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产权的分解

 

Abstract

 

This chapter summarizes the literature relating to the decomposition of

property into packages of less than full ownership in the United States and

United Kingdom. It does not include specialized areas of law such as Oil and

Gas Law and Water Law. Ownership of land is commonly divided by

geography into parcels, by time into leaseholds and other estates, and by use

into dominant and servient tenements. Some of these divisions, such as

leaseholds, have received substantial economic attention and developments

in the landlord-tenant debate are reviewed here. Other divisions, such as

other temporal estates and servitude doctrines, have received only occasional

economic analysis. For these topics, suggestions relating to possible

economic justifications are added to the summary of points made in the

literature.

JEL classification: K11

Keywords: Property, Land Tenure, Decomposition, Covenants, Servitudes

 

1. Introduction

 

In light of the importance of property to the economic system and the

tremendous attention to transaction costs since Coase (1960), it seems

somewhat odd that the particular rules of English property law, which

impose costs on land transactions, have received relatively little attention

from economists. Perhaps this is because the English common-law system of

property rules is both flexible enough and generally inexpensive enough that

it causes no large and obvious drag on commerce. Nevertheless, the rules

governing subdivision or decomposition of property rights have received

some attention from law and economics scholars. The purpose of this essay

is to review some of the literature relating to ways in which rights in land

can be divided and suggest explanations for existing decompositions of

property.

 

To start, it should be noted that economics and property law meet in at

least two fundamentally different ways. In the standard analysis, researchers

have attempted to determine the allocative and welfare effects of various

legal rules and regimes. Both economists and lawyers have, in a positive

vein, tried to explain and predict behavior of individuals and, in a normative

vein, criticized the law and proposed reforms based on those predicted

behaviors (for example, Epstein, 1982; Hirsch, 1983). Second, in a

nonstandard application, economically oriented analysis has occasionally

(Posner, 1998; Krier, 1974; and Stake, 1988) been used by lawyers to

explain the legal behavior of judges in a way that makes the law more

predictable, clarifying the law where the legal rules have previously had

vague content. The latter is not an application of Public Choice theory,

although the two have similar goals. It is instead an attempt to predict or

explain the results of cases by developing specific hypotheses from the

general proposition that judges decide cases in accordance with efficiency,

that is, that judges prefer efficient outcomes. Third, and related to the second

application, Hirsch (1987) has reviewed the extent to which lawmakers

appear to be aware of the economic characteristics of the markets their laws

are affecting. Readers should also note that, in a substantial portion of the

literature relating to specific rules of property, economists and law scholars

seem to be talking past each other. Economists can find articles lacking in

rigor and lawyers can find articles that seem to state obvious legal

practicalities in complicated terminology.

 

Before a private party can divide her rights in land, she must both have

some rights and have the right to transfer her rights. One basic topic,

therefore, in the decomposition of property is whether and to what degree

private parties have the right to alienate their rights. In one sense, this is a

definitional matter: is the right to transfer inherent in the bundle of sticks we

call ‘property’? The right of alienation is the first topic discussed below.

 

Once owners have the right to divide and transfer their interests, rights

in land can be divided in at least three ways. First, and most obvious, land

rights are divided spatially. In addition to the ordinary horizontal division of

land by region, the common law allows vertical division into surface estates

and subsurface estates, useful to miners and spelunkers. Although there are

economic studies of optimal size of landholdings for uses such as farming,

the law and economics literature on spatial division of rights in land is not

extensive, perhaps because there is not much law to study. One major

exception to this generalization is the substantial literature on takings law,

within which one topic is whether geographic areas can be segmented by

landowners hoping to establish a taking of a small part where the remaining

portion has not been affected.

 

Second, land rights can be divided temporally. Indeed, under early

English common law, land rights lasted no longer than the life of the feudal

tenant. An obvious inefficiency of that system was that improvements to the

land lasting longer than the tenant would redound to the benefit of the

overlord. Perhaps in part to internalize these positive temporal externalities,

the law soon allowed a tenant to acquire rights that would survive his death.

The literature on subdividing rights by time, including the substantial

literature on landlord-tenant law, is discussed after tenurial systems.

 

Third, rights in land can be divided according to use. One person can

have nearly complete dominion over a piece of land while another person

holds a right to put the land to some limited use, such as walking across it to

get to town. The multiple and confusing common-law doctrines of

covenants, equitable servitudes, easements and profits govern this area of

law, along with more modern zoning rules imposed by legislatures. The

common-law doctrines controlling private division of land by uses are

discussed, jointly and severally, after temporal divisions.

 

Decomposition of property rights has become an issue of constitutional

importance in the United States. The Fifth Amendment prohibits the

government from taking property without paying just compensation. The

difficult issue is often whether ‘property’ has been taken. If the government

deprives an owner of all her rights in all her land, a taking has occurred.

