaller unit of property is utilized or developed to a substantial degree.⁴¹ Think of public transportation corridors, large parks, or stadiums. But if property is divided among too many private owners, or if the rights concerning one unit of property are spread among too many owners, then for those greater public goods to manifest, more people must be willing to relinquish their right to exclude others from using their small slice of the pie.⁴²

A fictional example can make this more concrete. Imagine a swimming pool that is not owned by one person or entity, but instead is owned by hundreds of different people in individual chunks. Each person owns around one square meter and has complete and total rights over their small space. If even a handful of the individual owners decide to fence off their small portion of the pool from anyone else, they could prevent all other people from swimming laps. Because ownership of the pool is fragmented across many parties, the resource—the pool itself—cannot reach its full productive potential.

Although the swimming pool example is farfetched, anticommons and gridlock can calcify under the radar in ways that shape the real world. Michael Heller points to biomedical patents.⁴³ Years ago, a large pharmaceutical company developed what looked to be a promising treatment for Alzheimer’s Disease.⁴⁴ But the treatment never made it out of the lab because it wasn’t financially feasible for the company to pay off all the holders of patents of necessary component technologies.⁴⁵ The U.S. government developed the patent system to incentivize innovation in the world of biomedical technology. And it did. Driven by patents as rewards, we underwent a revolution in biomedical technology in the late 20th century.⁴⁶ But sooner or later it rings true that “there is nothing new under the sun”⁴⁷ and one must build with the materials that already exist. When too many people have the right to exclude others from using those building blocks, building a wall from the bricks can approach impossibility.

Hence the term “gridlock.”⁴⁸ We might have the building blocks to assemble resources that would massively improve public welfare, but whether we reach our goal depends on whether assembling those building blocks is feasible or whether they will instead stick in place, widely dispersed. I argue that we are witnessing a tragedy of the anticommons in housing too. Dispersed ownership rights stifle the production of the housing necessary to meet demand and ensure greater affordability and stability for all.

The most well-documented source of housing gridlock is regulatory: specifically, zoning and related regulations.⁴⁹ Most cities are governed by a zoning code, which limits land use in different geographic areas to specific uses—such as single-family housing only.⁵⁰ And in most cities, a property owner who seeks to use their property in violation of the zoning restrictions may request a “variance”: permission from the local government to, say, build a quadplex or small apartment building in an area otherwise restricted to single-family houses only.⁵¹ Often, a variance request triggers an elaborate comment and review process;⁵² even for the smallest proposed projects, house owners can voice their opposition and demand studies on traffic, environmental impact, water runoff or burden on public utilities.⁵³ Because this process is expensive and time-consuming for the property developer, often the result is either that housing is never built, or the end product contains fewer units at a higher selling price than originally planned.⁵⁴ That being so, gridlock and anticommons can follow from not only too many people owning pieces of what we’d typically think of as “property”—a piece of land, a patent or copyright, for example—but also from too many people or entities having the right and power to stop others’ use of their property, demonstrating the fragmentation of property rights.⁵⁵

However, loosening zoning restrictions will not necessarily suffice to escape gridlock. In many regions in and around metropolitan centers, restrictive covenants could pick up much of the slack. Imagine a developer buys a property and wants to build multifamily housing—a condo building, four townhouses, or even just a duplex. The property isn’t subject to any notable zoning restrictions. But it is within the bounds of a homeowners association (“HOA”). And within the HOA’s Covenants, Conditions, and Restrictions (“CC&Rs”) is a provision stating that all properties may only be used for the operation of one residence.

In this case, however, there is no variance process. The developer could petition the HOA board to allow multi-family housing, but (1) the board, made up of other homeowners in the subdivision, has no interest in losing the single-family, detached-home character of their neighborhood;⁵⁶ and (2) in any event, CC&Rs often can be amended only by a supermajority vote of all property owners within the association,⁵⁷ so if the developer wanted the legal right to build even a duplex, numerous owners in the vicinity would have to agree to the change. The chances of succeeding are slim.

Perhaps that would strike some people as just fine. We are talking about a single-family neighborhood, so maybe the property owner should simply find somewhere else to build the condos, townhouses, or duplexes. And anyway, the restrictive covenants should come as no surprise, right? The developer should have known what it was getting into. But for at least three reasons, restrictive covenants have contributed to and will continue to produce housing gridlock—not only as to an individual piece of property here and there, but also for residential properties and housing supply at local, regional, and national levels.

First, HOAs and single-family covenants are common and even rising in popularity. Single-family homes are the most prevalent form in the United States housing stock, representing around two-thirds of all units.⁵⁸ And around a quarter of all single-family homes in the United States are subject to HOA governance.⁵⁹ That share is poised to increase in the coming years—over 60% of new, single-family homes are subject to HOA governance, and the number is over 80% for new homes constructed in subdivisions.⁶⁰ Moreover, because a single-family restriction is one of the most common covenant terms for HOAs,⁶¹ it is reasonable to assume that the large majority of single-family homes under HOA governance are bound by a restrictive covenant to stay that way. The practical effect of HOAs’ increasing popularity for single-family home developments, and the prevalence of single-family use restrictive covenants, is that it is increasingly difficult to purchase a home that could one day be expanded into multiple units.⁶² And that is so even without taking into account the prevalence of other sorts of covenant terms that in practice allow only for single-family development—like minimum square footage requirements for each residence.⁶³ For this reason, I, like Lee Anne Fennell and James Winokur, am skeptical of arguments that decentralized governance by collections of private covenants could meaningfully provide for an open “market” of governance options for homebuyers.⁶⁴ Increasingly CC&Rs converge on this land-use uniformity and gobble up land as they do so.

Second, some people who own single-family homes either purchase them without recognizing that they are bound by a single-family covenant and the significance of that fact, or eventually come to want freedom from such a covenant when they stand to benefit from its removal.⁶⁵ Most people, we can assume, buy a home primarily because they like the home and its general location. And their awareness of HOA restrictions and amenities may not extend far past knowledge of the monthly or annual fee, as well as the access owners have to common areas, like a swimming pool.⁶⁶ Over time, research shows, homeowners often come to disfavor many restrictions governing their private land use.⁶⁷

Third, an obvious but important fact: land is a scarce resource.⁶⁸ As some land gets developed, the overall share of available land shrinks—especially land well-connected to amenities. Every property and subdivision developed for single-family use accelerates land consumption and constrains the resources available for future housing development.⁶⁹

Of course, these phenomena conspire to lock individual land parcels into perpetual hosts of one single-family home. But the aggregate effects could be substantial too. We have a housing shortage, but where new housing is being constructed, it’s disproportionately single-family and subject to a covenant keeping it that way.⁷⁰ Such development, being less dense and involving excessive land consumption, contributes to suburban sprawl.⁷¹ Radiating out from city centers, more and more large land agglomerations are “filled” with sparse housing; and because of covenants the gaps are not easily filled in later. That means that new housing necessarily stretches away from population centers rich in jobs, recreation, social services, and other amenities.⁷² This phenomenon disproportionately burdens lower-wealth residents for whom greater transportation costs and longer commuting times are especially difficult to manage.⁷³

And it likely will not improve on its own. Although covenant authors can specify that restrictions expire after a certain number of years, they usually do not do so.⁷⁴ Instead, restrictions often apply unless removed through an onerous process, in effect sticking to the corresponding land indefinitely. So, the more HOAs, the more single-family restrictions, and the more land is consumed by indefinite limitations on housing.

Thus, private rights can prohibit cities and surrounding regions from meeting housing demand.⁷⁵ A society filled with single-family land use may function well for a time. But that time is likely to be short if the regional population is to increase. Unused land is depleted, so would-be developers cannot simply buy another lot and build it up. The land that is already occupied is stuck in a web of private promises keeping it from being redeveloped to accommodate more people. Thus, gridlock is inescapable. Properties where the market would offer top dollars to purchase and convert into multiple housing units cannot budge. Too many people—most often HOA boards and members—have the unilateral right to say no.

B. Why Did We Get Gridlock?

The previous Section explained housing gridlock and how restrictive covenants contribute to it. But there is a more fundamental, or at least chronologically prior, question: Why do we have so many HOAs and restrictive covenants? No one factor or force can explain it all, but this Section discusses three separate, yet related explanations: one legal, another based on financial considerations and incentives, and a third psychological. It explains why the psychological element is particularly critical to grasp.

1. The Legal Backdrop

Non-possessory rights in land date back several centuries.⁷⁶ In fifteenth-century England, much land that up until then had stood open for passage was enclosed, and so free travel became more difficult.⁷⁷ In response, the “easement” was born as a legal right of passage through land under private control.⁷⁸ However, for centuries, those non-possessory interests rarely extended to provide rights, allowing people to limit how others used other properties.⁷⁹

Through the 1800s, the Industrial Revolution and corresponding urbanization brought people closer together and also presented a new array of land uses that could have unwelcome spillover effects on neighboring properties.⁸⁰ Non-possessory property interests that could be enforced to limit neighbors’ land uses proliferated.⁸¹ But even then, courts at first would apply such restrictions to the parties to the original agreement only.⁸² That changed in the mid-1800s, when American courts began to enforce these restrictive covenants not only against the parties to the initial agreement, but also to successive owners of the relevant properties.⁸³ The thought at the time was to expand property markets, turning contract-created development rights and limitations into transferable commodities.⁸⁴ Such a framework, proponents thought, would help efficiently allocate land uses to properties where they were most suited.⁸⁵

That history is our inheritance, and today the legal rules surrounding restrictive covenants make it quite simple to lock land uses into their present states for long periods of time. For a covenant to run with the land, one traditionally needs four things: (1) intent for a burden on the property to run to future owners; (2) horizontal privity (typically satisfied if the restrictions were placed when the properties were held in common and at an initial land conveyance or sale); (3) vertical privity (meaning a chain in conveyance of the property all the way back to the owners at the time the burden was created); and (4) touch and concern the burdened land (a notoriously fuzzy requirement, which for the purposes of this Article can be understood as a requirement that the burden somehow involves land use as opposed to a non-land-related restriction on owner behavior).⁸⁶

To simplify, this standard generally means that if at the initial sale of a piece of property, the right people aim to restrict how the property can be used into the future, they just have to say so, and future owners will be bound in precisely the same way. If someone owns two adjoining lots and wants to sell one, they can simply agree with the first purchaser that the transferred lot can only be used for one single-family home, unless the owner of the other property gives express permission to do otherwise. If that restriction is recorded with the deed to the sold property, then it can potentially stand for generations, even after all involved properties are sold again and again.

The most prominent source of single-family covenants today likely comes from HOA CC&Rs. Such restrictions are quite easy to create even though they can burden large collections of properties in one shot. The standard process is that a developer purchases a large piece of land, then subdivides it in accordance with local legal requirements.⁸⁷ In so doing, the developer, as the sole owner, has the right to set conditions on the properties’ future use, and can establish that the properties will all be members of a common-interest community (for example, they may be governed by an HOA and perhaps share in some common amenities).⁸⁸ The developer can then outfit each subdivided piece with a house and all requisite utility infrastructure. The properties at that point are worth far more taken together than the large portion of land the developer initially bought.⁸⁹ So the developer sells each home. If the developer specified in the community’s CC&Rs that each property is limited to single-family use, then each would-be purchaser must simply accept that restriction or look elsewhere.⁹⁰ And because the geographic areas where the developer acquires large chunks of land are often sparsely populated at the time and thus better suited to single-family homes, it is quite common for a developer to choose to include single-family covenants in a subdivision’s founding documents. In the short term (which is what matters to the developer), there is a market for it.⁹¹

Once the developer has sold off all the properties, it no longer retains control over how each property is used. That authority, with the pre-drafted restrictions, typically transfers to the HOA or the community members when the last property is sold, if not before.⁹² However, the restrictions tend to stick. There are many reasons for this, some of which will be explored in more detail below. But from a legal standpoint, the most important factor is that under the standard documentation for these common-interest communities, CC&Rs can only be amended through rather difficult means. It is typical for the restrictions to be amendable only by supermajority vote of the homeowners in the community.⁹³ It is not immediately obvious why in any given case the developer makes it so difficult to change restrictions. As discussed in Section I.B.2, infra, perhaps the developer suspects that buyers will pay more for the assurance that their neighborhood will not change in years to come. Or perhaps it is because such odious provisions are simply features of standard form CC&Rs today.⁹⁴ Either way, an entire new community is left with the restrictions, and it often takes nearly the entire community to be of the same mind to change the restrictions to even a single property.

In sum, the American legal system dove headfirst into commodification of fragmented land interests. In doing so, it made it quite simple for owners to restrict use of land for generations to come and to divide the power to restrict among many parties. And in the modern day, large developers use the same basic legal tools to cement indefinitely the single-family use of potentially hundreds of properties at a time—such that even when the developer is long gone, the law ensures that meaningful change is unlikely.

2. Financial Incentives

The financial considerations surrounding housing gridlock are essential but insufficient to understand the problem. Although they might partially explain why single-family restrictive covenants became so prevalent, they sometimes fail to explain why those covenants persist in certain locations. Basic financial considerations may suggest that restrictive covenants are eventually discarded when they expend their basic utility.⁹⁵ But that often does not play out in practice.

As the preceding Section suggests, financial incentives often encourage developers to mandate single-family use at the beginning of a new neighborhood’s life. For developers with massive capital and hopes of substantial profit, the goal is to construct, and then sell, a lot of homes.⁹⁶ One option would be to buy one or multiple smaller plots of land in an urban center where demand for multi-family housing near preexisting amenities is high. Some developers do take that path. But if other developers have already gobbled up city land for that purpose, or if local zoning provisions prevent a developer from building enough housing units to turn a large enough profit, then they might look elsewhere simply as a matter of necessity. In growing regions, that means looking to the open pastures of suburbs and beyond, where demand for housing is beginning to rise but land is still relatively cheap.⁹⁷ If they cannot build upward, they build outward.

That may partially explain why developers build so many single-family homes in expansive, sprawling subdivisions. But it does not necessarily account for why they restrict all the homes in the subdivision to single-family use. No one forces them to do so.

Although more research could be done as to why developers take that step, there are a couple of related possible explanations. First, and most importantly, there is reason to believe that, at least at the time the developer is first selling off the homes, single-family restrictions do not materially diminish the values of the properties they constrain. Most buyers of newly constructed single-family homes in sparsely populated areas are not interested primarily in an investment opportunity; they are looking for a place to live.⁹⁸ Thus, they perhaps do not care at the outset whether tomorrow or years from now they could be prevented from converting their home into a duplex, or from adding an accessory dwelling unit. Relatedly, buyers are not simply buying a home subject to a restriction; they are buying a home that is surrounded by other homes subject to a restriction. Someone looking for a home in a sprawling development in a sparsely populated region might prefer some assurance that their neighborhood character will remain stagnant.⁹⁹

But there comes a time when land cannot keep up with demand. As the population increases in a region that was once comparatively empty, the public interest demands more homes. As urban centers fail to accommodate the housing needs of prospective residents, more people seek to move into outer ring suburbs.¹⁰⁰ If the land is already substantially filled in these areas by single-family homes on large lots, housing prices will climb.¹⁰¹ Under such circumstances, developers could easily fill multiple housing units per lot.

Thus, once housing demand increases sufficiently, single-family covenants may come to deflate individual property values. As a general rule, per-unit construction costs decrease as the number of units in the structure increase.¹⁰² Further, the more housing units that can be constructed, the more total revenue is up for grabs.¹⁰³ For those reasons, a property that can host twenty, ten, or even two units is typically more valuable than a property that can only host one.¹⁰⁴ That is the basic economic incentive for developers to meet higher housing demand. And although no comprehensive study has been done to measure the effect on a property’s value of lifting a single-family covenant, there is analogous research regarding zoning.

Those numbers seem to point one way: “upzoning” increases property values where housing demand is high. This is especially true for single-family homes. One study found that in Minneapolis, the citywide upzoning initiative increased the value of single-family property by around 3%.¹⁰⁵ Another study found that in Chicago, properties near transit services saw a dramatic increase in value from upzoning—by 15–20%.¹⁰⁶ A study focused on Auckland, New Zealand also saw notable value increases.¹⁰⁷

Why, then, does the gridlock persist? If properties tend to jump up in value when restrictions limiting them to single-family use are lifted, why do single-family restrictive covenants still dominate so much of our single-family housing stock? There may be several reasons, including the high transactions costs someone who wants to bypass a covenant would incur by seeking waivers from all covenant beneficiaries. But from the perspective of all other parties involved, one of the potential causes is that those who would have to decline to enforce the covenant could in the short term suffer a drop in property value, or at least a drop in the subjective value they place on their property and on living in that neighborhood. In other words, although unlocking growth on a given parcel increases that parcel’s value, surrounding parcels might not similarly benefit, especially if they remain restricted. That is one possible reason why even though upzoning a particular property tends to increase its value, properties that are part of an HOA subject to single-family restrictions are sometimes valued higher than comparable properties not within an HOA.¹⁰⁸ Multiple studies have concluded that constructing new multi-family housing on a particular piece of property tends to depress the rent of nearby properties.¹⁰⁹ This result is no surprise, and is in fact a core goal of upzoning’s proponents.¹¹⁰ Thus, adding to the housing stock tends to reduce, or at least slow the increase of, the price of housing units that would compete against the new housing for occupants. This is perhaps a laudable result for the public at large, but one that is unwelcome to local homeowners centrally concerned with their own property’s value.

Yet, it is unclear whether such an effect holds true when looking at the value of surrounding homes that are not in the arena to compete for multi-family occupants, but that instead simply remain single-family properties. In theory, if enough potential buyers of a single-family home are dissuaded by the presence of multi-family housing nearby, then a home that remains a single-family property while its neighbors turn into multi-family homes might decrease in value. The evidence, however, struggles to show that such an effect plays out in practice. Again, borrowing from the zoning context, a survey of parts of the greater Raleigh, North Carolina area suggested that the upzoning of property had no significant effect, either positive or negative, on the value of neighboring properties.¹¹¹ Admittedly, it can be difficult to isolate the effect of upzoning and determine whether it alone tends to depress the value of neighboring properties. For one, demand for housing is often already quite high in those geographic areas (hence the upzoning decision). Also, upzoning and an increase in multi-family housing units may be accompanied by new amenities like restaurants or stores that can make the neighborhood more attractive to potential buyers.¹¹²

On the whole, then, single-family development with single-family restrictive covenants may make some financial sense at the time the covenants are first established. But as a general rule, whenever housing demand increases sufficiently, single-family covenants suppress the values of the properties subject to them. And although homeowners might assume that allowing other nearby properties to host multi-family development could suppress their own home’s value, the actual evidence may not definitively support that theory. What the evidence does support is that if all owners within an HOA could free up their own properties for multi-family use, then they would likely see their property values rise.¹¹³ But the restrictions persist. Not enough owners within an HOA get on board with the change. Given that this perpetual gridlock is not fully explained by the financial interests of the homeowners, another force must be at play. The next Section turns to it.

3. Underappreciated Psychological Forces

In general, owners of properties subject to a common single-family covenant stand to financially benefit by the lifting of that restriction. The fact that they do not take the plunge leads to a conclusion that is perhaps intuitive: owners who resist upzoning (and for the purposes of this Article, those who would try to enforce a single-family covenant if given the chance) do so not necessarily because they have calculated a quantifiable financial loss they might suffer, but at least in part because at a psychological level they have an aversion to the change in neighborhood character that the entry or proliferation of multi-family housing might bring about. This perceived change in quality of life can be a driving force even if it does not manifest in quantifiable financial harm. Because human psychology is potentially such a critical impetus behind the prevalence and enforcement of restrictive covenants, any solution to the resulting gridlock would benefit from a review of the relevant psychological principles. This Section serves that purpose.

Property ownership is not only a legal trait; it has deep personal implications to the owner and potential subsequent owners.¹¹⁴ That being so, concerns that motivate the retaining, using, and transferring of property are not only financial; they are psychological as well. This Section reviews contemporary psychological research that can help explain why property owners may hold onto possessions and entitlements notwithstanding contrary financial incentives.

People develop psychological attachments to their possessions. From a philosophical standpoint, thinkers from Hegel¹¹⁵ to Margaret Radin¹¹⁶ have argued that owning property is a prerequisite for human freedom, because at a psychological level people begin to associate what they own with who they are. Objects become part of the subject; material things contribute to immaterial “identity.” In other words, people need property to develop a fuller concept of self-personhood.

Psychological research supports this theory to a degree, particularly through two related key concepts: the “Endowment Effect” and the “Mere Ownership Effect.”¹¹⁷ Although the two concepts are not perfectly identical, they refer to a similar phenomenon—essentially, that people tend to place greater value on a thing they own or possess than on the exact same thing if they do not own or possess it.¹¹⁸ This Article refers to the two concepts interchangeably. The classic methodology to measure these phenomena is to construct an experiment of randomly selected people assigned to either be a “buyer” or a “seller” of some item, such as a coffee mug.¹¹⁹ The studies find that the “sellers” possessing the item assign the item a higher value than the buyers not possessing the item do.¹²⁰

The Mere Ownership Effect thus reveals that if we own or possess something, by that fact alone we will come to think of it as more valuable. The phenomenon applies to all sorts of “possessions,” even nonphysical ones, like intangible entitlements.¹²¹ And it applies even when a person has not had time to use or become more accustomed to the possession—merely being informed of possession or ownership is enough to trigger the effect.¹²²

Extrapolating to the broader world of property law, the Mere Ownership Effect means that owners of property will tend to value their property above general market value. Thus, they will resist selling an item even if offered the highest value reasonable buyers might pay. The Mere Ownership Effect means, therefore, that the status quo is sticky. Property will tend to stay in the same hands even when buyers are willing to pay the value of the property’s economic utility.

A related psychological principle is that “losses loom larger than gains.”¹²³ Someone who stands to lose a possession is likely to think that they will lose more than another person would think they gain by acquiring that same possession.¹²⁴ And the fear of losing X amount of value is felt more acutely than being denied an opportunity to gain X amount of value.¹²⁵ Some researchers have suggested that this principle of “loss avoidance” is what gives rise to the Endowment Effect.¹²⁶ Whether or not that is true, research shows that people are bad predictors of the importance of preference satisfaction.¹²⁷ In other words, people tend to think that having their preferences frustrated will be worse than it actually is. Once someone gets attached to anything—an object, a right, or even an idea—then they tend to overestimate how much they need it, and how bad it will be to lose it.¹²⁸

So, people tend to overinflate the value of anything they begin to conceive of as within their grasp. But perceptions of possession are not the only force that binds people to their things.

The more an owner associates a possession with meaningful memories and social relationships, the greater value the owner is likely to place on the possession.¹²⁹ This principle is intuitive—people subjectively value the sentimental. We value our close relationships with other people, and so we value the items that represent or remind us of those connections. Margaret Radin thus has argued that property law should place greater value on possessions like heirlooms, keepsakes, personal body parts, such as donatable organs, and the family home.¹³⁰ She calls these “personhood” property, possessions that are uniquely tied to the owner’s conception of self-identity (for example, a person who identifies as a “parent” is likely to place greater-than-market value on a picture that their child drew for them).¹³¹ Psychological research backs this up (although, interestingly, perhaps not as strongly for the family home as for some other possessions).¹³² All in all, our possessions take on greater meaning, and thus greater subjective value, when we come to associate them with things that give life deeper meaning, like family and friendship.

Just as people tend to place greater subjective value on possessions that are associated with meaningful social connections, people generate the most subjective value of all from the social connections themselves.¹³³ How many movies resolve by reminding the characters and the viewers that family, friends, and so forth are most important? The trope exists because it resonates at a psychological level.

Take these psychological phenomena and combine them. Humans place a value premium on things they already own or possess. We fear losing something more than we would desire to gain that same thing if we did not already have it. We overestimate how much we will suffer from losing something. And of all the things we can own, we guard most fiercely that which we associate with social and relational ties. If all these phenomena are borne out in the psychological research, another conclusion flows naturally: if we hold a tool that enables us to stop or slow change to our neighborhood, we will value that tool dearly—more so than we would value the opportunity to get that tool in the first place.

At this point the connection to restrictive covenants is coming into focus, and we can begin to answer the big question: Why do people hold onto restrictive covenants, especially those mandating single-family use only, when relinquishing such a right could make the most financial sense and when HOA restrictions are often unpopular among those subject to them?¹³⁴

In part it is because we are wired to see what we have (for example, our neighborhood as it currently stands) as much more valuable than what we would pay to get it in the first place.¹³⁵ Our neighborhood is ours, so ipso facto it is more valuable.¹³⁶ Thus, the people who must consent to the reworking or circumventing of a restrictive covenant are the same people who are psychologically predisposed not to do so, even if offered the equivalent of top market value to relinquish the right. Homeowners who buy a home in an HOA with single-family use restrictions might or might not see the HOA restrictions as a selling point. But once the home, the neighborhood, and the restrictions become theirs, psychological forces cement the status quo.

I. UNLOCKING HOUSING POTENTIAL

What can be done to break the housing gridlock? Legal mechanisms and economic interests lay the groundwork for gridlock by blanketing vast swaths of land in single-family restrictive covenants. And later, when both financial incentives and the public interest dictate that a change might be needed, the entrenched collection of private property rights collaborates with features of human psychology to stifle that change. This Part explores various options for breaking the gridlock covenants wrought. It evaluates each option through economic and psychological lenses and ultimately arrives at a new solution: in areas without single-family zoning but limited by a single-family covenant (or other covenant with a similar effect like one prescribing minimum square footage per unit and setbacks from property lines),¹³⁷ a property owner seeking to build multi-family housing can take advantage of a new procedural and remedial mechanism provided by statute. The mechanism in its first stage would encourage covenant beneficiaries to waive their enforcement rights, and in its second stage would limit remaining beneficiaries to one specific remedy that would allow efficient bypassing of covenants while still giving effect to preexisting legal rights. After this Part scans and evaluates a catalog of other options to avoid single-family covenants, it will explain this proposal in more detail and explain its advantages over other options, especially, but not only, from a psychological perspective.

A. Preexisting Tools for Breaking Gridlock

This Section explores some of the tools already available to private parties, courts, and policymakers for potentially bypassing the gridlock caused by restrictive covenants. It will evaluate the strengths and weaknesses of each from legal, economic, and psychological perspectives. Ultimately, it concludes that the standard toolkit likely will not be enough to accomplish the goal.

1. Private Bargaining’s Limitations

The simplest (not necessarily the easiest) way to avoid a restrictive covenant is to obtain a waiver—to convince the relevant party or parties not to enforce the covenant. Someone who seeks to develop multiple homes on a property could offer money to the property owners who have the power to enforce a single-family covenant.¹³⁸ No doubt this approach could work sometimes. But one of the central points of the preceding Part is that it often will not. Housing gridlock means that too many people have the right to say no. This is especially true in HOAs that include dozens or hundreds of homes. If a restrictive covenant will stand unless the large majority of homeowners vote to get rid of it,¹³⁹ then all it takes is one or a small handful of holdouts who cannot be paid off to let it go. Psychological phenomena tell us that holdouts are likely.¹⁴⁰ So, many homeowners will require well above “market value” to relinquish a covenant, if they could name a price at all.¹⁴¹ Only in cases in which the builder’s expected profit is enormous will the builder successfully buy development rights from all the parties that can stop them.¹⁴² If that were common, housing gridlock might not be a significant problem. But because psychological phenomena suggest that people will likely value and guard their covenant rights, the buyout method is unlikely to yield meaningful results on its own.

2. Broadscale Invalidation

Turning attention to the other end of the spectrum from free market to government control, the state or local government could simply declare single-family covenants invalid or unenforceable. Such an approach isn’t merely hypothetical. California has done it—at least for certain special circumstances. In 2021, when the state passed a law removing single-family zoning statewide, it also targeted certain covenants. It declared that any restrictive covenants limiting “the number, size, or location of the residences that may be built on the property, or that restrict the number of persons or families who may reside on the property,” are unenforceable against an owner or developer of “affordable” housing.¹⁴³ The language of the provision makes clear that it does not destroy all single-family covenants statewide, but instead only applies to those covenants that would restrict the construction or operation of housing that is subject to certain significant rent restrictions.¹⁴⁴ But in the sphere where the provision applies, its word is final. Any existing single-family covenants are powerless, no matter how longstanding they are or how many other properties purportedly benefit from them.

This total-abrogation approach has some benefits. It can cover many existing covenants all at once, providing numerous developers and landowners advance notice and assurance as to the (lack of) legal force those restrictions carry moving forward. It also, of course, completely bypasses the holdout problem. It does not matter whether all, or even any, property owners benefiting from the covenant can be persuaded to relinquish their hold. And relatedly, it perhaps does not directly cost the government or the builder anything.¹⁴⁵ The philosophy is simple: if the problem is that too many people have a private property right enabling them to say no to development, then remove the right entirely.

But total government appropriation is a blunt instrument. As such, it might bring the hammer down on the housing gridlock caused by single-family covenants while also rattling other interests that we would prefer to leave undisturbed. As described above, the primary harm from the loss of a covenant often is not so much financial as it is psychological.¹⁴⁶ And psychological research shows that being the subject of government coercion can be especially damaging.¹⁴⁷ Take a study regarding the use of eminent domain, which is similar in some ways to government invalidation of a covenant (in that it takes a property right or interest away from a private party). A study posed to its subjects multiple scenarios in which an owner parted with a parcel of land. In two scenarios, the owner agreed to sell it, and in the other, the land was confiscated by eminent domain in exchange for compensation.¹⁴⁸ But in all the scenarios subjects were informed that the owner of the parcel valued it at the same specified market value.¹⁴⁹ Nevertheless, subjects reported that the owner was worse off in the eminent domain scenario.¹⁵⁰

Stern and Lewinsohn-Zamir call this the “coercion premium.”¹⁵¹ It represents the fact that people suffer some sort of harm from being forced to part with property that is separate from and in addition to the value of the property itself. From that premise, Stern and Lewinsohn-Zamir suggest that any use of eminent domain to which the Takings Clause applies should require “just compensation” above the property’s market value.¹⁵² The idea is that if what the owner lost is beyond market value, then just compensation is also more than market value.

This principle carries at least two implications for restrictive covenants. The first concerns the takings issue itself. Courts across the country appear split as to whether a restrictive covenant gives the benefitted properties the sort of interest such that they are entitled to compensation when the government extinguishes that interest through a taking—but many jurisdictions likely would say that it does.¹⁵³ So, any such proposal might run into significant constitutional challenges depending on where it is enacted.¹⁵⁴ In the jurisdictions that might find the extinguishing of a restrictive covenant to be a taking, the government could incur an expense—perhaps a substantial one—to destroy the covenants.¹⁵⁵ And whatever “just compensation” ultimately might be, the coercion premium makes it more likely that landowners would challenge the action in court, thus presenting another cost to the government from litigation.¹⁵⁶

The second implication is that coercively terminating restrictive covenants will in itself inflict some level of psychic harm.¹⁵⁷ The precise amount of harm is perhaps impossible to quantify. But if the question of best policy turns on utilitarian considerations to any degree, the psychic harm must be part of the calculus nonetheless.¹⁵⁸ How much weight and credence it deserves is of course another question. Perhaps local or state policymakers would conclude that the benefit of more housing from terminating numerous single-family covenants is worth the cost of the psychic harm to single-family homeowners.

However, as that cost-benefit analysis shakes out, policymakers contemplating it should keep in mind two pillars of political participation: voice and exit.¹⁵⁹ These two forces drive much local (and, to an extent, state) policymaking. Voice refers to residents’ ability to give their input, either through detailed communication of some kind or, most significantly, through voting.¹⁶⁰ If enough people are fed up with policymakers’ decisions, they can vote them out. If that happens, then the officials that fill the vacancies might be more amenable to the homeowners’ interests (and therefore might try to undo the undoing of the covenants, leading to an end result that is worse than before—a reestablishment of the conditions that led to gridlock and new government leaders who might be more anti-housing on the whole).

The related force, “exit,” refers to residents’ ability to vote with their feet by moving away from jurisdictions with policies they disfavor and into jurisdictions with policies they favor.¹⁶¹ Exit casts a shadow over local and state government decision-making because when residents exercise it, the jurisdiction loses economic activity and housing demand, and so the tax base and revenue diminishes.¹⁶²

Voice and exit are of particular concern when the displeased demographic is homeowners. For one, homeowners tend to be especially active in local politics,¹⁶³ so any new policy or law that disfavors them is sure to garner strong opposition. Also, because homeowners (especially of single-family homes) tend to be wealthier than the average citizen,¹⁶⁴ their exit can be distinctly harmful to localities’ short-term fiscal goals.

But it is possible that in the long run these bogeymen of voice and exit would not prove catastrophic to the jurisdiction seeking to “take” the covenants. As for voice, if lifting single-family covenants creates room for enough new people to move into the jurisdiction early enough, then perhaps some of the strength of an anti-new-housing voting bloc can be diluted by new participants in public life. And as for exit, perhaps the exit of wealthy homeowners who prefer freezing neighborhoods as single-family only would not be that harmful to the jurisdiction if the removing of covenants unlocked trapped property value and increased the number of taxable housing units in the base.¹⁶⁵

Overall, then, if a local or state government chose to address housing gridlock simply by destroying single-family covenants, it would have to be ready for some negative economic and political backlash. And although it may turn out that destroying the covenants is worth the backlash on the whole, the coercion premium brought about by such actions should give decisionmakers pause and reason to evaluate less heavy-handed legislative options. Robert Ellickson recently surveyed some such options, such as statutory provisions limiting the lifespan of covenants to two or three decades.¹⁶⁶ He disfavors such restrictions because, if set on too short a timeline, they may terminate covenants before the covenants have expended their value to those directly benefited.¹⁶⁷ I would also be wary of them because of the flipside of the coin: If set on too long of a timeline, they might allow harmful covenants to maintain their hold for too long. In other words, such provisions may sometimes prove beneficial but fail to narrowly tailor to problem sources.

3. Traditional Common-Law Tools

Although covenants are supported by strong legal backing, the common law provides some principles to escape them in special cases. The two most obviously relevant here are the changed-circumstances doctrine and voiding as contrary to public policy.¹⁶⁸ The changed-circumstances doctrine in some ways comports with the psychological underpinnings of possession and attachment. But both that doctrine and the principle of voiding as contrary to public policy are unlikely sufficiently accessible from a legal standpoint to make much difference in the aggregate.

Under the common law, the changed-circumstances doctrine holds that a party owning a property burdened by a restrictive covenant can escape its enforcement if local conditions have changed so that the covenant no longer serves its purpose and no longer benefits the once-benefited property.¹⁶⁹ For example, consider if one property (hosting one house) was in covenant with another (also hosting one house) to never have loud parties, but years later the benefited property is purchased and converted into an industrial site. A court could determine that the purpose of the covenant, presumably to ensure peace and quiet for whoever lived in the home on the benefited parcel, can no longer be carried out because that property no longer hosts a home. The party can go on.

Relying on the changed-circumstances doctrine has some intuitive appeal for voiding single-family covenants. Imagine that six homes on one street were under a covenant for single-family use only. But twenty years after the establishment of the covenant nearly all of the other homes on the street and the surrounding area have been converted to duplexes, quadplexes, or small apartment buildings. If the purpose of the covenant was to do what could be done to preserve the single-family character of the entire surrounding area, and (so the owners thought) to preserve property values, perhaps the covenant can no longer serve its purpose. Psychologically, the feeling of loss the owners might experience by seeing the covenant dissolve would probably be diluted, because the neighborhood had already been changing for years. And if it was once financially beneficial to lock in single-family use, perhaps increased housing demand in the area (signaled by all the new construction) makes it so that the properties would be worth more if not so limited.

But the problem with the changed circumstances doctrine is that courts employ it only in rare cases.¹⁷⁰ As a general matter, courts hesitate to find changed circumstances unless there is no reasonably conceivable benefit to the covenant.¹⁷¹ In the context of single-family covenants, that would be incredibly hard to show. At least theoretically, ensuring that a neighboring property or properties remains single-family could benefit the surrounding properties’ values, because it suppresses local housing supply. The purpose of the covenant may not be economically efficient, but as long as the court finds a purpose, it likely will stand.¹⁷²

And the fact that such covenants often appear as part of the regulations of an HOA with dozens or more properties make the changed-circumstances doctrine an even weaker tool. If an HOA with a single-family covenant covers a sufficiently large swath of land, then it necessarily will insulate the properties within it from much neighborhood change. Instead, the entire subdivision or several blocks of the neighborhood remains a single-family enclave, and the areas beyond the HOA’s bounds are the spaces that might change. Of course, proliferation of multi-family housing outside of the bounds of the HOA is more than likely a primary reason why HOA members would want the single-family covenant to persist. The covenant’s purpose is to preserve the area as distinct from its surroundings.

So, although declining to enforce single-family covenants because of changed circumstances makes sense from a psychological standpoint and is probably less likely than other approaches to elicit backlash from psychic harm to homeowners, in practice under current common-law rules it is unlikely to be a powerful tool to break housing gridlock on any meaningful scale.

Declaring such a covenant invalid as contrary to public policy is potentially more powerful, but ultimately suffers from a similar weakness. Under the Restatement approach, a covenant is invalid if it is contrary to public policy.¹⁷³ It is rare that a court concludes a covenant is contrary to public policy.¹⁷⁴ But when it does happen, often it is because a state (or sometimes even the federal government) has made clear through enacted statutes or other written law that what the covenant aims to accomplish is specifically disfavored, or that it stands directly opposed to a goal codified in state law.¹⁷⁵ In the context of restrictive covenants, the public policy exception closely adheres to the unique principle that a court’s enforcement of certain restrictive covenants constitutes “state action.”¹⁷⁶ Thus, when a court is faced with a request to enforce or invalidate such a covenant, it must keep in mind whether doing so would contravene the explicit goals expressed in the state or federal constitution, or any other law such as one passed by a legislative body.

If a court concluded that enforcing a single-family covenant was contrary to public policy, then that would be a powerful tool to break apart some of the housing gridlock. The result of such a decision would completely bypass the covenant and thus free up the land for more productive residential use. But it is unclear what it would take to prove that enforcing a single-family covenant is against public policy, and even that inquiry could vary substantially by state. There are some easy cases. Take California, for example. There, again, the state passed a law declaring that any single-family covenant is unenforceable against a developer or operator of “affordable housing.”¹⁷⁷ Quite plainly, then, there is a public policy against single-family covenants blocking the development of affordable housing. But that is an easy case because the statute already does all the work—the statute by its own enactment guts all such covenants, so the “public policy” exception on the judicial side of the equation is unnecessary.

And there are easy cases on the other end of the spectrum, when enforcing such a covenant would clearly not violate public policy. If the government actor has already zoned large portions of similar land for single-family use only, then it would be hard to credibly assert that the government has any discernible public policy against private agreements that would do the same.

But there are cases between these two extremes that are trickier. Take for instance any of the jurisdictions that have effectively eliminated single-family zoning on the public side of things, but unlike California have said nothing about private covenants.¹⁷⁸ On the one hand, one could argue that a jurisdiction that took the affirmative step of freeing all land from the constraints of government-induced single-family restrictions would likewise oppose private arrangements that constrained property in a similar way. On the other hand, one could also argue that if the government wanted to touch private covenants, it could have said so more explicitly. And in any event, a government could reasonably want to loosen government constraints but remain agnostic on what private entities and private rights accomplish in the same subject area.

In an article released this year, Gerald Korngold specifically argues that the public policy doctrine is a viable method for voiding many single-family covenants.¹⁷⁹ He rightly notes that occasionally courts in some jurisdictions have viewed the doctrine more broadly, applying it even without explicit enacted guidance from the legislature on the issue.¹⁸⁰ I would welcome extending that approach to the issue of single-family covenants. But because it appears that such an approach would mark a stark departure from how courts in many states have approached the public policy doctrine, I think it profitable to seek another solution.

In sum, I believe that the void-as-contrary-to-public-policy approach likely is not a reliable mechanism for breaking gridlock moving forward under the current state of the law. At the very least, in many jurisdictions it would potentially require the jurisdiction to already have eliminated single-family zoning, and so far, that has happened only in a handful of cities and states. And even in those jurisdictions, it is likely that some other specific expression of a policy against restrictive covenants operating to constrain housing supply would be required.