And if the government divides the rights spatially or temporally or both,

taking all rights in some of the land for some substantial period of time, a

taking has occurred. But if the government divides rights along the

dimension of use, prohibiting some uses and allowing others, it is hard to

tell whether the rights taken were enough to call property. The US Supreme

Court’s answer does not turn solely on the absolute or proportional degree of

financial deprivation. The answer also depends on whether the regulation

deprives the owner of an ongoing use. This portion of takings doctrine has

been defended by Stake (1995) on the ground that depriving persons of

longstanding uses carries especially high costs, higher than would be

recognized if the value of the loss were calculated by reference to the amount

the owner’s would be willing to pay to acquire the rights taken.

 

2. Limited Alienation of Property - Land Tenure Systems

 

The topic of land tenure systems sits between the general theory of property

and the private subdivision of property rights. The question is what happens

when private owners are not allowed to have full rights in land. A right

sometimes missing from the property bundle is the right to alienate other

rights.

 

By the Statute Quia Emptores in 1290, English landholders gained the

right to transfer their interests to others without asking for consent of the

overlord, who in important ways played the role of the modern state. Prior to

that time in England, and more recently in other places, landholders lacked

complete freedom of alienation. From their beginnings, all American states

have allowed landowners to transfer their rights to others. So well ingrained

is this right that it seems odd that it could be otherwise.

Despite a long heritage of free alienation, the United States government

has not extended that right to many American Indians holding Reservation

lands. As a result of various statutes and changes in policy, Indian

Reservation lands are held in three types of tenure. Some Reservation lands

are held in legal fee simple by individuals, both Native American and not,

and are completely alienable. Some lands are held by Native American

tribes, but legal title lies in the United States, so the tribes cannot alienate

the lands. Similarly, some lands are held by individual Native Americans,

with legal title resting in the United States, again with the result that the

lands are inalienable.

 

Economic theory would predict that where rights cannot be transferred,

productivity will suffer. Omotunde (1972), applying the analysis of Coase

(1960), Alchian (1963) and Demsetz (1964, 1966) to land tenure, argues

that restrictions on the sale of land reduce investment in land by making it

difficult to borrow for improvements and by limiting an owner's ways of

capturing his investment. He concludes that there must be freedom and legal

enforcement of sale and rental contracts for a system of land tenure to

facilitate wealth increases.

 

The three types of land tenure existing on Indian Reservations presented

Anderson and Lueck (1992) with an opportunity to study empirically the

effects of tenure on land productivity. Where Native Americans cannot offer

the land as security for a loan, costs of borrowing will be higher and capital

investment will be lower. Where they cannot sell their interests, it becomes

harder for an owner to gather parcels into a farm of optimum size.

Difficulties in transfer during life increase the frequency of death-time

transfers and thus the frequency of devolution by intestate succession which

divides ownership. Multiple ownership leads to decreased investment of

labor by owners because the benefits of the effort will fall in part on other

owners. Multiple ownership, which entails sharing of inputs and output,

may also cause owners to avoid the most valuable use if the input to or

output from such use is comparatively harder for multiple parties to monitor.

 

Anderson and Lueck find that per acre value of agricultural output is

85-90 percent lower on tribal-trust land than on fee-simple land and 30-40

percent lower on individual-trust land than on fee-simple land. The authors

did not, however, convincingly rebut the possibility that the lands held in

individual or tribal trust were simply less productive lands than the average

lands held in fee. They stated that the patterns of ownership appear random

on the map, but untillable mountain peaks might also appear random on a

map. They also argued that the determinants of value are probably different

today than when the parcels were allotted, but for agricultural land that

seems dubious. The authors published data from the US Department of

Agriculture relating to relative land quality. On average, trust land has a

lower percentage of land in the top four land-capability categories, but the

authors say that the difference is not sufficiently strong to reject the

hypothesis that the land is equivalent. (Given the small number of

observations on quality, N = 13, it would have taken a large difference in

quality to reject the null hypothesis.) That the difference in rated capability

is not strong enough to be significant does not mean that the difference

might not indeed influence the actual land productivity. In addition,

considering the obvious potential relationship between land quality and

productivity, it is unfortunate that there were quality classification data for

only 13 reservations.

 

The article does not discuss a relatively recent legislative attempt by the

United States to reduce the number of owners of Native American lands.

Congress passed a law providing that, at the death of the owner, small

fractional interests in individual trust lands would pass to the tribe instead of

the intestate successors or devisees. This attempt to improve the productivity

of Indian lands was struck down by the US Supreme Court (Hodel v. Irving,

1987) because depriving fractional interest holders of their ability to pass

those interests at their death takes property without just compensation. Thus

Congress’s long history of failure to deal effectively with Indian lands

continues.