B. A Hybrid Solution

This Section first briefly identifies a potential multi-step solution to escaping housing gridlock while limiting negative externalities and psychic harm to property owners. It then explains each component of the solution in more detail and explores why it presents some advantages to other approaches from legal, economic, and especially psychological standpoints.

1. The Two-Stage Solution to Escape Gridlock

This Section gives an overview of a procedural and remedial solution to housing gridlock that single-family covenants (and covenants with a similar effect) helped bring about. The first stage of the solution involves a new legal mechanism created by statute. It would be available to any property owner subject to such a covenant in an area without single-family zoning. If the property owner (I will call this entity the “builder” for clarity) wants to construct multi-family housing on its property, it can force a decision of each beneficiary property on whether to decline to enforce the covenant. The builder would submit to the HOA members a rough plan for the development, such as whether it intends to create a duplex, add an accessory dwelling unit, or build an apartment or condo building, as well as the estimated size of the structure. Along with the rough plan, it would submit a lump-sum monetary offer—the amount the builder is offering to the property owners collectively to not oppose the development. The beneficiary property owners (most often this will include all other members of the HOA) then can individually decide whether to “opt in” to the offer. Those who do so will be entitled to a pro rata share of the total sum.

The second stage of the solution acts as a backdrop. Whether or not a majority of interested property owners opt in to receive a pro rata share of the monetary offer, the construction can go forward. But for those who did not opt in, a legal action for damages will still be available once the structure is completed to a habitable state. They cannot sue to block the development or require it to be torn down if it is already built; but they will be entitled to damages of some amount. There would be no need to determine liability—the builder’s violation of the covenant would be open and undisputed. The action, if it does not result in settlement, will proceed to a trial or hearing on the issue of harm alone. At that proceeding, the property owner would be entitled to a jury determination of damages within statutorily defined ranges, which could rest not only on evidence of the market value of enforcing the covenant in that instance, but also on any sort of harm (financial, psychological, or otherwise) the suing property owner suffered from the new construction.

The following Sections explore each component of the proposed solution in more detail and discuss the comparative advantages over other approaches from legal, economic, and especially psychological perspectives. They address the damages backdrop first since that component is more central to the overall scheme, and then address the initiating offer second.

2. Why Damages?

By now the stickiness of restrictive covenants is evident. They are hard to get rid of without express agreement by most benefited property owners.¹⁸¹ Broad coercive action by governing authorities might achieve the primary goal of breaking gridlock, but in the process it might generate various negative externalities rooted in the psychic harm that research suggests it would cause.¹⁸² And the common-law mechanisms limiting the perseverance of such rights are narrow and apply rarely.¹⁸³ But courts and the common law can contribute another tool: remedies. It is one issue what private rights parties possess; it is another issue which way a court will operationalize the right.¹⁸⁴ At the simplest level, sometimes a court can issue an injunction protecting a right, while other times it can order damages as payment for violating the right.¹⁸⁵

A promising tool for breaking the hold restrictive covenants have on housing supply would be—to use the classifications made famous by Calabresi and Melamed’s foundational work—converting the right provided by such a covenant from a property rule to a liability rule.¹⁸⁶ In other words: enforcing covenants only in such a way that the beneficiary of the covenant can receive payment for its violation, but cannot by force of law keep the burdened property in compliance. In a recent article, Robert Ellickson briefly suggested a damages approach and commended one state, Massachusetts, which has provided for it by statute in some special instances.¹⁸⁷ This Section explores a damages approach for single-family covenant violations from legal, economic, and psychological viewpoints. It then discusses the finer details of how such an approach could be implemented from a practical standpoint.

i. The Legal Landscape

From a legal perspective, damages are the preferred remedy across much of the common law.¹⁸⁸ Even for property rights (which one would rightly assume are often protected by a “property rule”), courts often require the plaintiff seeking to enforce its right to show why equitable relief like an injunction is appropriate. For intellectual property, electronic property, chattel, and sometimes even real property, a plaintiff must show that damages cannot adequately compensate them and that they will suffer irreparable harm without an injunction.¹⁸⁹ And even after all of that, a court might decline to issue an injunction if it finds it inequitable to do so based on the interests both of parties to the lawsuit and of third parties.¹⁹⁰ Thus, at a high level of generality, it comports with common-law remedial principles to presume that damages are a proper remedy when a restrictive covenant is violated.

In practice, however, most jurisdictions will enforce restrictive covenants by injunction.¹⁹¹ A covenant is a property interest and so, the thinking goes, an injunction to protect against its violation is presumptively appropriate.¹⁹² Injunctions are often available simply on a showing that a covenant was violated, without any necessary demonstration of harm by the complaining party.¹⁹³ And indeed, an injunction in some circumstances might even require a property owner to tear down a structure that was erected contrary to the covenant.¹⁹⁴ For restrictive covenants specifically, many courts favor injunctions to enforce them precisely because it is challenging to quantify the harm from violating them.¹⁹⁵ From a historical perspective, this practice follows from a unique turn of events in Anglo-American law that lowered the bar for what a restrictive covenant beneficiary would have to show to obtain equitable relief. Traditionally, covenants could be enforced against successors in interest only when the original covenanting parties were in horizontal privity; but eventually courts placed restrictive covenants under the umbrella of a new form of nonpossessory interest known as an equitable servitude, which more freely allowed for enforcement by injunction.¹⁹⁶

Yet in most jurisdictions courts still ultimately retain remedial discretion, and thus need not enforce a covenant through an injunction if doing so would be inequitable.¹⁹⁷ In Blakeley v. Gorin, a property owner planned to construct a large hotel and apartment building that would connect to the neighboring property at the rear via a large, elevated bridge.¹⁹⁸ But a covenant required property owners to leave a sixteen-feet-wide space behind their buildings at the rear of the property.¹⁹⁹ The restrictive covenant was over a century old and originally served to preserve a cart path.²⁰⁰ Even though the court noted that cart paths are now mostly obsolete, it explained that the covenant still served the valuable purpose of preserving light and air for surrounding properties.²⁰¹ Thus, the court held that the covenant should be enforced.²⁰² However, the court chose damages instead of an injunction to do so.²⁰³ In its view, the harm to surrounding properties from reduced light and air was minimal compared to the benefit to the developer and the public from the more productive use of the land.²⁰⁴

Likewise, sometimes courts specifically conclude that damages are an adequate legal remedy for the violation of a restrictive covenant. In Crossmann Communities, Inc. v. Dean, a builder violated a setback covenant by beginning to construct a house too close to the property boundary line.²⁰⁵ A neighboring property owner within the planned community sued to enjoin the construction.²⁰⁶ The Court of Appeals of Indiana held that although the covenant was enforceable, damages were an adequate remedy because “[a] restrictive covenant constitutes a compensable interest in land.”²⁰⁷

When it comes to single-family covenants, though, courts almost never elect damages instead of injunction.²⁰⁸ Why? It is not necessarily because they walk through the standard equitable considerations and determine an injunction is necessary. Instead, courts typically note that for violations of such covenants, plaintiffs are not limited to damages they can prove.²⁰⁹ Essentially, the court simply states that an injunction is allowed in the face of a violation and goes on its way.²¹⁰

That approach would be misguided in many cases dealing with proposed or completed multi-family housing development. If restrictive covenants were treated like most other private legal rights, then a plaintiff would have to affirmatively show that an injunction is necessary to safeguard their interests and that such relief is equitable considering all parties affected by it.²¹¹ In many cases, a property owner benefiting from a single-family restrictive covenant may have a very difficult time making such a showing. As described above in Section I, presumably from a homeowner’s perspective, the main reason to cherish a single-family covenant is that it preserves property values, both by suppressing nearby housing supply and by preserving “neighborhood character.” But, again, the evidence is tenuous that removing such a covenant significantly harms surrounding property values.²¹²

Regardless, if there is some measurable harm to property value by terminating the covenant, then damages could conceivably compensate for it because it would be financial loss.²¹³ And if there is no measurable harm to property value, that likely means the harm is not so much financial as psychic. Assuming psychic harm provides the foundation for a cognizable legal interest, it is true that damages might not always perfectly compensate for it. From a psychological standpoint, people prefer in-kind redress over monetary redress, even when the loss they suffered is of a fungible asset.²¹⁴ Extrapolating to the context of psychic harm, it is reasonable to assume that if there is real psychic harm from terminating a covenant, damages might not completely compensate for it. That may be one of the reasons the Restatement (Third) of Property and many courts remark without much explanation that because harm from the violation of a restrictive covenant is hard to quantify, injunctive relief is appropriate.²¹⁵

Still, under standard remedial principles, a court may go on to evaluate whether injunctive relief—even if a better compensator than damages—is appropriate based on a “balance of equities”; that is, whether an injunction makes sense given the harm such relief might cause to both the defendant and the broader public.²¹⁶ Often it does not make sense in light of those considerations. The benefit to the plaintiff homeowner would be avoiding some indeterminate amount of psychic harm. But the harm to the defendant and the public from an injunction (that is, strictly enforcing the covenant) might be more pronounced. The owner of the land limited by the covenant would suffer the financial consequences of only being able to operate a single-family home when multi-family use might be dramatically more profitable. And the public would suffer the consequences of one more instance of constrained housing supply.

The legal landscape thus points two ways here. On the one hand, courts are generally free to opt for damages instead of an injunction when presented with a violation of a covenant. On the other hand, courts in practice rarely do so, especially for single-family covenants. I next move on to the interrelated economic and psychological perspectives on the issue to explore why courts’ overprotectiveness of such covenants with injunctive relief is likely misguided.

ii. Economic Considerations

From an economic perspective, damages are often the best remedy if available. That is because they allow for “efficient breach.”²¹⁷ This concept is most prominent in contract theory, but it applies more broadly. To put it simply, damages place a number value on a legal right or duty. If a party wants to violate such a right or duty, damages set how much they must pay to do so.²¹⁸ And most commonly, damages aim to compensate the injured party for what it lost. So, if a violating party chooses to violate a right, and then pays damages to do so, theoretically that party has determined that its action is worth more to it than the money it had to pay. The end result is that the injured party is no worse off than before, and the violating party is better off—approaching a Pareto-efficient result.²¹⁹

If instead a violating party does not have the opportunity to violate a right and pay damages—indeed, if it cannot permanently violate a right at all because it is prohibited by an injunction—then the law entrenches inefficiency.²²⁰ The violating party cannot pay to get something they value more than the money, even when allowing them to do so theoretically would not ultimately make anyone else worse off.

To make it plain for the context of this Article: in theory a single-family covenant has a specific quantifiable value to a beneficiary of it (such that the owner assumes it enhances their property value).²²¹ And a prospective builder expects a certain financial gain from being able to construct a duplex, quadplex, or other multi-family housing development.²²² If the value the builder expects to gain from the project is greater than the value of the single-family restriction to the neighbors, then an efficient framework would allow the developer to violate the covenant and pay the neighbors what the restriction on that particular property was worth to them. The developer still profits, and the neighbors are no worse off (and that is not to mention the added benefit to the public at large from the increased housing supply).²²³

As explained in Part I above, although such a result could theoretically be achieved through private bargaining, the logistical difficulties of doing so means that a “liability rule” might be necessary to reach an optimal result.²²⁴ Under Calabresi and Melamed’s famous and foundational remedial framework, the standard perspective is that a right should be protected by a property rule when transactions costs are low, and a liability rule when transactions costs are high.²²⁵ The reason for this is that when transactions costs are low, such as when only two parties in close proximity are involved, then it is logistically simple for them to negotiate a buyout.²²⁶ But when transactions costs are high, such as when a builder must obtain permission from many parties, then a liability rule bypasses drawn-out negotiations and holdouts and jumps straight to compensation.²²⁷

For single-family covenants, a liability rule is often more appropriate. This is so especially when the population of property owners with the right to say “no” to multi-family development is large and thus the risk is great of holdouts who will accept no reasonable price for a change.²²⁸ Combined with the psychological phenomena leading neighbors to assume that such restrictions are worth more than they in fact are,²²⁹ this means that a lawsuit with damages as the end result is often a necessary tool to reach an efficient arrangement that private bargaining cannot achieve.²³⁰

What about an obvious and important economic objection—that any such limitation on the strength of single-family covenants might in the short run constrain housing supply? The idea is that there must be some profits-focused reason why subdivision developers include the single-family covenant in new CC&Rs.²³¹ And so if such a provision is weaker, the developers might have a harder time selling off homes initially. By extension, they perhaps would have less incentive to develop land in the first place.

Two responses: first, although it is true that homes within HOAs tend to be more valuable than those not in HOAs,²³² the evidence does not indicate that reciprocal single-family covenants are necessarily the primary reason for that. It is more likely that the better services within an HOA compared to those of the surrounding locality is a major selling point, with the complete, broad network of restrictions playing a role alongside.²³³ Indeed, a single-family restriction on a given piece of property likely suppresses that property’s value.²³⁴ So even if it were a selling point that other surrounding houses are covenant-bound to remain single family, any value bump from that fact could be offset by the fact that the same restriction applies to the purchased property too. Put another way, any “demoralization costs” of limiting the enforcement of restrictive covenants may in part be offset by the “morale benefits” of loosening constraints on individuals’ free use of their properties.²³⁵

Second, the objection fails to distinguish between local market conditions at the time of initial sale of the home and the time of subsequent transfers of the property to new owners. Most likely, by the time an owner of a house restricted to single-family use determines that they want to develop additional housing, years have gone by since the covenant was initially placed.²³⁶ When the initial developer of the subdivision first sold off the homes, it was able to capitalize on any value added immediately from the single-family restrictions (if there was any value added). So, the fact that legal remedies might make some room for market pressure towards multi-family housing down the road is unlikely to significantly affect the initial profitability for the developer from building out and selling off the subdivision of homes restricted to single-family use. The availability of damages down the road unlocks new housing and probably will not stifle initial subdivision development.

iii. Psychological Phenomena at Play

One might argue, though, that the precise problem is that you cannot put a numerical value on a single-family restriction from the point of view of the neighbors.²³⁷ This very Article even suggests that psychological attachment, more than quantifiable financial interest, explains the perseverance of such covenants.²³⁸ But even if it is difficult to put a number on what it means to lose the benefit of a restrictive covenant, psychological phenomena suggest that enforcing a covenant, but ordering damages, is perhaps the best way to pursue the public interest in a way that does minimal harm to landowner expectations.

First, I will address some psychological research that might seem to point away from a monetary remedial scheme. Research shows that people prefer in-kind redress over monetary relief.²³⁹ When they lose something, they are likely to be more satisfied if it is replaced with something similar—even if the thing lost is fungible.²⁴⁰ Relatedly, Stern and Lewinsohn-Zamir argue in favor of property rules and injunctive relief because in their view this principle means that courts systematically undercompensate injured parties.²⁴¹ If that is so, then perhaps one might assume that a property rule enforced by an injunction makes the most sense; if money in exchange for the loss of a right does not seem to make the injured party feel whole, then monetary relief is inadequate and an alternative remedy like an injunction is necessary.

Relatedly, the Mere Ownership Effect may partially explain the existence of property rules in general. If a liability rule assumes that basic infringements on property rights can be rectified through pay, property rules assume that sometimes they cannot.²⁴² A property rule promises that the legal system will protect a property interest even if infringement of that interest does not manifest as quantifiable financial harm (hence the classic standard for injunctive relief, which requires the plaintiff to show that they will suffer irreparable harm without an injunction and that legal remedies like damages do not adequately safeguard their interests).²⁴³ Property rules assume real harm even absent affirmative proof of it.²⁴⁴

To put it in terms of the Mere Ownership Effect: if something becomes “mine,” then for that reason alone it is more valuable to me.²⁴⁵ Therefore, an act that I see as an afront to the thing being “mine” hurts me, even if it causes no measurable damage to the object and even if it does not prevent me from using my property. If my right to exclusive possession is not respected, then I have lost something.²⁴⁶ At the end of the day, then, monetary compensation would fall short because the core of the harm is difficult or impossible to quantify.²⁴⁷ And so, if we care about that non-quantifiable harm, the best way to guard against it would be a property rule expressed through injunctive relief.²⁴⁸

That argument is compelling, but it suffers from a few shortcomings when applied to the issue at hand. First, it would mean mostly surrendering to gridlock. If we assume that because owners of restrictive covenants would rather have the covenants than money, we therefore must accommodate that preference; then life will go on as it has. In the numerous and increasing swaths of land across our country where single-family homes under covenant dominate, but housing demand is high, we will simply persist indefinitely in the housing shortage. Psychological realities may be quite important, but do not alone carry all the normative weight. Property owners might report that they prefer something over something else, but whether the law should cater to the preference is another matter entirely. Stern and Lewinsohn-Zamir, despite their favoring of in-kind remedies and property rules, note that just because people might prefer one kind of remedy does not mean the law necessarily should accommodate their desire.²⁴⁹

Indeed, while we can generate crucial insights by understanding psychological phenomena undergirding people’s relationship to their possessions, we likely cannot satisfy short-term preferences of all property owners and correct the legal and market mechanisms that have brought about housing gridlock at the same time. Again, recall the Mere Ownership Effect.²⁵⁰ Because people value their possessions above market rate by the simple fact that they possess them, a feature of human psychology makes efficient transfer of goods less likely.²⁵¹ The Mere Ownership Effect thus entrenches a status-quo bias into people’s relationship to property. And property rules simply bolster that status quo, regardless of whether it is economically efficient or socially beneficial to do so.²⁵²

Next, even from a psychological standpoint, we must take the preference for in-kind redress itself with several grains of salt. This Article explained above how the fear of neighborhood change has such deep psychological roots.²⁵³ But there is another element at play here. It is the fact that people are bad estimators of their future flourishing.²⁵⁴ Take for example, one of the most serious forms of compulsory lifestyle change: relocation. If people develop a fear and aversion to changes in their familiar surroundings like their neighborhood, then even more so they assume they will suffer deep psychic harm from being forced to move somewhere else entirely. But the psychological reality is that that is generally not the case. In fact, there is almost no evidence at all that people who must relocate to another home suffer any lasting psychological harm from that event.²⁵⁵ There are some narrow exceptions, such as people living in poverty for whom relocation often means eviction and homelessness.²⁵⁶ But for most people, even though the prospect of change may hurt, they readjust quickly.

That is not to say the initial discomfort does not matter. But when the choice is between an injunction that freezes a housing shortage under force of law and damages that both attempt redress and free up new housing, we have some important questions to ask: If any discomfort from the addition of new housing may wane into the immeasurable given enough time, then why operate under legal rules that, in effect, indefinitely prevent such change? And if psychological research shows that a person would not pay over market value to get a restriction in the first place, then why should we effectively “pay” them far above market value (expressed through unending specific performance)²⁵⁷ when they stand to lose that restriction?

Furthermore, not only do people adjust to new circumstances despite their initial discomfort, they also can be nudged to see their own possessions and entitlements through a different lens. Specifically, the degree of psychic harm a person experiences by losing a legal entitlement can be influenced by how that entitlement was previously framed and presented to them. One study measured this effect among a group of first-year law students.²⁵⁸ Students were divided into two groups and all were given a laptop. The students in one group were told they owned the laptop, which, they were informed, included the right to use, exclude others, and transfer.²⁵⁹ The other group was told that they owned all those same sticks in their bundle of property rights but not specifically that they owned the laptop itself.²⁶⁰ Both groups were then informed that the school was placing certain restrictions on the laptops’ use. Between the two groups, the students who were told they owned the laptop were more likely to report that they “lost” something because of the restrictions compared to the students who were merely told they had a collection of specific rights regarding the laptop.²⁶¹ Researchers later concluded that forewarning property owners of potential restrictions on their free use of property leads those owners to feel less like their rights had been violated when restrictions were later presented.²⁶²

So, if owners of a possession or entitlement are informed about the qualified nature of their right, they are less likely to feel a sense of loss when restrictions manifest later. For single-family covenants, this means that people’s expectations about what entitlements a restrictive covenant gives them potentially can be adjusted. If, in practice, they begin to see that violation of such a covenant entitles them to some form of financial compensation, then over time they may adjust to see their interest in the covenant as a financial one—and not an amorphous, yet deeply cherished, interest that entitles them to block neighborhood change.

On the other side of the coin, that same principle demonstrates why the damages approach has some psychological advantages to other methods of breaking housing gridlock, especially those involving sweeping mandates or broad invalidation of such single-family covenants. A damages regime enables people to relearn the nature of their interests. A wide-reaching statute that terminates or voids all single-family covenants in one shot gives people no time to adjust their expectations about their own entitlements before those entitlements are taken away. But if the covenants stay in place and are simply enforced differently when violations arise, then people perhaps have room to adjust their expectations without feeling like they have been entirely deprived of their rights. Admittedly, property owners might still experience some degree of surprise, such as when the legislative body first enacts an approach like the one this Article urges. Furthermore, the first property owners in a given geographic area to find themselves neighbors to a covenant violation under the new remedies approach would not have had sufficient time or previous examples based on which to adjust their expectations. But for subsequent neighbors, the blindsiding effect could be reduced.

But if damages are the answer, how will they be calculated? It is an important question because, as Stern and Lewinsohn-Zamir point out, the “coercion premium” means that property owners are unlikely to receive compensation that makes them whole, at least in the takings context.²⁶³ First, property owners, so the thinking goes, refuse to sell in a voluntary market transaction because they value their property above market value.²⁶⁴ Second, and relatedly, when the government resorts to a taking, the property owner suffers an additional psychic harm through the coercive practice.²⁶⁵ So, if just compensation is determined by a court’s estimation of fair market value, that compensation will systematically undercut what the property owner feels they lost.²⁶⁶ If all of that is true in the takings context, presumably it could hold true in the damages context too. In both cases, the property owner is given money in the face of their refusal to relinquish a property right.²⁶⁷

Still, the fact that someone subjectively would feel immense loss from having a property right transformed to a liability right does not by itself mean that their preference should determine proper compensation. If it did, then we could hardly hope to escape the holdout problem. A property owner who deeply cherishes the restrictive covenant could be entitled to such a substantial damages award for the loss of the covenant that developers would seldom find it profitable to build and risk the lawsuit. If all that mattered were property owner expectations, that might be fine. But if the public interest factors into the balance of the equities, we need another approach.

iv. Four Features of the Damages Action

To address this problem, I propose a compensation method with four key features.²⁶⁸ The first is that the property owner ought to be allowed to have a jury decide compensation if they so choose. Some jurisdictions already allow for this, even if they are not required to as a matter of constitutional law.²⁶⁹ A jury trial could in theory soften the effect of the coercion premium. Each member of the jury is someone who could own property or reside in a home that is part of a neighborhood with covenants.²⁷⁰ Because each of them could find themselves in the same situation, they could sympathize with the property owner’s subjective plight. Conversely, the jury could be a useful tool to moderate the intensity of the property owner’s preferences. Although the jury could have sympathy for the property owner, the fact that the jury is drawn from a “cross-section” of the community²⁷¹ means that it is less likely to be swayed by a property owner with an unusual attachment to the single-family covenant.²⁷²

The second and related feature of my compensation regime is that the property owner ought to be allowed to present evidence explaining why and to what degree they value their right to prevent the building of the structure at issue above market. In takings cases, most often the measure of just compensation is the market value of what was taken (that is, for the purposes of the issue at hand, the right to enforce the covenant in that particular instance), or the difference in fair market value between the plaintiff’s entire property before and after the taking.²⁷³ But of course in tort actions and elsewhere across the common law, other factors (such as pain and suffering and other psychic harms) can enter the equation to determine what would make an injured party whole.²⁷⁴

The third feature of my compensation regime is that the damages should be based on the harm from the construction of the precise structure or development the covenant-violating landowner builds, not from an extinguishing of the right to enforce the covenant against any other property bound by it.²⁷⁵ In other words, someone who wants to construct a medium or large apartment building may have to pay more in damages than a homeowner who wants to add an accessory dwelling unit behind their house, or convert their house into a duplex. If the central harm from the non-enforcement of a single-family covenant is more rooted in the change that could result from the specific covenant violation, as opposed to the weakening the covenant in the abstract, then it makes sense for the damages due to reflect that.²⁷⁶

The fourth and final feature of the compensation regime is statutory ranges or caps on damages, if not inconsistent with state law where the regime would be implemented. Specifically, the legislative body should prescribe either a range or a maximum damages award per property owner that considers the nature of the new structure, the nature of the surrounding structures, and the distance from the new structure to the property of the aggrieved owner. In other words, the legislative body could, for example, provide a range of permissible damages awards for duplexes built in single-family neighborhoods, which would be slightly lower in value than the range of permissible awards for quadplexes in the same neighborhood, which would be lower than that for ten- to twenty-unit apartment buildings in the same neighborhood, and so on.²⁷⁷ Prescribing a range instead of specific values enables courts or juries to consider various other factors that might make the new structure more or less harmful to the aggrieved property owner in a given case. And prescribing a range instead of allowing any damage award whatsoever accomplishes at least two things: (1) it gives builders some amount of predictability and thus confidence about whether it will likely be financially feasible for them to move forward and build the non-conforming structure;²⁷⁸ and (2) it guards against the risk that some juries might offer astronomical awards even for minor departures from single-family use restrictions—disproportionately burdening builders of smaller structures who likely have less capital on hand. Many states have addressed whether statutory caps on noneconomic compensatory damages are constitutional as a matter of their state’s law.²⁷⁹ In most states such limitations would likely be constitutional,²⁸⁰ but in the minority of states where they would not be, this compensation regime would have to operate without express limits on the compensatory damages that a plaintiff property owner could obtain.²⁸¹

It would be difficult here to declare the specific dollar value ranges appropriate for all possible cases. A legislative body could benefit from thorough input on that matter from builders and property owners. But, importantly, whatever ranges the legislative body chooses must not allow for such significant damages awards that builders would rarely bother moving forward with relatively noninvasive multi-family projects for which there is market demand. To make it just a bit more concrete: in regions where demand for more housing is high but not astronomical, damages awards in the range of several hundred dollars for the nearest neighboring properties may be appropriate for converting one home to a small handful. The value could scale up for larger construction projects and scale down for neighbors located farther from the project. Perhaps three-digit damages would strike many people as surprisingly low (not to mention the two-digit damages potentially in play for more distant neighbors). But the key here is that the damages award would, again, be provided in response to one covenant violation, not for termination of the covenant all together. The same or a similar amount in damages could be in play the next time around if another neighbor plans to develop housing in violation of the covenant too. And from the builder’s perspective, it is possible that they will have to pay every other property owner within the HOA in some form, either through damages or as part of the initial lump-sum payment. Thus, if individual neighbors are entitled to too high of a value in compensation, rarely would builders go through any of this process at all (except in cases of extremely high potential profit from the project).

These four features of the process of calculating damages should go far towards ensuring that property owners’ psychic harm is taken seriously, but not given so much weight that gridlock can persist as it has. And, as the next Section explains in more detail, from a psychological standpoint, it gives property owners a voice in the process—a crucial component to minimizing psychic harm throughout the procedural stages themselves.²⁸²

One thorny issue still remains: the proper timing for such a damages action. Many HOA CC&Rs specify time limits on how long construction projects may take; these are often one-year limitations.²⁸³ And HOAs may levy reasonable fines for failure to comply with such a deadline.²⁸⁴ That being so, an action for damages could ripen whenever covenant terms have been violated.²⁸⁵ For an express single-family covenant, that means the plaintiff can sue once a multi-family structure is built out to a habitable standard (that is, when the defendant no longer uses the property as a single-family residence as the covenant requires).²⁸⁶ For other restrictions that have the effect of only allowing for one single-family unit, such as minimum-square-footage requirements, an action could ripen as soon as the new construction has caused a violation. The HOA’s time limits on construction can serve as separate restrictions for which fines could accrue to the HOA daily after the deadline passes. This acts as an incentive for builders not to unduly delay and thus force aggrieved neighbors to delay their compensation. Yet, it is possible that HOAs could limit construction times so stringently that few multi-family projects could go forward.²⁸⁷ To dodge this counterpunch, localities or states may need additional legislative provisions directly targeted at allowing reasonable construction times.

3. Why an Opt-In Mechanism?

There is, however, one more psychological observation that bears on the question of the proper mechanism for escaping a single-family covenant, for which a damages approach alone might not meaningfully account. It is the fact that even property owners who lose an entitlement tend to feel that they have not lost as much if they (1) were given voice in the process,²⁸⁸ and (2) were not singled out for negative treatment.²⁸⁹ To account for the coercion harm and singling-out harm, I suggest a new legal mechanism that would chronologically precede the damages schema described above.

Psychologists have conducted specific research on the psychological effects of takings, and of procedural legal processes more generally. They have found that people often care as much about being treated with dignity and respect during legal processes as they care about the end result.²⁹⁰ Likewise, people are averse to legal processes that single them out for unfavorable treatment, even if it is in the name of the public interest.²⁹¹ That means that people are likely to suffer psychic harm if they are coerced into a situation in which they are disadvantaged for the sake of some public good but others against whom they compare themselves are not.²⁹²

Property owners who expect to be able to limit fellow HOA members to single-family use, but then can only collect market price for the right instead, might feel that their particular interests were steamrolled on behalf of some public good. That does not mean the damages approach is inappropriate, but it does beg the question of whether that particular form of psychic harm could be minimized along the way.

My proposal is one that gives landowners voice, but not veto. The legal mechanism is created by statute and triggered when an owner of a property within an HOA seeks to build in violation of a single-family covenant, and that area is not subject to single-family zoning. The builder can initiate a decision by each member of the HOA. It offers a single lump-sum value in exchange for the right to violate the covenant. Each member decides whether to opt in to receive a portion of the sum. The sum is divided among all HOA members who opt in, and in exchange, those members and the HOA itself relinquish the right to challenge the building. For those that do not opt in, the damages approach will apply.²⁹³ If they object to the construction, they can roll the dice and collect damages in court.

This legal mechanism draws inspiration from land assembly districts (“LADs”), though it has some key differences. LADs seek to break another form of property gridlock.²⁹⁴ Sometimes a large development that would span several individual land parcels would generate more economic value or public benefit than the sum of all the individual parcels under their current use.²⁹⁵ But because each individual parcel owner can refuse to sell, a single holdout can sink a socially beneficial development. LADs tackle this problem.²⁹⁶ When a state or locality authorizes an LAD, it gives the neighborhood the power negotiate a sale of all the land within it—either by majority or supermajority vote, or by the appointment of a board to negotiate the sale.²⁹⁷ The dissenting property owners can opt out, but then they would still lose their land to the project by eminent domain (and in exchange, receive just compensation from the government).²⁹⁸ All other properties effectively receive a pro rata share of the overall sale price.²⁹⁹

My proposal is similar to the LAD mechanism in two important ways. One, it allows for a lower-transactions-costs method of negotiating a selling price than bargaining with each individual entitlement holder. Two, it provides an incentive against holdouts,³⁰⁰ and ultimately can move forward whether there are individual holdouts or not. My proposal differs from the LAD mechanism because whereas with a LAD the owners have the ultimate say by majority vote over whether the land collection is sold at all,³⁰¹ in my proposal for restrictive covenants the development may move forward either way.³⁰² But the property owners can choose whether they prefer compensation through the slice of the developer’s up-front offer or whether they would rather leave their compensation to litigation and jury determination within the predefined damages range.

A psychological benefit of this approach is that it gives the property owners a sense of ownership over whatever result they reach. Those who opt in to the developer’s offer choose to do so and thus escape any acute harm from direct coercion. But even those who do not opt in could to an extent feel that their interests mattered. True, they were not able to stop the development simply by speaking up. But when they ultimately are only entitled to damages in court, that result is one they had some choice in bringing about; they are in the same boat as all other HOA members in that respect.

Of course, this procedural mechanism will interplay with the damages backdrop. If the builder has reason to believe that juries would give more favorable awards to neighboring property owners and strongly compensate for any unquantifiable psychic harm (that is, select higher values within the predefined damages ranges), then the builder might want to avoid such damages actions. They therefore would have an incentive to offer more in the initial lump sum to try to persuade owners to opt in and thus relinquish their rights to a later suit. Conversely, if the builder offers too much in the lump sum, but the neighborhood contains many holdouts, then the builder might end up substantially paying in the lump sum and still face the prospect of numerous damages suits, after which it would pay out again and again. And from the neighboring property owners’ perspectives, the lower the value a jury is likely to award within the damages range, the more likely the neighbors will be encouraged to accept a lump sum monetary offer by the builder up front. But the crucial point is that the two-stage solution, while guaranteeing that a builder can develop multi-family housing if it is determined to do so, also provides neighboring landowners both a degree of ownership over how their interests are credited and a mechanism for targeted compensation. This approach avoids holdouts and loosens housing gridlock in a way that takes property interests and people’s psychological attachments to them seriously.³⁰³

CONCLUSION

The housing crisis is complex. It is partly a legal and financial problem and, as this Article especially emphasizes, partly a psychological one. Even if homeowners have the economic incentive to build or allow for multi-family housing, and even if localities and states lift the “zoning straitjacket,”³⁰⁴ housing supply still could lag. Private restrictive covenants enshrining single-family housing curb housing production in many localities, potentially distressing millions of Americans and disproportionately harming those living in poverty. Psychological phenomena concerning how people develop attachments and perceive change conspire with powerful legal tools to hold these restrictions in place. The solution to this gridlock thus must account for those conspiring factors. This Article charts a possible course: an initial lump-sum offer from a builder with an opt-in mechanism for each HOA member, followed by a carefully prescribed damages action available to all remaining members. If we care deeply about both property owner expectations and providing an adequate supply of housing, this approach shows a way forward.

97 S. Cal. L. Rev. 1233

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Brian M. Miller*

* Assistant Professor of Law, Duquesne University Kline School of Law. I would like to thank Molly Brady, Charles Barzun, John Infranca, Peter Danchin, Michele Gilman, Will Moon, Anne-Marie Carstens, Aadhithi Padmanabhan, Alexi Pfeffer-Gillette, Chris Bryant, Matthew Sipe and Chelsea Banister for insightful comments. Thanks also to all the participants in the Maryland Law/Baltimore Law Junior Faculty Workshop for helpful feedback on an earlier draft. And thanks to the participants in the Richmond Junior Faculty Forum for helpful comments as well. I am grateful to Marc LeVan for valuable research assistance and to Tanya Thomas for research assistance at the earliest stages. Finally, thanks to the exceptional editors of the Southern California Law Review. Errors are mine.

Not a Vara Big Deal: How Moral Rights, Property Rights, and Street Art Can Coexist

October 2021March 2022Southern California Law Review Admin

Note | Intellectual Property Law
Not a Vara Big Deal: How Moral Rights, Property Rights, and Street Art Can Coexist
by Mary Daniel*

94 S. Cal. L. Rev. 927 (2021)

Keywords: Street Art, Copyright Law, VARA, 5Pointz

“Art Murder”—the accusation was sprayed in red paint onto the side of real estate developer Jerry Wolkoff’s Long Island City building.1 Underneath the denunciation was a patchy layer of white paint, and underneath that layer, decades of graffiti art that once made up 5Pointz, “the world’s premier graffiti mecca.”2 Aerosol artists from around the world travelled to the Queens neighborhood for a chance to contribute to the de

facto street art museum.3 However, the buildings that served as the artists’ canvas belonged to Wolkoff, and in 2013, hoping to benefit from the growing housing market in Long Island City, Wolkoff announced plans to raze the former factory buildings to make room for luxury high-rise condominiums.4 The potential destruction of 5Pointz caused a frenzy in the art community as artists scrambled to prevent the popular site’s demolition.5 Then, all hopes of preserving the artwork ended on the morning of November 19, 2013, when 5Pointz’s curator, Jonathan Cohen,6 awoke to discover that, at the direction of Wolkoff, more than 10,000 artworks covering 200,000 square feet were unceremoniously covered over with white paint in the middle of the night.7

Artists responded to the whitewashing by bringing suit under the Visual Artists Rights Act of 1990 (“VARA”), codified at 17 U.S.C. §106A, claiming that the destruction of the artwork was a violation of the artists’ moral rights.8 Moral rights are a relatively new feature of United States law and a feature that seemed improbable through much of the development of copyright law.9 However, in a surprising decision, the district court found in favor of the artists. Holding that painting over 5Pointz was unlawful, Judge Block ordered Wolkoff to pay the artists $6.7 million in damages.10 The decision marked the first time graffiti art was extended VARA protection.11 Wolkoff immediately appealed the district court’s decision, but in February 2020, the Second Circuit upheld Judge Block’s decision in its entirety.12

The ruling has been heralded by many as a big win for artists’ rights

that signifies courts’ growing recognition and respect for artists working in atypical mediums.13 However, many others have expressed concern that such an expansion of VARA is at odds with property law and signifies a dangerous trend of artists’ rights superseding property owners’ rights.14 Moral rights run counter to the United States’ traditionally utilitarian approach to copyright law, and the 5Pointz ruling exemplified the inevitable conflict between moral rights and property rights. Additionally, the street art movement has a reputation as a fringe community, with the term “street art” often used to describe both lawfully and unlawfully created artwork. By extending VARA protection to the unconventional medium, opponents worry that the court lowered VARA’s standard and opened the door for other mediums to push the limits of the statute.15 Fueling this anxiety, there have been other artists seeking the shelter of VARA following the 5Pointz ruling. For example, the Blued Trees movement, started by artist and activist Aviva Rahmani, is an art installation affixed to trees along planned natural gas pipeline pathways.16 Rahmani has successfully filed the project for copyright registration and hopes to use the moral rights granted by VARA to prevent the removal of the trees.17 These concerns have led to demands for the 5Pointz ruling to be overturned or for VARA to be amended, or even repealed, so as to limit its interference with property rights.18

This Note argues that VARA’s application to street art is appropriate and not something for property owners to fear. While moral rights undoubtedly conflict with property rights, it is important for the United States to recognize moral rights in order to keep up with international standards and encourage creation. Additionally, street art is no longer the fringe movement it once was; artists such as Jean-Michel Basquiat, Keith Haring, and Banksy have helped sway the public opinion of street art away from viewing it as vandalism and towards viewing it as a legitimate artistic

medium worthy of additional copyright protection.19 Finally, the language of VARA is intentionally limiting and leaves a lot of interpretation to the courts.20 Generally, courts have been hesitant to apply VARA unless clearly warranted, suggesting that cases such as Blued Trees should not be a cause for panic given the court’s careful application of VARA.21

Part II of this Note explores the development of United States copyright law. Particular emphasis is put on the resistance to the concept of moral rights. Part III discusses the 5Pointz ruling and analyzes critics’ arguments against the holding and against moral rights in general. This Part also explores the potential ramifications of the 5Pointz ruling. Part IV argues that this recent application is appropriate and not a cause for concern about overreaching. The arguments against V ARA are also addressed and concluded to be unpersuasive. The appropriateness of the application of VARA to street art is supported by public opinion and judicial interpretation, while future overreaching is prevented by the statute’s limiting language and a careful court. Blued Trees is used as an illustration of the ease with which a court can deny VARA protection. Finally, Part V suggests that VARA offers appropriate coverage presently, but future expansion of VARA may be necessary.

__________________________________________________________________________________________________________

*. Executive Senior Editor, Southern California Law Review, Volume 94, J.D. Candidate 2021, University of Southern California Gould School of Law; B.A. Communications and Fine Art 2015, Loyola University Maryland. Thank you to Professor Sam Erman for his guidance during the drafting of this Note. Additionally, thank you to my friends and family for their support and feedback. Finally, thank you to all the Southern California Law Review editors for their hard work.

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Daniel

Divergence in Land Use Regulations and Property Rights – Article by Christopher Serkin

May 2019October 2019Southern California Law Review Admin

From Volume 92, Number 4 (May2019)
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Divergence in Land Use Regulations and Property Rights

Christopher Serkin [*]

INTRODUCTION

For the past century, property rights—and in particular development rights—have been circumscribed and largely defined by comprehensive local land use regulations. As any student of land use knows, zoning across the country shares a common DNA. Despite their local character, zoning limits on development rights in almost every American jurisdiction share a deep family resemblance borne from their common origin in the Standard Zoning Enabling Act (“SZEA”). Zoning for much of the twentieth century therefore converged around a core goal of separating incompatible uses of land as a kind of ex ante nuisance prevention.[1] Of course, zoning went much farther than the common law of nuisance, but its animating justification was to minimize the externalized impacts of certain kinds of intensive development.

For decades, zoning created a relatively stable and predictable system defining development rights and also neighbors’ expectations about what could be built nearby. While municipalities innovated on the margins, the shared approach meant that developers could easily assess the developable envelope and permissible uses for any property, and many became sophisticated at navigating local zoning ordinances to maximize development potential. This also resulted in equally stable political dynamics. By and large, developers and conservative property rights advocates were allies in opposing restrictive zoning, while community groups and pro-regulation liberals advocated for zoning to protect community character, in-place residents, and the environment.[2]

More recently, however, zoning has been changing. Even first principles are up for grabs, and land use regulations increasingly diverge from each other. Some municipalities today deploy zoning as a framework for bargaining with developers.[3] Others focus on sustainable development, housing affordability, community preservation, and many other goals.[4] The proliferation of new zoning goals means that property and development rights may now be strikingly different between jurisdictions. This is a period of increasing divergence in the substantive content of development rights across municipalities.

This trend towards divergence in land use regulations has not, however, resulted in the wholesale jettisoning of traditional approaches to zoning and land use regulation. In fact, while the goals may increasingly diverge, zoning’s fundamental tools remain fairly consistent. Instead of wholesale divergence in zoning and development rights, what we are actually witnessing more closely resembles multimodal convergence, where zoning regimes coalesce around multiple points instead of a single goal.[5]

The question here is whether this divergence is beneficial on balance. Any divergence has its costs, primarily in the form of increased information costs for property owners and the deadweight costs of increased special interest group rent seeking. But it comes with benefits, too, as diversity in land use goals allows consumers to select their preferred set of property rights. Too little divergence and people are locked into regimes they may not want. Too much and information costs may grow too high.

Increasing divergence—or multimodal convergence—also explains some of the new political fights around zoning and property rights. Traditional conservative and liberal positions have become unsettled as progressives have increasingly blamed zoning for the affordability crisis in many cities.[6] Some liberal groups, however, continue to embrace restrictive zoning because they prioritize environmental or community-preservation concerns or favor mandatory inclusionary zoning as a better response to affordability.[7] Simultaneously, conservative suburbs that had previously rejected land use regulations in favor of a pro-growth agenda have had second thoughts and are deploying strict new limits on development partly to constrain the burden on congestible infrastructure like roads.[8] In short, restrictive zoning and strong property rights are no longer at opposite ends of a single spectrum. Making sense of zoning’s new landscape requires grouping land use regulations as focusing primarily on one of several different possible goals. These include, among others, affordability, environmental protection, aesthetics, historic preservation, community protection, fiscal concerns, and more invidious exclusion. Sometimes these are competing goals, and sometimes they are simply orthogonal to each other. This Article identifies the range of goals that local governments today pursue through zoning and then examines the costs and benefits of this new zoning reality.

I. Zoning’s Common Origin

In our fragmented and diverse political system, the consistency of land use regulations between municipalities may seem surprising. In fact, however, zoning everywhere in the United States shares a common—and familiar—origin in the Standard Zoning Enabling Act (“SZEA”).[9] Promulgated in 1926 by the Department of Commerce, the SZEA was designed as model legislation for states to adopt that would empower local governments to enact comprehensive zoning and land use regulations.[10] The approach was a success. Following a tacit blessing by the Supreme Court in Village of Euclid v. Ambler Realty Co.,[11] almost every state in the country adopted some version of the SZEA within the ensuing decades, and zoning became ubiquitous.[12]

From that origin story comes a common set of concerns that zoning was meant to address. Zoning has long been seen as a kind of ex ante nuisance prevention.[13] It separated incompatible uses of land before they arose, keeping factories out of residential neighborhoods during the urbanization and industrialization of the early twentieth century.[14] And it protected single–family homes from more intensive uses, in effect stratifying much of the country into single-use zones. This had a pernicious underbelly, reinforcing divisions based on class and on race, keeping apartment buildings and other forms of multifamily housing out of more affluent single-family zones.[15] Indeed, this is zoning’s original sin.[16] But this is also the fundamental justification that the Supreme Court endorsed in Euclid.[17]

Political fights emerged quickly. The mainstream arguments were not over the project of zoning, but instead over its implementation. Few people objected to the idea of using regulations to separate genuinely incompatible land uses. Indeed, the regulatory goal of minimizing externalities was consonant with both liberal and conservative convictions. But zoning’s contours have been contested now for a long time. By and large, conservatives objected to regulatory restrictions on property rights and so have advocated for limited zoning that separates only the most conflicting uses. Others on the right have advocated for even more extreme regulatory minimalism, relying on private land use controls instead of zoning and invoking covenants and homeowners’ associations as remedies for regulatory overreach.[18] Liberals, on the other hand, embraced zoning. They were willing to take a more capacious view of the harms of neighboring uses and so promoted increasingly fine-grained land use regulations.[19] The conventional understanding of attitudes towards zoning could therefore be presented along a simple spectrum from anti-regulation to pro-regulation.[20] Slowly over time, local governments moved beyond these narrow goals. Today, the underlying goals of many land use regulations have nothing to do with ex ante nuisance controls.

II. Divergence in the Purposes of Land Use Regulation

Local governments have become increasingly creative about pursuing a variety of municipal goals through land use regulations, and zoning has become concomitantly more nuanced and sophisticated. The result is a more complex regulatory apparatus that owners must navigate to develop property in many jurisdictions. It has also resulted in widening fissures in the political fights over zoning. Although not always noticed, even by local officials and developers let alone by courts and scholars, the presumptive conservative opposition to land use regulations and liberal support has, in many cases, flipped.[21] Odd political alliances dot the landscape of local land use disputes, with—for example—affordable housing advocates working alongside for-profit developers to resist restrictive zoning ordinances.

From a distance, the divergence in local uses of zoning creates what appears to be real instability. When the dispute over zoning was framed simply in terms of more versus less regulation, the stakes were predictable and relatively clear. But now with governments pursuing many different goals in their land use regulations—with apparent divergence in the purposes of zoning—this area of law appears quite chaotic.

Municipal land use regulations no longer converge around the central organizing goal of minimizing conflicting uses of property (if they ever truly did). This is not, however, a story of entirely disorganized divergence. The proliferation of goals still relies for the most part on conventional zoning tools, even if these tools are deployed somewhat differently. What one therefore observes, looking carefully, is multimodal convergence in land use controls. And identifying those various points of convergence can go a long way to discerning patterns in—and understanding the political stakes of—zoning fights wherever they occur. The first step, however, is to survey the many goals that land use regulations today can serve and how local governments tend to pursue them.

Many of the specific objectives are by now familiar. Scholars already distinguish between growth machine and homevoter jurisdictions.[22] Advocates for sustainable development clash with NIMBYs (“Not in My Backyard”) and BANANAs (“Build Absolutely Nothing Anywhere Near Anything”) and are joined by California’s new YIMBYs (“Yes in My Backyard”).[23] It is easy to observe these fights on the ground and to see how much jurisdictions can diverge in their land use priorities. But instead of seeing these as one-off battles or through the realpolitik lens of interest-group conflicts, it is worth stepping back and canvassing the range of goals that local governments today pursue through their land use regulations.

Looking broadly, modern land use regulations often represent an effort to pursue one or more of the following goals. These are not mutually exclusive. Some are congruent with each other, but others are in inextricable tension. Many implicate a voluminous academic literature. They are presented here in only their most cursory outlines. The value of this Article is not in the exhaustive explication of any particular land use goal but instead in a broad survey of many of them together to identify the resulting content of the land use regulations that each of these goals tends to produce. What begins to emerge is a sense of real divergence in the objectives that local officials pursue through land use regulations, the implementation of which nevertheless converges around a few key zoning tools.

A. Minimizing Harms from Neighbors

Minimizing conflicting uses of property is the original justification for zoning, and conventional land use tools are well-suited to this goal by separating residential, commercial, and industrial uses. Debates persist over what counts as incompatibility and what sorts of externalized harms need to be regulated.[24] Nevertheless, this overarching goal—and the resulting approach to zoning—are straightforward. Indeed, this objective continues to dominate land use regulation in many suburbs, where residents continue to protect low-intensity residential development by minimizing incursions of more intensive uses.[25]

B. New Urbanism and Mixed Use

In many other areas, however, the traditional view of incompatible uses has broken down. People increasingly seek mixed uses and walkable neighborhoods, preferring that vibrancy to single-use residential areas.[26] New urbanism champions these land use goals.[27] New urbanists may still accept at least implicitly the goal of separating incompatible uses, but they adopt a very different view of what counts as incompatible.

New urbanist land use regulation therefore looks quite different from conventional Euclidean zoning. The regulatory regime still regulates land uses and development density, but it seeks vibrant and diverse uses instead of homogenous ones. In addition to some rigid use districts, then, it permits forms of mixed-use development.[28] Some zoning ordinances do this explicitly, predesignating certain zones for mixed use buildings.[29] Others do this through overlay districts or through special exceptions and variances.[30] The result is mixing more intensive and commercial uses with residential ones, often on arterial streets or in places located near mass transit.

C. Encouraging Growth

Following Professors Harvey Molotch and William Fischel, land use literature has long divided municipalities into “growth machine” and “homevoter” jurisdictions.[31] The former seek to attract development and mobile capital and to encourage investments in new local developments. But this can be further subdivided into a number of different specific motivations. Most obviously, as the “growth machine” name implies, this pro-development attitude can reflect a straightforward desire to benefit the local development community. Builders, architects, realtors, lawyers, bankers, and others all have a strong financial interest in increased development activity.[32] Others favor growth for its own sake. A growing city feels dynamic and vibrant, even as it puts pressure on existing communities.[33] Still others are more instrumental, favoring growth for the increased economic activity that it sometimes produces and also for the services and amenities that size brings, whether a restaurant, professional sports team, or symphony, to name just some of the most obvious examples.[34]

Whatever the specific reason, this pro-growth agenda translates into a broad hostility to strict land use regulations. Municipalities that impose onerous regulatory hurdles are at a competitive disadvantage when it comes to attracting development and will expect to see development activity decrease, all else being equal. The resulting approach to zoning is therefore to minimize regulatory hurdles in order to encourage growth.

D. Discouraging Growth

The opposite goal is also commonplace: discouraging growth. Just as some people seek growth for the amenities it brings, others may object because of increasing congestion or changes in municipal character that can accompany substantial new development.[35] It can also come simply from status quo bias.[36]

Again, whatever the specific motivation, the anti-growth agenda embraces zoning and land use regulations of all kinds. The clearest regulatory strategy to preserve the status quo is to erect as many regulatory hurdles as possible to prevent new development. Strict zoning requirements, including designating large areas of a municipality as effectively off-limits for development, are the most obvious techniques.[37] But adding new layers of regulation can be equally if not more effective. One study has demonstrated that every new regulation reduces building permits for multifamily units by 6%.[38] Historic preservation rules, strict subdivision ordinances, development impact fees, and so forth can also create an atmosphere hostile to development that drives growth elsewhere.

E. Zoning for Tax Revenue

Zoning is increasingly bound up with issues of municipal finance. Sometimes this is direct, like using regulatory concessions as opportunities to raise money or develop infrastructure.[39] But more often, this is indirect, like using zoning to encourage land uses that have net positive budget impacts. Public schools, in particular, are often the largest expense for local governments and therefore drive land use decisions.[40]

While normatively controversial, local governments often seek to exclude affordable housing because low-income households generate relatively little revenue and yet place significant burdens on municipal budgets through impacts on schools and other municipal services. On the flip side, local governments seek land uses that generate substantial tax revenue while creating few costs.[41] Depending on the nature of the tax base, this often means seeking to attract high-valued homes for people with few if any school-aged children.

Traditionally, these dynamics have produced large-lot zones, limits or bans on multifamily housing, and other familiar, if troubling, forms of exclusionary zoning. By requiring housing that consumes more land per unit, a local government can reduce the amount of housing that can be built in any area and also can increase the land costs associated with housing, driving up prices. Admittedly, this dynamic has been shifting somewhat in recent years. Changing consumer preferences means that dense, mixed-use, multifamily development can sometimes be the most expensive, with new high-rise areas in cities like Nashville generating by far the most net tax revenue per square foot.[42] Nevertheless, in much of the country and especially in suburbs, the conventional wisdom still holds. Those places still deploy large lot zoning and bans on multifamily housing in order to exclude lower-income households and to attract and retain housing for the affluent.[43]

F. Zoning for Fees

A more direct form of fiscal zoning comes from the bargaining opportunity that land use regulations can represent. Several decades ago, Professor Carol Rose demonstrated that zoning can be seen through the competing lenses of planning and dealing.[44] Under the dealing model, land use regulations should be seen as a kind of opening offer. Developers then must petition governments for more permissive regulations—like increases in density—and provide certain financial or in-kind benefits in exchange for regulatory largesse. Some people view this as a kind of graft, others simply as a way of ensuring that developers internalize more of the costs of increased density.[45] Regardless, many local governments have become increasingly sophisticated about enacting land use regulations that create a framework for bargaining.

The most familiar example is the imposition of impact fees or exactions. These are explicit mechanisms by which local governments charge developers for the burdens of new development, either through prespecified legislated fees or ad hoc bargains.[46] But other zoning approaches also create bargaining moments for local governments. For example, some local governments place large amounts of land into holding zones, typically industrial or agricultural zones where no other uses are permitted.[47] These do not reflect the municipality’s judgment about the highest and best use for the property but instead create such strict limits that anyone wanting to develop the property will have to seek a rezoning. Since property owners are rarely entitled to rezonings as of right, this gives municipalities discretion and so creates a meaningful opportunity to bargain for developer contributions to infrastructure, and so forth.

More generally, then, zoning ordinances can generate revenue either by imposing prespecified impact fees or by giving local officials discretion in land use decisionmaking. Vague zoning standards—like a requirement that development be “consistent” with existing community—allow local officials to deny land use applications.[48] This discretion therefore also allows officials to grant the applications but only upon certain concessions or contributions by the developer.

G. Zoning to Increase Property Values

According to Professor Fischel’s leading account of suburbs and small local governments, homeowners dominate the political landscape and are primarily motivated by property values.[49] Most homeowners’ primary asset is their house, and so they are keenly interested in property values, seek policies and regulations that will increase local property values, and reward local politicians who provide them.[50]

There is no magic zoning bullet that will automatically create higher values. Instead, the relationship between zoning and property values is dynamic and depends tremendously on local context. Nevertheless, it is generally the case that restricting the supply of developable land will tend to increase property values. In fact, it amounts to a kind of transfer from new entrants who have to pay higher housing costs to in-place residents who see their property values climb.[51]

This does not always work. Sometimes, depending on elasticity in local markets, strict regulations can produce economic stagnation. If demand for housing is weak or very responsive to price, then overly restrictive zoning can be self-defeating.[52] But where demand is strong, as in many affluent and developed communities, restrictions on supply can increase property values for in-place property owners.

H. Affordability

Not everyone benefits from rising property values. A countervailing pressure in many municipalities is the desire to encourage more affordable housing options.[53] Rents and home prices that are too high can drive out important members of the community—like teachers, government employees, artists, low-wage workers, and so forth—which can have adverse economic effects and can also deplete social capital.[54]

Local governments have a number of tools at their disposal to address housing affordability, but each comes with limitations. Obvious, but much maligned, tools include rent regulation and the provision of public housing.[55] But land use regulations can also be deployed to encourage affordable housing. Inclusionary zoning, for example, offers developers density bonuses in exchange for developing some number of affordable units or sometimes requires a number of affordable units outright as a condition for building.[56] More generally, too, simply increasing the supply of any form of new housing can also put downward pressure on price.[57] Cities today are experimenting with ways of relaxing density limits in order to increase the supply of new housing and thereby address affordability. In 2018, New York, for example, changed its off-street parking requirements for certain kinds of buildings, dramatically increasing the number of residential units that could be developed on any given lot.[58] The most extreme example is the YIMBY movement in California, which pushed for a change in 2018 that would have all but eliminated density limits on residential development anywhere near mass transit.[59] This would have unlocked an enormous amount of development potential throughout California’s cities. The measure failed, but there can be no doubt that affordability is motivating increasing political pressure.[60]

Not everyone agrees that unlocking development potential will help with affordability. Indeed, it might seem that developing high-end market rate housing would increase not decrease local housing costs. But the law of supply and demand is powerful, and even market-rate housing eases the demand for more modest existing housing elsewhere in the municipality and so puts downward pressure on price. In 2019, Professor Vicki Been et al. surveyed the economic literature and concluded that unlocking supply, even without explicit inclusionary zoning requirements, helps make housing more affordable, whereas supply restrictions drive prices up.[61] While responses remain controversial and contested, zoning for affordability involves lowering regulatory barriers, reducing development restrictions and unlocking increased development potential, or directly regulating price either through rent regulation or inclusionary zoning.

I. Historic Preservation

Although not squarely “zoning” in many places, historic preservation can motivate local officials who seek to protect buildings or neighborhoods of historic significance. Designating property as historically significant can create a new layer of regulatory oversight. It therefore triggers a kind of additional veto right that can make it more difficult to build.[62] Historic preservation ordinances vary in their details and in their strength but generally require property owners to apply for a certificate of appropriateness when seeking to tear down or modify a structure designated as historically significant.[63]

J. Community Preservation

More than historic preservation, community preservation motivates a significant amount of land use regulation. In fact, historic preservation is often a kind of rough proxy for the real concern of preventing displacement of the existing community. Development can threaten community in a number of different ways. Most directly, an influx of new residents can affect existing social ties and threaten existing social capital.[64] Development can simultaneously price some residents out of the neighborhood.[65] This gentrification—a perennial issue in local government and land use law [66]—creates its own winners and losers. The former includes primarily in-place property owners; the latter includes renters. Nevertheless, people concerned with preserving the existing in-place community will usually object to development that changes the character of a place.[67]

Some local governments have begun to experiment with community preservation directly, enacting community preservation ordinances that do not require a showing of historical significance but rather community significance to preserve a building.[68] Most use zoning’s blunter tools, again seeking to restrict new development by erecting regulatory hurdles. While this can sometimes prove self-defeating, creating stagnation and capital flight, community members will often take that risk in order to protect their social capital and communities. There is no doubt that concerns about the fragility of existing communities motivate a significant amount of restrictive zoning.

K. Aesthetic Regulation

Today, in many places, the motivation for many land use regulations appears to be as much aesthetics as anything else. Neighbors are concerned about the impact of new development on the look of their neighborhood for its own sake and often oppose development primarily because they think it will be ugly.[69]

Sometimes, this concern is explicitly included in zoning ordinances by requiring architectural review.[70] Such architectural review provisions tend to create greater homogeneity in building design, often specifying a narrow list of appropriate architectural styles for any new buildings.[71] Homogeneity does not ensure beauty, of course, and can in fact create the opposite.[72] But it is a proxy for uncontroversial buildings and so minimizes aesthetic outliers.

Some jurisdictions have also turned away from traditional use-based zoning ordinances to form-based codes instead. As their name implies, these codes focus on the particular form that buildings can take—on bulk, shape, and so forth—instead of on the permitted uses. These often impose quite specific design requirements that function like de facto aesthetic regulations.[73]

L. Environmental Protection: Sustainable Development

We have now long understood the important role that land use regulations can play in climate change.[74] Real estate development contributes significantly to carbon emissions. The sprawl associated with single-family residential suburbs is much more carbon intensive than dense development closer to people’s jobs and to commercial centers.[75]

Energy conservation is a backdrop for many discussions about new development. This can translate directly into land use regulation. Zoning that minimizes sprawl and that encourages denser development near transportation will lower carbon emissions.[76] Indeed, this is the explicit goal of sustainable development, which has generated an enormous amount of zoning activity and scholarly interest.[77] The blueprint for sustainable development remains contested, but experts broadly agree that urban living produces much less carbon than suburban and rural living. They therefore favor increasing density in the urban core while discouraging the land-consuming sprawl that has characterized development for much of the past century.[78]

M. Environmental Protection: Animals and Habitats

A related motivation for land use regulation, especially in rural areas, is more traditional environmental protection and specifically the protection of environmental resources like wetlands. Wetland regulations are often administrated at the state level, rather than the local level.[79] Nevertheless, they function as sometimes dramatic limits on development. Other kinds of environmental regulations have a similar effect. Septic regulations can prove more restrictive than zoning in controlling density in rural areas without municipal wastewater.[80] Explicit environmental review through the National Environmental Policy Act (“NEPA”) or its state analogues also shape large-scale development.[81]

Other municipalities focus environmental efforts on wildlife habitat. The most sophisticated efforts involve taking an inventory of animal pathways and then seeking to create habitat connectivity by preventing development that interferes with those pathways.[82] Wildlife overlay districts seek to preserve critical habitat and to promote ecological health. More often, however, local governments pursue what is better characterized as aesthetic environmentalism. The goal is to promote a community character that includes vegetation, trees, open space, and a general sense of nature, regardless of the actual impact on wildlife or natural resources. Proponents often object to cookie-cutter suburbs and promote more large-lot development that preserves a more rural feel.

The result for zoning is increased restriction on development, but the location for these restrictions is motivated by a concern for natural resources and not by aesthetics, community character, and so forth.

N. Economic Intervention

Zoning and land use controls can be an important if sometimes problematic tool for local governments to affect economic outcomes. At the most parochial level, land use regulations can be used as a kind of economic protectionism for in-place businesses by excluding competition.[83] Prohibitions on new entrants, coupled with grandfather protection for existing businesses, can create a kind of regulatory mini-monopoly. This can look like pure rent seeking or just naked economic favoritism for in-place businesses.[84] Sometimes, however, local governments can justify anti-competitive zoning on broader economic grounds. For example, some local governments have tried to use zoning and land use controls to exclude large box stores like Wal-Mart, ostensibly to preserve smaller businesses and downtown commercial areas, and the positive externalities they generate.[85]

Local governments can also use zoning to pursue specific economic goals. For example, noncumulative zoning in industrial areas is best understood as a kind of subsidy for industry by keeping property values lower for industrial land.[86] In other instances, local governments can create what amount to aspirational zones for uses they seek to attract—like New York City creating a new biomedical zone.[87] And even more broadly, local governments may use land use regulations to try to generate agglomeration surplus through a sufficient density of a particular kind of business or industry: think, here, of tech in Silicon Valley; insurance in Hartford, Connecticut; theater on Broadway; and so forth.[88] These places and industries may all have their own specific land use needs, and local governments are often especially solicitous of these industry-driven zoning requirements.[89]

O. Exclusion and Segregation

In addition to the more-or-less principled justifications for land use regulation identified above, there are also more overtly pernicious ones that are important to acknowledge. Zoning can be used to exclude disfavored groups or businesses. This is most obvious and familiar in the context of racially motivated zoning. Although explicitly race-based zoning is clearly unconstitutional and illegal, exclusionary zoning often has a racially discriminatory impact, if not motivation. Because this can be so difficult to detect and to prove, it remains widespread.[90] For example, opposition to affordable housing or simply to less expensive multifamily housing may well be motivated for some people by racial animus.[91] The political fights over such housing are therefore often accompanied by charges of racism and can be bitter and ugly.[92]

Table 1 summarizes the different municipal goals described in this Section and the resulting implications for zoning.

What should be immediately apparent is the extent of convergence in the resulting approaches to zoning, even as land use objectives continue to diverge. Clearly, Table 1 obscures, through simplification, important limits on the extent of convergence. New urbanists, for example, will not favor relaxed zoning restrictions in all of the same places, or in the same way, as environmentalists. Nor are these interests mutually exclusive, even in the same person or political body. Someone can prioritize aesthetic concerns in one place and affordable housing in another in the same municipality. There is nothing inherently inconsistent in those views.

Indeed, questions of location and scale create persistent tensions in each of these approaches. Increased density in one place might increase property values but make other parts of the municipality more affordable. Local renters who might find themselves priced out of that particular neighborhood might therefore object, even though the effect of increased supply is to improve affordability.[93] Similarly, favoring density, transit–oriented development, or a more urban mixed-use streetscape does not mean favoring those elements everywhere. They can conflict with concerns over historic or community preservation in particular locations in ways that are not internally inconsistent.

III. Evaluating MultiModal Convergence

A. The Costs and Benefits of Divergence

The diverging goals of land use regulations—and the resulting property and development rights that they circumscribe—create both costs and benefits. They also create new political alliances that can make the real stakes of zoning fights increasingly opaque. Being clear eyed about these dynamics allows for a more careful assessment of the changing landscape of land use regulations.

The most obvious cost of the proliferation of land use goals comes from the difficulty in navigating divergent regulatory regimes. When zoning codified the straightforward goal of separating incompatible uses of property, it was relatively easy for property owners and developers to anticipate ahead of time what uses would be permitted on any particular property. Comprehensive plans gave a sense of the municipality’s preferences and priorities, while the zoning ordinance prescribed broad categories of uses and densities that it would allow. A developer seeking to build new multifamily housing or a new commercial center would look for property with the right physical and regulatory characteristics to decide what land to buy and where to develop. And this process was relatively transparent.

Divergence in land use goals can obscure some of zoning’s signaling and channeling functions. Today, the content of the zoning ordinance does not necessarily reveal the municipality’s underlying purposes and goals and so can make the regulatory treatment of land more opaque. The fact that property is zoned as agricultural, for example, does not necessarily mean the municipality is hostile to development there. It might mean, instead, that local officials are open to a rezoning for a price.[94] Likewise, the fact that development will require a normally routine special use permit, or a less routine variance, does not mean a developer should expect to get it if the development will occupy land that local officials believe is important for habitat or the local officials are simply opposed to growth. In other words, divergence in the underlying purposes of land use regulations—especially in specific locations within a municipality—means that it can be difficult for property owners and developers to know ahead of time what uses will be permitted in any particular place. The contours of property rights and development potential are therefore rendered at least partially obscure.

Divergence in land use regulations creates another cost, too, in the form of special interest group rent seeking.[95] Support for—or opposition to—some land use approval can now include special interest group pressure from many different directions. Those interventions are costly themselves, but they can also create a more complex and less transparent set of choices for local officials. The results can be less effective regulations, whether judged by efficiency, by public preference, or any other metric.

There are benefits of the seeming divergence, however. Most importantly, multiplicity in land use regulations can allow people to better satisfy their individual preferences by choosing to live in a place that pursues their particular regulatory priorities. And they will not always choose to live in the place where their property rights are the most expansive. Indeed, it is quite to the contrary. While no one likes to be told what they can and cannot do on their own property, almost everyone likes being able to tell neighbors what they can do on theirs. Many people will willingly trade greater restrictions on their own land for equivalent restrictions on their neighbors. The proliferation of common interest communities, many of which are subject to much more burdensome property restrictions than any local zoning ordinance would ever impose, is proof that many people prefer this trade–off.[96] Just as people can choose to live in a place with good public schools, or low taxes, or mass transit, or lots of open space, regulatory priorities can be important selection criteria for homeowners.

Relatedly, satisfying consumers’ regulatory preferences facilitates Tieboutean sorting.[97] This has structural benefits. Desirable regulatory regimes will be capitalized into property values, at least to some extent. That provides an important feedback mechanism for local governments seeking to satisfy consumer preferences. Where regulatory choices are limited to the binary options of “more” or “less,” price becomes an unhelpful or even perverse signal. More regulation will tend to restrict supply and so drive up prices, all else being equal. The pressure from sorting will always favor more restrictive zoning. But in a world of multimodal convergence, where local governments pursue a variety of regulatory objectives, sorting starts to generate meaningful price signals in property values. For example, the fact that many local governments have sought to brand themselves as “green” cities, partly through their land use regulations, demonstrates at least their perception of the benefits of such sorting.[98]

In theory, then, the proliferation of attitudes towards land use regulations, as well as the regulations themselves, should allow for consumers to satisfy their regulatory preferences and to purchase the bundle of property rights that they want. To the extent they are visible to outsiders—sometimes an unrealistic assumption—land use priorities allow for more efficient sorting.[99]

The tension between predictability and clarity in property rights on the one hand and satisfying diverse preferences on the other creates a meaningful limit on the goals that local governments should be able to pursue and how they pursue them. Too much divergence and information costs become too high. But too little and more people will be stuck in regimes that do not actually reflect their interests. Multimodal convergence therefore represents a surprisingly appropriate compromise between the certainty of unidimensional land use goals and more chaotic divergence. It also means that not everyone in a municipality must agree on the same goals to still be able to agree on an approach to zoning. The fact that different substantive goals can produce the same attitude towards zoning in a particular dispute means that more people can satisfy their regulatory preferences with fewer options.

This is not to say that the extent of the observed divergence that exists today is appropriate. It may be too great, and so the information costs are already too high. Or it may not be enough, and people are being forced into regulatory regimes that do not satisfy their preferences. This is, fundamentally, an empirical question, and one that would require further exploration to try to resolve. The observation here is simply that some degree of divergence is desirable, and that multimodal convergence reflects a kind of tacit compromise between an overly rigid set of land use goals and a regulatory free-for-all.

Multimodal convergence also provides a useful way of thinking about political alignments and narratives in contemporary land use fights. It explains why many land use disputes today involve such unlikely bedfellows. For example, the motives of the growth machine and affordable housing advocates may be very different, but their view of zoning may be quite consistent.[100]

These dynamics also make it more difficult to understand the “real” stakes of many land use disputes. Does opposition to multifamily housing in a particular place come from concern about habitat loss, from aesthetic preferences, or from racist opposition to the likely low-income residents who are predicted to move in? Any of those views would be consistent with a vote against the new development.

The purpose of highlighting these dynamics is not, ultimately, to favor one over another. Appropriate concerns in one place may be entirely inappropriate somewhere else. But bringing awareness to the diversity of goals that can be implicated by modern land use disputes should allow for more explicit evaluations of the trade-offs in any zoning decision. Even if the motivation for restrictive zoning is aesthetic, for example, it is important to recognize the impact on affordability. Conversely, encouraging growth may help affordability or create opportunities for agglomeration, but with the possibility of burdening infrastructure beyond what it can easily support and displacing in-place local residents.

But these dynamics do reveal that different groups sometimes end up advocating for land use regulations against their expressed interests. These groups are either being disingenuous about their actual motivations or are mistaken about how different substantive policies translate into land use regulation. The survey of land use goals in the previous part makes it easier to identify these unexpected positions and to explore alternative explanations.

B. An Example: Nashville’s Music Row

Consider a recent land use fight in Nashville, Tennessee. There is nothing particularly special about this example. Indeed, its point here is its banality—if interesting local color. Nor does it implicate every different interest identified above. But it does reveal the complicated goals of modern land use controversies.

Nashville’s Music Row is two long, multiblock streets near and roughly parallel to the campus of Vanderbilt University. Its name comes from the many recording and music studios located along these long strips.[101] The buildings, however, look residential and are an eclectic hodgepodge that includes craftsman-style bungalows from the first half of the twentieth century, some modern buildings, and a few small office buildings. Increasing development pressure, however, has led to the redevelopment of many of these music-industry uses into new apartment buildings.[102] This has led to heated conflict over the future of Music Row, culminating in a two-year building moratorium that recently ended.[103]

At first glance, fights over the future of Music Row look entirely conventional. Groups arrayed against the development include NIMBY neighbors as well as preservationists. One of the most hard-fought development battles on Music Row concerned RCA Studio A. In 2014, when a developer announced plans to tear down and redevelop the property, singer-songwriter Ben Folds wrote an open letter to the musical community imploring that the building be saved.[104] He listed the musicians who recorded hit records there, including The Beach Boys, Dolly Parton, Jewel, Kesha, Hank Williams Jr., and many, many others. Folds was himself the tenant at the time, and he organized an aggressive and ultimately successful effort to buy the building and preserve it as a recording studio.[105]

While Studio A was saved through a voluntary transaction for $5.7 million, other building and redevelopment plans remain fiercely contested by preservationists. But historic preservation is an awkward fit because many of the buildings are not historical in any way. The historic preservationists are focused less on the buildings than on the musical history that they represent. In fact, it appears that their interests are not about preserving the architecture but are instead about preserving the music industry more broadly. One preservationist, for example, articulated the agenda this way: “We can’t just sit back and let Nashville’s unique history be destroyed and its present-day musical culture lost.”[106]

Other opposition to development appears to be more about preserving the community’s character than about any historic resources.[107] One longtime bartender said of the development on Music Row: “It’s not Nashville anymore. It used to be a little place, with a little airport, that had some fantastic music and big personalities and millions of different stories. Now it’s a metropolis, this is a big city.”[108] Others have focused their opposition on the associated infrastructure burdens and, in particular, on traffic.[109] Indeed, traffic has become a flashpoint in Nashville. There is no consensus about how to address it, but many people oppose all new development until a plan is in place.[110]

Finally, additional opposition comes from community groups who worry about affordability.[111] Any new construction in and around Music Row is likely to be very expensive. Many people worry that any new housing will be unaffordable, and that this will displace current residents. Housing costs in Nashville have been skyrocketing, putting particular pressure on affordable housing. According to one study, Nashville has lost 18,000 affordable housing units since 2000, and 44% of Nashville renters are housing–cost burdened.[112] Opponents of new development often focus on affordability as a central objection.[113]

On the opposite side are developers who see a significant financial opportunity in the Music Row redevelopment.[114] Their interests are predictable. But the City also sees a substantial fiscal upside. Not only does new development generate more property tax revenue, but also its net fiscal impact is even more positive. Where dense urban infill has occurred nearby, the net tax revenue per square foot is dramatically higher than anywhere else in the metro area because of the relatively low cost of building out infrastructure and the high property values.[115] This, coupled with the City’s generally lax approach to land use regulation, makes redevelopment of Music Row appear all but inevitable, despite the interests aligned on the other side. Whoever wins, the controversy seems entirely predictable and conventional.

A closer look at the stakes, however, reveals a more complicated dynamic, and one that is increasingly representative of modern land use fights. Consider, first, the effect on traffic: a central source of opposition. This is a perplexing reason to oppose redevelopment. Music Row is adjacent to Vanderbilt and in the heart of the City. Yes, new residential buildings will increase local traffic to some extent, but it should marginally reduce traffic in the City more broadly. It is not exactly transit-oriented development since there is no meaningful transit in Nashville. But it is development that is closer to the places people work and play and so will result in fewer vehicle miles traveled. Traffic has a lot of political valence, and it makes tactical sense for opponents to use it as a reason to push back against development, but it seems misguided as a basis for objecting new buildings on Music Row. For this same reason, those concerned with sustainable development should favor dense infill in places like Music Row over suburban sprawl. This also reduces development’s total carbon footprint.

Increased housing costs citywide are also a poor reason to oppose the redevelopment of Music Row. While new housing may well precipitate a change in the character of the particular neighborhood and increase prices there, the best evidence demonstrates that adding supply will decrease median property values in the City and increase affordability. This is true even if the new housing stock is exclusively market rate and expensive. Such is the power of supply and demand.[116] Opposition to new development by immediate neighbors on grounds of affordability is rational if parochial—what Professor Been has labeled “City NIMBYs.”[117] Opposition based on concerns about housing costs throughout the city makes little sense.

There are countervailing peculiarities on the other side as well. Focusing on the fiscal impact of redevelopment, tax implications are only part of the story. Many business leaders and politicians have argued that it is in Nashville’s economic interest to preserve the music industry.[118] Preventing redevelopment of Music Row means that music studios do not need to compete with residential developers and so amounts to a kind of subsidy for the music business. There are agglomeration economies that come from the clustering of music studios in one particular area: musicians and songwriters frequently collaborate throughout the day, musicians record together, industry executives meet and do business in person up and down Music Row.[119] And, as traffic problems worsen throughout the city, the value of spatial proximity is only increasing.

Yes, market pressures demonstrate that the property is more valuable as residential or mixed-use development. Putting the property to a higher and better use unlocks value, by definition. However, the music industry produces significant benefits—positive externalities—for the City as a whole and should perhaps be preserved for that reason. It generates significant economic activity and also creates a kind of identity that attracts businesses and residents. If those benefits exceed the marginal value of redevelopment, then the City has a fiscal reason to subsidize the industry and prevent redevelopment, even if that means missing out on some increased tax revenue.

None of this reveals what the right answer is for Nashville. But it does demonstrate how the stakes of modern land use and zoning fights often go far beyond the traditional proregulation and antiregulation camps. It also reveals how different groups’ interests do not converge around any singular goal. Instead, different constituencies are motivated by very different underlying goals. Ultimately, people choose to live, to work, and to invest in Nashville for very different reasons. Some like the small-city feel of the place, others the music industry, still others the statewide emphasis on property rights and economic liberties, and others the appealing and new housing stock in increasingly dense mixed-use neighborhoods. But ultimately, these are all different views that can be reflected in different land use policies. Allowing Nashville to make decisions about which goals it will prioritize will give voters and property owners the opportunity to pursue or protect those aspects of the city that they most want.

[*] *.. Elizabeth H. & Granville S. Ridley, Jr. Professor of Law, Vanderbilt Law School. Christina Jeffcoat provided excellent research assistance.

[1]. For the seminal Supreme Court case recognizing the utility of zoning in this area, see Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 387–89 (1926).

[2]. Christopher Serkin, The New Politics of New Property and the Takings Clause, 42 Vt. L. Rev. 1, 3–6, 13 (2017).

[3]. Robert C. Ellickson et al., Land Use Controls 95, 332–33 (4th ed. 2013) (discussing revenue related purposes of zoning and “dealmaking” by local governments); Carol M. Rose, Planning and Dealing: Piecemeal Land Controls as a Problem of Local Legitimacy, 71 Calif. L. Rev. 837, 879 (1983) (discussing local governments’ desire to retain flexibility to bargain ad hoc with developers).

[4]. Ellickson et al., supra note 3, at 114–15, 121, 328, 858 (discussing local governments’ ability to zone for more purposes than originally anticipated in the SZEA and examples of local governments that use zoning to achieve sustainability, affordability, and preservation goals); see also Melvyn R. Durchslag, Forgotten Federalism: The Takings Clause and Local Land Use Decisions, 59 Md. L. Rev. 464, 464–65 (2000) (discussing various municipal land use goals); Serkin, supra note 2, at 6–7 (comparing differing political attitudes toward environmental zoning versus rent regulations).

[5]. Thanks to Professor Edward Cheng for labeling the phenomenon of multimodal convergence.

[6]. See Conor Friedersdorf, San Francisco’s Self-Defeating Housing Activists, Atlantic (Dec. 29, 2015), https://www.theatlantic.com/politics/archive/2015/12/san-francisco-is-confused-about-the-villain-thats-making-it-unaffordable/422091; Ilya Somin, Why More Liberal Cities Have Less Affordable Housing, Wash. Post: Volokh Conspiracy (Nov. 2, 2014), https://www.washingtonpost.
com/news/volokh-conspiracy/wp/2014/11/02/more-liberal-cities-have-less-affordable-housing/?utm_ter
m=.b355844b719a. See generally Vicki Been, City NIMBYs, 33 J. Land Use & Envtl. L. 217 (2018) (exploring increasing “Not In My Backyard” (“NIMBY”) policies in cities and the resulting effect on urban housing costs).

[7]. Serkin, supra note 2, at 14–15.

[8]. See Emily Badger, The Bipartisan Cry of ‘Not in My Backyard’, N.Y. Times (Aug. 21, 2018), https://www.nytimes.com/2018/08/21/upshot/home-ownership-nimby-bipartisan.html; Mike Rosenberg, Housing Construction in Local Suburbs Is at Historic Lows, While Seattle Is Setting Records, Seattle Times, https://www.seattletimes.com/business/real-estate/king-county-suburbs-slow-their-housing-growth-canceling-out-seattle-building-boom (last updated Aug. 11, 2018, 12:49 AM).

[9]. A Standard State Zoning Enabling Act (Advisory Comm. on Zoning, U.S. Dep’t of Commerce, rev. ed. 1926).

[10]. See, e.g., Christopher Serkin, Existing Uses and the Limits of Land Use Regulation, 84 N.Y.U. L. Rev. 1222, 1232–33 (2009) (briefly describing the history of the SZEA and citing sources on the topic).

[11]. Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 394–95 (1926).

[12]. See, e.g., Rose, supra note 3, at 848–49 & n. 29 (briefly describing history of zoning in the United States).