 

Comparing the history of Congressional control of Indian ownership to

English history shows the economic importance of a good fit between law

and culture. In common-law England, when a landowner died his lands

passed according to the rules of primogeniture, under which the eldest male

child took full title. Primogeniture did not divide land into fractional

interests that could lead to ineffective use. By the time modern rules of

intestate succession were adopted, hundreds of years of experience had

created an English cultural expectation of individual ownership. The

English, culture-based tradition of individual ownership counteracted the

tendency of the modern law to subdivide ownership; private transfers kept

most lands from being held by too many hands. The Native Americans, upon

whom the US Government forced individual ownership and fractious laws of

succession, had a different cultural heritage, one of tribal ownership or no

ownership at all. Native American culture, being less oriented toward

individual control, could not counter the sterilizing tendency of the modern

rules of heirship.

 

The problem of alienability arises in a different way in connection with

long-term leases. Historically, common-law courts have allowed landlords to

impose restrictions on the alienability of leaseholds. By inserting the

necessary terms in a lease, landlords could retain to themselves the legal

power to prevent alienation without their consent. Courts upheld these

clauses without concern for whether the landlord withheld consent

unreasonably or arbitrarily. Recently, it has appeared to observers that some

American courts will no longer let landlords prevent alienation by tenants.

However, it is also possible to read some of the decisions as merely requiring

landlords to express clearly their retention of an absolute veto, a requirement

which would reduce tenants’ information costs.

 

Johnson (1988) argues that restrictions on alienability serve legitimate

purposes and, hence, the modern trend toward limiting the scope of

restrictions will lead to inefficiency in the law. Landlords need to be able to

keep tenants from leasing to new tenants whose occupancy might injure the

value of the landlord’s reversion. Because they cannot easily specify in

advance all of the ways in which potential new tenants might injure their

retained interest, landlords often need complete discretion to reject the

transfer of the leasehold. Without that power, landlords will forsake the

long-term lease in favor of otherwise less-efficient alternatives such as

short-term leases. In addition, Johnson argues that requiring landlords to be

more clear in their retention of unfettered discretion to veto transfers may be

quite costly. He does not describe in practical terms, however, why it would

be especially costly for landlords to specify ‘sole, absolute, and unfettered

discretion’ in their leases in order to retain unconstrained veto power.

 

3. Temporal Division via the Estate System

 

The English common-law system allows a number of different ‘estates’ in

land, each estate varying in potential duration. A ‘fee simple’ lasts

potentially forever. A ‘life estate’ lasts for the life of a person, usually the

holder of the estate. A ‘term of years’ is measured by a period of time. All of

these estates can be made ‘defeasible’, by attaching a condition specifying

the circumstances in which the estate terminates prematurely. For example,

a transfer ‘to the City as long as the land is used for a public park’ creates a

fee simple determinable, an estate that could last forever but will terminate

earlier if the land is not used for a public park. With the exception of the fee

simple absolute, in which the owner holds perpetual rights, each of the

estates above divides rights according to time, with the holder of the named

estate holding the present possessory rights and at least one other person

holding a ‘future interest’ which will become possessory when the present

estate terminates.

 

It is plain that dividing rights temporally may increase the utility of land.

A student may need a place to live for only a year and have no desire (or

capital) to invest in ownership that lasts forever. A teacher taking sabbatical

leave may have no interest in possession for that year, but a strong interest

in the right to possession forever thereafter. A one-year lease divides the

ownership of the land to accommodate both interests and maximize the

value of the land.

 

Stake (1990) argued that some forms of divided ownership, those

hinging on contingencies that might occur in the distant future, diminish

rather than increase the utility of land to living persons. The empirical

evidence for this proposition is that those temporal divisions of rights are

made primarily in gifts (often testamentary gifts). Because such divisions are

rarely, if ever, found in transactions in which two or more parties exchange

rights to produce gains from trade, there is good reason to doubt that

creating such interests increases value. Of course the act of dividing the

ownership makes the donor happy, and that utility added to the values of the

present and future interests will probably be greater than the value of a fee

simple absolute. But after the donor dies, which is sometimes the instant the

two interests are created, the donor’s utility drops out of the sum and the

remaining values are together less than the value of a fee simple. One

economic function of the Rule against Perpetuities, which eliminates remote

future interests, is to help reunite multiple interests into a more valuable fee

simple.

 

The possibility of negative externalities is created whenever land rights

are divided according to time. A life tenant might fail to make repairs to

existing buildings because the repair costs will fall solely on the tenant but

the costs of not repairing will fall in part on the ‘remainderman’ holding the

future interest. To the dismay of his landlord, a tenant with a one-year

tenancy might cut down valuable trees to use for firewood despite the trees

being worth more, in the long run, alive. The common law partially

internalized negative temporal externalities by the doctrine of ‘waste’, which

makes the present estate holder liable to the holder of the future interest for

actions that damage the land in a permanent way. Interestingly, the doctrine

of waste also acknowledges the subjective value of land in its rule that

merely changing the character of land can be waste even though the change

increases market value. Posner (1998, pp. 83-84) points out that present and

future estate holders could in theory prevent inefficient maintenance by

agreement, obviating the need for the doctrine of waste, but that negotiations

may bog down in bilateral monopoly problems. Furthermore, the future

interest holders are often minors who lack the capacity to contract.