[13]. See, e.g., Brian Galle, In Praise of Ex Ante Regulation, 68 Vand. L. Rev. 1715, 1724 (2015) (“[Z]oning laws restrict development before it results in unwanted burdens on neighbors, while nuisance suits impose liability after the damage has begun.”); G. Donald Jud, The Effects of Zoning on Single-Family Residential Property Values: Charlotte, North Carolina, 56 Land Econ. 142, 142 (1980) (“One of the principal purposes of municipal zoning ordinances is to protect property owners from the deleterious external effects that may arise when incompatible land uses exist within the same neighborhood.”); Carol M. Rose, Property Rights, Regulatory Regimes and the New Takings Jurisprudence—An Evolutionary Approach, 57 Tenn. L. Rev. 577, 588 (1990) (“As land resources became more developed, we progressed from a regime of ‘anything goes’ with one’s landed property, to a regime of post hoc judicial control on ‘nuisances,’ to a regime of legislatively defined, ex ante regulation.”); Mariana Valverde, Taking ‘Land Use’ Seriously: Toward an Ontology of Municipal Law, 9 Law Text Culture 34, 52 (2005) (identifying a “religion of incompatible land uses that was codified in the 1916 New York City zoning ordinance”).

[14]. See Euclid, 272 U.S. at 386–91 (analogizing a town’s ability to prevent industry from building in residential areas to the law of nuisances).

[15]. See Ambler Realty Co. v. Village of Euclid, 297 F. 307, 316 (N.D. Ohio 1924) (stating that the true purpose of separating single-family residences and apartment buildings was to further economic class divisions), rev’d 272 U.S. 365 (1926); Richard H. Chused, Euclid’s Historical Imagery, 51 Case W. Res. L. Rev. 597, 613–14 (2001) (discussing how the Supreme Court’s language in Euclid’s majority opinion created a negative, stereotypical image of apartment buildings, validating zoning as a way to segregate based on race and class).

[16]. Christopher Serkin, Capitalization and Exclusionary Zoning, Interdisc. Ctr. Herzliya (forthcoming 2019) (manuscript at 5) (on file with author).

[17]. Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 394–97 (discussing the effects of apartment buildings on single-family residences and concluding that as apartments come very near to being nuisances, it is within a municipality’s police powers to exclude them from single-family residential areas); see also Chused, supra note 15, at 614.

[18]. The intuition appears to be that burdens imposed by voluntary associations, like the private governance of a homeowner’s association, are preferable to public regulatory authority. It is not obvious why that should be since people can choose their local governments just as they can choose their residential subdivisions. For early endorsement of more but not exclusive reliance on nuisance law, see Robert C. Ellickson, Alternatives to Zoning: Covenants, Nuisance Rules, and Fines as Land Use Controls, 40 U. Chi. L. Rev. 681, 682 –83, 761–62 (1973).

[19]. See Serkin, supra note 2, at 6–7, 13.

[20]. William A. Fischel, The Homevoter Hypothesis 14–16, 18 (2001) (comparing “growth machine” jurisdictions with “homevoter” jurisdictions).

[21]. For some recognition of these changes, see Been, supra note 6, at 219–23; Serkin, supra note 2, at 13–16.

[22]. See Been, supra note 6, at 218 (noting that cities have traditionally been viewed as “growth machines” and suburbs as favoring NIMBY policies to protect “homevoter” property values).

[23]. See Edward H. Ziegler, Sustainable Urban Development and the Next American Landscape: Some Thoughts on Transportation, Regionalism, and Urban Planning Law Reform in the 21st Century, 42 Urb. Law. 91, 92–99 (2010) (discussing the NIMBY’s opposition to sustainable development); Ben Lockshin, Beyond NIMBY: Understanding Different Affordable Housing Advocates and Detractors (Part 1), Greater Greater Wash. (Sept. 26, 2017), https://ggwash.org/view/64879/beyond-nimby-understanding-different-affordable-housing-advocates-detractors (discussing the differences between NIMBYs and BANANAs); Alana Semuels, From ‘Not in My Backyard’ to ‘Yes in My Backyard’, Atlantic (July 5, 2017), https://www.theatlantic.com/business/archive/2017/07/yimby-groups-pro-dev elopment/532437 (discussing the rise of YIMBY views in California in response to the need for high-density housing).

[24]. See generally Holly Doremus, Takings and Transitions, 19 J. Land Use & Envtl. L. 1 (2003) (discussing the effects of changing morals, technology, and scientific understanding on land use regulations); William A. Fischel, The Law and Economics of Cedar-Apple Rust: State Action and Just Compensation in Miller v. Schoene, 3 Rev. L. & Econ. 133 (2007) (concluding that the government should regulate land uses that harm uses with higher commercial values).

[25]. See Wayne Batchis, Enabling Urban Sprawl: Revisiting the Supreme Court’s Seminal Zoning Decision Euclid v. Ambler in the 21st Century, 17 Va. J. Soc. Pol’y & L. 373, 379–80 (2010) (explaining that the single-use zoning structure exists in the majority of U.S. jurisdictions); Nicole Stelle Garnett, Save the Cities, Stop the Suburbs?, 116 Yale L.J. Pocket Part 192 (2006), http://yalelawjournal.org/forum/save-the-cities-stop-the-suburbs (discussing the persistence of single-use zoning in suburbs).

[26]. See, e.g., J. Peter Byrne, The Rebirth of the Neighborhood, 40 Fordham Urb. L.J. 1595, 1596–97 (2013) (arguing that new urban residents seek vibrant, mixed-use neighborhoods).

[27]. Doris S. Goldstein, New Urbanism—Planning and Structure of the Traditional Neighborhood Development, 17 Prob. & Prop. 9, 9 (2003) (“New Urbanism is a land planning philosophy advocating compact, mixed-use, pedestrian-friendly development.”).

[28]. See id. at 10 (discussing how new urban developments separate residential and commercial sections but also allow a mixture of uses in residential sections).

[29]. For an example of explicit mixed-use zoning, see Seaside, FL., Code of Ordinances ch. 158, no. 83-10 (1983); Samantha Salden, The Seaside Code: The Poster That Started It All, Seaside Res. Portal, https://seaside.library.nd.edu/essays/the-code (last visited May 11, 2019) (discussing the Seaside Code as the first application of new urbanism in a form-based code).

[30]. Brian W. Ohm & Robert J. Sitkowski, The Influence of New Urbanism on Local Ordinances: The Twilight of Zoning?, 35 Urb. Law. 783, 785 (2003) (comparing flexible techniques such as overlay zoning to the rigidity of single-use districts); Scott B. Osborne, Planning Issues in Mixed-Use Developments, 21 Prac. Real Est. Law. 29, 30 (2005) (discussing new urbanist zoning through conditional use permits and special zoning designations).

[31]. Fischel, supra note 20, at ix, 15–16; Harvey Molotch, The City as a Growth Machine: Toward a Political Economy of Place, 82 Am. J. Soc. 309, 309 –10 (1976).

[32]. S. Rodgers, Urban Growth Machine, in 12 International Encyclopedia of Human Geography 40, 41–42 (Rob Kitchin & Nigel Thrift, eds., 2009) (describing the property investors, developers, financiers, etc. that make up the growth machine).

[33]. See Office of Policy Dev. & Research, U.S. Dep’t of Hous. & Urban Dev., Ensuring Equitable Neighborhood Change: Gentrification Pressures on Housing Affordability 5–6 (2016), https://www.huduser.gov/portal/sites/default/files/pdf/Insights-Ensuring-Equitable-Growth.pdf (discussing the burdens of rapid urban growth on existing communities).

[34]. See William K. Jaeger, The Effects of Land-Use Regulations on Property Values, 36 Envtl. L. 105, 112–17 (2006) (discussing how land use decisions can increase property values and “amenity” benefits); see, e.g., Scott Cohn, New Insights on How Cities and States Stack Up in the Race to Win Amazon’s $5 Billion HQ2, CNBC, https://www.cnbc.com/2018/07/05/new-clues-on-how-cities-stack-up-in-the-race-to-win-amazons-hq2.html (last updated July 10, 2018, 7:42 PM) (explaining that Amazon’s criteria for new headquarters includes an area with more than one million people and urban locations that can attract and retain talent).

[35]. See Michelle Shortsleeve, Challenging Growth-Restrictive Zoning in Massachusetts on a Disparate Impact Theory, 27 B.U. Pub. Int. L.J. 361, 380 (2018) (describing how municipalities use zoning to limit population growth, and thus constrain congestion and preserve community aspects).

[36]. Eric A. Cesnik, The American Street, 33 Urb. Law. 147, 173–84 (2001) (discussing how metropolitan planning is constrained by the status quo or the existing look and function of the area).

[37]. See Robert C. Ellickson, Suburban Growth Controls: An Economic and Legal Analysis, 86 Yale L.J. 385, 390–92 (1977) (describing the various ways municipalities prevent all development in certain areas).

[38]. Kristoffer Jackson, Do Land Use Regulations Stifle Residential Development? Evidence from California Cities, 91 J. Urb. Econ. 45, 54 (2016); see also Been, supra note 6, at 227–28.

[39]. See infra Section II.F.

[40]. Ellickson et al., supra note 3, at 649–50 (discussing the high public costs of public schools). For an analysis of the interplay between fiscal land use decisions and public schools, see Eric A. Hanushek & Kuzey Yilmaz, Land-Use Controls, Fiscal Zoning, and the Local Provision of Education, 43 Pub. Fin. Rev. 559, 563–67 (2015).

[41]. See Paul G. Lewis, Retail Politics: Local Sales Taxes and the Fiscalization of Land Use, 15 Econ. Dev. Q. 21, 24–26 (2001) (arguing that the quest for retail development and its resulting sales tax revenue motivates California’s land use decisions).

[42]. Christopher Serkin & Leslie Wellington, Putting Exclusionary Zoning in Its Place: Affordable Housing and Geographic Scale, 40 Fordham Urb. L.J. 1667, 1684 (2013); Smart Growth Am., Fiscal Impact Analysis of Three Development Scenarios in Nashville-Davidson County, TN 11 (2013), https://smartgrowthamerica.org/app/legacy/documents/fiscal-analysis-of-nashville-develop ment.pdf (showing the tax revenue generated by the one high-rise area as compared to two other developments).

[43]. Been, supra note 6, at 219 –23.

[44]. Rose, supra note 3, at 882, 889–91.

[45]. See, e.g., Vicki Been, Impact Fees and Housing Affordability, 8 Cityscape 139, 143–47 (2005) (discussing the advantages and disadvantages of development fees); Arthur C. Nelson, Development Impact Fees: The Next Generation, 26 Urb. Law. 541, 548–53 (1994) (addressing various objections to development fees).

[46]. See Jim Rossi & Christopher Serkin, Energy Exactions, 104 Cornell L. Rev. (forthcoming 2019).

[47]. See Robert C. Ellickson, The Role of Economics in the Teaching of Land-Use Law, 1 UCLA J. Envtl. L. & Pol’y 1, 7 (1980).

[48]. See Erin Ryan, Zoning, Taking, and Dealing: The Problems and Promise of Bargaining in Land Use Planning Conflicts, 7 Harv. Negot. L. Rev. 337, 347–49 (2002) (noting the increasingly discretionary practice of land use decisionmaking).

[49]. Fischel, supra note 20, at 18.

[50]. Id. at 5–6.

[51]. Vicki Been, “Exit” as a Constraint on Land Use Exactions: Rethinking the Unconstitutional Conditions Doctrine, 91 Colum. L. Rev. 473, 483 (1991); Molly S. McUsic, Looking Inside Out: Institutional Analysis and the Problem of Takings, 92 Nw. U.L. Rev. 591, 62526 & n.162 (1998).

[52]. Been, supra note 51, at 504, 509 (discussing how one community’s overly stringent regulation may result in an otherwise beneficial development being taken to a community with better regulatory policies).

[53]. See Been, supra note 6, at 227 –29 (noting the contributions of restrictions on housing supply to the lack of affordable housing options).

[54]. Steven J. Eagle, “Affordable Housing” as Metaphor, 44 Fordham Urb. L.J. 301, 306–21 (2017) (discussing the diverse economic and social benefits of affordable housing); see also Keith Wardrip et al., Ctr. for Hous. Policy, The Role of Affordable Housing in Creating Jobs and Stimulating Local Economic Development 10–13 (2011), https://providencehousing.org/wp-con tent/uploads/2014/03/Housing-and-Economic-Development-Report-2011.pdf.

[55]. Serkin, supra note 16 (offering a tentative justification for rent regulation).

[56]. For an overview of inclusionary zoning, see Cecily T. Talbert et al., Recent Developments in Inclusionary Zoning, 38 Urb. Law. 701, 702 –03 (2006).

[57]. See Vicki Been et al., Supply Skepticism: Housing Supply and Affordability, 29 Housing Pol’y Debate 25, 29 (2019).

[58]. N.Y.C., NY, The Zoning Resolution, art. II, ch. 5 (2018), https://www1.nyc.gov/site/ planning/zoning/access-text.page.

[59]. Benjamin Schneider, YIMBYs Defeated as California’s Transit Density Bill Stalls, Citylab (Apr. 18, 2018), https://www.citylab.com/equity/2018/04/californias-transit-density-bill-stalls/558341.

[60]. See id.

[61]. Been et al., supra note 57, at 27–29.

[62]. See Vicki Been et al., Preserving History or Restricting Development? The Heterogeneous Effects of Historic Districts on Local Housing Markets in New York City, 92 J. Urb. Econ. 16, 17 (2016) (“We find that construction activity falls in districts after designation, as expected given the rules accompanying designation.”).

[63]. For a description of zoning for historic preservation, see J. Dennis Doyle, Historic Preservation Zoning in Maryland, 5 Md. L.F. 100, 101–05 (1976).

[64]. See Catherine Hart, Community Preference in New York City, 47 Seton Hall L. Rev. 881, 905 (2017) (explaining that the influx of high-income individuals into low-income communities “replaces local residents and deprives long-time residents of the stake they have built in their community”).

[65]. Been, supra note 6, at 242–44.

[66]. See Sheryll Cashin, The Failures of Integration 324 –27 (2004); Rachel D. Godsil, The Gentrification Trigger: Autonomy, Mobility, and Affirmatively Furthering Fair Housing, 78 Brook. L. Rev. 319, 335–37 (2013) (discussing a more nuanced approach to gentrification).

[67]. The built environment is also important for community preservation, even independent of the financial pressures that can come from gentrification. As Professor Carol Rose observed decades ago, buildings can be important for constituting community, and indeed preservation efforts should be evaluated to that end. See Carol M. Rose, Preservation and Community: New Directions in the Law of Historic Preservation, 33 Stan. L. Rev. 473, 488–91 (1981).

[68]. See William A. Fischel, Neighborhood Conservation Districts: The New Belt and Suspenders of Municipal Zoning, 78 Brook. L. Rev. 339, 347–49 (2013) (discussing community preservation techniques other than those based on historic status).

[69]. See, e.g., Dan Grossman, Think Those Slot Homes in Denver Are Ugly? You’re Not Alone, 9 News, https://www.9news.com/article/money/personal-finance/real-estate/think-those-slot-homes-in-de
nver-are-ugly-youre-not-alone/73-490912391 (last updated Nov. 10, 2017, 2:44 PM) (discussing Denver residents’ aesthetic opposition to homes described as “Minecraft characters, Lego characters,” and “robots”).

[70]. See Shawn G. Rice, Zoning Law: Architectural Appearance Ordinances and the First Amendment, 76 Marq. L. Rev. 439, 446–48 (1993) (discussing the ways that architectural appearance ordinances can limit the aesthetics of communities).

[71]. Id. at 446 (describing architectural appearance ordinances as limiting “excessive dissimilarity” and requiring “conformity” or “harmony” (citations omitted)).

[72]. See Edward Scissorhands (20th Century Fox Dec. 6, 1990).

[73]. For a description of form-based codes, see Nicole Stelle Garnett, Hoover Inst., Upscaling the Neighborhood 18–32 (2018), https://www.hoover.org/sites/default/files/upscaling_ the_neighborhood_revised_final_garnett_0.pdf.

[74]. For an overview of this dynamic, see generally David Markell, Climate Change and the Roles of Land Use and Energy Law: An Introduction, 27 J. Land Use & Envtl. L. 231 (2012) (discussing the effect that “land use, energy efficiency, and mobile and stationary source emission reduction approaches” can have on climate change).

[75]. See Reid Ewing et al., Smart Growth Am., Measuring Sprawl and Its Impact 18–19 (2002), https://www.smartgrowthamerica.org/app/legacy/documents/MeasuringSprawl.PDF.

[76]. Patricia E. Salkin, Sustainability and Land Use Planning: Greening State and Local Land Use Plans and Regulations to Address Climate Change Challenges and Preserve Resources for Future Generations, 34 Wm. & Mary Envtl. L. & Pol’y Rev. 121, 147–56 (2009) (surveying regulatory land use techniques meant to increase sustainability).

[77]. See, e.g., John R. Nolon, An Environmental Understanding of the Local Land Use System, 45 Envtl. L. Rep. 10215, 10220–21 (2015).

[78]. Other kinds of less conventional responses are possible as well. For an example of one, see Rossi & Serkin, supra note 46.

[79]. See George F. Gramling, III, Wetland Regulation and Wildlife Habitat Protection: Proposals for Florida, 8 Harv. Envtl. L. Rev. 365, 377 –78 (1984).

[80]. See Christopher Serkin, Public Entrenchment Through Private Law: Binding Local Governments, 78 U. Chi. L. Rev. 879, 913 (2011) (discussing how building infrastructure with limited capacity can be more controlling than zoning).

[81]. See Bradley C. Karkkainen, Whither NEPA, 12 N.Y.U. Envtl. L.J. 333, 349 (2004) (arguing that environmental-informative requirements function as regulatory penalties, creating incentives to upgrade environmental standards early in projects).

[82]. Critical Paths for Vermont Wildlife, Nat’l Wildlife Fed’n, https://www.nwf.org/Our-Work/Habitats/Wildlife-Corridors/Northeast (last visited May 12, 2019).

[83]. See, e.g., Ensign Bickford Realty Corp. v. City Council of Livermore, 137 Cal. Rptr. 304, 309 (Ct. App. 1977); Sprenger, Grubb & Assocs., Inc. v. City of Hailey , 903 P.2d 741, 748 –49 (Idaho 1995).

[84]. See Coniston Corp. v. Village of Hoffman Estates, 844 F.2d 461, 466–67 (7th Cir. 1988).

[85]. A downtown commercial district may generate significant positive effects, which a big-box store at the edge of town can threaten. See Scott L. Cummings, Law in the Labor Movement’s Challenge to Wal-Mart: A Case Study of the Inglewood Site Fight, 95 Calif. L. Rev. 1927, 1948 –52 (2007).

[86]. Roderick M. Hills, Jr. & David Schleicher, The Steep Costs of Using Noncumulative Zoning to Preserve Land for Urban Manufacturing, 77 U. Chi. L. Rev. 249, 253 –56 (2010) (acknowledging the prevalence of the use of noncumulative zoning for these purposes but ultimately arguing against it).

[87]. Transwestern, New York City Life Science Market 5 (2017), https://download.trans
western.com/public/Media/NY-Life-Science-Outlook_2Q2017.pdf.

[88]. See Roderick M. Hills & David Schleicher, Planning an Affordable City, 101 Iowa L. Rev. 91, 115 –16 (2015) (“Many cities have no adequate substitutes, because they create agglomeration economies that rivals cannot duplicate.”).

[89]. Broadway enjoys a special zoning district. For an interesting overview of New York’s zoning code, see Allison Meier, How Zoning Laws Shaped New York City over the Last Century, Hyperallergic (Dec. 14, 2016), https://hyperallergic.com/341092/mastering-the-metropolis-mcny.

[90]. See Donald J. Smythe, The Power to Exclude and the Power to Expel, 66 Clev. St. L. Rev. 367, 397 –99 (2018) (analyzing the continued use of exclusionary zoning by local governments).

[91]. See, e.g., Timothy J. Choppin, Breaking the Exclusionary Land Use Regulation Barrier: Policies to Promote Affordable Housing in the Suburbs, 82 Geo. L.J. 2039, 2054 (1994) (“Discrimination, both racial and economic, is one reason suburban residents oppose affordable housing.”).

[92]. See Mick Dumke, Amid Affordable Housing Dispute, Conservatives Seek a Home on the Northwest Side, Chi. Sun-Times (May 23, 2018, 10:48 AM), https://chicago.suntimes.com/news/
affordable-housing-chicago-northwest-side-gop-conservative-republicans-northwest-side-jefferson-park-illinois-policy-institute (describing a political fight over a proposed affordable housing project in Chicago).

[93]. See Been et al., supra note 57, at 25 –27.

[94]. See Rose, supra note 3, at 862–63, 897; see also Melanie Yingst, Commission OKs Rezoning of Properties, Troy Daily News (June 14, 2018), https://www.tdn-net.com/news/43184/commission-oks-rezoning-of-properties (discussing an Ohio local zoning commission’s decision to rezone two agricultural properties to allow residential development of the area).

[95]. See generally Jonathan R. Macey, Promoting Public-Regarding Legislation Through Statutory Interpretation: An Interest Group Model, 86 Colum. L. Rev. 223 (1986) (discussing interest-group rent seeking).

[96]. See Robert H. Nelson, Privatizing the Neighborhood: A Proposal to Replace Zoning with Private Collective Property Rights to Existing Neighborhoods, 7 Geo. Mason L. Rev. 827, 833 (1999) (arguing that the proliferation of common interest communities demonstrates their appeal).

[97]. Charles M. Tiebout, A Pure Theory of Local Expenditures, 64 J. Pol. Econ. 416, 417–20 (1956).

[98]. See Denise Ryan, The $31b “Green” Branding of Vancouver, Vancouver Sun (Jan. 31, 2016), http://www.vancouversun.com/business/green+branding+Vancouver/11686117/story.html.

[99]. See Tiebout, supra note 97, at 418.

[100]. Serkin, supra note 2, at 13–15.

[101]. See Jessi Maness, The History of Music Row: 60 Years of Greatness, Sports & Ent. Nashville (Oct. 13, 2015), http://sportsandentertainmentnashville.com/the-history-of-music-row-60-years-of-greatness.

[102]. See, e.g., Michelle C. Kroft, Show Your Support—Help Save Music Row at the Rally the Row Event July 24th!, Hist. Nashivlle, Inc. (July 16, 2018), http://historicnashvilleinc.org/show-your-support-help-save-music-row-at-the-rally-the-row-event-july-24th [https://perma.cc/UVK8-R89Z] (“Since 2013, 43 buildings with music industry connections have been demolished—most to make way for apartment buildings.”); see also Margaret Renkl, The Day the Music Died, N.Y. Times (Jan. 21, 2019), https://www.nytimes.com/2019/01/21/opinion/nashville-music.html (outlining the gentrification of Music Row).

[103]. See Tony Gonzalez, Music Row Apartments Halted, Prompting New Study, Tennessean (Feb. 12, 2015 6:44 PM), https://www.tennessean.com/story/news/local/2015/02/12/music-row-apartment-plan-halted-prompting-study/23324495.

[104]. Open Letter from Ben Folds, owner of Grand Victor Sound (June 24, 2014), https://musicrow.com/2014/06/ben-folds-open-letter-rca-studio-a-to-be-sold.

[105]. See Richard Fausset, Deal Saves Historic Nashville Studio, N.Y. Times (Oct. 3, 2014), https://www.nytimes.com/2014/10/04/us/deal-saves-historic-nashville-studio.html.

[106]. Jessica Nicholson, National Trust for Historic Preservation and Historic Nashville to Hold Rally the Row Event, Music Row (July 20, 2018) (quoting Carolyn Brackett, Senior Field Officer, National Trust for Historic Preservation), https://musicrow.com/2018/07/national-trust-for-historic-preservation-and-historic-nashville-to-hold-rally-the-row-event [https://perma.cc/2DR2-6QU6%5D; see also id. (“We have to act now to save this place that is iconic and historically priceless.” (quoting Trey Bruce, Vice President, Historic Nashville)).

[107]. See, e.g., Nashville Metro. Planning Dep’t, Music Row Detailed Plan app. (2016) [hereinafter Music Row Detailed Plan], https://www.nashville.gov/Portals/0/SiteContent/Planning/
docs/MusicRow/Music%20Row%20Detailed%20Plan%20Draft%20Recommendations__withAppendix.pdf (Survey 1 Responses Organized by Question) (listing comments from survey respondents about preserving Music Row, including: “To me, the individual buildings create an overall feel that binds the community. It’s humble and full of character.”).

[108]. Nikki Junewicz, Historic Buildings in Danger in Music Row Redevelopment Proposal, Fox 17 Nashville (May 20, 2018) (quoting Jonathan Long, local bartender), https://fox17.com/news/local/
historic-buildings-in-danger-in-music-city-row-redevelopment-proposal [https://perma.cc/HDK4-RGL3%5D.

[109]. See Music Row Detailed Plan, supra note 107, at app. (“GROW[TH] SHOULD NOT OCCUR BY BUILDING . . . . That would only worsen the traffic and will be less inviting for tourism.”); see also E-mail from John Dotson, Parks Broker, e-Pro, to Planning Commissioners (Dec. 6, 2016, 11:40 AM), https://www.nashville.gov/document/ID/cdd7797e-1ed5-49c7-8e20-7fc9ef4fd8a9/
December-8-2016-public-comments-received-through-December-7 (“We are most concerned about traffic, parking and infrastructure.”).

[110]. See, e.g., Music Row Detailed Plan, supra note 107, at app. (commenting the following on getting around Music Row: “[I]nfrastructure should be considered BEFORE approval of millions of square feet of new construction, not after.”). Cf. Hiroko Tabuchi, How the Koch Brothers Are Killing Public Transit Projects Around the Country, N.Y. Times (June 19, 2018), https://www.nytimes.com/
2018/06/19/climate/koch-brothers-public-transit.html (discussing the support and opposition for a new transit plan in Nashville and other cities across the United States).

[111]. See Office of the Mayor Megan Barry, Housing Nashville: Nashville & Davidson County’s Housing Report 11 –12, 40–42 (2017) [hereinafter Nashville Housing Report], https://www.nashville.gov/Portals/0/SiteContent/MayorsOffice/AffordableHousing/Housing%20Nashville%20FINAL.pdf; see also Music Row Detailed Plan, supra note 107, at app. (commenting the following concerning how to strengthen the Music Row community: “Affordability. Nashville can’t chase out all of us median income people . . . .”).

[112]. Nashville Housing Report, supra note 111, at 11, 16.

[113]. See David Plazas, The Costs of Growth and Change in Nashville, Tennessean, https://www.tennessean.com/story/opinion/columnists/david-plazas/2017/01/29/costs-growth-and-change-nashville/97064252 (last updated Jan. 10, 2018, 6:50 PM) (discussing how the development boom in Nashville has led to increasingly high housing costs); Stephen Trageser, Music Row Development and Neighborhood Character, Nashville Scene (Sept. 25, 2018 3:00 PM), https://www.nashvillescene.com/news/pith-in-the-wind/article/21024081/music-row-development-and-neighborhood-character (“[W]ith Nashville real estate prices as high as they are today, the chances of [neighborhood business] finding a comparable spot nearby seem slim.”) (discussing the pressure to develop Music Row and its effect on existing businesses).

[114]. Staff Reports, Music Row Project Lands $12.8M Permit, Nashville Post (Apr. 4, 2018), https://www.nashvillepost.com/business/development/article/20999454/notes-music-row-project-lands-128m-permit (reporting that a development company has obtained a permit to build a Music Row office building expected to be worth $35 million).

[115]. Smart Growth Am., supra note 42, at 10–11 (analyzing the significantly positive fiscal impact and tax benefit of the Gulch, a dense infill development, compared to two other Nashville developments).

[116]. See Emily Hamilton, Three Lessons from Nashville’s Building Boom, Market Urbanism (Apr. 27, 2018), http://marketurbanism.com/2018/04/27/three-lessons-nashvilles-building-boom (“While there’s no way to legislate that great music will continue to come out of Music Row, the best way to make Nashville a good place for up and coming artists is to allow for new housing construction that will allow affordable neighborhoods to stay that way.”) (arguing that development has kept rents in other neighborhoods more affordable).

[117]. See Been, supra note 6, at 242–43.

[118]. See Patrick Sisson, On a Mission to Preserve Nashville’s Music Row, Meridian, https://www.meridian.net/tennessee/2016/11/10/13592846/nashville-live-music-row (last visited May 12, 2019) (describing the outsize impact Music Row has had on Nashville’s economy).

[119]. See Carolyn Brackett & Randall Gross, Nat’l Trust for Historic Pres., A New Vision for Music Row 15 (2016), https://www.nashville.gov/Portals/0/SiteContent/Planning/docs/
MusicRow/Music%20Row%20Recommendations%20Report%20April%202016.pdf (“Like in the early days of Music Row, many industry leaders and participants still walk between offices and meet up for lunch, networking, contracting, or collaboration.”).

From Nuisance to Environmental Protection in Continental Europe – Article by Vanessa Casado Perez & Carlos Gomez Liguerre

May 2019October 2019Southern California Law Review Admin

From Volume 92, Number 4 (May 2019)
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from nuisance to environmental protection in Continental Europe

Vanessa Casado Perez [*] & Carlos Gomez Liguerre [†]

Introduction

Neighboring relationships are prone to conflict. The use of an estate has effects on the one next to it. A doctor may be bothered by the noise coming from a confectioner’s business.[1] The more heterogeneous the uses of the pieces of property are, the more likely conflicts are to arise. While individuals have always had the capacity to affect the enjoyment of their neighbors, the situations became more complex with the advent of industrialization, which put residential and industrial users in close proximity.

Historically, the law of nuisance has been used to solve these conflicts. Nuisance law combines property and liability rules leading to injunction and damage remedies.[2] Today, regulation has been added to the mix of solutions to neighbors’ disputes. In environmental matters—the litmus test for nuisance—the choices are even more varied. As pollution got more egregious, regulation took the center stage. The increase in the number of parties tested the limits of the institution of nuisance. Regulation initially took the form of permits and licenses for the most egregiously polluting industries, often requiring those industries to adopt some precautions and, thus, reducing the potential nuisances. Second, land use planning mitigated the conflict between uses by regulating whether they were allowed to be in close proximity. Third, countries enacted environmental laws because industrialization brought the potential for smoke and particles to travel beyond the land of the immediate neighbor. Furthermore, even ex post liability has taken a regulatory turn with publicly enforced environmental liability schemes.

Nuisance was the first line of defense against pollution, but today it has been mostly superseded by regulatory schemes.[3] This shift left nuisance with a limited role—solving issues between a small number of close by neighbors—in almost every jurisdiction that lacks figures like public nuisance.[4] While it is foreseeable that two parties will negotiate ex ante to achieve a socially desirable outcome—for example, two parties may establish an easement or servitude between neighboring plots of land precluding potential nuisance [5]—the situation in which large amounts of people or their lands are affected requires a different type of response.

Even though its role has been reduced, private law nuisance regulation has not been static. Not only has the regulatory landscape become more complex, but also, as law and economics literature has analyzed, nuisance provisions have gone beyond the building blocks of property and liability rules, demonstrating the complexity of current regulation in scenarios of conflicting uses of property [6] and acknowledging the interplay with public regulatory standards.

The codification and evolution of nuisance in civil law jurisdictions illustrates perfectly the evolution just described. This Article analyzes the evolution and complexity of the legal responses to neighboring conflicts in European civil law countries. All of the civil codes analyzed (France, Germany, Spain, the Netherlands, and Catalonia) are based on Roman law rules that are not always clear. The fuzziness of those Roman law rules explains, in part, why the civil codes did not respond homogenously to nuisances, despite this common origin. The first Subsection briefly describes the institution of nuisance in Roman law. Then, this Article describes the original codification of nuisance and the changes in the treatment of this institution. After assessing the initial divergence and the trends towards similar rules across jurisdictions, this Article explains the potential forces of convergence at the European level: the Draft Common Frame of Reference, the E.U. Environmental Liability Directive, and the decisions of the European Court of Human Rights.[7]

I. Comparative Analysis of Nuisance Provisions

A. Nuisance and Roman Law: A Common Origin

Continental civil law jurisdictions’ nuisance regulation has a common origin: Roman law. There are few Roman texts dealing with nuisance. It is clear from the Digest of Justinian (“Digest”) that there was an action against someone who interferes with another’s property with intention to injure (innuria).[8] The response to the most common nuisance situation, in which a landowner injures another’s piece of land by using his own land in a purportedly legal way without aiming at affecting the enjoyment of his neighbors, did not have a clear footing in Roman law.[9]

There was a sense that although private property was absolute, there were some inacceptable interferences. Among interferences, smoke was the one that troubled medieval jurists the most when interpreting the Digest. The Digest explained that an owner of a cheese shop emitting smoke cannot interfere with his neighbor’s property, but the owner who emits smoke from a hearth can.[10] Bartolus of Saxoferrato, one of the greatest medieval jurists, suggested that what matters is the amount of smoke and the normal or abnormal character of the activity.[11] The lack of consensus among medieval jurists translated into different provisions in different jurisdictions at the time of codification.

B. Evolution: From Property to Torts

While there was discussion about the limits of property in Roman law, the civil codes adopted a very broad vision of property as stated in article 544 of the French Civil Code of 1804: “[p]roperty is the right of enjoying and disposing of things in the most absolute manner, provided they are not used in a way prohibited by the laws or statutes.”[12] The same trend can be observed in article 348 of the Spanish Civil Code [13] and in section 903 of the German one.[14] But this trend continues even today; the Catalan Civil Code, the most recent of continental Europe, still captures the same idea.[15]

Even though property was deemed absolute, European civil codes did not absolutely ignore negative externalities caused by a use of a piece of real estate property to neighboring ones. European civil codes regulate the equivalent of the tort of nuisance in two ways: as an action protecting property by injunction and as a tort action for damages.[16]

The regulation against nontrespassory invasions is understood primarily as a regulation between neighboring owners, and solutions are sought first in the realm of property. As a result of their common Roman law origins, European civil codes approach property holistically.[17] In this first building block—the property one—nuisance is configured as a sub-type of trespass, with the difference being that intrusion, instead of being physical, is produced by intangible substances.[18] The European civil codes incorporate rules that seek to solve the problem of immissions (nontrespassory invasions) ex ante through the constitution of easements, which allow the owner of an estate to carry out annoying activities and force the owner of another estate to put up with them. The easement can be constituted by agreement between the affected parties or by law. The basic ex post remedy against a nuisance is the action of cessation (from the Roman law actio negatoria),[19] with which the affected owner can paralyze the activities that are not covered by a servitude, similar to the remedy of injunction. This action is both an action and remedy. The right of damages has, in this first building block, a residual position.

Property rules, however, do not work that well when the owners are no longer contiguous and when the victims of the immission are many and cannot be identified ex ante.[20] As a result of the industrialization and the proliferation of highly polluting industrial activities, the scenario just described with multiple parties affected became commonplace. At that time, in the late nineteenth to early twentieth century, a second phase started where tort law and its ex post remedies supplemented the property protection in continental European legal traditions. Liability rules were applied to nuisance cases by either extending the rules of the law of torts or by jurisprudential doctrines, such as abuse of rights, which require reparation of the damage caused even though it is caused in the exercise of a pre-existing right. Some jurisdictions extended the general fault-based torts and, in other jurisdictions, strict liability provisions were enacted.[21] As we shall see, the idea of strict liability was difficult for European civil codes to embrace,[22] but the problems that nuisance tackles fit better in a strict liability framework. In fact, strict liability is preferable to forms of negligence because it affects the incentives of the polluter in relation to both precautions and the level of activity.[23]

In a third phase, even tort law proves to be insufficient. Administrative regulations start by regulating dangerous activities to health and the environment, becoming the benchmark for the standard of care. In most cases, those activities that have been authorized according to administrative regulations cannot be enjoined.[24] The estate owner affected by another’s activity can only request compensation for the damages he suffered. The role of liability rules has, thus, been reinforced in this phase dominated by administrative rules.

Remedies offer the most succinct way to summarize the evolution of nuisance. Initially, injunction (cessation action) was the main remedy. Then, jointly with injunction, damage compensation entered the picture. Finally, damage compensation became the main private law remedy because the tortfeasor may have had to pay compensation but the tortfeasor did not need to stop the action if it was protected by an administrative license.[25]

C. Country Provisions

This Section describes the different provisions. As noted, the original codification of nuisances in the different civil codes was not homogenous even though all traditions stem from Roman law. The lack of homogeneity across jurisdictions could also be explained by the date of approval and the stage of industrialization of different countries at the initial point of codification. The civil codes, which codify all of private law, of different countries were approved at different points in their history, from the 1800s to the early 2000s. Some codes were approved during the first industrial revolution, which ended in the early 1800s; others in the midst of the second industrial revolution in the late 1800s and early 1900s; and others around the mid-1900s when zoning was introduced. The differences, as shall be seen, do not exactly track the different levels of industrialization. It would be expected that a higher level of industrialization at the time of codification translated into a more fine-grained nuisance provision. In a more refined version of such a hypothesis, those countries where industrialization is mature may give a clearer response to nuisance. Before, while on their way to industrialization, the marginal value of the immission is high enough that the willingness to stop it may be lower.[26] But as industrialization advances, the marginal benefit of more industrial activities declines, and thus, conflicts may be solved favoring the nonindustrial actor.[27] This is reflected in the jurisprudence of the German courts, which updated its interpretation of the nuisance provisions.[28] The latter illustrates that the legislator was not the only driving force of change in nuisance provisions: courts also played an important role, which is not a common feature in civil law. Finally, convergence has been prompted by the preeminent role of administrative regulation on nuisances that may affect a large number of estates: jurisdictions are converging toward highly complex nuisance regulations.[29]

The following Subsections explore the regulation in five different jurisdictions, and Section I.D summarizes the threads underlying European regulation.

1. France

The broadest regulation of the protection of the right to enjoy one’s property can be found in the oldest regulation of the ones analyzed: the Napoleonic Code of 1804. The French Civil Code states the following in its article 544: “[p]roperty is the right of enjoying and disposing of things in the most absolute manner, provided they are not used in a way prohibited by the laws or statutes.”[30]

In fact, the preparatory works of the Code make no mention of nuisance.[31] Thus, to challenge a nuisance situation, the only option was the general damage action, which is a fault-based liability clause in article 1382 of the Code: “[e]very action of man whatsosever which occasions injury to another, binds him through whose fault it happened to reparation thereof.”[32]

The traditional nuisance scenario does not often fit a framework based on fault, though. Thus, it was up to the French judges to find a solution to neighboring problems. They used an “abus de droit” framework, particularly for interferences created with the aim to affect the neighbor.[33] If property were absolute, abusing only one’s own rights would be the source of liability. Later, French judges also created the doctrine of “troubles de voisinage” (neighbors’ problems) when a use of land was unduly offensive.[34] The analysis of “troubles de voisinage” is based on the idea that one who profits from an activity that his neighbor does not and imposes harm on him should compensate his neighbor for the harm. Nonetheless, if the neighbor has chosen a particularly sensitive activity, he should not be compensated. This judge-made law is still in place, but it has been complemented by regulation mitigating nuisances. For example, the Planning Code prohibits issuing a building permit if a structure “may be exposed to grave nuisance . . . , and in particular, those due to noise.”[35] This rule is not tailored to the particular situation and has no standard of unreasonableness. But judges have not been the only source of change. For example, the French Code of Construction and Housing allows the “coming to the nuisance” defense.[36]

In March 2017, the Ministry of Justice of the French Government issued a draft bill amending the tort provisions in the Civil Code (Projet de Réforme de la Responsabilité Civile).[37] The Project aims to modernize the tort provisions (extra-contractual liability) in the Civil Code, pushing the agenda set by Ordinance n°2016-131 of February 10, 2016 for the reform of contract law, the general regime of obligations and proof of obligations.[38] The proposed text includes a nuisance provision.

The Project would amend article 1244 of the Code as follows:

The owner, lessee, holder of a title whose principal object is a permission to occupy or exploit land or a building, or a person who commissions work on land or enjoys the latter’s authority, who causes a nuisance exceeding the normal inconveniences of being neighbours, is liable strictly for the harm resulting from the nuisance.

Where a harmful activity has been authorised by an administrative means, the court may, however, award damages or order reasonable measures permitting the nuisance to be stopped.[39]

2. Germany

Almost a century after the approval of the Napoleonic Code, the German Civil Code (“BGB”), approved in 1896 (coming into force in 1900), regulated ownership with more limitations than its French counterpart in section 1004:

If ownership is impaired in any other way than by deprivation or withholding of possession, the owner may require the disturber to remove the injury. If a continuance of the injury is to be apprehended, the owner may apply for an injunction.

The claim is barred if the owner is bound to submit to the injury.[40]

Even before the BGB, German courts had ruled on neighbors’ disputes applying standards of strict liability. In fact, up until 1883, industrial users were always at the losing end. In 1883, the Supreme Court of the Empire (Reichsgericht) adopted the locality rule, around the same time as industrial interests grew in importance. The interpretation of this provision in the early years of the twentieth century was clearly favorable to the developing industry: instead of defining locality as the surrounding area, courts looked at the situation in other cities.[41] This locality rule was incorporated in section 906 of the BGB, showing this slightly more limited conception of ownership. Section 906 expands the type, although not the choice necessarily, of remedies available. Instead of an injunction, if damages resulted from a nuisance that the plaintiff had to tolerate, the defendant would have to pay permanent damages. Section 906 of the current BGB provides the following:

(1) The owner of a plot of land may not prohibit the introduction of gases, steam, smells, smoke, soot, warmth, noise, vibrations and similar influences emanating from another plot of land to the extent that the influence does not interfere with the use of his plot of land, or interferes with it only to an insignificant extent.

. . . (2) The same applies to the extent that a material interference is caused by a use of the other plot of land that is customary in the location and cannot be prevented by measures that are financially reasonable for users of this kind. Where the owner is obliged to tolerate an influence under these provisions, he may require from the user of the other plot of land reasonable compensation in money if the influence impairs a use of the owner’s plot of land that is customary in the location or its income beyond the degree that the owner can be expected to tolerate.[42]

In 1994, this text was added to paragraph (1):

An insignificant interference is normally present if the limits or targets laid down in statutes or by statutory orders are not exceeded by the influences established and assessed under these provisions. The same applies to values in general administrative provisions that have been issued under section 48 of the Federal Environmental Impact Protection Act [Bundes-Immissionsschutzgesetz] and represent the state of the art.[43]

This legislative amendment goes in line with codifying the complex rules that Professors Georg von Wangenheeim and Fernando Gomez analyzed [44] or the broader pliability rules (a combination of property and liability rules) that Abraham Bell and Gideon Parchomovsky introduced.[45] In its current reading, section 906 is a great example of how legislation has tried to resolve the tension between the public interest and the principle of free enjoyment of one’s property. In other words, it shows the connection between administrative law and nuisance. The effect of embracing administrative law solutions for environmental issues and neighbor relations reduces the remedies toolkit. This scheme is reflected today not only in the 1994 version of the BGB but also in a provision of the 1974 Federal Act for the protection against emissions.[46] Like the BGB, this Act excludes injunctions (actio negatoria) and only allows for requiring precautions or compensation for both harm to one’s property and lost income if it stems from an activity that has been licensed by the administration. This concept of denial damage is gaining terrain.

Nonetheless, this displacement of injunctions was also not an innovation in Germany. Since 1869, when the Industrial Code for the North German Federation was issued, case law has recognized it. The Industrial Code established that there was no injunction if the activity emitting the nuisance had a license.[47] This defense was extended by courts to all cases where there was a permit [48] or, more recently, when the activities were deemed in the public interest.[49] Once again, in this realm, courts went beyond the text. Courts have connected the locality rule and administrative operating licenses rule that “a facility not licensed by the administration could not be judged as customary in a place.”[50] Courts have also affected the relationship between administrative statutes and nuisance when judges have encountered cases in which there was a violation of emissions administrative standards. While the violation does not automatically trigger the application of nuisance because the link between the damage and the violation needs to be proven, courts have reversed the burden of proof.[51]

3. Spain

The Spanish Civil Code of 1889 is thought to be influenced by the French Napoleonic Code, but its nuisance regulation is far more specific than the French one, perhaps because it was approved almost a century later. The specific regulation of article 590 of the Spanish Civil Code suggests that there is not a clear correlation between industrial development and the intricacies of the nuisance regulation because Germany was equally, if not more developed, than Spain and both their codes give specific responses to nuisance.

The detailed regulation in the Spanish Civil Code may be explained by the existence of a historical regulation of nuisance. In Spain, there were references in the Partidas of Alfonso X (The Wise) and in el Fuero Real,[52] both from the thirteenth century. In the early nineteenth century, a legal text (the Novisima Recopilacion), while not properly regulating nuisance, established rules about fire prevention or location of industries that demonstrate the concerns regarding nuisance.

This legal tradition is embodied in article 590 of the Spanish Civil Code, which is located in the property part of the Code. It reads as follows:

Nobody may build near a wall belonging to another or a party wall wells, drains, aqueducts, ovens, forges, chimneys, stables, deposits of corrosive materials, artefacts which moved by steam engine, or machines which, by themselves, or as a result of their products are dangerous or harmful, without keeping the distances provided in applicable regulations and local customs, and without performing the necessary protective works, subject to the conditions provided by the same regulations as to the manner of performing them.

In the absence of regulations, the precautions deemed necessary to prevent any damage to the neighbouring properties or buildings shall be taken, after the issuance of an expert report.[53]

Again, the Spanish Civil Code offers a more detailed regulation in article 1908 in the part dedicated to torts. It specifically targets situations that may amount to a nuisance and adopts a strict liability rule. A codified strict liability rule in the late nineteenth century was not common. Article 1908 reads as such:

Likewise, the owners shall be liable for damages caused:

1. By the explosion of machines which have not been taken care of with due diligence, and by the inflammation of explosive substances which have not been put in a safe and suitable place.

2. By excessive fumes which are harmful to persons or properties.

3. By the fall of trees placed on transit spaces, unless it results from force majeure.

4. By the emanations of drains or deposits of infectious materials which have been built without observing precautions appropriate to their location.[54]

In Spain, too, the role of courts has been central. While scholars of other jurisdictions perceive courts as moving in a single direction, Spanish courts have used different tests. As a recent Supreme Court decision states: “[t]he response of the Spanish legal regime and its complementary case law to the problem of harm caused to an individual by immissions that today we would label as ‘environmental’ has not been homogeneous.”[55] Echoing Roman law, the requirement of intention dominated some nuisance cases even though article 1908 does not require fault. From there, courts incorporated the French doctrine of abuse of rights, which was incorporated in the Spanish Civil Code in 1974,[56] during the dictatorship years. When the doctrine of abuse of rights fell short, courts looked to other European countries, namely Germany, for a model to follow. There, the distinction between nuisances that must be tolerated and those that must not hinges on the abnormal use of the property.[57] The confusion in the jurisprudence has been such that while there is no requirement of fault to request an injunction, courts have applied fault principles when an action for damages caused by nuisance has been brought.[58] In some of the cases in which they required fault when they should not have, the courts paid lip service to negligence by setting the bar of diligence extremely high, even in cases where the activity was subjected to a license and public regulation had been complied with.[59]

4. Netherlands

In the Netherlands, the discussion under the old Civil Code from 1838, which preceded the industrial revolution starting around 1850, traced a similar path to the one in French private law. Initially, the approach focused on the idea of property and the abuse of rights under article 625 of the old Civil Code, which determined that an owner could not use his property in a way that caused nuisance to others.[60] This was criticized because it treated article 625 as a basis for liability beyond the general negligence provision of article 1401, which read: “[e]very unlawful act which causes damage to another obliges the person by whose fault that damage was caused to compensate it.”[61] When the focus shifted to article 1401, the role of article 625 was interpreted to be merely that there was no defense against liability based on exercising one’s own property right.[62] The unlawfulness of article 1401 required either a violation of a statutory duty or the infringement of a right. In nuisance actions, Dutch courts expanded the traditional grounds for unlawfulness by adopting a proper social conduct test to determine when the nuisance was unlawful and, as a consequence, negligent. Based on this test, in 1919, the Dutch Supreme Court accepted noise as a violation of a property right.[63] The same 1919 decision made clear that holding a license did not give those creating a nuisance immunity from a tort action. In this case, the legislature responded faster than the courts. The Industrial Nuisance Act of 1875 [64] adopted a complex licensing system and an expansive view of nuisance by declaring that the denial of a license could be based on one of the following grounds: “(1) danger; (2) damage to property. . . ; and (3) serious nuisance, e.g. nuisance that makes a house partially or entirely impossible to live in and spreading of waste or disgusting smells.”[65]

One of the scholars who defended the assertion that article 1401 was the provision applicable to nuisance cases was a drafter of the new 1992 Civil Code, and accordingly, the social conduct test is still the controlling approach. The new Civil Code, though, has more specific provisions. Article 5:37 reads as follows:

The owner of immovable property may not, to a degree or in a way that is unlawful according to Article 6:162 of the Civil Code, cause nuisance to owners of other immovable properties by instigating sounds, vibrations, smells, smoke or gases or by denying these owners daylight or fresh air or by taking away the support of buildings or constructions.[66]

The reference to article 6:162 [67] is still a reference to negligence, showing the difficulty that civil law jurisdictions had in accommodating strict liability. The interpretation of the unlawfulness of the conduct depended on the definition of proper social conduct in Dutch case law. The test for proper social conduct is a multifactor test, which allows courts room to adapt the rule to the particular circumstances, such as the locality.[68]

While negligence still plays a role, its role has been diminished by the advent of explicit strict liability in many instances, such as the collapse of real property (article 6:174),[69] or the damage caused by dangerous substances (article 6:175).[70] The latter incorporates administrative standards to define when a substance is dangerous, and thus, the article applies. The switch between a property rule and a liability rule—that is, between injunction and damages—is not based on an administrative standard in the Dutch Civil Code. It is based on the public interest; the court will assess if a nuisance must be tolerated, although with compensation, based on compelling reasons of public interest (article 6:168).[71] Administrative regulations define what is in the public interest, but the Dutch Civil Code allows courts to look beyond regulations.

5. Catalonia

One of the most recent civil codes, the Catalan Civil Code of 2006, has a more detailed regulation. It includes a cessation action on articles 544-5 [72] and 544-6,[73] and then it devotes two articles to regulate what legal (article 546-13) and illegal (article 546-14) nuisances are, paying close attention to the role of regulation, as well as the economic benefits of the conflicting activities. It is worth noting that before the codification in 1990, the Catalan Parliament passed an act on nuisance with very similar regulations regarding the connections with administrative regulations. Both recognize that even though an activity may comply with existing regulations, it may still be a nuisance if damage occurs and the damage caused should be compensated. Both also established the nonrebuttable presumption that if an activity exceeds the legal limits set in specific legislation, the activity is a nuisance. It also regulates a situation reminiscent of the famous U.S. case, Boomer v. Atlantic Cement Co.[74] The Catalan Civil Code allows an activity to continue while compensating for past and future damages if the cessation of said activity will have dire economic consequences. The nuisance provisions seem to align with the current regulation in section 906 of the BGB and, in general, with the trend toward the incorporation of administrative law in private law analysis.

1. The proprietors of an estate must tolerate emissions coming from a neighbouring estate that are innocuous or that cause prejudice that is not substantial. In general, prejudice is considered substantial when it exceeds the limit or indicative values established by the laws or regulations.

2. The proprietors of an estate must tolerate emissions that cause substantial prejudice if they are the result of the normal use of the neighbouring estate, according to the regulations, and if putting an end to them involves an expenditure that is economically disproportionate.

3. In the case referred to in Section 2, the proprietors affected have the right to receive indemnification for damage caused in the past and economic compensation, set by common agreement or judicially, for any that may be caused in the future if these emissions excessively affect the produce of the estate or its normal use, according to local custom.

. . . 5. Substantial emissions that come from administratively authorised installations give the neighbouring proprietors affected the right to request the adoption of technically possible and economically reasonable measures to prevent the damaging consequences and to request indemnification for the damage caused. If the consequences can not be prevented in this way, the proprietors have the right to economic compensation, established by common agreement or judicially, for damage that may occur in the future.[75]

D. Comparative Analysis

First, although every continental civil code analyzed has a common origin in Roman law, the lack of clarity in Roman norms still seeped into the codification. Moreover, as mentioned, it cannot be said that their Roman origins translated into convergence at the time of codification. Similarly, the divergence at the outset cannot be explained by the different levels of industrialization. The hypothesis was that differences between nuisance provisions included in the civil codes traced the economic development of the particular country. The idea behind such a hypothesis is that those rules enacted at the beginning of industrialization coupled with development of urban areas would be more detailed because the conflicts between neighboring activities would be more acute, particularly in the absence of zoning and other public regulations. Germany and Spain approved their civil codes at roughly the same time, and while Germany had a higher level of industrialization, its provisions do not necessarily reflect this. An alternative hypothesis could be that at the beginning of industrialization, while conflicts were acute, institutional actors felt the need to be lenient toward those industrial activities imposing on their neighbors given that the social benefits they brought were high. Thus, jurisdictions would pay more heed to nuisance once industrialization was mature, and the marginal benefit from an industrial activity may not exceed the marginal harm to a nonindustrial actor.[76] Broad nuisance provisions may suggest that these adaptations could occur at the judicial level.

Second, while nuisance provisions did not change much in the codes until the 1990s, their interpretations have. Judges have been very important driving forces of evolution and convergence in nuisance law toward strict liability.

Third, the evolution of nuisance provisions where they have been amended or where recent provisions have been enacted acknowledges the complexity of the current framework regulating relations between neighbors increasingly dominated by public law. Borrowing Professor Mark Geistfeld’s title, it can be said that the newest provisions make explicit the role of tort law in the age of statutes.[77] As a result, these provisions are more complex.

There are two main tenets of this relationship between tort and administrative regulation. First, some regulations specifically state that if there is damage and the defendant has violated the pertinent administrative regulations, it will be assumed that the damage is substantial enough that the nuisance does not need to be tolerated.[78] Even in the absence of such an explicit regulation, if damage exists, there would be a strong presumption against the defendant before the courts. Second, complying with the administrative regulation does not mean that nuisance is excluded if there is damage, but rather the remedy changes, as will next be described. As Professors Georg von Wangenhein and Fernando Gomez pointed out, nuisance rules today are a combination of property and liability rules, and the switch between the two types of rules is provided by a regulatory standard.[79] While administrative regulation could explicitly preempt nuisance actions by declaring an activity a legal nuisance,[80] thus requiring the landowner affected to endure it, the avenue most commonly taken by European jurisdictions is that even when in compliance with the regulation, damages and preventive measures, but not injunctions, are available.[81] The impact of the coordination with administrative standards on Coasean bargaining remains to be analyzed. If an actor needs to comply with a regulation, the option of paying the party supporting a higher level of interference becomes less attractive because the actor will also face a fine.[82]

II. Forced Convergence at the European Level?

All the civil law jurisdictions analyzed are part of the European Union and parties to the European Convention on Human Rights. As a result, there could be transnational forces of convergence, defining either nuisance rules themselves or the realm in which private nuisance can operate.

This Article analyzes three potential sources of convergence. First, while there has not been a binding harmonization of private law and, thus, there is no European nuisance, the Draft Common Frame of Reference (“DCFR”), which offers a sort of uniform civil code for European countries, will be briefly discussed. The DCFR can offer a sense of what direction jurisdictions will take in the future, a focal point for convergence of sorts. Next, this Article covers the Environmental Liability Directive. All countries analyzed above need to implement the Directive. Given the subject matter of the Directive, it has a clear impact on nuisance. It has a potential impact in two ways. First, for those regulations that incorporate the administrative standard to assess whether the interference is substantial, the standard is now homogeneous because it is set at the European level. Second, it establishes a public liability regime, and thus may compete with private nuisance actions. Finally, this Section reviews the decisions of the European Court of Human Rights that have considered nuisances a violation of a person’s right to respect for his private and family life as well as his home. National authorities that fail to respond to nuisances promptly and adequately may be found in violation of the European Human Rights Convention. As a consequence, national authorities may reduce even further the need for nuisance provisions to play a complementary role, although its existence clearly plays such a role and contributes to deterrence.

A. The Draft Common Frame of Reference

In 2009, the European Commission published the DCFR.[83] The DCFR is similar to the Uniform Commercial Code and the Restatement in the United States, without being either.[84] Although it has been described a “European Civil Code in all but name,”[85] it is not yet that. It sets up the minimum common denominator across the private law of European countries that should facilitate the future unification of private law at the European level to strengthen the common market, but there is not yet anything to restate. The DCFR aims to serve as a model for both future European Law and future national law as it also identifies the best legal solutions.[86]

Article VI.-3:206 of the DCFR (Accountability for damage caused by dangerous substances or emissions) states the following :

(1) A keeper of a substance or an operator of an installation is accountable for the causation by that substance or by emissions from that installation of personal injury and consequential loss, loss within VI.-2:202 (Loss suffered by third persons as a result of another’s personal injury or death), loss resulting from property damage, and burdens within VI.-2:209 (Burdens incurred by the State upon environmental impairment), if:

(a) having regard to their quantity and attributes, at the time of the emission, or, failing an emission, at the time of contact with the substance it is very likely that the substance or emission will cause such damage unless adequately controlled; and

(b) the damage results from the realisation of that danger.

. . . (3) “Emission” includes:

(a) the release or escape of substances;

(b) the conduction of electricity;

(d) noise and other vibrations; and

(e) other incorporeal impact on the environment.

. . . (5) However, a person is not accountable for the causation of damage under this Article if that person:

(a) does not keep the substance or operate the installation for purposes related to that person’s trade, business or profession; or

(b) shows that there was no failure to comply with statutory standards of control of the substance or management of the installation.[87]

The DCFR targets only harm to people or property, not pure ecological damage. As such, diminished revenues by a restaurant as a result of the loss of an environmental amenity do not fall under this article. The scope is limited to: (1) substances—solid, liquid, or gas—that are objectively dangerous, either by nature or because they are kept in large quantities; and (2) emissions—a broader concept. The DCFR adopts strict liability for nuisances created by commercial or industrial activities. Non-professional parties, according to the comments to the DCFR, may still be liable but under a negligence rule.[88] According to article 3:102 of the DCFR, a person is negligent when he “does not meet the particular standard of care provided by a statutory provision whose purpose is the protection of the person suffering the damage from that damage.”[89] Furthermore, under the DCFR, compliance with public regulation standards offers a defense, an issue not admitted in every jurisdiction. The DCFR may be a force of convergence in the future if either the European Union decided to enact these provisions or if countries used it as a focal point for future reforms of their civil codes. As of today, it shows the tension between negligence and strict liability that many European jurisdictions face when regulating nuisance and the need to acknowledge the preeminence of administrative regulations.

B. E.U. Environmental Liability Regulation

1. Directive

It is impossible to fully grasp the role of nuisance in European law without understanding the European Directive 2004/35, of 21 of April, on environmental liability with regard to the prevention and remedying of environmental damage.[90] This Directive aims at protecting public property or common goods that are not covered by civil code rules protecting private property and at solving the collective action problem normally associated with such environmental damage. Furthermore, the transboundary character of many environmental issues made the common regulation necessary. The Directive adopts the “polluter pays” principle [91] and specifically states that it is complementary to the national regulations. For the purpose of this piece, article 3(3) states: “[w]ithout prejudice to relevant national legislation, this Directive shall not give private parties a right of compensation as a consequence of environmental damage or of an imminent threat of such damage.”[92]

The content of article 3(3) leaves national nuisance provisions intact, and it is surprising for two reasons. First, Directive 2004/35 deviated from the content of the White Paper [93] that started the legislative process for this Directive. In that White Paper, the Commission pointed at the need to create a level playing field for all the actors subject to E.U. environmental liability.[94] Given that the European Union embraces the complementarity between private and public enforcement, the lack of harmonization of private remedies is surprising because the Directive was expected to follow the steps of other European regulations, such as defective products.[95] It is remarkable that something similar happened in the case of waste regulation. The substantive regulation of waste management in the European Union was accompanied by a proposal of harmonized liability framework, in which compliance with a license to operate was not considered a defense.[96] The proposal was abandoned, and now waste falls under the Environmental Liability Directive.

Second, the European Union is a member of the Aahrus Convention, and it has been argued that the European Union’s lack of civil remedies in the environmental liability directive may be in tension with article 9(2)(b) of the Convention, which calls for such remedies.[97] In fact, in 2016, the European Commission in its roadmap, titled “[c]ommunication on access to justice at national level related to measures implementing EU environmental law,” expressed the problems that still exist due to the lack of harmonization across member states.[98]

2. Countries’ Responses

Each country must incorporate the contents of the Directive 2004/35 into their own national legislation. All national laws incorporating the E.U. regulation go beyond harm to the environment by including provisions that carve out property damages. Those private damages are not dealt with in the special legislation.[99] The statutes seem to set up clear boundaries between environmental damage and other types of damages, closing the door to potential claims of breach of statutory duty because the scope of the norm does not cover those private interests. Instead, private damages are subject to the general nuisance rules. It is difficult to imagine a case in which a court will deny that, provided there is property damage, there is no nuisance when the defendant has been found liable under the environmental liability statutes. A violation of the statute will play a role when ascertaining fault, or where nuisance is governed by strict liability, a violation can be sufficient evidence that the damage reaches the threshold of significance and that such nuisance should not be tolerated.[100]

C. Nuisance as a Violation of Human Rights

An interesting development in this field is the jurisprudence of the European Court of Human Rights (“ECHR”), which considers nuisance a violation of human rights. The ECHR did so in López Ostra v. Spain. The plaintiff, López Ostra, lived near the town’s waste-treatment plant, which caused odors, fumes, and noise.[101] The Spanish executive authorities were passive and did not respond promptly to stop the nuisance.[102] The ECHR in López Ostra expressed that: “severe environmental pollution may affect individuals’ well-being and prevent them from enjoying their homes in such a way as to affect their private and family life adversely, without, however, seriously endangering their health.”[103]

Accordingly, the Court decided that López Ostra had a right to respect for her private and family life, her home, and her correspondence according to article 8 of the European Convention on Human Rights:

1. Everyone has the right to respect for his private and family life, his home and his correspondence.

2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.[104]

Courts generally give Spain’s authorities room to balance the rights of the individual with the public interest, but in this case, Spanish authorities had gone too far. The Court awarded López Ostra pecuniary damages based on the depreciation of her home and nonpecuniary damages to compensate for her mental anguish.[105] The Kingdom of Spain had to pay 4,000,000 pesetas in 1998 (around 27,719 in U.S. dollars).[106]

The ECHR has had the opportunity to reiterate the same doctrine in two subsequent cases on immissions. Both cases were against Spain and about noise nuisances. The cases are Moreno Gómez v. Spain [107] and Cuenca Zarzoso v. Spain.[108] In the first decision, the Court stated that:

Although the object of Article 8 is essentially that of protecting the individual against arbitrary interference by the public authorities, it may involve the authorities’ adopting measures designed to secure respect for private life even in the sphere of the relations of individuals between themselves . . . . Whether the case is analysed in terms of a positive duty on the State to take reasonable and appropriate measures to secure the applicants’ rights under paragraph 1 of Article 8, or in terms of an interference by a public authority to be justified in accordance with paragraph 2 of Article 8, the applicable principles are broadly similar. In both contexts regard must be had to the fair balance that has to be struck between the competing interests of the individual and of the community as a whole. Furthermore, even in relation to the positive obligations flowing from the first paragraph of Article 8, in striking the required balance the aims mentioned in the second paragraph may be of a certain relevance . . . .[109]

López Ostra, Moreno Gómez, Cuenca Zarzoso, and other decisions, such as the decision dealing with the noise produced by runaways at Heathrow Airport, should push public authorities to enforce the environmental regulations to prevent and stop nuisances, thus reducing the sphere of private law. There is an obligation of the States that have signed the European Convention on Human Rights to adopt the appropriate administrative measures to prevent nuisances that affect the lives of their citizens.

Conclusion: Is There Still a Role for Private Law?

This Article’s analysis of the nuisance provisions in several European civil law countries has shown the different stages of the protection against nuisances: from property, to torts, and then to public regulation. At the time of codification, these European countries did not converge even though their traditions all stem from Roman law. Some countries have almost no provision of nuisance; in other countries, fault liability triggers damages that are combined with cessation actions; and yet, others adopted strict liability.

These divergent nuisance provisions still play a role today, albeit a reduced one. European civil law jurisdictions’ nuisance provisions reflect the evolution from nuisance problems between two adjacent neighbors to a scenario of nuisance conflicts between heterogeneous users with a high number of potential defendants. Like in the common law, nuisance provisions work well for the former. For the latter, public regulations take the central stage. Recently enacted or amended civil codes converge in the sense that they acknowledge the interplay between private law and public regulation. In many cases, private nuisance is not wholly displaced, but the remedies available to defendants will depend on whether the activity causing a nuisance has been administratively authorized. If it is administratively authorized, the cessation action that leads to an injunction remedy is no longer available.

[*] *. Associate Professor, Texas A&M School of Law. Research Associate Professor, Texas A&M Department of Agricultural Economics. Affiliated Researcher, The Bill Lane Center for the American West, Stanford University. E-mail: vcasado@law.tamu.edu.

[†] †. Profesor Titular, Universitat Pompeu Fabra Barcelona. Humboldt Research Scholarship for Experienced Researchers – Alexander von Humboldt Stiftung. E-mail: carlos.gomez@upf.edu. The authors want to thank the organizers of and participants in the Convergence and Divergence in Private Law conference held at the New York University School of Law on November 13, 2018. The authors thank Joseph Rebagliati and Steffani Fausone for their excellent research assistance.

[1]. R.H. Coase, The Problem of Social Cost, 3 J.L. & Econ. 1, 2 (1960).

[2]. This mix of remedies makes the analysis of this legal institution complex. “There is perhaps no more impenetrable jungle in the entire law than that which surrounds the word ‘nuisance.’” Prosser and Keeton on the Law of Torts § 86, at 616 (W. Page Keeton et al. eds., 5th ed. 1984). Professor Henry Smith states that “[i]n light of these conflicting strains of thought about nuisance, the law of nuisance is widely regarded as a ‘mess,’ a ‘wilderness of law,’ a ‘legal garbage can,’ and a ‘mystery.’” Henry E. Smith, Exclusion and Property Rules in the Law of Nuisance, 90 Va. L. Rev. 965, 970 (2004) (citations omitted). However, Professor Smith believes that there it is not so such a mess but a combination of property rights delineating strategies. Id.

[3]. The literature is rich on the choice between ex ante regulation or ex post liability as substitutes. For an account on this topic, see Steven Shavell, Economic Analysis of Accident Law 277 –84 (1st ed. 1987).

[4]. For a definition of public nuisance, see Nuisance, Encyclopædia Britannica, https://www.
britannica.com/topic/nuisance#ref59803 (last visited May 17, 2019). For an analysis of public nuisance, see generally John E. Bryson & Angus Macbeth, Public Nuisance, the Restatement (Second) of Torts, and Environmental Law, 2 Ecology L.Q. 241 (1972).

[5]. Richard A. Epstein, The Economic Structure of Roman Property Law, in The Oxford Handbook of Roman Law and Society 513, 521 (Paul J. du Plessis et al. eds., 2016).

To prevent undue complication of the title, the general law restricts the scope of servitudes. It is not possible to place a servitude on a servitude, or subject them to time limitations or specific conditions. Similarly, servitudes can only bind adjacent properties, thus reducing the difficulty of detecting who is in breach, and facilitating (by reducing the number of parties) the renegotiation or termination of the servitude. These restrictions on freedom of contract give greater clarity to third persons without imposing serious economic disadvantages on the initial parties or their successors in title. The practices that are barred are ones that generally do not make economic sense. The added clarity to the relationship allows servitudes to hold their value over time.

Id.

[6]. Saul Levmore, Unifying Remedies: Property Rules, Liability Rules, and Startling Rules, 106 Yale L.J. 2149, 2160–66 (1997).

[7]. It is important to note that this Article focuses only on regulations and remedies related to nontrespassory invasions on real property, not on noninvasive, aesthetic nuisances.

[8]. Dig. 47.10.44 (Javolenus, From the Posthumous Works of Labeo 9).

[9]. See James Gordley & Arthur Taylor von Mehren, An Introduction to the Comparative Study of Private Law 167–71 (2006); see also Thomas Glyn Watkin, An Historical Introduction to Modern Civil Law 255 –56 (1999); David B. Schorr, Historical Analysis in Environmental Law, in The Oxford Handbook of Legal History 1001, 1008 (Markus D. Dubber & Christopher Tomlins eds., 2018); Peter G. Stein, ‘Equitable’ Remedies for the Protection of Property, in New Perspectives in the Roman Law of Property 185, 194 (Peter Birks ed., 1989).

[10]. Dig. 8.5.8 (Ulpian, Edict 17).

[11]. See Gordley & Taylor von Mehren, supra note 9, at 169 –70.

[12]. The Code Napoleon; Or, The French Civil Code art. 544, at 150 (A Barrister of the Inner Temple trans., 1827) [hereinafter The Napoleonic Code of 1804], http://files.libertyfund.org/
files/2353/CivilCode_1566_Bk.pdf (providing a translation of the French Civil Code of 1804).

[13]. Código Civil [C.C.] [Civil Code] art. 348 (Spain), translated in Ministerio de Justicia, Spanish Civil Code 70 (Da Sofía de Ramón-Laca Clausen trans., 2013).

[14]. “The owner of a thing may, to the extent that a statute or third-party rights do not conflict with this, deal with the thing at his discretion and exclude others from every influence.” Bürgerliches Gesetzbuch [BGB] [Civil Code], § 903, translation at https://www.gesetze-im-internet.de/
englisch_bgb/englisch_bgb.html#p3704 (Ger.).

[15]. “Property acquired legally grants to the owners the right to the full use of the properties that constitute its object and to possess and dispose thereof.” Codi Civil de Catalunya art. 541-1, translated in Law 5/2006, of 10 May, on the Fifth Book of the Civil Code of Catalonia, Relating to Real Rights, Parlament de Catalunya 23, https://www.parlament.cat/web/documentacio/altres-versions/lleis-
versions/index.html (last visited May 17, 2019).

[16]. The structure of these legal claims resembles the order suggested by Smith, supra note 2, at 978–81, according to which the availability of different remedies depends on the level of information shared by the affected parties. The choice between property or liability rules, as the choice between exclusion and governance as strategies to delineate property rights, depends on the cost of information. Accordingly, nuisance has components of both liability and property rules.

[17]. This holistic approach differs from the more fragmented common law one. Yun-chien Chang & Henry E. Smith, An Economic Analysis of Civil Versus Common Law Property, 88 Notre Dame L. Rev. 1, 7 (2012). According to these authors, the differences are not relevant. The divergence is just explained by a different system of property delineation. Id. at 5–6; see also Henry E. Smith, Exclusion Versus Governance: Two Strategies for Delineating Property Rights, 31 J. Legal Stud. S453, S457 (2002) [hereinafter Smith, Exclusions Versus Governance].

[18]. The difference between trespass and nuisance is far from clear, as it happens in the common law. “The distinction between liability in trespass to land, nuisance, and Rylands v. Fletcher is extremely fine and varies from jurisdiction to jurisdiction within the Common Law.” Konrad Zweigert & Hein Kötz, Introduction to Comparative Law 606 (Tony Weir trans., 3d rev. ed.1998).

[19]. Herbert Hausmaninger & Richard Gamauf, Am. Philological Ass’n, A Casebook on Roman Property Law 232 n.34 (George A. Sheets trans., Oxford Univ. Press 2012) (2003); see also Reinhard Zimmermann, The Law of Obligations: Roman Foundations of the Civilian Tradition 910 (Oxford Univ. Press 1996).

[20]. The growth in the number of victims increases transaction costs to the potential tortfeasor because it would need to reach an agreement with each of the victims as to the best way to compensate them. In such a scenario, liability rules are better. Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089, 1108 –09 (1972); see also Richard A. Posner, Economic Analysis of Law 62–66 (9th ed. 2014). But see Robert C. Ellickson, Alternatives to Zoning: Covenants, Nuisance Rules, and Fines as Land Use Controls, 40 U. Chi. L. Rev. 681, 690, 729 –30 (1973). For Professors Louis Kaplow and Steven Shavell, the choice between a property or a liability rule lies not only on the existence of transaction costs but also on the existence of imperfect information in relation to the potential damages (of the tortfeasor, the victim, and the judge deciding the case). See Louis Kaplow & Steven Shavell, Property Rules Versus Liability Rules: An Economic Analysis, 109 Harv. L. Rev. 713, 719 (1996). For a general explanation, see Keith N. Hylton, The Economics of Nuisance Law, in Research Handbook on the Economics of Property Law 326, 323 –43 (Kenneth Ayotte & Henry E. Smith eds., 2011). Professor Smith defines two strategies to delineate property rights: exclusion and governance. The cessation action belongs to the former, with the rest of nuisance to the latter. Nuisance is thus a hybrid. See Smith, supra note 2, at 991. For a general account of exclusion versus governance as methods of delineating property rights, see Smith, Exclusions Versus Governance, supra note 17, at S457–67.

[21]. For a comparative survey, see Jean Limpens et al., Liability for One’s Own Act, in 11 International Encyclopedia of Comparative Law: Torts pt. I, 119–25 (André Tunc ed., 1983).

[22]. See Gerhard Wagner, Comparative Tort Law, in The Oxford Handbook of Comparative Law 1003, 1029–34 (Mathias Reimann & Reinhard Zimmermann eds., 2008).

[23]. Steven Shavell, Strict Liability Versus Negligence, 9 J. Legal Stud. 1, 7 (1980).

[24]. Administrative agencies displace owners as first-order decisionmakers who can choose any use they want for their properties. This governance rule comes accompanied by a displacement of injunction as an available remedy. The right of the neighbor not to be interfered with by the use of someone else’s plot of land is now protected only by a liability rule. This does not mean though that property rules protecting entitlements via injunction do no longer exist. They still apply to all situations in which uses do not require an administrative authorization. For an analysis of the trade-offs between property and liability rules, see Smith, supra note 2, at 1047 –48.

[25]. Professor Saul Levmore has described an evolution of remedies from a property rule to a liability rule. The continental European process does not fit into any of the typologies proposed by Professor Levmore. In the case of nuisance, European regulation has changed from a property rule (A stops B) to another damage compensation rule without the need to stop the activity (B pays A, but B can continue his activity provided that B complies with the administrative authorization of the activity). Levmore, supra note 6, at 2156; see also Smith, supra note 2, at 970.

[26]. Kenneth S. Abraham, The Relation Between Civil Liability and Environmental Regulation: An Analytical Overview, 41 Washburn L.J. 379, 384 (2002).

[27]. Id.

[28]. See infra Section I.C.2.

[29]. Georg von Wangenheim & Fernando Gomez, Conflicts of Entitlements in Property Law: The Complexity and Monotonicity of Rules, 100 Iowa L. Rev. 2389, 2391–95 (2015).

[30]. The Napoleonic Code of 1804, supra note 12, art. 544, at 150.

[31]. Gordley & Taylor von Mehren, supra note 9, at 170.

[32]. The Napoleonic Code of 1804, supra note 12, art. 1382, at 378.

[33]. James Gordley, Disturbances Among Neighbours in French Law, in 2 The Development of Liability Between Neighbours 65, 84 –85 (James Gordley ed., 2010).

[34]. Id. at 69; see also Thierry Kirat, Les conflits liés au voisinage. L’effet des relations juridiques sur la construction institutionnelle de l’espace, in Proximités et changements socio-économiques dans les mondes ruraux 243, 249–50 (2005) (Fr.).

[35]. Code de l’urbanisme art. R111-3 (Fr.), translated in Gordley, supra note 33, at 79.

[36]. Code de la construction et de l’habitation art. L112-16 (Fr).

[37]. Projet De Reforme De La Responsabilite Civile [Reform Bill on Civil Liability], (proposed Mar. 13, 2017) (Fr.), http://www.justice.gouv.fr/publication/Projet_de_reforme_de_la_responsabilite_
civile_13032017.pdf, translated in Reform Bill of Civil Liability (proposed Mar. 13, 2017), http://www.te
xtes.justice.gouv.fr/art_pix/reform_bill_on_civil_liability_march_2017.pdf. Previously, other proposed amendments by Terre, Catala, and Béteille also included nuisance provisions intended for inclusion in the code as an anchor for the “troubles of neighbors.” Clément Bizet, Les troubles du voisinage: définition et régime, in Avant-projet de loi Réforme de la responsabilité civile 21, 22, 24 (2018), https://hal-univ-paris10.archives-ouvertes.fr/hal-01793099/document.

[38]. Ordonnance 2016-131 du 10 février 2016 portant réforme du droit des contrats, du régime général et de la preuve des obligations, Journal Officiel de la République Française [J.O.] [Official Gazette of France], Feb. 11, 2016, No. 26.

[39]. Projet De Reforme De La Responsabilite Civile art. 1244.

[40]. The German Civil Code art. 1004, at 226 (Chung Hui Wang trans., 1907), https://archive.org/
details/germancivilcod00germ/page/n3 (providing a translation of the original German Civil Code).

[41]. Andreas Thier, Disturbances Between Neighbours in Germany 1850-2000, in 2 The Development of Liability Between Neighbours, supra note 33, at 87, 93.

[42]. Bürgerliches Gesetzbuches [BGB] [Civil Code], § 906, translation at https://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.pdf.

[43]. Id. § 906, para. 1, sentences 23.

[44]. See generally von Wangenheim & Gomez, supra note 29 (analyzing the interaction between private law rules and public law regulatory standards).

[45]. See generally Abraham Bell & Gideon Parchomovsky, Pliability Rules, 101 Mich. L. Rev. 1 (2002) (discussing contingent rules and entitlements, that is rules that protect the holder of a property entitlement or liability rule, depending on whether some condition has been met or not).

[46]. Bundes-Immissionsschutzgesetz [BImSchG] [Federal Immission Control Act], Mar. 15, 1974, Bundesgesetzblatt, Teil I [BGBl I] at 721, last amended by Gesetz [G], July 18, 2017, BGBl I at 2771, art. 3 (Ger.), https://www.gesetze-im-internet.de/bimschg/BJNR007210974.html#BJNR00721097
4BJNG000103360.

[47]. Gewerbeordnung für den Norddeutschen Bund [Trade Regulations for the North German Confederation], June 21, 1869, § 26 (current version at Gewerbeordnung [GewO], as amended Gesetz [G], Nov. 29, 2018, BGBl I at 2666, tit. II, https://www.gesetze-im-internet.de/gewo/BJNR002450
869.html#BJNR002450869BJNG000202301 (Ger.)).

[48]. For an example of a case in which a court considered that neighbors had to tolerate the sparks from a railway because the railway had a permit, see Reichsgericht [RG] [Federal Court of Justice] Sept. 20, 1882, Entscheidungen des Reichsgerichts in Zivilsachen [RGZ] 265 (267), 1882 (Ger.).

[49]. Thier, supra note 41, at 95.

[50]. Id. at 97, 99 (citing Bundesgerichtshof [BGH] [Federal Court of Justice] Oct. 30, 1998, 140 Entscheidungen des Bundesgerichtshofes in Zivilsachen [BGHZ] 1 (6), 1999 (Ger.)). Building licenses are only one factor to consider when analyzing the customary nature of an activity, though. The role of courts in the expansion of strict liability emanating from section 906 of the BGB did not end here. Courts have applied section 906 of the BGB to cases in which there was an illegal use of land and which would result in a negligence claim if the defendant had acted with fault. Id. at 102 (citing Bundesgerichtshof [BGH] [Federal Court of Justice] Mar. 2, 1984, 90 Entscheidungen des Bundesgerichtshofes in Zivilsachen [BGHZ] 255 (262) (Ger.)).

[51]. Id. at 100.

[52]. Aniceto Masferrer, Relations Between Neighbours in Spanish Law 1850–2000, in 2 The Development of Liability Between Neighbours, supra note 33, at 173, 177.

[53]. C.C. art. 590 (Spain), translated in Ministerio de Justicia, supra note 13, at 107.

[54]. Id. art. 1908.

[55]. S.T.S., May 31, 2007 (R.J., No. 589, p. 3431) (Spain).

[56]. De Bases para la modificación del título preliminar del Código Civil ch. 3, art. 7, para. 2 (B.O.E. 1974, 163) (Spain).

[57]. Masferrer, supra note 52, at 186 –90.

[58]. Id. at 190–91.

[59]. Id. at 191.