 

The converse of the waste problem is that of positive externalities. The

present estate holder may fail to make efficient improvements to the land

because he bears the burdens of the improvements while some of the benefits

accrue to the holder of the future interest, who takes possession when the

present possessory estate terminates. With a nod to Coase, Posner (1998, p.

82) asks and answers why multiple owners cannot solve the problem of

inadequate investment by contract. The possessory estate holder often lacks

the endowment to make major capital improvements and the future interest

holders may be hard to identify or lack the capacity to strike an enforceable

bargain. The law plays an important role in regulating land use when

ownership is divided.

 

4. Leaseholds

 

Landlord-tenant law is one area in which there is both a substantial

literature and one that speaks to scholars from both the economics and law

perspectives. Limitations on the alienability of tenant interests and on

landlords’ rights to evict have been blamed for inadequate investment in

improvements to land. Solow (1971) discussed the problem in connection

with poverty in nineteenth century Ireland. Basu (1989) added that landlords

wanting to make an offer to share the costs of improvements face an adverse

selection problem in that only the tenants who expect to stay long enough for

their investment to be repaid will accept the offer, leaving the landlord with

inadequate return on his contribution.

 

Leases can have many functions, such as spreading risk (Cheung, 1969)

or creating appropriate incentives for development and husbandry (Allen

and Lueck, 1992; Williams, 1979a; see also Lueck and Allen, 1996). In the

context of leasing personalty, Flath (1980) discussed how leases can

economize on transaction costs such as identifying, assuring and

maintaining quality. Those topics and many others in commercial leases are

more a matter of contract law and are analyzed primarily with contractual

analysis and thus are outside the scope of this chapter. One early use of

leasehold estates may have been to avoid the ecclesiastical prohibition of

usury. When the law prevented lending of money at market interest rates, a

lender could avoid usury by transferring money in return for the borrower’s

(landlord’s) transfer of an estate in land. The lease would be designed so

that the periodic rents from the land during the term of the lease would be

sufficient to pay both the principal lent and the desired interest (see

Simpson, 1986, p. 72).

 

Residential leases raise additional issues. Under the common law,

landlords had few obligations with regard to the leased premises. Recent law

reforms have attempted to force landlords to deliver habitable premises at an

affordable price. The standard economic analysis of reforms designed to

benefit residential tenants is presented entertainingly (that is, at the expense

of lawyers) in Albon (1982). Assuming that supply decreases with price and

shifts as landlords’costs increase and that such marginal costs exceed

marginal values to tenants, the results of reform are not favorable to tenants.

If rents are not controlled, rents will increase by more than the value of the

increased housing services to tenants. Under such conditions, the reforms

force tenants to buy housing services they do not wish to buy. If rents are

controlled, demand will exceed supply and a shortage will develop, housing

search costs will increase for tenants, and landlords will discriminate more.

Schwallie (1990) argues that, because investors are risk averse, increased

uncertainties caused by law reform will reduce the attractiveness of the

return from rental housing. In a neighborhood with declining values, the

application of housing quality minima may hasten the withdrawal of units

from the market and increase discrimination against riskier tenants.

 

Hirsch, Hirsch and Margolis (1975) state that repair-and-deduct

remedies may be an inefficient means of housing code enforcement for a

number of reasons. Landlords, being specialists in housing, often have more

experience than residential tenants in making repairs or finding an

appropriate tradesman. Tenants have little reason to monitor the quality of

the work, as long as it serves their temporary needs. Landlords have access

to all portions of the building and can coordinate related repairs and

improvements.

 

On the other hand, tenants, who often learn of problems before

landlords, are more likely to make repairs before they become costly if they

know they can deduct the cost. In addition, tenants might make more

efficient repairs because they will make no more repair than they think is

needed.

 

Nevertheless, landlords are repeat players. They are likely less transient

than residential tenants and thus will know local repair firms. More

important, once landlords recognize that ignoring tenant requests for repairs

leads to their paying for inefficient repairs, they will become more

responsive to tenant requests. The inefficiency of self-help by tenants can be

seen to be like the costs of incarcerating criminals; some loss is justified to

deter wrongdoing. The repair-and-deduct remedy might be a low-cost way of

getting landlords to pay attention to tenant complaints.

 

Markovits (1976) argues that the standard economic analysis is wrong in

a number of ways. Some tenants, such as children, will value the mandated

services more highly than their cost and those tenants will gain from law

reform. Reform requirements can also be allocatively efficient if they require

housing improvements that create benefits, such as reduced fire, disease and

crime, that are external to the person who pays the rent.

 

Almost all reforms of landlord-tenant law were designed to improve the

life of tenants by shifting rights from landlords to tenants. But empirical

work indicates that the reforms have hurt many tenants (Hirsch, Hirsch and

Margolis, 1975; Hirsch, 1980, 1981, 1983, 1984, 1987; Rydell, 1981; and

Schafer, 1979). If that is so, why have the habitability reforms been so

popular? Posner (1998) suggests that competing approaches to helping

impoverished tenants require spending and taxing, whereas habitability

reforms seem to eliminate poor housing without any public expenditure. On

the other hand, one might speculate that the passage of reforms increasing

housing quality unaccompanied by rent controls might be explained as a

rational attempt by tenants whose income has increased to increase their

housing quality without incurring the costs of moving.