[60]. Art. 2:625 BW (oud) (Neth.); A.J. Verheij, Fault Liability Between Neighbors in the Netherlands 1850 –2000, in 2 The Development of Liability Between Neighbours supra note 33, at 107, 110.

[61]. Elizabeth van Schilfgaarde, Negligence Under the Netherlands Civil Code—An Economic Analysis, 21 Cal. W. Int’l L.J. 265, 272 (1991) (alteration in original) (quoting Art. 3:1401 BW (oud) (Neth.)).

[62]. Verheij, supra note 60, at 110 –11.

[63]. HR 31 januari 1919, NJ 1919, 161 m.nt Molengraaff (Lindenbaum/Cohen) (Neth.); see also Verheij, supra note 60, at 118–19.

[64]. Verheij, supra note 60, at 128–29. Professor A.J. Verheij describes that from 1850 to 1880, domestic industry developed thanks to steam engines, railroads, and trade. Id. at 129. In 1880, the development of heavy industry started. Id.

[65]. Verheij supra note 60, at 125 (discussing Wet Tot Regeling Van Het Toezicht Bij Het Oprigten Van Inrigtingen, Welke Gevaar, Schade Of Hinder Kunnen Veroorzaken 10 junij 1875, S. 1875, 95 (repealed 1952) (Neth.)).

[66]. Art. 5:37 BW (Neth.), translated in Dutch Civil Code: Book 5 Real Property Rights, Dutch Civ. L., http://www.dutchcivillaw.com/civilcodebook055.htm (last visited May 18, 2019).

[67]. Article 6:162 reads as follows:

1. A person who commits a tortious act (unlawful act) against another person that can be attributed to him, must repair the damage that this other person has suffered as a result thereof.

2. As a tortious act is regarded a violation of someone else’s right (entitlement) and an act or omission in violation of a duty imposed by law or of what according to unwritten law has to be regarded as proper social conduct, always as far as there was no justification for this behaviour.

3. A tortious act can be attributed to the tortfeasor [the person committing the tortious act] if it results from his fault or from a cause for which he is accountable by virtue of law or generally accepted principles (common opinion).

Art. 6:162 BW (Neth.), translated in Dutch Civil Code: Book 6 the Law of Obligations, Dutch Civ. L., http://www.dutchcivillaw.com/civilcodebook066.htm (last visited May 18, 2019).

[68]. Verheij, supra note 60, at 116.

[69]. Art. 6:174 BW (Neth.), translated in Dutch Civil Code: Book 6 the Law of Obligations, supra note 67. The Dutch Supreme Court refused to apply this provision to a case in which, as a result of the collapse of a building, asbestos particles had affected the premises of the neighbors. Verheij, supra note 60, at 122.

[70]. Art. 6:175 BW (Neth.), translated in Dutch Civil Code: Book 6 the Law of Obligations, supra note 67.

[71]. Id. art. 6:168.

[72]. Article 544-5 reads as follows:

Negatory action is not appropriate in the following cases:

a) If the disturbances or emissions it is intended to put an end to or future disturbances or emissions that it is claimed to prevent do not prejudice any legitimate interest of the proprietors in their property.

b) If the proprietors must support the disturbance due to a provision of this code or due to legal businesses.

Codi Civil de Catalunya art. 544-5, translated in Law 5/2006, of 10 May, on the Fifth Book of the Civil Code of Catalonia, Relating to Real Rights, supra note 15, at 31.

[73]. Article 554-6 reads as follows:

1. Negatory action is aimed at the protection of the freedom of domain of the real estate property and the re-establishment of the thing to the state prior to a legal or material disturbance.

2. In the exercise of negatory action, the corresponding indemnification for the damage and prejudice produced can be claimed. In this case, the actors do not have to prove the illegitimacy of the disturbance.

Id. art. 544-6.

[74]. See generally Boomer v. Atl. Cement Co., 257 N.E.2d 870 (1970) (allowing for permanent damages when the harm suffered is small compared to the cost of removing the nuisance).

[75]. Codi Civil de Catalunya art. 546-14, translated in Law 5/2006, of 10 May, on the Fifth Book of the Civil Code of Catalonia, Relating to Real Rights supra note 15, at 38–39.

[76]. See Abraham, supra note 26.

[77]. See generally Mark A. Geistfeld, Tort Law in the Age of Statutes, 99 Iowa L. Rev. 957 (2014) (explaining the relationship between tort law and statutes).

[78]. This aligns with the rule 1P (B stops A up to a point, and A pays damages associated with its lawful operation) that Professor Levmore describes in his work, which enhances the seminal article by Judge Guido Calabresi and Professor A. Douglas Melamed on this topic. Levmore, supra note 6, at 2149; see also Calabresi & Melamed, supra note 20, at 1092–93.

[79]. Von Wangenheim & Gomez, supra note 29, at 2392, 2398.

[80]. A partial and indirect way to declare something a legal nuisance is by allowing the “coming to the nuisance” defense because it allows certain activities to continue if they were in the area before the plaintiff. This is what Article L.112-16 of the French Construction and Housing Code does. Code de la construction et de l’habitation [French Construction and Housing Code] art. L112-16 (Fr.).

[81]. “Corrective justice is, therefore, attenuated in a regulatory system.” Richard A. Epstein, Nuisance Law: Corrective Justice and Its Utilitarian Constraints, 8 J. Legal Stud. 49, 101 (1979).

[82]. Fines affect ex ante decisions on investments. See generally Lucian Arye Bebchuk, Property Rights and Liability Rules: The Ex Ante View of the Cathedral, 100 Mich. L. Rev. 601 (2001) (explaining the role that different ex post rules, including fines, can have on ex ante decisions despite easy bargaining and the distributive effects of the ex post rules).

[83]. Frank Emmert, The Draft Common Frame of Reference (DCFR)—The Most Interesting Development in Contract Law Since the Code Civil and the BGB, 2 Cuadernos de la Maestría en Derecho 7, 12 (2012). For further discussion on international tort law and the DCFR, see generally Walter van Gerven et al., Cases, Materials and Text on National, Supranational and International Tort Law (2000); Gerhard Wagner, The Law of Torts in the DCFR, in The Common Frame of Reference (Gerhard Wagner ed., 2009).

[84]. Emmert, supra note 83, at 11 –12; Nils Jansen & Reinhard Zimmermann, “A European Civil Code in All But Name”: Discussing the Nature and Purposes of the Draft Common Frame of Reference, 69 Cambridge L.J. 98, 101 –02 (2010).

[85]. Jansen & Zimmerman, supra note 84, at 100.

[86]. The DCFR also aimed to provide an optional set of rules that parties could choose when negotiating an agreement, particularly in contract law. Reinhard Zimmermann, The Present State of European Private Law, 57 Am. J. Comp. L. 479, 510 (2009). However, its provisions could also serve as the baseline to negotiate potential settlements between neighbors in nuisance cases. Id. at 51011.

[87]. Study Grp. on a European Civil Code & Research Grp. on EC Private Law (Acquis Grp.), Principles, Definitions and Model Rules of European Private Law 3396 (Christian von Bar et al. eds., 2009), https://www.law.kuleuven.be/personal/mstorme/european-private-law_en.pdf.

[88]. Id.

[89]. Id. at 3274.

[90]. Directive 2004/35, of the European Parliament and of the Council of 21 April 2004 on Environmental Liability with Regard to the Prevention and Remedying of Environmental Damage, 2004 O.J. (L 143) 56 (EU) [hereinafter Directive on Environmental Liability].

[91]. Article 3(1) of the Directive sets a strict liability standard for those activities it considers particularly dangerous. Id. at 60. The list of activities can be found in Annex III of the Directive. Id. at 70–71. In all other cases—that is, on cases of environmental damage caused by activities not considered dangerous per se—liability is based on fault. For an analysis of the effect of strict liability and fault liability on the prevention of environmental damage, see Michael Faure & Göran Skogh, The Economic Analysis of Environmental Policy and Law 241 –61 (2003).

[92]. Directive on Environmental Liability, supra note 90, at 61.

[93]. Commission White Paper on Environmental Liability, COM (2000) 66 final (Feb. 9, 2000). A White Paper “launch[es] a debate with the public, stakeholders, the European Parliament and the Council in order to arrive at a political consensus.” Glossary of Summaries, EUR-Lex, https://eur-lex.europa.eu/summary/glossary/white_paper.html (last visited May 18, 2019).

[94]. Commission White Paper on Environmental Liability, supra note 93, at 15.

[95]. Gerrit Betlem, Torts, a European Ius Commune and the Private Enforcement of Community Law, 64 Cambridge L.J. 126, 128 –29 (2005). For another example, check the 2004 Intellectual Property Directive, which, following the premise that tort remedies can complement regulation to ensure deterrence, aimed at harmonizing the sanctions, including private enforcement. Directive 2004/48/EC, of the European Parliament and of the Council of 29 April 2004 on the Enforcement of Intellectual Property Rights, 2004 O.J. (L 157) 45, 81 (EU).

[96]. Commission Proposal for a Council Directive on Civil Liability for Damage Caused by Waste, at 15, COM (1989) 282 final (Sept. 15, 1989).

[97]. Betlem, supra note 95, at 132. A similar claim can be made in relation to the European Convention on Human Rights given that articles 6 (right to a fair trial) and 13 (right to an effective remedy) offer a similar, albeit general, protections. Id. at 133 –35 (analogizing the question of private civil law remedies in the context of the Environmental Liability Directive with the Muñoz decision, in which the issue was whether a standard laid by E.U. law was actionable under national tort law).

[98]. European Comm’n, Communication on Access to Justice at National Level Related to Measures Implementing EU Environmental Law 2 (2016), http://ec.europa.eu/smart-regulation/roadmaps/docs/2013_env_013_access_to_justice_en.pdf.

[99]. Examples of provisions stating that damages to property are not dealt with by the legislation dealing with pure environmental damage include : Loi 2008-757 du 1er août 2008 relative à la responsabilité environnementale et à diverses dispositions d’adaptation au droit communautaire dans le domaine de l’environnement (1), Journal Officel de la Republique Francaise [J.O.] [Official Gazette of France], Aug. 2, 2008, p. 12361 (Fr.); Lei n. 19/2014 de 14 de abril Define as bases da política de ambiente, art. XIII, Diário da República n. 73/2014, I Série A. 2400 (2014) (Port.); Environmental Responsibility Law art. V (B.O.E. 2007, 255) (Spain). These provisions prevent the compensation of damages decided by the public authority. The victim is obliged, then, to claim for damages before the courts. The German regulation states such principle clearly when it declares the potential liability of the tortfeasor, although it defers the case to the general courts. The Environmental Liability Act sets forth the following:

If an environmental impact caused by an installation specified in Annex 1 causes a person’s death, injury to his body or damage to his health, or damage to an item of property, the operator of the installation shall have an obligation to compensate the injured person for the resulting damage.

Umwelthaftungsgesetz [UmweltHG] [Environmental Liability Act], Dec. 10, 1990, BGBl I at 2634, last amended by Gesetz [G], July 17, 2017m BGBl I at 2421, § 1 (Ger.), https://www.gesetze-im-internet.de/englisch_umwelthg/englisch_umwelthg.html.

[100]. Nonetheless in 2005, Professor Gerrit Betlem predicted that a harmonization of E.U. law as a result of the Environmental Liability Directive based on the breach of statutory duty. See Betlem, supra note 95, at 145–48.

[101]. López Ostra v. Spain, 303 Eur. Ct. H.R. (ser. A) 39, 39 (1994).

[102]. See id. at 55.

[103]. Id. at 54.

[104]. Id. at 53–56 (quoting European Convention on Human Rights § 1, art. 8).

[105]. Id. at 40.

[106]. Id. at 59.

[107]. Gómez v. Spain , 2004-X Eur. Ct. H.R. 329.

[108]. Zarzoso v. Spain, Eur. Ct. H.R. (2018), http://hudoc.echr.coe.int/eng?i=001-180296.

[109]. Gómez, 2004-X Eur. Ct. H.R at 341.

Divergence and Convergence at the Intersection of Property and Contract – Article by Giuseppe Dari-Mattiacci & Carmine Guerriero

May 2019October 2019Southern California Law Review Admin

From Volume 92, Number 4 (May 2019)
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Divergence and Convergence at the Intersection of Property and Contract

Giuseppe Dari-Mattiacci [*] & Carmine Guerriero [†]

In this Article, we study rules that solve the conflict between the original owner and an innocent buyer of a stolen or embezzled good. These rules balance the protection of the original owner’s property and the buyer’s reliance on contractual exchange, thereby addressing a fundamental legal and economic trade-off. Our analysis is based on a unique, hand-collected dataset on the rules in force in 126 countries. Using this data, we document and explain two conflicting trends. There is a large amount of first-order divergence: both rules that apply to stolen goods and those that apply to embezzled goods vary widely across countries. Yet, there is also remarkable second-order convergence: virtually all legal systems protect the innocent buyer more strongly if the good was embezzled (rather than stolen) and if she purchased it in an open market, at an auction, or from a professional seller (as opposed to a private sale). We show that, while divergence is attributable to varying cultural values, convergence can be rationalized using a classic functional approach: these rules harmonize the owner’s incentives to protect property and the buyer’s incentives to inquire about title.

Introduction

Most legal systems around the world simultaneously advance two fundamental goals: the protection of property and the reliability of contractual exchange.[1] When stolen or embezzled personal property is sold to an innocent buyer, however, one of them needs to be prioritized over the other. This problem, which we call the “property-contract balance,”[2] arises because the thief or the embezzler commonly cannot be found or is insolvent. Therefore, we face the dilemma of either returning the property to the original owner—thereby frustrating the buyer’s contractual expectations—or upholding the transfer—thereby undermining the security of ownership.[3]

The rules addressing this issue—that is, good-faith purchase (“GFP”) rules—are as old as law itself. They can be found in the code of Hammurabi, the Talmud, Greek law, and Roman law, and Hindustani law, and they epitomize the pervasive phenomenon of transfers through (possibly unfaithful) intermediaries such as brokers, gallerists, middlemen, agents, and Internet platforms. Unauthorized agency, forged financial instruments, and double sales of personal or real property all raise analogous, GFP-like problems.[4]

The perplexing normative question of how such cases should be adjudicated is the object of an important and vast scholarship.[5] In this Article, we are concerned with the positive question of how such cases are adjudicated in different countries around the world, and if trends emerge, how such trends can be rationalized. In the analysis, we employ a unique dataset on the GFP rules in force in 126 countries around the world.[6]

To start with, we show that there is a large amount of first-order divergence across legal systems and quantify these differences using various indicators. GFP rules vary widely across countries, both for stolen and embezzled goods. This finding puts to rest a lingering debate in the literature, which has been traditionally divided in two camps: those who argue that GFP rules—and more generally private law provisions—vary,[7] as we show, and those who believe that they are rather uniform if one considers how such rules are applied in practice [8] (we account for this in our study).

Yet, we also show that there is remarkable second-order convergence—thereby vindicating both camps’ contentions—on how the protection of owners and buyers varies as a function of the mode of expropriation (theft versus embezzlement) and the context of the transfer (commercial versus private): virtually all legal systems in our dataset afford more protection to the innocent buyer if the good was embezzled rather than stolen, or if the purchase occurred in a commercial setting (we distinguish among public markets, auctions, and professional sellers, both for stolen and for embezzled goods) as opposed to a private sale. A fitting illustration is provided by the theft rule [9] versus the entrustment doctrine [10] in U.S. law: the owner prevails against a good-faith buyer of a stolen good, while the buyer prevails if the good was embezzled and she purchased it from a professional seller.

What explains these trends and how can they be reconciled? We use a combination of empirical analysis—which yields useful insights only if there is variation in the underlying data—and theoretical rationalization. We first address the question of divergence. In a previous study,[11] we developed a metric for cultural differences across countries—somewhat arbitrarily called self-reliance—capturing two distinct and important features of a country’s cultural endowment: respect for others and regard for hierarchy.[12] We show that a country’s degree of self-reliance accounts for divergence in GFP rules better than other measurable cross-country differences, including: random “disagreements,” the legal origins of a country’s current legal system, differences in political systems, and differences in religious beliefs.[13]

Our previous study dealt with stolen goods, but here, we exploit for the first time the other half of the data: embezzled goods.[14] Both analyses yield the same result: specific cultural traits are the root of comparative variation in private law rules and possibly beyond. In particular, we find that high levels of respect for others and low levels of regard for hierarchy—corresponding to a high degree of self-reliance—are associated with stronger owner protections. We demonstrate this contention using direct survey data on cultural traits and then repeat the analysis using the features of a country’s language as instrumental variables that embed cultural traits.[15] The survey data is contemporaneous to law and hence one cannot be sure there is a causal relationship rather than a simple correlation. Language, instead, does not often vary as a result of legal reforms and can be used as a stable indicator of hard-wired cultural traits.[16] To explore a possibly interesting avenue for future research, we also repeated our tests using world-wide data provided in the recent article, The Moral Machine Experiment [17] and spotted some interesting, though not very robust,[18] correlations between law and morality. More specifically, value systems that put more weight on an individual’s status and seniority are associated with stronger owner protection.

While our analysis yields insights into the causes of divergence, it also raises the question of how to rationalize (1) the relationship between legal divergence and cultural variation and (2) legal convergence. The literature has produced two main theoretical perspectives on the GFP problem. The ex anteincentives approach emphasizes that the level of protection that the law affords the original owner versus the buyer has an effect on the parties’ incentives to reduce the likelihood of potential conflicts. Namely, it dampens the owner’s incentives to protect her property and reinforces the buyer’s incentives to inquire about title.[19] Conversely, the ex postvalue approach suggests that, since something has already gone wrong, the contested good should simply be assigned to the party that surely, or absent reliable information on private valuations, values the good the most.[20]

Our analysis vindicates—again—both sides of the debate. We argue that the value approach provides a useful theoretical framework to understand divergence. The intuition is that while it is in principle more likely that the buyer attaches more value to the contested good—because high-value buyers self-select into the market—the importance of ex post reallocations is affected by the prevalence of theft—which in turn depends on the level of respect for others—and the efficiency of the enforcement system—which is a function of the level of regard for hierarchy.

In turn, we explain that the incentive approach sheds light on convergence. In a nutshell, stronger buyer protection emerges in contexts where the buyer has comparatively little control over the situation, and vice versa. In embezzlement cases, the owner can easily reduce the likelihood of expropriation by selecting a more trustworthy agent, which is not the case with theft cases. Similarly, in commercial transactions, there is a legitimate expectation that title has already been scrutinized, and hence, there is little the buyer can add.[21] In contrast, in private sales, the buyer’s effort pays off.[22]

We proceed as follows. In Part I we lay out the theoretical foundations of our approach, describe the data, and document convergence and divergence in GFP rules for stolen and embezzled goods. In Part II, we focus on divergence, show empirically that it is the product of cultural differences (in the degree of self-reliance), and compare our explanation with extant theories of comparative variation. In Part III, we address the issue of convergence and propose that, while the ex postvalue approach elucidates divergence, the ex anteincentives approach best accounts for convergence. The Appendix contains details of the analysis and of the data collection process, additional figures and regression tables.

I. First-order divergence and second-order convergence

We focus on the regulation of the GFP for value without notice of personal property in the case of theft—in which the original owner was dispossessed by a thief—and embezzlement—in which the good was originally entrusted by the original owner to an (unfaithful) embezzler. Scholarship has traditionally been divided on the issue of divergence versus convergence in GFP rules.[23] Traditional comparative analyses were based on only a handful of countries, often covered only blackletter law, and did not generally offer a way to compare the rules in force in different countries in an unambiguous and measurable way.[24]

To overcome these challenges, we worked with 149 teams of property experts in 125 countries,[25] who generously provided their time and effort to this project. Their names and the list of countries covered in this study can be found in the Appendix. These experts are either law professors at leading universities in their respective countries or practicing lawyers associated with internationally renowned law firms, most of which are part of the Lex Mundi network. We collected the data by means of a questionnaire in which we asked the question, “[a]t what conditions does a good faith buyer acquire ownership of a stolen or embezzled good?” and investigated a number of complementary and boundary issues.[26]

We inquired about the specific rules that apply to GFP, the definition of good faith, whether good faith is presumed, whether compensation is due to the dispossessed good-faith buyer in case the owner successfully reclaims the good,[27] the general background rules of adverse possession, transfer of property and statutes of limitations, and which goods are excepted (such as cultural heritage) or registered (such as automobiles) and hence subject to a different set of rules. The data covers the period 1981–2011; there was no relevant reform over this period.[28] Importantly, experts were instructed to report the black-letter rules and how they are applied in practice by courts.

In order to obtain a comparable measure of the rules of interest in each jurisdiction, from the experts’ answers we distilled four variables indicating the number of years after which the good-faith buyer acquires title on the good in each of four situations: private sale, public market, auction, and professional seller. We repeated the same exercise twice: for stolen goods and for embezzled goods. (We focused on cases in which the good is immediately resold after theft or embezzlement.)[29] These variables provide a quantitative measure of the protection of the original owner versus the good-faith buyer in each case: the greater the number of years, the stronger the protection of the original owner, and conversely, the weaker the protection of the good-faith buyer.[30]

Table 1 provides an example of the most relevant of the variables in our dataset for four countries as compared to the United States, and of the extent of variation. Starting from the top row, Denmark provides the strongest degree of owner protection in the case of stolen goods purchased in a private sale. In this case the buyer never acquires title, hence the owner is fully protected. (The “theft rule” in the United States provides the same degree of protection.)[31] At the other end of the spectrum, Italy fully protects the buyer, who acquires title immediately. Turkey and France afford the owner an intermediate level of protection, recognizing the buyer’s title after five and three years, respectively. None of these four countries require the owner to pay compensation to the buyer when the owner reclaims a good that the buyer purchased privately (second row).

The third and fourth rows concern commercial transactions, in which the buyer purchased the good in a public market, at an auction, or from a professional seller.[32] While the main index of owner protection is the same as in private sales, Turkey and France require the owner to pay a compensatory sum to the buyer equal to the market price and the purchase price, respectively, conditional on the owner satisfying the time limitation.

Moving down the table, while France and Italy have uniform rules for stolen and embezzled goods, both Denmark and Turkey provide more protection to the buyer when the good was embezzled rather than stolen. The difference is particularly stark in Denmark, where owners are provided with full protection in the case of theft and buyers are provided with full protection in the case of embezzlement. (The buyer is fully protected in the United States under the entrustment doctrine if the embezzled good was purchased from a professional seller.)[33]

To illustrate one of the metrics we use, in Figure 1 we provide the same information as in the first row of Table 1 for all the countries in our dataset.[34] Each dot in the graph represents a different country. The position of the dot in the graph indicates the degree of owner protection for private sale; the degree of owner protection for embezzled goods is indicated on the horizontal axis and the degree of owner protection for stolen goods is indicated on the vertical axis.

The countries that can be found along the diagonal afford the same degree of protection for stolen and embezzled goods (like Italy and France). Countries above the diagonal afford more protection to the owner if the good was stolen as opposed to embezzled (like Denmark and Turkey) and, vice versa, countries below the diagonal afford less protection to the owner if the good was stolen as opposed to embezzled.

The figure shows a large degree of first-order divergence in GFP rules. Countries are widely spread out both along the vertical axis—implying variation in the GFP rules concerning theft—and along the horizontal axis—which refers to embezzlement. Next to the two polar cases (full owner protection and full buyer protection), many countries offer several different intermediate degrees of protection to the owner, with a particularly relevant amount of variation in the range from zero to ten years.

The figure also shows the extent of second-order convergence, which can be appreciated by comparing the rules for stolen goods with those for embezzled goods. With only a couple of exceptions, the vast majority of the countries in our dataset lie above the diagonal; that is, almost all countries afford more protection to the original owner when the good was stolen rather than embezzled.

Analogous results are obtained when one considers the case of theft versus embezzlement in commercial transactions in Figure 2,[35] and the case of private sales versus commercial transactions for both theft and embezzlement in Figure 3.

Table 2 shows the prevalence of buyer-compensation provisions. These provisions surface more often across commercial settings as compared to private transactions, which is consistent with a greater degree of buyer protection in commercial transactions. Likewise, with private transactions, buyer-compensation provisions are more common in cases of embezzlement as compared to theft. This is again in line with the fact that embezzlement is associated with more buyer protection. However, in commercial transactions the result is inverted: buyer-compensation provisions are more common with theft. Although apparently puzzling, this result can be rationalized by noting that, in all cases, the removal of the compensation requirement is accompanied by a shorter term of years. This suggests a substitution effect: the reason for the lower prevalence of compensation rules is the fact that the buyer effectively received more protection. In the following sections, we delve into the causes of divergence and convergence.

II. Empirical analysis

A. Theories of Comparative Variation and Their Empirical Implications

There are four main competing explanations for comparative variation that—given currently available data—lend themselves to empirical investigation. We introduce them in the following sections and emphasize their main empirical implications.

1. Functional Equivalence

The functional-equivalence theory [36] holds that different legal systems most often implement the same solutions when addressing similar problems, owing to an underlying commonality of aims. This implies that, as emphasized by Professor Saul Levmore,[37] when differences in the laws of different countries are detected, they must be illusory (so that different rules actually reach the same outcome), accidental (rules differ for some random historical accident), or innocuous divergences of opinions (in cases when the optimal solution is unclear).

We can exclude the instances when differences in GFP rules are illusory. We asked country experts in our pool to report on how the black-letter law is applied in practice and to focus on the outcome of potential lawsuits. Differences remain and are substantial. If these differences are due to divergences in the way equally reasonable persons could assess the same issue, then they should not exhibit any particular pattern. If we detect a pattern in the data, we can then conclude that the functional-equivalence theory cannot explain divergence (while, as we will see in Part III, it may successfully explain convergence). Differences due to historical accidents may instead follow a pattern due, for instance, to colonization or transplantation dynamics. We discuss this issue in Section II.A.3.

2. Culture

Countries differ sharply in terms of dominant cultural values. In turn, cultural differences may result in differences in the law.[38] Culture can be “measured” in various ways. Direct measurements are provided by questionnaires administered through world-wide surveys.[39] The problem with direct measurements of cultural differences is that they are contemporaneous to law and hence it is hard to determine whether the relationship is causal. Therefore, to inquire about the cause of comparative variation, one needs to look deeper and identify cultural traits in a way that is unlikely to be the product of private law rules or some hidden common cause.

Language provides a relatively stable measure of deep cultural traits that—controlling for colonization, which codetermined law and language in many former colonies—is unlikely to be affected by private law. More specifically, pronoun usage embeds the way in which native speakers of a certain language relate to each other.[40] On the one hand, some languages allow the speaker to drop the first-person pronoun. This rule de-emphasizes the individual in a conversation and is empirically associated with lower levels of trust and respect for others.[41] On the other hand, some languages require the speaker to choose between the formal and the informal version of the second-person pronoun. This rule is empirically associated with higher levels of regard for hierarchy.[42] Our self-reliance indicator captures both dimensions.[43]

3. Legal Origins

Differences among legal systems can be traced back to a process of transplantation from one country to another.[44] The legal-families theory in comparative law [45] and the legal-origins theory in comparative economics [46] emphasize a particularly pervasive channel of transplantation: colonization. Empirically, this approach implies that divergence should be explained by common law rather than civil law origins; common law is associated a higher degree of private ordering in society, which in turn stresses owner protection.[47]

Instead of relying simply on the identity of the colonizer in a distant past, we empirically identify a country’s legal tradition based on its current characteristics along five dimensions: the precedential value of appellate decisions, the possibility to appeal on questions of facts, the role of equity, the adversarial character of procedure, and the scope of oral evidence.[48] This classification provides a continuous measure of proximity to a pure common law system, which in turn can be tested against self-reliance as a possible explanation for divergence.

4. Political Economics

Politics may play an important role in determining a country’s private law institutions.[49] In our context, the protection afforded to original owners versus good-faith buyers could be a function of the balance of power between an entrenched, concentrated elite, focused on protecting static ownership, and the rest of society. As a result, we should expect less democratic systems and systems based on majoritarian rather than proportional representation to reflect the preferences of the elite [50] and tend towards higher levels of owner protection.[51]

5. Religious Beliefs

Culture is heavily influenced by religious beliefs. Max Weber pointed out the effect of Protestantism on capitalist attitudes. He explained that, contrary to Catholics, Protestants saw worldly success as a sign of salvation and submitted to an ethics that discouraged expenditures to the benefit of re-investment.[52] A recent study has empirically documented the association of religion with an attitude towards the protection of capital. In particular, it found higher levels of creditor protection to be associated with Protestantism.[53] Analogizing to the GFP problem, we should expect Protestantism to be associated with higher levels of owner protection.[54]

B. Testing the Explanatory Power of Alternative Theories

All of the theories of comparative variation illustrated in the previous Section are compatible with a certain degree of divergence in GFP rules but each yields different predictions as to the pattern of such divergence. While the functional-equivalence theory implies that divergence should manifest itself as random noise, all other theories, including ours, predict that divergence should follow a certain predictable pattern in response to changes in the country characteristics emphasized by the theory under examination.

These theories taken together predict that owner protection should be greater in countries displaying a stronger culture of self-reliance, a legal system nearer to a perfect common law tradition, weaker constraints on the executive, a majoritarian rather than proportional electoral system, and a larger share of Protestants in the population. If any of these variables can be shown to explain a country’s GFP rules, then we can reject the functional-equivalence hypothesis, which implies that none of them should be statistically significant.

To compare the explanatory power of these theories we ran a regression. Figure 4 visualizes the main result of the analysis, depicting the effect of self-reliance on owner protection after controlling for the determinants of comparative variation suggested by the competing theories.[55] The degree of a country’s self-reliance is measured on the horizontal axis, while the relevant owner protection indicator is measured on the vertical axis. A positively-sloped regression line indicates a positive effect of self-reliance on owner protection, and a steeper slope indicates a bigger effect. (Vice versa, a negatively-sloped line reveals a negative effect.)

Self-reliance has a positive, large, and statistically significant (at the 1% level) effect on owner protection in the case of embezzled goods. This result holds for all market configurations and allows us to reject the hypothesis that divergence is random.[56]

Similarly, Figure 4 reports the effect of a larger share of Protestants on owner protection, after controlling for all the determinants of comparative variation suggested by the competing theories (including self-reliance). In this case, the effect is smaller and negative, suggesting that a larger share of Protestants is associated with weaker owner protection. This result is inconsistent with the Weberian view that we mentioned before. Moreover, as documented in the Appendix, the coefficients attached to Protestantism are statistically significant at a 5% level only in the two upper graphs and in the bottom-left graph in Figure 5.

Similar tests on the effects of constraints on the executive, a majoritarian rather than proportional electoral system, and the common law tradition return coefficients that are statistically undistinguishable from zero. These results demonstrate that divergence in GFP rules for embezzled goods is best explained by cultural differences rather than randomness, a common rather than civil law origin, political economics, or religious beliefs. These results are in line with our previous study in which we focused on stolen goods and found the same pattern.[57] (We also ran a series of regressions—including widely used controls, related to income, natural resources, genetic variation and conflicts—and report the results in the Appendix.)

Since our analysis stresses the role of cultural and religious beliefs, moral beliefs may also play a role. We thus ran an additional regression analysis on data from the recent article, The Moral Machine Experiment,[58] which classified countries based on moral beliefs, as exemplified in a modern version of the trolley problem: an autonomous car is about to crash on either one of two (groups of) people. Respondents were essentially asked who should die and who should be spared. We found an interesting positive correlation between the propensity to spare higher-status and older individuals in a country and owner protection in GFP rules in that country (Figure 6). While these results may make intuitive sense—given that the protection of property generally favors individuals belonging to the elite as opposed to the masses and older as opposed to younger individuals—their statistical significance vanishes when introducing relevant controls. Future studies may delve deeper into the empirical relation between law and morality.

III. Convergence and divergence in theory

Scholarship on the topic has put forward two alternative frameworks to rationalize the choice between owner protection and buyer protection in GFP. One camp [59] gives primacy to ex ante incentives to reduce the risk of unwanted transfers. In particular, the comparison is between the owner’s incentives to protect her property and the buyer’s incentives to inquire about title. The intuition is that protecting buyers provides owners with incentives to protect their property in order to reduce the likelihood of theft or embezzlement; conversely, protecting owners provides buyers with incentives to inquire about title in order to reduce the risk of paying for goods they will lose at a later time.

An alternative approach is to focus on the ex post allocation of the good to the (most likely) higher-value user between the buyer and the owner.[60] A useful heuristic is the fact that, typically, voluntary market transactions occur between a relatively high-value buyer and a relatively low-value owner. If the opposite were true, the transaction would not take place. Therefore, the potential buyers that populate a typical market are generally relatively high-value individuals.[61] Intermediaries tend to resell in those markets because the higher the buyer valuation, the greater their gains. In turn, dispossessed owners are not necessarily high-value individuals: some of them may never have sold the good while others might have in the future. Therefore, on average, the ex post conflict between the good-faith buyer and the original owner is most likely to involve a high-value buyer and an average-value owner. This in turn suggests that, in principle, ex post value is maximized in expectation if goods are assigned to the good-faith buyer.[62]

A. The Ex PostValue Theory and First-Order Divergence

In previous studies, we have shown that country-specific characteristics affect the likelihood of ex post misallocation and, in turn, the relative desirability of buyer protection.[63] Respect for others and regard for hierarchy are relevant for the regulation of GFP transactions. Countries with a higher level of enforcement benefit more from buyer protection and hence are more likely to adopt it. The intuition is that high levels of enforcement result in goods being returned to their original owners more often under owner protection, which makes buyer protection preferable. Conversely, countries with a higher degree of trust and respect for others benefit less from buyer protection because of a lower incidence of unwanted transfers. In this way, country characteristics can be used as an explanation for the GFP rules in force.[64]

In terms of self-reliance, this analysis suggests that a higher degree of self-reliance—corresponding to higher levels of trust and respect for others and lower regard for hierarchy and enforcement—should be empirically associated with a higher level of owner protection.[65]

B. The Ex AnteIncentives Theory and Second-Order Convergence

The ex anteincentives theories of GFP rules have traditionally been widely employed to construct normative arguments as to which rule is preferable on a global scale and have influenced scholarship more profoundly than the ex postvalue approach.[66] In turn, ex anteincentives theories are premised on the idea that improved ex post protections dilute incentives ex ante. More specifically, increasing owner protection improves the buyer’s incentives to inquire about title but reduces the owner’s incentives to “self-protect” her property.

However, this premise can be called into question in a dynamic market where prices adjust to expectations. If one allows the price that a buyer is willing to pay for a possibly stolen or embezzled good to reflect the risk that she will lose the good later on, the intuition illustrated above becomes far from obvious. While the literature has focused on the fact that legal protection affects the marginal benefits of self-protection, we argue that it also affects its marginal costs, making the result possibly indeterminate.[67]

In particular, a higher level of owner protection has a direct effect on the incentives for the owner to protect her property because it increases the probability that a stolen or embezzled good will be returned and hence lowers the benefits from efforts to protect property. However, it also has an indirect effect. If the owner is protected, the market value of goods of dubious origin decreases (as buyers may be wary of losing the good later on), which reduces the expected gains of thieves and embezzlers, making them less aggressive at the margin. This in turn makes it cheaper for the owner to protect her property, thus creating an incentive towards more self-protection for the owner. Similarly, on the buyer’s side, owner protection increases the benefits of inquiring about title but also makes goods cheaper and, hence, lowers the cost of not doing so.

Overall, the parties’ incentives may be positively or negatively affected by increased legal protection, weakening the power of the incentive-theory to explain the design of GFP rules for theft and embezzlement and, in turn, first-order divergence in GFP rules. We argue, however, that incentives can contribute to understanding second-order convergence in GFP rules.

We start with comparing theft with embezzlement. The core of the argument is that for any given marginal benefit of self-protection for the owner, the marginal cost of self-protection for the owner is lower in the case of embezzlement than in the case of theft. The reason is intuitive: while thieves are strangers, an owner chooses whom to trust. In embezzlement cases, there are many ways the owner can protect her property, because most commonly she is in a (contractual) relationship with the potential embezzler and, hence, can both screen her counterparty ex ante and control her ex post. Therefore, comparatively, the owner has lower costs of care in embezzlement cases, while the buyer’s incentives to inquire about title remain unaffected.

To stress our point, whatever effect owner protection has on the owner’s incentives to self-protect—and we have argued above that this effect is indeterminate—this effect is different in theft as opposed to embezzlement cases. In particular, the effect is comparatively more likely to go towards increased self-protection in the case of embezzlement. Convergence emerges as a second-order effect, when comparing the relative (a priori indeterminate) effect of legal protection in different setups.[68]

A similar trend can be detected by comparing the rules that apply to private transactions with those pertaining to commercial transactions made in a market, at an auction, or through a professional seller. In the latter set of cases, buyer protection is systematically stronger. This is because the original owner’s ability to protect her property remains unchanged while the buyer’s ability to inquire about title may be far greater in private transactions as compared to commercial settings. In this case, information about title, whenever available, should have already been acquired by the intermediary so there is little scope for any additional buyer’s inquiry. It may therefore be preferable to attempt to incentivize the owner.

Conclusion

In this article, we have documented first-order divergence and second-order convergence in GFP rules around the world. Our empirical analysis shows that the most likely cause of divergence is cultural differences across countries, while a likely push towards convergence remains the functional uniformity of these rules. Of the two main theoretical approaches to GFP rules, we have shown that the ex postvalue approach is well suited to rationalize divergence, while the ex anteincentive approach explains convergence. While navigating the different camps that have polarized the debate on the normative and positive analysis of GFP rules, at the various junctures of our analysis we end up vindicating both sides of the debate and emphasize that different approaches contribute different layers of the theory we advance. Our conclusions do not imply that other factors are not at play. We have offered an exploratory analysis of the effects of morality, and future research may offer a more nuanced view.

Appendix

A. Additional Figures

B. Econometric Analysis

C. List of Country Experts

Besa Tauzi, Boga & Associates (Albania); António Vicente Marques and Cláudia Veloso, AVM-Advogados (Angola); Martín Bensadon, Marval O’Farrell & Marval (Argentina); Armen Melkumyan, Prudence CJSC (Armenia); Michael Back, Freehills (Australia); Wolfgang Faber, University of Salzburg (Austria); Rashid Aliyev, Baker & McKenzie, Baku, CIS Limited (Azerbaijan); Saifuddin Mahmood, Hassan Radhi & Associates (Bahrain); Al Amin Rahman and Sabrina Zarin, FM Associates (Bangladesh); Amina Khatoon, Doulah & Doulah (Bangladesh); Aliaksandr Danilevich, Belarusian State University (Belarus); Sergei Makarchuk, Law Firm CHSH Cerha Hempel Spiegelfield Hlawati, Minsk Office (Belarus); Caroline Cauffman, Maastricht University and University of Antwerp (Belgium); Tania Moody, Barrow & Williams (Belize); Mario Kempff and Patricio Rojas, CR & F Rojas Abogados (Bolivia); Meliha Povlakić and Darja Softić Kadenić, University of Sarajevo (Bosnia and Herzegovina); Rafael Gagliardi and Newton Marzagão, Demarest & Almeida Advogados (Brazil); Dimitar Stoimenov, Peterka & Partners Law Firm (Bulgaria); Camille Razalison and Adrien Rangira, John W Ffooks & Co (Burkina Faso and Ivory Coast); Jehny Ramiandrisoa and Adrien Rangira, John W Ffooks & Co (Burundi); Nimrod E Mkono, Gilbert LP Nyatanyi, Lambert Nigarura, and René-Claude Madebari, Mkono & Co. Burundi (Burundi); Eddy Ratianarivo and Adrien Rangira, John W Ffooks & Co (Cameroon); Matías Ignacio De Marchena Vicuña, Claro y Cía (Chile); Elliott Youchun Chen, Beijing Jun Ze Jun Law Offices, Shenzhen (China); Jie Chen, Jun He Law Offices (China); Ernesto Rengifo García, Universidad Externado de Colombia and Garrido & Rengifo Abogados (Colombia); Adrián Álvarez Orellana, Consortium Laclé& Gutiérrez (Costa Rica); Eduardo Calderon, Adriana Castro and Manuel Santos, BLP Abogados (Costa Rica); Hano Ernst, University of Zagreb (Croatia); Tatjana Josipovic, University of Zagreb (Croatia); Stéphanie Laulhé Shaelou, University of Central Lancashire (Cyprus); Alexandr Thöndel, Charles University (Czech Republic); Michaela Zuklínová, Charles University (Czech Republic); Arnauld Kayembe Tabu, University of Kinshasa and Kayembe Tabu Law Office Kinshasa (DRC) (Democratic Republic of Congo); Bukayafwa Deo Gratias, MBM-Conseil SCA (Democratic Republic of Congo); Francois Butedi, SADC-CNGO (Democratic Republic of Congo); Phebe Mavungu Clément, University of the Witwatersrand (Democratic Republic of Congo); Ole Borch, Bech-Bruun (Denmark); Tobias Vieth, Danders & More (Denmark); Laura Bobea Escoto, Medina & Rizek, Abogados (Dominican Republic); Pablo Ortiz-Garcia and Luis Marin-Tobar, Perez Bustamante & Ponce (Ecuador); Roque Albuja, Quevedo & Ponce (Ecuador); Ahmed El-Gammal and Nihal Madkour, Shalakany Law Office (Egypt); Monica Machuca, Aczalaw (El Salvador); Kai Kullerkupp, University of Tartu (Estonia); Liina Linsi and Monika Tamm, Lawin (Estonia); Molla Mengistu, School of Law, Addis Ababa University (Ethiopia); Muradu A Srur, Addis Ababa University, School of Law (Ethiopia); Jarmo Tuomisto, University of Turku (Finland); Sophie Tavergnier and Philippe Xavier-Bender, Gide Loyrette Nouel (France); David Kakabadze, Georgian Legal Partnership (Georgia); Vanessa Pickenpack and Klaus Guenther, Oppenhoff & Partners (Germany); Ellen Bannerman, Bruce-Lyle, Bannerman & Associates (Ghana); Norma Dawson, Queen’s University Belfast (Great Britain and Northern Ireland); Ben McFarlane, University College London (Great Britain, Hong Kong and Malaysia); Alexandra Economou, Drakopoulos Law Firm (Greece); Cristóbal Fernández and María de la Concepción Villeda, Mayora & Mayora, S.C. (Guatemala); Juan José Alcerro Milla, Carolina Aguirre Larios and Melissa Amaya Pastrana, Aguilar Castillo Love (Honduras); Gabor Fejes, Oppenheim and Partners Freshfields Bruckhaus Deringer (Hungary); Ciccu Mukhopadhaya and Surjendu Das, Amarchand Mangaldas and Suresh A. Shroff and Company, New Delhi (India); Nafis Adwani, Ali Budiardjo, Nugroho, Reksodiputro (Indonesia); Behrooz Akhlaghi, Shahrzad Majdameli, Encyeh Seyed Sadr, Camellia Abdolsamad, Ali Shahabi, Seyed Iman Mohamadian, Dr. Behrooz Akhlaghi & Associates (Iran); Caterina Gardiner, National University of Ireland, Galway (Ireland); Amnon Lehavi, Radzyner School of Law, Interdisciplinary Center (IDC) Herzliya (Israel); Alessio Greco, Istituto Mediterraneo per i Trapianti e Terapie ad Alta Specializzazione (Italy); Courtney B. Smith, Foga Daley, Attorneys at law (Jamaica); Hiroo Atsumi, Atsumi & Sakai (Japan); Bassam Abu-Rumman, Ali Sharif Zubi Advocates & Legal Consultants (Jordan); Dariya Saginova, Grata Law Firm (Kazakhstan); Saule Massalina, Salans law firm (Kazakhstan); Valikhan Shaikenov, Aequitas Law Firm (Kazakhstan); Peter Gachuhi, Kaplan and Stratton Advocates (Kenya); Atdhe Dika and Vegim Kraja, Kalo & Associates Law Firm (Kosovo); Al Noor, Al -Twaijri and Partners Law Firm (Kuwait); Babitskaya Elena Viktorovna, Veritas Law Agency Limited Liability Company (Kyrgyz Republic); Kanat Seidaliev, Grata Law Firm (Kyrgyz Republic); Nurlan Alymbaev, Law Firm Alymbaev (Kyrgyz Republic); Julija Kolomijceva, bnt Klauberg Krauklis Zab (Latvia); Tiisetso Sello-Mafatle, Sello-Mafatle Attorneys (Lesotho); Jaunius Gumbis, Lawin Lideika, Petrauskas, Valiūnas and partners (Lithuania); Simas Gudynas, Lawin Lideika, Petrauskas, Valiūnas and partners (Lithuania); Alex Schmitt, Bonn Schmitt Steichen (Luxembourg); Nenad Gavrilovic, Faculty of Law ‘Iustinianus Primus’, Skopje, University ‘Ss Cyril and Methodius’ (Macedonia); Fatima Diarra, Cabinet d’Avocats Sim (Mali); Jotham Scerri-Diacono, Ganado Advocates (Malta); Vincent Chong Leung, Juristconsult Chambers, cabinet d’avocats (Mauritius); Héctor Calatayud Izquierdo, Basham, Ringe y Correa (Mexico); Octavian Cazac and Vladimir Palamarciuc, Turcan Cazac Law Firm (Moldova); Nergui Enkhtsetseg, Anand & Batzaya Advocates (Mongolia); Neda Ivovic, University of Donja Gorica (Montenegro); Zohra Hasnaoui and Ahmad Hussein, Hasnaoui Law Firm AGIP (Abu-Ghazaleh Intellectual Property – Morocco) (Morocco); Carlos de Sousa E Brito, Carlos de Sousa E Brito & Associados (Mozambique); Win Win Aye and Khin Wint Maw, Kelvin Chia Yangon Limited (Myanmar); Willem Bodenstein and Mike Bottger, Lorentz Angula Incorporated (Namibia); Arthur Salomons, University of Amsterdam (Netherlands); Roger Tennant Fenton, Southern Cross Chambers (New Zealand); Minerva Bellorin R., Diogenes E, Velasquez V, and Mazziel A Rivera Núñez, Aczalaw (Nicaragua); Lydia Rosoanirina and Adrien Rangira, John W Ffooks & Co (Niger); Joseph Eimunjeze, Udo Udoma & Belo-Osagie (Nigeria); Jan-Ove Færstad, University of Bergen (Norway); Alastair R. Neale and Ruqaya Al Khanbashi, Jihad Al Taie Law Office (Oman); Zaid Al Khattab, Talala Abu Ghazaleh & Co (Oman); Ahsan Zahir Rizvi, Rizvi, Isa, Afridi & Angell (Pakistan); Ivette E Martínez, Patton Moreno & Asvat (Panama); Ramon Varela, Morgan & Morgan (Panama); Esteban Burt, Peroni Sosa Tellechea Burt & Narvaja (Paraguay); Manuel Villa-García Noriega, Estudio Olaechea S Civil de RL (Perù); Eduardo de los Angeles, Romulo Mabanta Buenaventura Sayoc & de los Angeles (Philippines); Jerzy Andrzej Pisuliński and Michal Kucka, Jagiellonian University in Cracow (Poland); Margarida Costa Andrade, University of Coimbra (Portugal); Monica Jardim, University of Coimbra (Portugal); Thelma Rivera, Goldman, Antonetti & Córdova, PSC (Puerto Rico); Ejan Mackaay, Université de Montréal (Quebec, Canada); Cristina Bolea and Vlad Peligrad, Clifford Chance Badea SCA (Romania); Magdalena Raducanu, Salans Moore si Asociatii SCPA (Romania); Sergey Strembelev and Natalia Dialektova, Egorov Puginsky Afanasiev & Partners Law Offices (Russia); Vannissa Rakotonirina and Adrien Rangira, John W Ffooks & Co (Rwanda and Senegal); Stephen Matthews and Abdullah Al Saab, The Law Office of Mohanned S Al-Rasheed (Saudi Arabia); Andrew Steven, University of Edinburgh (Scotland, UK); Nataša Lalatović Đorđević, Moravčević Vojnović and partners in cooperation with Schoenherr (Serbia); Žarko S. Borovčanin, Jankovic, Popovic & Mitic od (Serbia); Oredola Martyn, Clas Legal (Sierra Leone); Yi-Ling Teo, Gateway Law Corporation (Singapore); Katarína Čechová, Čechová & Partners (Slovak Republic); Tomaz Kerestes, University of Maribor (Slovenia); Athol Gordon, Bowman Gilfillan Attorneys (South Africa); Chun-Wook Hyun, Kim & Chang (South Korea); Carlos Díez Soto, Technical University of Cartagena, and Isabel González Pacanowska, University of Murcia (Spain); John Wilson, John Wilson Partners, Attorneys at Law & Notaries Public (Sri Lanka); Martin Lilja, Salzburg University (Sweden); Bénédict Foëx, University of Geneva (Switzerland); Deema Abu Zulaikha, Tag-Legal Syria (Syria); Kamanga Wilbert Kapinga, CRB Africa Legal (Tanzania); Cynthia M Pornavalai, Tilleke & Gibbins (Thailand); Phisit Dejchaiyasak, Weerawong, Chinnavat and Peangpanor Limited (Thailand); Stephen A Singh, Johnson, Camacho and Singh (Trinidad and Tobago); Issam Mokni, Ferchiou & Associés (Tunisia); Yesim Atamer, Ece Bas, Başak Başoğlu, Meliha Sermin Paksoy, and Pinar Yazici, Istanbul Bilgi University (Turkey); Emmanuel Kasimbazi, Makerere University (Uganda); Oleg Boichuk, Magisters (Ukraine); Rami Abdellatif and Mohammed Kamran, Al Tamimi Advocates & Legal Consultants (United Arab Emirates); Steven Walt, University of Virginia School of Law (United States); Pedro J Montano, Universidad de la República and Scelza & Montano (Uruguay); Juan Enrique Aigster and José Alberto Ramírez, Hoet Pelaez Castillo & Duque Abogados (Venezuela); Dang The Duc and Tuong Tran, Indochine Council (Vietnam); Sydney Chisenga, Corpus Legal practitioners (Zambia); Peter Lloyd, Gill, Godlonton & Gerrans (Zimbabwe).

D. List of Countries and Country Codes

[*] *. Professor of law and professor of economics, University of Amsterdam; Joseph P. Cunningham Visiting Professor of Commercial and Insurance Law (Fall 2018), Columbia Law School; Visiting Professor of Law (Spring 2019), New York University School of Law.

[†] †. “Rita Levi-Montalcini” Associate Professor, Department of Economics, University of Bologna; e-mail: c.guerriero@unibo.it; homepage: https://sites.google.com/site/carmineguerrieroshome
page. The authors would like to thank Yun-chien Chang, Richard Epstein, Franco Ferrari, Saul Levmore, Ariel Porat, and Henry Smith for insightful comments. We are deeply grateful to Edmond Awad and his coauthors—Sohan Dsouza, Richard Kim, Jonathan Schulz, Joseph Henrich, Azim Shariff, Jean-François Bonnefon and Iyad Rahwan—for sharing with us the data from The Moral Machine Experiment. The authors would also like to thank Melissa Bales for excellent research and editorial assistance.

[1]. This notion is central to the large literature in law and economics that has originated from R. H. Coase, The Problem of Social Cost, 3 J.L. Econ. 1 (1960). Its importance, however, had long been recognized in legal scholarship, not only in the United States. E.g., Gaetano Petrelli, L’Autenticità Del Titolo Della Trascrizione Nell’Evoluzione Storica e Nel Diritto Comparato, 53 Rivista di Diritto Civile 585, 588 (2007); J.G. Sauveplanne, The Protection of the Bona Fide Purchaser of Corporeal Movables in Comparative Law, 29 Rabel J. Comp. Int. Priv. Law 651, 651 (1965). See generally René Demogue, Les Notions Fondamentales du Droit privé: Essai Critique Pour servir d’Introduction à l’ étude des Obligations (1911) (on the notion of static versus dynamic security); Victor Ehrenberg, Rechtssicherheit und Verkehrssicherheit: mit besonderer Rücksicht auf das Handelsregister (1904) (on the notion of certainty of rights versus certainty of transactions).

[2]. We introduced this notion in Giuseppe Dari-Mattiacci & Carmine Guerriero, Law and Culture: A Theory of Comparative Variation in Bona Fide Purchase Rules, 35 Oxford J. Legal Stud. 543 (2015) (dealing exclusively with stolen goods).

[3]. Ashton Hawkins et al., A Tale of Two Innocents: Creating an Equitable Balance Between the Rights of Former Owners and Good Faith Purchasers of Stolen Art, 64 Fordham L. Rev. 49, 49–50 (1995); Menachem Mautner, “The Ethernal Triangles of Law”: Toward a Theory of Priorities in Conflicts Involving Remote Parties, 90 Mich. L. Rev. 95, 95–96 (1991); see also Grant Gilmore, The Commercial Doctrine of Good Faith Purchase, 63 Yale L.J. 1057, 1057 (1954) (stressing that the historical emergence of the doctrine of good faith purchase served a commercial purpose: enabling contracting parties to rely on market transactions without costly inquiries about title); Boris Kozolchyk, Transfer of Personal Property by a Nonowner: Its Future in Light of Its Past, 61 Tul. L. Rev. 1453, 1454 (1987) (focusing on the rule’s function of enabling transfers through market intermediaries); Daniel E. Murray, Sale in Market Overt, 9 Int’l & Comp. L.Q. 24, 24–25 (1960) (arguing that the good faith purchase rules provide common sense solutions to a universal problem); Sauveplanne, supra note 1, at 651–52 (stressing the commercial logic behind good faith purchase rules). For a formal analysis, see Benito Arruñada et al., Property Rights in Sequential Exchange, 35 J.L. Econ. & Org. 127, 127–28 (2019).

[4]. See Benito Arruñada, Institutional Support of the Firm: A Theory of Business Registries, 2 J. Legal Analysis 525, 534–54 (2010); Kenneth Ayotte & Patrick Bolton, Optimal Property Rights in Financial Contracting, 24 Rev. Fin. Stud. 3401, 3402–04 (2011). This Article focuses on personal property; real property is subject to registration, which in turn has different effects under different national registration systems. For analysis on real property, see generally Carmine Guerriero, Endogenous Property Rights, 59 Int. Rev. L. & Econ. 313 (2016).

[5]. See, e.g., Alan Schwartz & Robert E. Scott, Rethinking the Laws of Good Faith Purchase, 111 Colum. L. Rev. 1332, 1333–38 (2011) (providing a recent scholarly contribution to this field that contains a review of the relevant literature).

[6]. The raw data and a detailed description can be found in Giuseppe Dari-Mattiacci & Carmine Guerriero, A Novel Dataset on Horizontal Property Rights in 126 Jurisdictions, 11 Data Brief 557, 559–60 (2017). We dropped Taiwan due to a coding error and hence reduced the sample size to 125 countries for the purposes of this analysis. This change does not affect any of our main results since our proxy for the quality of legal enforcement is not observable for this jurisdiction. We thank Yun-chien Chang for having drawn our attention on this issue.

[7]. See, e.g., Saul Levmore, Variety and Uniformity in the Treatment of the Good-Faith Purchaser, 16 J. Legal Stud. 43, 45 (1987); John Henry Merryman, The Good Faith Acquisition of Stolen Art, in Crime, Procedure and Evidence in a Comparative Context 275, 275–81 (John Jackson et al. eds., 2008); Patricia Youngblood Reyhan, A Chaotic Palette: Conflict of Laws in Litigation Between Original Owners and Good-Faith Purchasers of Stolen Art, 50 Duke L.J. 955, 1006 (2001).

[8]. E.g., William M. Landes & Richard A. Posner, The Economics of Legal Disputes Over the Ownership of Works of Art and Other Collectibles, in Economics of the Arts 177, 214–17 (Victor A. Ginsburgh & Pierre-Michel Menger eds., 1996). For a historical perspective, see also Murray, supra note 3, at 50–52 (discussing how multiple legal systems across space and time have been similar).

[9]. See Solomon R. Guggenheim Found. v. Lubell, 569 N.E.2d 426, 431 (N.Y. 1991).

[10]. See U.C.C. § 2-403(2)–(3) (Am. Law Inst. & Unif. Law Comm’n 2018). For a constitutional perspective on the theft rule versus the entrustment doctrine, see generally Elwood Earl Sanders, Jr., (Red) Elvis Has Left the Building: Did the UCC Legalize Theft? Constitutional Concerns Arising from the UCC Entrustment Clause, A Critical Analysis of Lindholm v. Brant, 13 Appalachian J.L. 21 (2013).

[11]. Dari-Mattiacci & Guerriero, supra note 2, at 550; see also Giuseppe Dari-Mattiacci, Carmine Guerriero & Zhenxing Huang, The Property–Contract Balance, 172 J. Institutional & Theoretical Econ. 40, 49, 60–61 (2016).

[12]. Self-reliance takes three possible values: high, if a country has high respect for others and low regard for hierarchy; low, if a country has low respect for others and high regard for hierarchy; and medium, in the residual cases (high or low levels of both respect for others and regard for hierarchy). Collapsing two cultural dimensions into a single variable has the advantage of allowing for direct visualizations of the results.

[13]. See infra Section II.A (providing details on these approaches and references).

[14]. Dari-Mattiacci & Guerriero, supra note 2, at 559–60.

[15]. See infra Section II.B.

[16]. See Chi-yue Chiu, Language and Culture, Online Readings Psychol. & Culture, Mar. 2011, at 1, 3–5 (providing a literature review on the effects of language on culture); Emiko S. Kashima & Yoshihisa Kashima, Culture and Language: The Case of Cultural Dimensions and Personal Pronoun Use, 29 J. Cross-Cultural Psychol. 461, 462 (1998) [hereinafter Kashima & Kashima, Culture and Language]; Emiko S. Kashima & Yoshihisa Kashima, Erratum to Kashima and Kashima (1998) and Reiteration, 38 J. Cross-Cultural Psychol. 396, 396 (2005); Sean Lee, Rethinking the Relationship Between Pronoun-Drop and Individualism with Bayesian Multilevel Models, 2 J. Language Evolution 188, 192 (2017) (arguing that the associations between language and culture found by Kashima and Kashima may be driven by Indo-European languages); Amnon Lehavi & Amir Licht, BITs and Pieces of Property, 36 Yale J. Int’l L. 115, 115–18 (2011) (first to use this approach in legal scholarship); Lewis Davis, An Extension of the Kashima and Kashima (1998) Linguistic Dataset 2–4 (May 12, 2012) (unpublished manuscript) (on file with authors).

[17]. See Edmond Awad et al., The Moral Machine Experiment, 563 Nature 59, 60–64 (2018).

[18]. See infra Section II.B (explaining these findings vanish when one adds relevant controls).

[19]. See Levmore, supra note 7, at 46; Anthony Ogus, What Legal Scholars Can Learn from Law and Economics, 79 Chicago-Kent L. Rev. 383, 394–95 (2004). For a formal mathematical approach to the problem, see generally Landes & Posner, supra note 8; Caspar Rose, The Transfer of Property Rights by Theft: An Economic Analysis, 30 Eur. J.L. Econ. 247 (2010); Schwartz & Scott, supra note 5; Omri Ben Shahar, Property Rights in Stolen Goods: An Economic Analysis (1997) (unpublished manuscript) (on file with authors).

[20]. Barak Medina, Augmenting the Value of Ownership by Protecting It Only Partially: The “Market-Overt” Rule Revisited, 19 J. L. Econ. & Org. 343, 368 (2003).

[21]. Several previous contributions have recognized the fact that the owner is in the best position to reduce the risk of embezzlement and that the buyer is justified in assuming the presence of good title in an open commercial setting. E.g., Benito Arruñada, Institutional Foundations of Impersonal Exchange 41 (2012); Arruñada, supra note 4, at 528; Randy E. Barnett, Squaring Undisclosed Agency Law with Contract Theory, 75 Calif. L. Rev. 1969, 1996–97 (1987); Karen Theresa Burke, International Transfers of Stolen Cultural Property: Should Thieves Continue to Benefit from Domestic Laws Favoring Bona Fide Purchasers?, 13 Loy. L.A. Int’l & Comp. L.J. 427, 444–46 (1990); Saul Levmore, Rethinking Comparative Law: Variety and Uniformity in Ancient and Modern Tort Law, 61 Tul. L. Rev. 235, 287 (1986); Levmore, supra note 7, at 59; Mautner, supra note 3, at 131; Medina, supra note 20, at 346; Harold R Weinberg, Sales Law, Economics, and the Negotiability of Goods, 9 J. Legal. Stud. 569, 590–91 (1980).

[22]. At a very general level, our analysis proposes a framework to rationalize divergence and convergence in private law rules, suggesting that divergence is driven by culture while convergence is driven by function—more precisely, the need to provide incentives for good behavior. For alternative frameworks used to addresss the same issue, see Yun-chien Chang & Henry E. Smith, Convergence and Divergence in Systems of Property Law: Theoretical and Empirical Analyses, 92 S. Cal. L. Rev. 785, 78696 (2019); Saul Levmore, Convergence and Then Downstream Divergence in Torts and Other Law, 92 S. Cal. L. Rev. 769, 78283 (2019); see also Yun-chien Chang, 214 Jurisdictions in the World Gets It Wrong: Fractional Ownership and Internal Auction in the Good-faith Purchase Problem 28–35 (2018) (unpublished manuscript) (on file with authors) (arguing that the market overt rule provides optimal incentives to owners, buyers, and intermediaries).

[23]. See supra notes 78 and accompanying text.

[24]. When we started collecting data for this project, the largest previous study on this matter only covered about thirty countries; for this information, see generally National Reports on the Transfer of Movables in Europe (Wolfgang Faber & Brigitta Lurger eds., 2011); Rules for the Transfer of Movables (Wolfgang Faber & Brigitta Lurger eds., 2008). Recent comparative law scholarship increasingly makes use of large datasets and a series of notable studies on this matter have been produced by Professor Yun-chien Chang, whose work is complementary with ours.

[25]. Note that in the data we differentiate among England, Wales, Northern Ireland, and Scotland.

[26]. The questionnaire was drafted by the two of us and Arthur Salomons and was sent to the country experts in English or French.

[27]. While a number of countries require the original owner to pay compensation to the good-faith buyer when the good is reclaimed, interestingly, no jurisdiction in our sample contained the opposite rule, which would require a prevailing good-faith buyer to pay compensation to the original owner in order to retain the good.

[28]. The data is freely available in Dari-Mattiacci & Guerriero, supra note 6, at 559–60. For more details and extensive summary statistics, see Dari-Mattiacci & Guerriero, supra note 2, at 55055.

[29]. We did so because statutes of limitations start running at different times in different jurisdictions. In this way, we made sure that our comparisons are not affected by this additional source of variation.

[30]. There are cases in which the buyer never acquires title (as reported in Table 1). We assigned to these cases the value of 30 years, which is the largest value short of “Never” in our data. We repeated the analysis with alternative proxies for “Never” and the results remain essentially the same.

[31]. E.g., Solomon R. Guggenheim Found. v. Lubell, 569 N.E.2d 426, 431 (N.Y. 1991).

[32]. Note that the dataset differentiates among these three cases while the table does not, because the four countries reported here apply uniform rules, in contrast with the United States. See id.

[33]. See U.C.C. § 2-403(2)–(3) (Am. Law Inst. & Unif. Law Comm’n 2018).

[34]. For the list of country and country codes, see infra Appendix.

[35]. Note that there is less variance in commercial transactions, as compared to private sales. This observation is consistent both with a static push towards more buyer protection in commercial settings, which mechanically reduces variation and with a dynamic tendency towards convergence due to higher stakes and more frequent interactions. See Richard A. Epstein, The Path to the T.J. Hooper: The Theory and History of Custom in the Law of Tort, 21 J. Legal Stud. 1, 1516 (1992).

[36]. Konrad Zweigert & Hein Kötz, Introduction to Comparative Law 33–47 (Tony Weir trans., Clarendon Press 3d rev. ed. 1998).

[37]. Levmore, supra note 7, at 65. For further discussion, see generally Levmore, supra note 22.

[38]. See Sjoerd Beugelsdijk & Robbert Maseland, Culture in Economics 313–18 (2011); Geert Hofstede, Cultures and Organizations 23–24 (1991); Deepak Lal, Unintended Consequences: The Impact of Factor Endowments, Culture, and Politics on Long-Run Economic Performance 62–65 (1998) (noting the effect of culture on predominantly-Islamic countries); Philippe Aghion et al., Regulation and Distrust, 125 Q.J. Econ. 1015, 1046–47 (2010); Thorsten Beck et al.,, Law, Endowments, and Finance, 70 J. Fin. Econ. 137, 151–53 (2003); Yuriy Gorodnichenko & Gerard Roland, Culture, Institutions and the Wealth of Nations, 99 Rev. Econ. Stat. 402, 40204 (2017); Jim Granato et al., The Effect of Cultural Values on Economic Development: Theory, Hypotheses, and Some Empirical Tests, 40 Am. J. Pol. Sci. 607, 613 (1996); Avner Greif, Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies, 102 J. Pol. Econ. 912, 914 (1994); Luigi Guiso et al., Does Culture Affect Economic Outcomes?, 20 J. Econ. Persp. 23, 44–46 (2006); Amir N. Licht et al., Culture, Law, and Corporate Governance, 25 Int’l Rev. L. & Econ. 229, 253 (2005); Susan Rose-Ackerman, Corruption, in 1 The New Palgrave Dictionary of Economics and the Law 517, 521 (Peter Newman ed., 1998); Shalom H. Schwartz, A Theory of Cultural Values and Some Implications for Work, 48 Applied Psychol. Int’l Rev. 23, 25 (1999); René M. Stulz & Rohan Williamson, Culture, Openness, and Finance, 70 J. Fin. Econ. 313, 346 (2003); Guido Tabellini, Institutions and Culture, 6 J. Eur. Econ. Ass’n 255, 255–59 (2008); Claudia R. Williamson & Carrie B. Kerekes, Securing Private Property: Formal Versus Informal Institutions, 54 J.L. & Econ. 537, 564 (2011).

[39]. For an example of one of these world-wide surveys, Ronald Inglehart, World Values Survey wave 6 (20102014), Inst. for Social Res. (2014), http://www.worldvaluessurvey.org/WVSDocument
ationWV6.jsp.

[40]. See Peter Mühlhäusler & Rom Harré, Pronouns and People: The Linguistic Construction of Social and Personal Identity 16–18 (Peter Trudgill et al. eds.,1990); Kashima & Kashima, Culture and Language, supra note 16, at 461–64.

[41]. See Geert H. Hofstede, Culture’s Consequences 11–14 (Walter J. Lonner & John W. Berry eds., 1980) (classifying culture along the individualism-collectivism dimension). Italian, for instance, allows pronoun drop (low level of trust and respect for others), while English does not (high level of trust and respect for others).

[42]. See Shalom H. Schwartz, Beyond Individualism/Collectivism: New Cultural Dimensions of Values, in Individualism and Collectivism 85, 98 (Uichol Kim et al. eds., 1994) (classifying culture along the hierarchy-egalitarianism dimension). Italian, for instance, allows the use of different second person pronouns modulated by social distance (widespread acceptance of hierarchy), while English does not (limited acceptance of hierarchy).

[43]. See supra note 12 and accompanying text.

[44]. See Alan Watson, Legal Transplants 16–20 (Univ. of Ga. Press 2d ed. 1993); Alan Watson, Roman Law & Comparative Law 197 (1991).

[45]. See James Gordley, Comparative Law and Legal History, in The Oxford Handbook of Comparative Law 753, 761 (Mathias Reimann & Reinhard Zimmermann eds., 2006).

[46]. See Rafael La Porta et al., Legal Determinants of External Finance, 52 J. Fin. 1131, 1131 (1997) (defining modern legal origins as either English, French, German, or Scandinavian). See generally Thorsten Beck et al., Law and Finance: Why Does Legal Origin Matter?, 31 J. Fin. Econ. 653 (2003) (providing another example of legal origins); Edward L. Glaeser & Andrei Shleifer, Legal Origins, 117 Q.J. Econ. 1193 (2002) (same); Rafael La Porta et al., Law and Finance, 106 J. Pol. Econ. 1113 (1998) (same).

[47]. Rafael La Porta et al., The Economic Consequences of Legal Origins, 46 J. Econ. Literature 285, 28587 (2008).

[48]. Since many countries have undergone substantial reforms after colonization, classifying a country as a common law or a civil law jurisdiction by looking at the moment of colonization may be unwarranted. Carmine Guerriero, Endogenous Legal Traditions, 46 Int’l Rev. L. & Econ. 49, 67 (2016); Mariana Pargendler, The Rise and Decline of Legal Families, 60 Am. J. Comp. L. 1043, 1043–47 (2012). In addition, identifying the legal tradition as the country of origin of the colonizers lumps together a number of factors that are difficult to disentangle from the notion of a legal tradition, such as business culture, language, religion, preference heterogeneity and inclusiveness of political institutions, as one of us documented in previous works. See Guerriero, supra, at 67.

[49]. Clayton P. Gillette, Who Puts the Public in Public Good?: A Comment on Cass, 71 Marq. L. Rev. 534, 534–36 (1988); Mark J. Roe, Legal Origins, Politics, and Modern Stock Markets, 120 Harv. L. Rev. 460, 463 (2006).

[50]. Marco Pagano & Paolo F. Volpin, The Political Economy of Corporate Governance, 95 Am. Econ. Rev. 1005, 1007 (2005); See Bernd Hayo & Stefan Voigt, Endogenous Constitutions: Politics and Politicians Matter, Economic Outcomes Don’t, 88 J. Econ. Behav. & Org. 47, 48 (2013).

[51]. In the analysis, we measure the level of democracy by the constraints on the executive as coded in the Polity IV dataset. Monty G. Marshall & Ted Robert Gurr, Polity IV Individual Country Regime Trends, 1946-2013, Polity IV Project (June 6, 2014), http://www.systemicpeace.org/
polity/polity4.htm. Please note that this website has since been updated and its data does not exactly match the data used by this Article. We also use data on the electoral systems from Lorenz Blume et al., The Economic Effects of Constitutions: Replicating—and Extending—Persson and Tabellini, 139 Pub. Choice 197, 209–25 (2009).

[52]. See Max Weber, The Protestant Ethic and The Spirit of Capitalism 108–11 (Talcott Parsons trans., Routledge 2005).

[53]. Stulz & Williamson, supra note 38, at 315.

[54]. To test the effect of religion, we use data collected by Rafael La Porta et al., The Quality of Government, 15 J.L. Econ. & Org. 222, 234–44 (1999).

[55]. For the summary statistics of all the variables we use and the estimates of our regression, see infra app. The figure reports the residuals from regressing the variable of interest (for instance, owner protection in private sales, in the upper-left graph) on all explanatory variables and compares it with the residuals from regressing self-reliance on the same explanatory variables. Through this procedure, we capture the extent to which self-reliance explains owner protection after considering the effect of other variables.

[56]. A recent study has emphasized that the association between languages and culture is especially driven by Indo-European languages. See Lee, supra note 16, at 192. To make sure that our results are not affected by this potential problem, we repeated the analysis with countries speaking only Indo-European languages and found the same results. The sample size, though, is severely reduced, limiting the possibility of running additional tests. See the Appendix for details.

[57]. See Dari-Mattiacci & Guerriero, supra note 2, at 57173.

[58]. See Awad et al., supra note 17, at 60–64.

[59]. See supra note 19 and accompanying text.

[60]. See supra note 20 and accompanying text.

[61]. This remains true even though owner of stolen or embezzled goods may attach low or high value to them.

[62]. The desirability of buyer protection is only increased if one considers a potential feedback effect on prices. Buyer protection is likely to increase the resale price of stolen or embezzled goods, because buyers are willing to pay more if their title is more secure. In turn, the increase in price could add to the self-selection of buyers: higher prices discourage low-value buyers from entering the market, reinforcing our argumentation.

[63]. Dari-Mattiacci & Guerriero, supra note 2, at 55557; Dari-Mattiacci, Guerriero & Huang, supra note 11, at 15–16; Carmine Guerriero, Property Rights, Transaction Costs, and the Limits of the Market 3 (Dec. 4, 2018) (unpublished manuscript) (on file with authors).

[64]. See Schwartz & Scott, supra note 5, at 1372–73.

[65]. This approach is in line with a related study by Professors Lehavi and Licht, who proposed individualism as a cultural feature explaining the protection of property. Lehavi & Licht, supra note 16, at 117–18 (explaining that self-reliance encompasses individualism through the pronoun-drop feature of the language as one of its two subcomponents).

[66]. In contrast, the literature on private takings originated from Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089 (1972) which almost entirely focuses on the maximization of ex post value. The problem addressed in this literature is the maximization of the chance that the good ends up in the hands of the highest value user. When voluntary transactions fail this goal because of transaction costs, involuntary transactions (takings) may be tolerated. Differently from this literature, in a GFP situation the “taking” is effectuated by an intermediary (a thief or an embezzler) rather than directly by the taker (buyer, in our setup) and hence the transaction is always involuntary from the perspective of the owner and the buyer. See Dari-Mattiacci & Guerriero, supra note 2, at 555 & n.61.

[67]. See generally Dari-Mattiacci, Guerriero & Huang, supra note 11, for a formal model of this trade-off.

[68]. We cannot exclude, however, that the ex postvalue theory could also help explain differences between private and commercial sales and between theft and embezzlement in cases were transaction costs systematically vary across these environments. The interaction between the original owner and the intermediary, and the higher complexity of commercial environments might increase transaction costs and call for weaker original owners’ property rights. See Calabresi & Melamed, supra note 66, at 1095–97; Guerriero, supra note 63 (manuscript at 26–27).

Convergence and Divergence in Systems of Property Law: Theoretical and Empirical Analyses – Article by Yun-chien Chang & Henry E. Smith

May 2019October 2019Southern California Law Review Admin

From Volume 92, Number 4 (May2019)
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Convergence and Divergence in Systems of Property Law: Theoretical and Empirical Analyses [*]

Yun-chien Chang [†] & Henry E. Smith [‡]

This Article utilizes a unique data set of property laws in 119 jurisdictions in the world to test convergence/divergence theories in comparative property law. Our theory predicts that first, because legal systems face similar positive transaction costs in delineating property rights, the structure of property law among all jurisdictions in the world will converge or remain similar since some time in the distant past. Second, our theory posits that the style of property law will tend to converge when the doctrines in question are isolated, but diverge when they are interconnected. Our data and descriptive analysis support the theory. Doctrines regarding possession, sales, condominiums, tenancies in common, and limited property rights serve as prominent examples.

Keywords

numerus clausus principle, tenancy in common, possession, sales, condominium

Introduction

Comparative property law faces the familiar challenge of choosing a unit of comparison. What do we compare and why? Doctrines with similar labels might serve different functions, their labels being a mere etymological accident. Examples include civil law “real rights” (rights in things) versus common law “real property,” or civilian “cause” (the reason for a contract) versus “cause” in the common law of torts.[1] Alternatively, doctrines with very different labels can show a high degree of similarity, as in common law adverse possession and civil law prescriptive acquisition.

So far so familiar. And yet the comparative problem of identifying the proper subject matter of inquiries into convergence or divergence is at its extreme in the case of property. To get a handle on what to expect in terms of convergence and divergence among systems of property law, we need a theory of how those systems work and what problems they are meant to solve. If the contours of property systems reflect the ends they are supposed to serve and the costs of achieving those ends, we can start to predict how these forces will play out in the comparative arena.

We take as our starting point an account of property’s overall architecture and its functional motivation. Property law serves as a platform for the interaction of actors in society with respect to things. Because our potential uses of resources often conflict, and most of the external objects of the world are only contingently associated with any actor, the law needs a way to protect uses, prioritize decisions about use, and facilitate the coordination of actors’ uses. In a world of zero transaction costs, we could formulate the law governing such interactions in a fully articulated fashion: every micro-action by each actor impacting each other actor with respect to each aspect of each resource would be the subject matter of a legal rule, and such rules could condition on any combination of features of other actors, things, or relations.[2] The complexity here quickly becomes intractable. In our world, property law employs (legal) things and a combination of exclusion and governance strategies to manage this complexity.[3] Because this management function could not be accomplished by contract alone or through a more articulated activity-based tort law, we can call it the “essential function” of property law.[4] And because every modern property system faces this problem to roughly the same gross extent, we can expect some similarity in the institutional responses to this basic problem. Separating the world into more or less distinct things and affording to owners rights based on exclusion over these things is a first cut, which is then refined through more use-based governance strategies that take care of especially important interactions between actors.[5]

As with other law, we can distinguish the structure and the style of a system of property law.[6] The structure of property law refers to how property law groups problems so that they need not be treated in a fully articulated fashion, and in so reshaping problems, property law serves an essential function—a function that cannot be replicated by contract. For the property systems we will be investigating, the manner of carving up the set of resource-related activities turns out to be some version of a hybrid of exclusion and governance strategies. Property law identifies things and affords owners the right to exclude, as implemented in property torts like trespass and conversion, and fine-tunes this package with rules of governance. In real property, these governance devices include nuisance, easements, covenants, and zoning, and in personal property they include bailments. In both areas, governance devices also include leases and mortgages. Sophisticated hybrids of exclusion and governance are also possible, ranging from condominiums to partnerships and corporations, and, in the common law world, to the trust. The need to employ a system based on a mixture of exclusion and governance stems from the problem of protecting uses at a positive cost, not least the intractability of an unstructured system.

Serving the essential function of property—protecting uses in a world of positive institution costs—still leaves a great deal of freedom in terms of how to serve those objectives within the framework. In any set of cultural artifacts, including law, style is a characteristic manner of doing things. Families of legal systems, like common law and civil law, have sometimes been defined in terms of style,[7] although we will not prejudge this matter here. In property law, an example of style would be the reliance on possession and a more implicit definition of ownership in common law systems versus the definition of dominion and departures from it in typical civilian systems. Likewise, a lease can be a contract given in rem protection or can be delineated as an in rem right of a limited scope. Styles of property law show great persistence overall, in at least some of their aspects. As with styles generally, this can be attributed to path dependence; because law exhibits network effects, it is difficult to change even in the face of equally good or even superior alternatives.[8]

Structure and style raise the issue of how tightly a given aspect of property law is integrated into the overall system. Private law doctrines that are most integrated into its overall system are the most difficult to change; doctrines that are easily treated in isolation, with fewer ripple effects, are conversely much easier to modify.[9] In property law, the various doctrines and institutional features sometimes interlock and sometimes do not. Those that are highly interconnected with the rest of the system, like possession, might be expected to be difficult to change, in contrast to doctrines that can safely be treated in isolation, like the contractual aspects of leases.

Our approach to convergence and divergence is rooted in a combination of the relative propensity to change and the relative closeness of starting points. In a system like property, which is some combination of spontaneous order and design, change over time (whatever its source) will flourish or be cut off depending on the resultant fitness (however defined) of the overall system. Drawing on a well-known evolutionary model, Lee Alston and Bernardo Mueller add this aspect to the bundle of rights.[10] The various elements of the bundle of rights—rights to grow tomatoes, rights to build a shed, rights to walk and so forth—may be relatively isolated or show “epistatic” connections.[11] In an epistatic connection, a change in one element will lead to an effect on a connected element. Thus, a change in one gene may produce an effect in another gene, if they are epistatically connected. Likewise, the right to draw water affects the value of the right to grow tomatoes, but the right to prevent airplane overflights is (presumably) unconnected to either the right to draw water or the right to grow tomatoes.

Once epistatic connections are in the picture, the implications of different patterns and densities of epistatic connections for the evolution of property rights are likely to be quite important. Along a spectrum, we can distinguish three types of scenarios. First, the elements in the bundle of rights might be wholly unconnected. If we get the answer right for each element, then all we have to do is add up the effects of all the elements, and we can be assured that we have optimized the entire bundle. Often, in the conventional post-realist bundle of rights picture, exactly this disaggregated pattern with no epistatic connections is assumed. If so, it is easy to change individual elements without the downside of severe, unrelated (by epistatic connection) negative effects emerging in the bundle. However, assuming epistatic connections away is unrealistic (for example, water and farming), even if convenient.

At the opposite extreme, we might have maximal epistatic connections: everything is connected with everything else. If so, the pattern of consequences to minor variations in one element of the bundle is random or chaotic and very hard to predict. This pessimistic picture does not describe our world either. Sometimes problems, like high-altitude airplane overflights, can indeed be treated largely in isolation from other problems.