 

5. Division of Land by Usage

 

This entry now shifts from division of land ownership by time to division by

use, where one person holds the right to control one use while another holds

the right to control remaining uses in the same land at the same time.

Someone having the right to possess land holds an ‘estate in land’.

Easements and profits, along with covenants and servitudes, are not estates

in land, but they are interests in land. Examples include a utility company’s

easement to bury service lines under private lawns or a neighbor’s equitable

servitude preventing an owner from using his home for a business. A

promise by an owner to keep his driveway cleared might be found by a court

to be a covenant, a servitude, or an easement. Land-use doctrines govern the

separation of such non-possessory rights from the rights of possession

ordinarily thought of as ownership. The next sections address the

enforceability, outside the landlord-tenant context, of easements, profits,

licenses, covenants and servitudes.

 

The basic economic rationale for allowing the set of all rights to use a

piece of land to be carved up into smaller packages of rights would appear to

be the same as the rationale for allowing the ownership of a farm to be

broken geographically into tracts for a subdivision or allowing the

ownership of one lot to be sliced temporally into the rights of landlord and

tenant; the sum of the parts can be worth more than the whole.

 

Assume that it is worth $200 to Sara, who owns Blackacre, to be able to

walk across her neighbor Ben’s pasture on Whiteacre to get to town. Assume

also that Ben feels a loss of less than $100 from Sara’s walking across the

pasture. As with any contract, Ben and Sara could improve their positions by

an exchange, in this case Sara’s $150 for Ben’s allowing her to walk across

Whiteacre. The land-use situation differs from the ordinary contractual

situation, however, in that Sara’s real interest is not just in Ben’s consent,

but in the consent of all future owners of Whiteacre (see Dunham, 1965).

Sara’s goal cannot be achieved by contract because Ben cannot bind his

successors to perform his contract.

 

The problem is solved by separating out the right to determine whether

the owner of Blackacre can walk across Whiteacre to get to town from the

other rights in Whiteacre. Over the centuries, the tremendous gains to be

had from exchanging rights to control the use of land have driven owners to

seek legal mechanisms to accomplish those exchanges. And courts have

obliged. As Korngold (1990) puts it, with servitudes people do not have to

acquire more rights than they want.

 

The interesting economic issues relate not to why rights in Whiteacre can

be subdivided according to usage, but rather why the law fetters the

subdivision of rights, as it does, and whether there is any current utility to

having multiple doctrines with differing rules by which rights are

subdivided. Many of the restrictions have yet to be supported with an

economic rationale. One concern, supporting constraints, is that subdivision

of rights will lead to situations in which later purchasers think they are

buying complete packages of rights when, in fact, they are not. During the

initial development of the common law, England had no recording system to

give purchasers notice of outstanding non-possessory interests in land.

Without such a system, mistakes and fraud become likely, reducing the

liquidity of land markets and undermining the basis for assuming that a

voluntary exchange of rights is a Pareto improvement.

 

Curtailing the number of non-possessory interests with restrictive

doctrine reduces the occasions for incomplete or false information. In

addition, peculiar restrictions and obligations impressed on land by a

capricious or imprudent owner may continue to burden land in perpetuity.

Indeed, if severe enough, such private restrictions could deprive the land of

its productive power forever. In part for those reasons, judges and scholars

have been quite reluctant to allow burdens to run to successors and have

imposed the many limitations found in land-use doctrine.

 

As a means of controlling uses of land, servitudes of one form or another

should be compared to and contrasted with zoning. Servitudes are created by

private parties, whereas zoning is imposed by public entities, local

governments. Following Siegan (1972) and Ellickson (1973), servitudes are

often discussed as an alternative to zoning (see Speyrer, 1989). As is obvious

from thousands of modern developments, however, public and private

controls are not mutually exclusive and often have different functions.

 

Fischel (1990) noted that zoning is often easier to revise, at least

compared to covenants requiring unanimous consent. Hughes and Turnbull

(1996) contended that things that are inherently difficult to adjust, like lot

configuration and basic type of use, are better candidates for regulation by

zoning. By contrast, they said, activities that are easily adjusted by

subsequent landowners, like yard plantings and automobile parking, require

more rigid intertemporal regulation and would be better regulated by

covenant.