In between these two extremes of zero and total connectivity is what has sometimes been called “organized complexity.”[12] Here, epistatic connections are important but far from universal. They can also be clustered. Innovation is promoted by the fact that interconnection is not complete and is semi-organized.[13] Either by design or through spontaneous variation, changes to part of the bundle can be made, and the overall effect can move in the direction of a local optimum more easily than under complete connection (and the chaotic landscape it corresponds to). This is another sense in which the bundle of rights (if one wishes to call it that) is a structured one.[14]

The notions of essential function and interconnection allow us to form expectations or even predictions about the convergence and divergence of property systems. Structural aspects of modern property systems that solve the basic problem of managing use conflict and avoiding intractability will cause some convergence on the exclusion-governance architecture. To be sure, the relative emphasis on exclusion and governance will vary according to local conditions, and in particular, it will be easier to add, subtract, or modify governance rules than it will be for analogous changes to the exclusionary setup. Property systems will converge in having a mix of exclusion and governance and will diverge more in the area of governance than in exclusion, as exclusion is one of the three essential elements in property.[15] We should also expect that, because in general it is more detachable from the system, stylistic variation more easily arises in governance than in exclusion. So, our first proposition is that structural aspects of property law should show convergence and the structures in question should be stable over time. More tellingly, even if the initial condition of the property structure is no exclusion at all, this arrangement is unlikely to persist if open access does not make sense on its own terms (that is, it fails to provide benefits that exceed the costs, or compares unfavorably with other arrangements that could be implemented).[16] A prime example is the people’s commune during the Cultural Revolution in China. Private property and individual farming had been the norm and practice, but during the revolution the government mandated a shift to limited-access common property. As is well known, this social experiment did not last long.[17] The structure of property law, therefore, will converge to an exclusion-based system, regardless of the initial conditions.

When it comes to more stylistic features, we must distinguish between those that are more interconnected and those that are less interconnected with the rest of the system of property law. Our second proposition holds that, in any aspect of the property system that is less interconnected, we should expect more stylistic variation. Tighter interconnection will lead to more uncontained ripple effects and a more jagged fitness landscape,[18] such that it is harder to achieve higher peaks of fitness. Conversely, less interconnected doctrines can respond to pressures for improvement, whether designed or not, and the improvement to that one piece of the system leads directly to an overall unambiguous contribution to fitness.

We might offer a third, dynamic, proposition: the less interconnected an aspect of the property system is, the more we should expect that it could change over time for a variety of reasons. One of these reasons is voluntary borrowing, or legal transplants due to colonialism. Previous work has found that in the admittedly small number of mixed systems that have both common and civil law heritages, there is a tendency to borrow contract law more than property law (never the latter without the former),[19] and within property law to borrow more in the in personam than in the in rem aspects.[20] Thus, in terms of changes over time, we might expect that stylistic features would converge or diverge but that more rapid changes would take place in less connected, rather than in more connected, areas of property law.

Now, after decades or centuries of evolution in property law, we might be more likely to observe the convergence of isolated (less interconnected) doctrines, if at least one of the following conditions holds: (1) there is one or a few apparently dominant strategies; (2) convergence in a global market saves transaction costs and attracts investment and business; or (3) there have been conscious or subconscious, voluntary or involuntary borrowing or legal transplants, with or without explicit efficiency concerns.[21] This is not the place to propose a full-fledged convergence and divergence theory.[22] Our key point here is only that less interconnected doctrines are more likely to vary (resulting in divergence or convergence depending on background conditions) than more interconnected ones.

In this Article, we employ a snapshot of current property systems. We are not in a position to test the third proposition—that the interconnectedness of doctrines should correlate with rapidity of change. As for the first two, assuming that systems are not subject to overwhelming pressures to converge, we can isolate our expectations: property systems should show more convergence in their less interconnected than in their more interconnected aspects. This is based on the particular conditions of our world. If all countries had the same property law to begin with, we would see that more interconnected parts of the property system remain the same—they would remain convergent. Less interconnected parts of the property system, given that they cannot become more convergent, and they vary more, will become relatively divergent. Of course, this is not our world. We live in one where the common and civil law have very different starting points (styles) in terms of property law.[23] The civil law system is also inherently plural. Hence, what is more interconnected has different starting points and remains divergent, whereas what is less interconnected could diverge or converge due to one or more of the three forces laid out above. By contrast, the basic structure is highly systemic and so should show more convergence than do more structurally peripheral aspects. And among styles of property law, we should expect those that are connected to the rest of the law to retain their greater diversity. Our theoretical framework is summarized in Table 1.

Aided by a unique data set on property laws in 119 jurisdictions in the world (see Figure 1),[24] we find that many property issues, as of 2015, are still framed in drastically different fashions. For instance, in civil law countries, rei vindicatio—the action to force someone to return possession of a thing to its owner—is the major right of a property owner, while this expression is almost nontranslatable into a legal term in English (“revindication” is the usual English word, which means nothing to common-law lawyers). Property owners in the common law, of course, are generally well protected—by different means with different labels (trespass, conversion, replevin, and so forth).

Structures of property, on the other hand, do appear to converge. Most jurisdictions, in their civil codes or case law, address the same types of property issues. This suggests that the problem of serving property’s functions at positive information cost everywhere creates the same disputes. Uncertainty over titles to real or personal property gives rise to the adverse possession doctrine. High costs of verifying true owners of movables put on sale lead to the good-faith purchaser doctrine.[25] Use rights and security rights, while often bearing very different names (for example, the land charge in England is functionally equivalent to the Reallast in Germany), are staples in virtually all property systems. Moreover, jurisdictions around the globe adopt only around ten limited property forms, and many jurisdictions explicitly reserve to the legislature the power to create new forms.[26]

The exact contents of property doctrines do not necessarily converge. Lawmakers around the world face the same issue of positive information costs, but the same problem does not always call for the same solution. Information costs only force legal systems to come up with a solution, but often anything goes.[27] Many, if not most, doctrines mix structural and stylistic aspects. When lawmakers for any reason settle on a solution, etched in civil codes or leading cases, they do not always have strong reasons to change the solution to become more like other jurisdictions.

Specifically, concrete solutions are more likely to converge if the doctrine in question is more isolated from other doctrines. This is true of structural and especially of stylistic aspects of law. In an interconnected doctrine, such as the definition of possession, convergence (indeed, any deviation from the status quo) requires moving other pieces in the whole system to go along with the change.[28] Especially in the civil law world, the fear of unintended consequences in changing a foundational doctrine in a civil code could kill any proposal for deviation. France and Germany each have their own conceptual system of possession, which is hard to uproot after hundreds of years of doctrinal interpretation. When European scholars proposed the Draft Common Frame of Reference,[29] they neither found common ground nor simplified the concept. Instead, they managed to keep the two conceptual systems of possession together—creating a lot of confusion and contradiction.[30] By contrast, a “downstream” doctrine that is more isolated from other doctrines has more wiggle room, as, in the worst-case scenario, a failed experiment would not drag the whole system down with it. Co-ownership partition is a prime example of such a doctrine. The aforementioned data show that ninety-one jurisdictions (77%) prefer partition in kind and allow partition by sale.[31] The widely adopted condominium form is another example.[32]

To be sure, we do not claim that isolation and interconnection are the only reason for doctrines to converge or diverge. Many other factors—the benefit of convergence, for one—affect lawmakers’ decisions. That is, large benefits of convergence may push interconnected doctrines toward convergence. Europe’s effort in streamlining registration of mortgages is a case in point. By contrast, small benefits of convergence will leave isolated doctrines untouched. Doctrines related to accession and finders are two examples.

In addition, rigorously testing convergence and divergence empirically would require a panel data set with 100 plus jurisdictions over the past several decades. Powered by such a panel data set, scholars could chart the evolution of property doctrines to examine whether they were the same or different in the beginning or became similar or dissimilar to one another over time. Unfortunately, no such data sets are available. Our approach is to use property laws around the world in 2015 as a snapshot and inquire whether they are the same (convergent) or still different (divergent).

I. Convergence in Structure

Our first proposition is that property systems will converge in terms of their structure. The structure of property law responds to function more than does what we call “style.” The latter is a way of achieving a function that could easily be different, and it functions mainly as a method of communication among actors in a legal system. Because structure is functionally motivated in a deeper and more thorough sense, we expect that similar functional needs will be reflected in similar property structures—to the extent that property law responds to those functional needs. We further hypothesize that some very basic functions served by property law systems, and important constraints on the devices each system utilizes, are prevalent across jurisdictions. We are not yet in a position to test this proposition comprehensively. Nevertheless, highly suggestive illustrative evidence is available from our snapshot of 119 jurisdictions. In this Section, we will present evidence from devices, like adverse possession, that respond to the cost of verifying titles and from principles, like the limited number of property forms, that manage information costs.

A. High Information Costs of Verifying Titles

The information costs for potential transactors to verify the identities of current owners have been high everywhere most of the time throughout history. Therefore, countries around the world, through legal transplants or imitations, develop similar strategies for reducing the expenditure of information costs to reasonable levels. Well-known doctrines such as adverse possession and good-faith purchase are cases in point. Indeed, 82 of the 119 jurisdictions (69%) have adverse possession doctrines that enable, at a minimum, good-faith possessors to acquire ownership of items of personal property. In 11 additional jurisdictions (9%) that are greatly influenced by French law, there is no need for an adverse possession doctrine for movables, as possessors of movables are immediately presumed to be the owners. 108 of the 119 jurisdictions (91%) have the good-faith purchase doctrine or the French doctrine that presumes all possessors to be owners. 108 of the 119 jurisdictions (91%) have an adverse possession doctrine that at least enables good–faith possessors to acquire ownership of land.[33] Notably, 20 jurisdictions explicitly limit the application of the adverse possession doctrine to unregistered land. Since the main justification for the adverse possession doctrine in the contemporary world is clearing titles and aligning the gap between de jure and de facto ownership arising from high information costs,[34] a categorical rule that excludes registered land makes sense, as information costs for verifying titles to registered land should not be high.

B. Limitations on the Number and Kinds of Property Forms

As property has in rem effects, a large number of limited property forms carved out of ownership create information costs for all potential transactors; they need to discover, understand, and price the encumbrance of such rights on real and personal property. One popular way to control the level of such information costs is to adopt a closed system, the numerus clausus, under which only the legislature can invent new property forms. As Figure 2 shows, 50 of the 119 jurisdictions (42%) explicitly stipulate the numerus clausus principle. Those that do not, such as states in the United States,[35] may endorse and enforce it in practice without promulgating the principle in statutes. Countries like South Korea and Taiwan allow custom to create new forms, but in practice very few, if any, new forms have been recognized through custom. Some systems, like those of Norway [36] and South Africa,[37] purport to have a numerus apertus (or open number) of forms, but in practice are quite strictly closed. Likewise, even Spain’s numerus apertus system is heavily limited by its registrars’ reluctance to register new forms.[38]

Another way to control information costs is to adopt only a small number of property forms. The recursive nature of property forms and, in common law jurisdictions, the existence of the trust, to a large extent make unnecessary a significant number of forms.[39] Basic forms, such as the mortgage and the usufruct (leaseholds and life estates being partial functional substitutes), go a long way in increasing the value of property. The data set we use includes twenty-six types of limited property forms.[40] Figure 3 shows that most countries have around ten forms. (The North Korean Civil Code contains zero limited property forms.) Certain forms are core, with high adoption rates: easement (99%), mortgage of real properties (98%), pledge of personal properties (97%), pledge over rights (82%), usufruct (82%), and rights of retention (roughly, the combination of artisan’s lien, mechanic’s lien, and warehouseman’s lien) (76%).[41]

II. Divergence in Interconnected Doctrines

We do not expect convergence across the board. Instead, doctrines that are more interconnected with the rest of the system of property law should be expected to resist convergence if they start out in a divergent state. Such divergence will be a possibility mainly for stylistic aspects of property law because of the structural convergence explored in the previous section. An interconnected doctrine is difficult to change because the change will cause more severe and widespread knock-on effects throughout the law. Thus, our second proposition holds that more interconnected doctrines will show more stylistic divergence (and as taken up in the next Section, less interconnected doctrines will tend to show more stylistic convergence across property systems). We illustrate interconnected doctrines in the areas of possession, sales, and temporal divisions of property.

A. Possession

Possession is the root of many property law doctrines, such as adverse possession, first possession, delivery of items of personal property for purposes of sale, good-faith purchase, and so forth. That the law recognizes something along the lines of possession is structural and is convergent across legal systems. As Professor Thomas Merrill points out,[42] possession is a common-sensical cue that ordinary persons in everyday life can understand. Moreover, using possession as a proxy for boundaries helps enforce the exclusion-based structure of property. But what kind of possession doctrine to implement in the law is stylistic and interconnected. That is, the specific definition of possession, while only different on the margins, is difficult to change. We see this at work in civil law jurisdictions, where several versions of intention requirements for possession exist, as shown in Table 2. By contrast, one has a hard time identifying judicial or statutory definitions of possession in common law jurisdictions, even though they have the same second-order doctrines (adverse possession and so forth).[43]

We doubt that in practice any such intention requirement will make a substantial and substantive difference, and yet, the doctrine has not converged. Perhaps more controversially, we also doubt in practice whether no-intention or animus domini as a precondition for possession has any real world consequences. Still, the doctrine remains divergent, probably because possession is a fundamental concept and lawmakers worry that changes in definition may bring unintended consequences. Possessory notions are not only important for protecting property rights through trespass and conversion, but they also play a role in doctrines like original acquisition and adverse possession—even in animal torts, as possessors of animals in Germany and Taiwan are liable in tort when the possessed animals injure other human beings.[44] Aspects of possession intersect with bailment and with agency, security interests, and the like. A change in the definition of possession might have implications throughout property law, which might require adjustment in those areas.

Jurisdictions differ in their choices in defining possession along other dimensions as well. Twelve non-common-law jurisdictions (10%) banish “agents in possession” (that is, employees relative to their employers) from the ranks of possessors, as do several common-law jurisdictions that distinguish possession on the one hand and custody or occupation on the other hand.[45] Thirty-seven jurisdictions (31%) prefer the concept of détention (physical control along with a purpose to control on behalf of others), and provide that a person with only détention is not a possessor.

B. Sales

What constitutes a valid sale is highly divergent across jurisdictions.[46] To transfer title to movables, in fifty-eight jurisdictions (49%) a valid sale contract itself does the trick; in fifty jurisdictions (42%), delivery (possession changing hands) is sometimes or always required; and in nine jurisdictions affected by English law, a title transfers when parties intend it to.[47] Clearly, sales are connected with a complicated web of other property doctrines—for instance, do constitutum possessorium (in which the original owner becomes a mere possessor for the acquirer of the item in question)[48] and attornment (in which the seller agrees to assign to the buyer the right to reclaim the thing in question from a third party) count as delivery by default?[49] Is there a “real agreement” (dingliche Einigung) in addition to the sale contract?[50] Are the two levels of contracts always invalid at the same time?[51] Are the services of notaries or attorneys required to execute sale contracts? And so on. For a jurisdiction to change from an intention-based system to a delivery-based system, many foundational principles have to make way.

Sales of immovables are also a case in point. In fourteen jurisdictions (12%), a valid sale contract is sufficient to sell land and buildings. In thirty-seven jurisdictions (31%), recording creates an “opposability effect” to third parties.[52] In sixty-three jurisdictions (53%), registration is necessary. Twelve of these sixty-three jurisdictions conceptualize a real agreement as one necessary element in a sale. Here, it is apparent that changing the doctrine creates ripple effects on the design of the register and the markets of middlemen and professionals. Interestingly, anecdotal evidence suggests that in France and Japan, two opposability countries, basically all sales of real estate are recorded. Hence, if they move away from opposability and require registration as a precondition for valid transfer, market practices would not need to change at all. The behaviors of sellers, buyers, and third parties would be the same. Still, there is no sign that France and Japan are making the change.

C. Temporal Division of Property

Only 13 of the 155 jurisdictions, all with common-law heritage, recognize future interests. This is one feature that maps onto the common-civil division perfectly. Another is the property-form trust (as opposed to a trust-like contract that lacks the features of property).[53] This feature can be expected to remain stable for a long time, because recognizing future interests or trusts would change the highly interconnected civil-law concept of ownership.

III. Convergence in Isolated Doctrines

As opposed to interconnected doctrines that tend to resist convergence and so tend to diverge, more isolated doctrines will tend to converge more across legal systems. We illustrate this with an analysis of the convergence in co-ownership and condominium doctrines, which can be altered without massive ripple effects through the rest of property law. These doctrines exhibit the expected convergence across jurisdictions.

A. Co-Ownership: Management, Sale, and Partition

Doctrines regarding co-ownership demonstrate our point that convergence and divergence depend greatly on whether the doctrines are isolated or interconnected. This Section shows that voting rules for managing and selling co-ownership are more divergent than rules regarding judicial partition of co-ownership. Both sales and partitions end the co-ownership; co-ownership doctrines will not apply after sales and partitions. Doctrines related to solo ownership apply to solo-owned things after sales and partitions of those things, just as for other things that have never been co-owned. Between the two, we also expect the voting rules for sales to be more divergent than the partition rules, as the former have to interact with the voting rules for management. For example, lawmakers are unlikely to set the voting rules for sales at super-majority voting if the voting rules for management require consensus. In comparison, partition is a unilateral right of any co-tenant, and judges usually have wide discretion as to the details of partition. Hence, judicial partition rules may change on the books while partition practices remain the same,[54] making it easier for them to converge.

By contrast, a covenant to manage tenancy-in-common property among cotenants means that the complex relationship continues to exist. Lawmakers have to consider, in a whole package, how to structure other dimensions of co-ownership. For instance, is there a duration cap to a management covenant? If a covenant cannot be established without consensus, it is more reasonable to allow it to last longer. In addition, can a management covenant include a covenant not to partition during the agreed term of the management? (Seventy-six jurisdictions allow it.) Can courts end such a covenant not to partition should circumstances mandate it? (Twenty jurisdictions stipulate a rule like this.) Under what conditions does a management covenant bind transferees of shares? (Forty-one jurisdictions stipulate a rule like this regarding real property, whereas twenty-four jurisdictions do so regarding personal property.) Hence, countries cannot easily adopt new voting rules for managing co-owned properties, as property policies in other doctrines would need to change as well.

Tables 3 through 5 are consistent with our predictions. Regarding the voting rules for managing co-owned properties, both the majority rule and the consensus rule have a substantial number of supporters, but neither is adopted in more than half of the jurisdictions.[55] In addition, multiple voting rules that are more complicated are adopted, too. As for the voting rules for selling co-owned properties, Table 4 demonstrates that a majority of jurisdictions favor the consensus rule,[56] and the 119 jurisdictions have converged to three simple rules: consensus, majority, and super-majority voting. As for judicial approaches to partition, one rule (partition in kind is preferred and partition by sale is the second choice) is adopted in 60% of the jurisdictions. Two other popular approaches still prefer partition in kind and allow partition by sale, and only add additional options.

B. Condominium

The condominium form is another example of a discrete device that shows convergence across jurisdictions. The condominium form was quickly recognized in at least eighty-nine jurisdictions (75%) after its invention.[57] The condominium form is used almost exclusively in residential buildings, and by definition is not applicable to land, so recognizing this form would not mess up the co-ownership regime in land. Late-coming lawmakers can choose any form to structure high-rise residential buildings. For one, they can opt for the cooperative, but only one jurisdiction, Pakistan, recognizes the cooperative while not recognizing the condominium. As it turns out, many jurisdictions adopt the condominium form,[58] as it does not interfere with existing doctrines.

Conclusion

Using data from 119 countries in 2015, we test the relationship between the interconnectedness of property doctrine and the degree of convergence and divergence in those doctrines across countries. Structural aspects of property, especially those that are in rem, tend to be integral to the system of property law, and as expected, we find that strategies for verifying titles and the limits on the number of property forms do indeed show convergence across legal systems. When it comes to more stylistic aspects of property, we find the expected contrast between those that are more and those that are less interconnected with the rest of property law. Because property solves the problem of managing uses at positive information cost, and network effects lead to path dependence, we expect interconnected doctrines to show more variation across countries, given the different starting points that many countries exhibit. Lynchpin doctrines like possession, sales, and temporal division diverge across countries, while more isolated doctrines involving features of co-ownership such as sale, partition, and condominium show greater convergence. We leave the dynamic implications of our functional account for further work. Even in the snapshot we are able to offer here, the picture of property that emerges is one in which the functions of property law play out differently depending on their integration into the overall system.

[*] *. We thank Richard Epstein, Saul Levmore, Charles Delmotte, Adam Mossoff, Ariel Porat, Christopher Serkin, and WU Ying Chieh for helpful comments and the Classical Liberal Institute at New York University for inviting us to present at the Convergence and Divergence in Private Law Symposium held at the New York University School of Law on November 2–3, 2018.

[†] †. Research Professor & Director of Center for Empirical Legal Studies, Institutum Iurisprudentiae, Academia Sinica, Taiwan. J.S.D., New York University School of Law. Email: kleiber@sinica.edu.tw. This Article is funded by Academia Sinica’s Career Development Award 106-H02. For coding of property law in the 100 plus jurisdictions, I thank my research assistants over five years from Taiwan, Peru, New Zealand, India, Israel, Colombia, China, Hong Kong, Singapore, Uganda, Turkey, France, and South Africa. They are Winnie Awino, Harika Bakaraju, Gahli Berger, Paloma Carreno, Jung-Han Chang, Danlin Chang, Gina Chavarry, Meng-Xin Cai, Chih-jui Chen, Tzu-Yuan Chu, Yichen Chu, Gital Dames, Huseyin Guzeler, Melanie Lee, Ingrid Lee, Christina Lee, Calvin Lim, Tin-jun Liu, Hannah Musgrave, Maria Oluyeju, Anne-Line Schwint, Zun Wei and Daniella Weinrauch. The librarians at the University of Chicago Law School and Cornell Law School provided great help in identifying foreign law materials when I was a visiting professor there. Some of the aforementioned research assistants are LL.M. students at Chicago and Cornell. The University of Chicago Law School also covered the expenses for the LL.M. research assistants. The law library at the University of Iowa College of Law also provided me with foreign legal materials when I was the Bonfield Fellow for 2016. Prof. XU Guodong, though we have never met in person, allowed me to photocopy his civil code collections.

[‡] ‡. Fessenden Professor of Law and Director of the Project on the Foundations of Private Law, Harvard Law School. Email: hesmith@law.harvard.edu. For her excellent research assistance, I would like to thank Kelsey Mollura.

[1]. See N. Stephan Kinsella, A Civil Law to Common Law Dictionary, 54 La. L. Rev. 1265, 1268, 1287 (1994).

[2]. See Brian Angelo Lee & Henry E. Smith, The Nature of Coasean Property, 59 Int’l Rev. Econ. 145, 151–53 (2012); Thomas W. Merrill & Henry E. Smith, Making Coasean Property More Coasean, 54 J.L. & Econ. S77, S9394 (2011).

[3]. For further discussion on employing things and their possession to manage this complexity, see Henry E. Smith, The Elements of Possession, in Law and Economics of Possession 65, 67 (Yun-chien Chang ed., 2015); Henry E. Smith, Property as the Law of Things, 125 Harv. L. Rev. 1691, 1701–08 (2012) [hereinafter Smith, Property as the Law of Things].

[4]. See Henry Hansmann & Reinier Kraakman, The Essential Role of Organizational Law, 110 Yale L.J. 387, 393–94 (2000); Henry E. Smith, The Economics of Property Law, in 2 Oxford Handbook of Law and Economics: Private and Commercial Law 148, 152–54 (Francesco Parisi ed., 2017).

[5]. See Henry E. Smith, Exclusion Versus Governance: Two Strategies for Delineating Property Rights, 31 J. Legal Stud. S453, S456–57 (2002).

[6]. See Yun-chien Chang & Henry E. Smith, An Economic Analysis of Civil Versus Common Law Property, 88 Notre Dame L. Rev. 1, 4–5 (2012) [hereinafter Chang & Smith, Economic Analysis]; Yun-chien Chang & Henry E. Smith, Structure and Style in Comparative Property Law, in Research Handbook on Comparative Law and Economics 131, 132–33 (Theodore Eisenberg & Giovanni B. Ramello eds., 2016).

[7]. See Anthony Ogus, The Economic Basis of Legal Culture: Networks and Monopolization, 22 Oxford J. Legal Stud. 419, 419–20, 423 (2002); see also Nuno Garoupa & Thomas S. Ulen, The Market for Legal Innovation: Law and Economics in Europe and the United States, 59 Ala. L. Rev. 1555, 1615–16 (2008) (discussing the monopolizing tendency of legal culture in Professor Anthony Ogus’s sense). For a new approach that uses the contents of property law quantitatively to categorize legal families, see generally Yun-chien Chang et al., Drawing the Legal Family Tree: An Empirical Comparative Study of 108 Property Doctrines in 128 Jurisdictions (June 28, 2017) (unpublished working paper) (available at https://ssrn.com/abstract=2993794).

[8]. See Douglass C. North, Institutions, Institutional Change and Economic Performance 93–94 (1990); S. J. Liebowitz & Stephen E. Margolis, Path Dependence, Lock-In, and History, 11 J.L. Econ. & Org. 205, 206–08 (1995) (discussing the three different forms of path dependence); see also Paul A. David, Path Dependence, Its Critics and the Quest for “Historical Economics,” in Evolution and Path Dependence in Economic Ideas 15, 18–32 (Pierre Garrouste & Stavros Ioannides eds., 2001) (making a case for the economic significance of path dependence); W. Brian Arthur, Competing Technologies, Increasing Returns, and Lock-In by Historical Events, 99 Econ. J. 116, 116–17 (1989) (discussing the potential of a dynamic model to capture technological lock-in).

[9]. See Henry E. Smith, The Persistence of System in Property Law, 163 U. Pa. L. Rev. 2055, 2067–74 (2015).

[10]. Lee Alston & Bernardo Mueller, Towards a More Evolutionary Theory of Property Rights, 100 Iowa L. Rev. 2255, 2260–65 (2015); see also Henry E. Smith, Complexity and the Cathedral: Making Law and Economics More Calabresian, Eur. J.L. & Econ. (July 14, 2018), https://doi.
org/10.1007/s10657-018-9591-x; Henry E. Smith, Comment, Property as Complex Interaction, 13 J. Inst. Econ. 809, 811 (2017). Professors Lee Alston and Bernardo Mueller note that their model with some but not complete epistatic couplings reflects a view of the bundle that gives it some structure. Alston & Mueller, supra, at 2267 & n.41 (quoting Henry E. Smith, Property Is Not Just a Bundle of Rights, 8 Econ J. Watch 279, 286 (2011) and citing Chang & Smith, Economic Analysis, supra note 6, at 21–26).

[11]. Alston & Mueller, supra note 10, at 2267–68.

[12]. E.g., Warren Weaver, Science and Complexity, 36 Am. Scientist 536, 539–42 (1948).

[13]. Alston & Mueller, supra note 10, at 2262 & n.31 (citing Yun-chien Chang & Henry E. Smith, The Numerus Clausus Principle, Property Customs, and the Emergence of New Property Forms, 100 Iowa L. Rev. 2275 (2015)); see also Thomas W. Merrill & Henry E. Smith, Optimal Standardization in the Law of Property: The Numerus Clausus Principle, 110 Yale L.J. 1, 40–42 (2000).

[14]. Chang & Smith, Economic Analysis, supra note 6, at 21–30; Yun-chien Chang, The Economy of Concept and Possession, in Law and Economics of Possession, supra note 3, at 108–12 (arguing that ownership, not property, should be characterized as a bundle of rights); Smith, Property as the Law of Things, supra note 3, at 1709–10.

[15]. See Chang & Smith, Economic Analysis, supra note 6, at 30–34; Smith, Property as the Law of Things, supra note 3, at 1709–10; cf. Thomas W. Merrill, Property and the Right to Exclude, 77 Neb. L. Rev. 730, 734–35 (1998); Thomas W. Merrill, Property and the Right to Exclude II, 3 Brigham-Kanner Prop. Rts. Conf. J. 1, 2–8 (2014) (arguing that exclusion is the sine qua non of property).

[16]. According to Professor Harold Demsetz’s famous theory, once resources become more valuable, property rights are likely to emerge to internalize externalities. See Harold Demsetz, Toward a Theory of Property Rights, 57 Am. Econ. Rev. 347, 350 (1967). In this demand-side account, Demsetz assumed that this would in practice favor greater exclusion. For extensions of this theory that allow for the emergence of mixtures of exclusion and governance and that take into account the supply side, see Thomas W. Merrill, The Demsetz Thesis and the Evolution of Property Rights, 31 J. Legal Stud. S331, S333–38 (2002) (summarizing contributions to a symposium extending the Demsetz model to account for the supply of property rights, including non-exclusion-based rights).

[17]. See Yun-chien Chang & Henry E. Smith, The Numerus Clausus Principle, Property Customs, and the Emergence of New Property Forms, 100 Iowa L. Rev. 2275, 2303 (2015) (noting that new property forms emerge from the commons arrangement).

[18]. For an explanation of fitness landscapes and their peaks, see Alston & Mueller, supra note 10, at 226067.

[19]. See Vernon Valentine Palmer, A Descriptive and Comparative Overview, in Mixed Jurisdictions Worldwide 17, 57 (Vernon Valentine Palmer ed., 2001); Kenise Kim, Mixed Systems in Legal Origins Analysis, 83 S. Cal. L. Rev. 693, 711–14 (2010).

[20]. See C.G. van der Merwe, Interpenetration of Common Law and Civil Law as Experienced in the South African and Scottish Law of Property, 78 Tul. L. Rev. 257, 274–89 (2003).

[21]. Cf. G. Marcus Cole, The Long Convergence: “Smart Contracts” and the “Customization” of Commercial Law, 92 S. Cal. L. Rev. 851, 855 (2019) (“[T]he law of one law.”).

[22]. For further discussion on convergence and divergence, see generally Richard A. Epstein, The Necessity of Convergence in Private Law, 92 S. Cal. L. Rev. 751 (2019); Saul Levmore, Convergence and Then Downstream Divergence in Torts and Other Law, 92 S. Cal. L. Rev. 769 (2019).

[23]. See Chang & Smith, Economic Analysis, supra note 6, at 36–54.

[24]. The data set as a whole contains 155 jurisdictions. In this Article, we limit our attention to the 119 jurisdictions that either have a civil code or are English common-law jurisdictions (including Israel, South Africa, and Scotland, which are mixed jurisdictions that have been heavily influenced by English common law). Thirty-six jurisdictions are excluded because their property laws may have been less comprehensively identified. Thus, the data set’s lack of information regarding these jurisdictions may or may not reflect the underdevelopment of property law—it may not, in the case of Nordic countries.

More specifically, the 119 jurisdictions studied here include the following: Afghanistan, Albania, Algeria, Angola, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bolivia, Brazil, Burkina Faso, Burundi, California, Cambodia, Cape Verde, Chile, China, Colombia, Comoros, Costa Rica, Cuba, Czech Republic, Dominican Republic, Ecuador, Egypt, El Salvador, England and Wales, Equatorial Guinea, Eritrea, Ethiopia, France, Georgia, Germany, Greece, Guatemala, Guinea, Guinea-Bissau, Haiti, Honduras, Hong Kong, Hungary, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Ivory Coast, Japan, Jordan, Kazakhstan, Kuwait, Kyrgyzstan, Latvia, Libya, Liechtenstein, Lithuania, Louisiana, Luxembourg, Macau, Madagascar, Malaysia, Malta, Mauritius, Mexico, Moldova, Monaco, Mongolia, Mozambique, Netherlands, New York, New Zealand, Nicaragua, Niger, Nigeria, North Korea, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Quebec, Romania, Russia, Rwanda, São Tomé and Príncipe, Scotland, Seychelles, Singapore, Slovakia, South Africa, South Korea, Spain, Switzerland, Syria, Taiwan, Tajikistan, Thailand, Timor-Leste, Togo, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, Uruguay, Uzbekistan, Venezuela, and Vietnam.

[25]. See infra Section I.A.

[26]. See infra Section I.B.

[27]. Cf. Levmore, supra note 22, at 77076, 783; Giuseppe Dari-Mattiacci & Carmine Guerriero, Divergence and Convergence at the Intersection of Property and Contract, 92 S. Cal. L. Rev. 809, 81314, 83134 (2019).

[28]. See infra Section II.A.

[29]. Vanessa Casado Perez & Carlos Gomez Liguerre, From Nuisance to Environmental Protection in Continental Europe, 92 S. Cal. L. Rev. 1003, 102224 (2019).

[30]. See Yun-chien Chang, The Problematic Concept of Possession in the DCFR: Lessons from Law and Economics of Possession, 5 Eur. Prop. L.J. 4, 11–23 (2016).

[31]. See infra Section III.A.

[32]. See infra Section III.B.

[33]. For a more detailed analysis of adverse possession doctrines in the surveyed jurisdictions, see Yun-chien Chang, The Many Faces of Adverse Possession (2019) (unpublished working paper) (on file with authors).

[34]. See Abraham Bell, Title in the Shadow of Possession, in Law and Economics of Possession, supra note 3, at 320–21; Thomas W. Merrill, Property Rules, Liability Rules, and Adverse Possession, 79 Nw. U. L. Rev. 1122, 1129 (1985).

[35]. See Merrill & Smith, supra note 13, at 9–11, 23–24, 60.

[36]. Although in terms of law on the books, Norway does not have a numerus clausus principle and may even be said to have a numerus apertus principle, strong norms of legal practice and a high degree of consensus about background norms may serve to constrain the nonlegislative creation of new property forms—an event that rarely occurs. On the pragmatic nature of Norwegian property law, see generally Geir Stenseth, The Importance of the Social Function of Property—Norway, in The Social Obligation Norm of Property and its Contemporary Relevance (Jessica Viven-Wilksch & Paul Babie eds. trans., 2d ed. forthcoming 2019). For similar reasons, Norwegian law can be more accommodating of custom without creating a serious information-cost problem for third parties. See generally Peter Ørebech, Western Scandinavia: Exit Bürgerliches Gesetzbuch—the Resurrection of Customary Laws, 48 Tex. Int’l L.J. 405 (2013) (discussing the role that customary law has played in Western Scandinavia).

[37]. South Africa may be said to have a soft numerus clausus principle that differs little in its results from a more conventional numerus clausus. See C.G. van der Merwe & M.J. de Waal, The Law of Things and Servitudes 43–44 (1993); Hanri Mostert & Leon Verstappen, Practical Approaches to the Numerus Clausus of Land Rights: How Legal Professionals in South Africa and the Netherlands Deal with Certainty and Flexibility in Property Law, in 8 Modern Studies in Property Law 351, 351–52, 370–71 (Warren Barr ed., 2015).

[38]. In Spain, any real property right can be registered. See Ley Hipotecaria art. 2 (B.O.E. 1946, 58); Reglamento Hipotecario art. 7 (B.O.E. 1947, 106). In practice, the set of forms is not completely open, because the Spanish registrar ends up standardizing the forms—the Dirección General de los Registros y del Notariado, an office within the registrar, decides whether a right has the nature of real property. Nonetheless, there are examples where the Spanish registrar accepted new forms of real rights that had not had formal legal recognition. We thank Vanessa Casado Perez for this point.

[39]. See Henry E. Smith, Standardization in Property Law, in Research Handbook on the Economics of Property Law 148, 152–53 (Kenneth Ayotte & Henry E. Smith eds., 2011).

[40]. Temporal forms such as reverters and remainders in the fee system are excluded. A few idiosyncratic forms that only exist in one or two countries (such as China) are also excluded. Our statistics thus may slightly underestimate the number of property forms in some countries, but our basic takeaway lesson remains the same. Note that ownership and co-ownership are not counted as limited property forms.

[41]. Regarding such a lien in, say, Taiwan, see Yun-chien Chang et al., Property and Trust Law in Taiwan 128–29 (2017).

[42]. Thomas W. Merrill, Ownership and Possession, in Law and Economics of Possession, supra note 3, at 9.

[43]. For a classic statement of skepticism that there is anything to unify notions of possession across areas of U.S. property law, see Burke Shartel, Meanings of Possession, 16 Minn. L. Rev. 611, 611–13 (1932).

[44]. Chang, supra note 14, at 122.

[45]. Ramakarane v. Centlec (Pty) Ltd. 2016 (51) ZAFSCH at 17 (S. Afr.), http://www.saflii.org/za/
cases/ZAFSHC/2016/51.pdf (“‘[P]ossession’ means the physical or corporeal holding of the document pursuant to the right to its possession, as in the case of an agent or bailee; ‘custody’ means the mere actual physical or corporeal holding of a document, regardless of the right to its possession, as in the case of a servant . . . .”); Brigitta Lurger & Wolfgang Faber, Principles of European Law on Acquisition and Loss of Ownership of Goods 395 (2011) (“In England and Ireland, the term ‘custody’ is used to denote cases where the physical control is in a person’s hands, but the results of the possession are attributed to the possessor proper.”); Dilan Thampapillai et al., Australian Commercial Law 11 (2015) (“Custody will occur where a party is holding the goods, but they do not have ownership or possession at law.”); Bruce Ziff, Principles of Property Law 136 (6th ed. 2014) (observing that Canadian law distinguishes custody and possession but considering such a distinction “arcane”); Possession and Custody in the Law of Larceny, 30 Yale L.J. 613, 615 (1921) (pointing out that a servant is in custody while the master is in possession).

[46]. As with possession, whether to provide for sales is quite structural and convergent, but deciding what constitutes a sale is stylistic and interconnected—and quite divergent, as discussed in the text.

[47]. See Yun-chien Chang, Wealth Transfer Laws in 153 Jurisdictions: An Empirical Comparative Law Approach, 103 Iowa L. Rev. 1915, 1932–40 (2018).

[48]. See Cases, Materials and Text on Property Law 817 (Sjef van Erp & Bram Akkermans eds., 2012).

[49]. See Chang, supra note 47, at 1939–40 tbl.1.

[50]. Real agreement, a German concept, “describes the meeting of minds during registration for real properties and delivery for personal properties as a separate, thing-related contract. That is, it takes two contracts and registration to transfer titles to real estates.” Id. at 1926 (citation omitted).

[51]. See id. at 1927–28.

[52]. In these jurisdictions, once a real estate sale contract is consummated, it binds the seller, and between the two transacting parties, the ownership is considered transferred to the buyer. If the transfer is not registered, and later the original seller sells the real estate to a third party who registers, the third party (second buyer) will become the owner, as against the first buyer and everyone else in the world. If instead the first buyer registers the transfer, it creates an opposability effect against everyone. Hence, no later buyer who buys from the original owner will become the owner.

[53]. The trust in East Asia is contract-based. See Lusina Ho & Rebecca Lee, Emerging Principles of Asian Trust Law, in Trust Law in Asian Civil Law Jurisdictions 259, 278 (Lusina Ho & Rebecca Lee eds., 2013).

[54]. See Yun-chien Chang, Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-Ownership, 4 J. Legal Analysis 515, 536 (2012) (observing that a legal reform in Taiwan changed the judicial partition rule from no preference towards any mode to preferring partition in kind, but the percentages of partition in kind rulings before and after the reform remained constant).

[55]. In twenty-one jurisdictions, we cannot find any rule regarding co-ownership management. We suspect that in the absence of any explicit rule, consensus is the most likely fallback option. Even if this is the case, consensus voting does not garner support from a majority of jurisdictions.

[56]. If we count the twenty jurisdictions for which we cannot find explicit rules as adopting consensus voting, consensus voting is adopted in three-fourths of the jurisdictions.

[57]. In seventy-eight of the eighty-nine jurisdictions, their civil codes provide for the condominium form. In the other eleven jurisdictions, it is other statutes that do so.

[58]. Louisiana is an interesting exception. The condominium form is not included in its civil code at all and was only enabled by the Louisiana Condominium Act. This may be due to the ill-conceived claim by the Louisiana Supreme Court that the condominium form is “illegitimate under a civilian understanding of property.” See George M. Armstrong, Jr., Louisiana Condominium Law and the Civilian Tradition, 46 La. L. Rev. 65, 65 (1985) (citing Lasyone v. Emerson, 57 So. 2d 906 (La. 1952)).