 

6. Easements, Profits and Licenses

 

An easement appurtenant can be used for the benefit of the dominant parcel

only. Suppose Ben, Sara and Janet own lots 1, 2 and 3, in a row, and Ben

grants to Sara an easement so that she can get from her house to the road

passing Ben's lot. Sara then buys Janet’s lot and decides to build a new

house on that lot. Sara cannot use her easement for the benefit of lot 3 even

though there is no more harm to Ben than he anticipated when he granted

the easement. This rule obviously puts Ben and Sara in a bilateral monopoly

situation, with the possible result that a Pareto-improving exchange of rights

will not take place because of strategic bargaining. One justification for the

rule is that in most situations, unlike the example above, the extension of an

easement to benefit parcels other than the dominant tenement will indeed

generate greater costs to the servient land, and it is administratively easier to

lump all extensions together than to sort out the harmless extensions from

the bulk. The rule also creates an incentive for the holder of the easement to

negotiate with the servient owner before extending or modifying her use of

the easement in any way. Nevertheless, it would seem that courts might be

justified in rejecting this rule.

 

Easements can be created by express or implied grant or reservation and,

unlike real covenants and equitable servitudes, can be created by

prescription (longstanding use). Like real covenants and equitable

servitudes, easements can be divided into negative (or restrictive) easements

and positive (or affirmative) easements. Early English decisions recognized

four types of negative easement: easements of light, air, building support and

flow of water in artificial streams. In most American states, a landowner has

no right to sunlight coming across his neighbor’s land. Because of increased

interest in solar energy, some reformers have argued that either nuisance or

prior appropriation rules should be applied to protect persons who install

solar energy devices from being shaded by subsequent development (for a

critical discussion, see Williams, 1979b). Reform advocates have failed to

recognize, however, that private allocation of rights should suffice because

current law defines solar rights clearly and allows for their alienation at low

cost (by restrictive covenant) and freerider and holdout problems are

minimal because rarely are more than a few owners involved.

 

For a number of reasons, courts cabined the development of negative

easements with the rule that only four types could be created; no new forms

were allowed. One economic rationale is that negative easements are harder

for prospective purchasers of the servient parcel to discover than affirmative

easements, such as shortcut footpaths. Observability was important because

property could be burdened by an easement even if the purchaser had no

notice of it.

 

A person who uses land of another in a particular way for a long time

may gain an easement by prescription, which allows that person (and

possibly her successors) to continue making that use of the land. In light of

the ease of exante contracting, it is unclear whether this ability to gain rights

by wrongful act can be justified. It is some evidence of the questionable

merits of the doctrine that in 1966 the Law Reform Committee debated total

abolition of prescription in England. However, the closely related doctrine of

adverse possession has been defended on the ground that depriving a

longstanding user carries a higher cost than refusing to honor the

meritorious claim of a non-user (Stake, 1995). Perhaps prescription might be

justified on a similar rationale.

 

The rules of prescription provide a good example of path-dependent

evolution in the law. The possibility in England that negative easements

could be created by prescription explains the English judicial reluctance to

allow new types of negative easements. If new types of negative easements

could be created by longstanding non-use, any new use of land could be met

with a neighbor’s objection that she had a prescriptive negative easement

preventing such use. The law could not allow new sorts of negative

easements to be created by prescription without creating great uncertainty

about changing the use of lands. In America, where most courts have held

that negative easements cannot be created by prescription, allowing new

sorts of negative easements is not so problematic and need not be proscribed.

 

Easements may terminate by their own terms, by express release, by

adverse use, or by abandonment, though the latter is hard to prove.

Easements terminate by the ancient doctrine of ‘merger’ if the servient

tenement and the easement come into the same hands. In such cases the

easement is not created anew when the once-dominant or once-servient

parcel is sold. This rule creates problems for future holders of the dominant

parcel that wrongly assume the old easement still exists. However, the

merger rule can be justified on the simple ground that it reduces the costs of

selling the unencumbered fee in the future; the seller of the once-servient

parcel need not specify that he is transferring both the previously

encumbered fee and the right to be free of the encumbrance. On the

reasonable assumption that sellers wish to transfer all their rights more often

than they wish to transfer a previously divided subset of their rights, the rule

reduces transaction costs.

 

A profit (or ‘profit à prendre’) is a right to sever and remove some

substance, like minerals, gravel, or timber, from land possessed by another.

The common-law rules governing ownership of fugacious mineral rights

were borrowed from the rules applied to the capture of wild animals.

Because those rules created common-pool problems and led to massive

waste, they have been superseded by statutory regimes.

 

7. Real Covenants

 

Whereas easements and profits usually involve rights of the dominant owner

to do something without interference from the servient owner, real covenants

and equitable servitudes usually involve promises by the servient owner that

he will do or not do something, such as maintain a wall or make noise on a

Sunday. The two groups of interests overlap somewhat in the area of

negative easements.

 

A real covenant is a promise. It is different from a contractual promise in

that a real covenant is stuck to some interest in land and passes

automatically to each owner of that interest rather than staying with the

original party to the promise. The law of real covenants sets forth a number

of ‘elements’ that must be met for a promise to ‘run’ with land: as

covenants, they must be in writing; they must be intended to run; they must

‘touch and concern’ the land rather than being irrelevant to the ownership of

interests in land; there must be ‘horizontal’ and ‘vertical’ ‘privity of estate’,

abstruse requirements explained below; and under modern recording acts

grantees of the affected interests in land must have notice of the covenants.

 

These requirements apply separately to the burden (duty to perform) and

the benefit (right to performance) of the covenant. Whether the burden runs

to future holders of the servient parcel and whether the benefit runs to

holders of the dominant parcel are, for the most part, independent issues.

The covenanting parties must intend, for example, that the burden of the

promise run to the successors of the burdened party for the burden to run

and must intend that the benefit run in order that the benefit run. An

examination of the doctrinal elements follows next.

 

Intent

We can be reasonably confident that the parties to a real covenant will reap

gains from their exchange only if the law enforces what the parties intended.

If the law expands the rights exchanged, the chances that the outcome will

not be a Pareto improvement increase dramatically. Furthermore, if

covenanting parties thought the law might increase the duration of the rights

exchanged beyond what was intended, they might pass up a beneficial

exchange. Therefore, it is essential that courts find that the parties intended

for the promise to run before holding that it does so. Winokur (1989)

contends that courts are all too willing to find intent, essentially dispensing

with the requirement as an independent element. In order to assure more

meaningful consent, he urges that courts require some explicit language

expressing the parties’ intention that the covenant run.

 

Although the running of the benefit and burden are usually independent,

English (see London County Council v. Allen, 1914) and a few American

authorities have linked the two. These authorities hold that the burden of a

real covenant will not run with land if the benefit is ‘in gross’. The cost of

this rule is that it prevents many beneficial divisions of rights in land.

Suppose, for example, a talented gardener has worked hard to make his

house a showcase for his horticultural abilities. Suppose also that his family

has outgrown this house, and he would like to sell if he could be assured that

his successors would maintain his garden. He cares what happens to his

garden no matter where he moves; he wants to hold the benefit in gross. If

the running of the burden is tied to the running of the benefit, he cannot

hold the benefit in gross, and he must forego the sale or give up control of

his garden.

 

The advantage of this intent-frustrating rule is that it makes a real

covenant easier to terminate by private negotiation because it will usually be

possible to find the holder of the benefit since it is tied to land. If the benefit

is not tied to land, a successor willing to pay more than the gardener’s price

to convert the garden to another use might have a hard time finding the

gardener. Thus transaction costs could prevent the successor from buying his

way free of the promise. The requirement that the benefit run with land

helps keep down the costs of terminating promises. This justification seems

to have failed to convince most American commentators, perhaps because

the problem of locating benefit holders could be solved less confiningly by

legislation requiring holders of benefits in gross to place their mailing

address on record if they wish to keep the promise from lapsing.

 

Touch and Concern

Courts require that the benefit of the real covenant touch and concern (or

‘touch or concern’) Blackacre for the benefit to run to the owner of

Blackacre and that the burden touch and concern Whiteacre for the burden

to run. Reichman (1978) points out that the touch and concern element is

the only real barrier to the attachment of a promise to land. He clarifies,

however, that it does not prohibit any particular agreement, it merely shifts

the burden of negotiation once a parcel has been transferred. If the promise

does touch and concern the new neighbors have to negotiate if they want to

terminate the covenant. If the promise does not touch and concern, the new

neighbors have to negotiate if they want to reinstate the promise.

 

A promise to keep a party wall in good repair touches and concerns, but

promises to pay money, promises enforcing ideologies and promises for

personal services usually do not. Some promises have proved hard for courts

to categorize, and this touch and concern element has long been criticized as

being ‘indeterminate’. Rarely, however, do the critics identify an actual case

that has been decided badly because of the touch and concern element.

Rather, Epstein (1982) has said, the harm from indeterminacy is that it

generates litigation, increases the costs of exchanges, or dissuades parties

from using covenants.

 

The amount of litigation generated by the touch and concern requirement

remains uncertain. The reported appellate cases in the United States in the

twentieth century in which that element has played an important part

number only in the hundreds. A Lexis search on 10 August 1996 for ‘touch

and concern and (covenant or servitude)’ in the ‘mega’ file containing all

US federal and state cases yielded 264 cases. Although the reported

appellate cases are just the tip of the iceberg, this tip is so small that the

whole might not be of huge concern. It is unknown to what degrees the

touch and concern element deflects parties from desirable transactions or

raises the drafting costs of completed transactions.

 

The element may be less indeterminate than the critics suggest.

According to one extensive examination of American cases, Stake (1988),

the element can be understood as a mechanism for efficiently allocating the

burden and the benefit of the promise. If the benefit of the promise is likely

to be enjoyed more by the successor than the original promisee, the court

will find that the benefit touches and concerns. In other words, the benefits

will be allocated to the person who would enjoy them most.

 

On the burden side, courts act as if they assume the promise will be

performed and the question is by whom. If placing the burden of

performance on the successor to the promisor would avoid inefficiencies that

would result from leaving the burden with the original promisor, the court

will find that the covenant touches and concerns. In some cases it is a simple

matter of allocating the burden to the party that can perform the obligation

more easily. For example, the new owner of a barn is better able perform a

promise to keep the barn painted because he can monitor its condition and

has easy physical access when it is time to paint. In other cases the court

improves the allocation of resources by avoiding situations having more

subtle inefficiencies, such as when the court passes burdens to pay

homeowners association dues on to those who will be spending those dues. If

the court were to find that the covenant did not touch and concern, the

homeowners in charge of the association would in theory have the power to

make improvements and charge them to former homeowners, a group not

represented in the decisions to purchase.

 

There are other economic tests for determining whether a covenant

touches and concerns land. Under one, a covenant touches and concerns if it

was set up to regulate externalities generated by the use of one parcel (see

Nelson, Stoebuck and Whitman, 1996). Another intuitive approach is to ask

whether ownership of some particular land makes the burden easier to

perform or the benefit more enjoyable. Neither of these latter two approaches

will, however, predict the court’s decisions in homeowners association dues

cases as accurately as the efficiency approach first stated. In many cases

challenging the running of homeowners association dues, the courts have

upheld the promises to pay dues, finding them to touch and concern the land

despite the usual rule that the burdens of promises to pay money do not

touch and concern. The externalities approach does not explain this result

because homeowners association dues are often not imposed in order to

regulate externalities created by the use of land. The intuitive approach does

not predict the judicial results because it is not significantly easier for the

successor to pay the dues than the original promisor.

 

Successful positive explanation of touch and concern does not as a

normative matter justify the element’s interference with the parties’ intent

that the covenant run. Reichman (1978) defended the touch and concern

element on the ground that tying to land the sorts of promises that do not

touch and concern to land could reduce efficiency, democracy, or personal

freedom.

 

Stake (1988) developed a justification of the touch and concern element

that focussed on the asymmetrical costs of rectifying judicial mistakes. The

effect of the touch and concern element is to keep promises from running to

successors. The starting point for the analysis is that people make mistakes.

When the original parties err in predicting the preferences of their

successors, the touch and concern limitation will beneficially prevent the

perpetuation of the inefficient promise. When the original parties correctly

predict the preferences of their successors, that limitation deprives the

successors of the benefits of the exchange. The key to the beneficial

operation of the touch and concern element is that the costs of privately

rectifying errors of the parties and errors of the law are asymmetrical.

 

Assume that a group of neighbors agreed that they and their successors

would play poker together once a week. Assume that one of them sells to a

new owner who refuses to play poker. If the group tries to enforce the

covenant, the court will not enforce it because the burden fails to touch and

concern his land. Assuming that this covenant as applied to the new owner

has become inefficient, generating less wealth than it costs to perform, the

judicial refusal to enforce it against the new owner enhances efficiency. This

non-enforcement is valuable because it might not be accomplished easily by

the parties. Because all of the parties must agree to let one player out of the

group, all are in a position to hold out. Thus, the touch and concern element

beneficially prevents some inefficient promises from running against parties

that might find it hard to buy their way free of the obligations.

 

Assuming, on the other hand, that the old covenant generates more good

than harm for the new parties, the element causes the court to keep an

efficient agreement from running. This error, however, is relatively easy for

the parties to remedy. When a covenant for the new group of neighbors to

play poker would be efficient, transaction costs will rarely prevent the

negotiation of that new covenant. No owner has the power to hold out or free

ride because no owner is necessary to the agreement; the group can simply

get someone else to play. Therefore, private extension of the erroneously

limited covenant is comparatively unproblematic. The very fact that the

covenant does not touch and concern helps to assure us that the judicial error

will not be difficult to reverse.

 

The touch and concern element might also be criticized for depriving

some promisees of the benefit of their bargain. However, if the covenant fails

to touch and concern it presumably remains enforceable against the original

promisor. The mistaken promisee loses a remedy against the successor, but

gains a remedy against the original promisor that would have been lost if the

burden had run. Thus, the distributional effects of the touch and concern

element are mitigated.

 

The American Law Institute (1991) proposes to supercede the touch and

concern element with a judicial inquiry into whether the promise in question

violates public policy. It is not clear how this approach will make the law

more determinate. Nor is there any assurance that this new test will interfere

less with private intent, since the traditional touch and concern approach has

prevented few covenants from running. It is also not apparent how the new

test could take advantage, as the traditional test does, of the asymmetrical

costs of repairing judicial and private error. Finally, the touch and concern

element in no way impedes enforcement of the promise between the original

parties, as the reformed test could, judging by the language of Section 3.1 of

the Third Restatement. Recommending the supersedure of touch and

concern with a general inquiry into public policy fails to recognize that it

could be useful to have a rule that allows a promise to be enforced between

the original parties but not their successors.

 

Notice

For the burden of a covenant to run, the promisor’s successor must have had

‘notice’ before purchasing the land. The notice element requires that the

successor to the promisor have some opportunity to find out about the

obligations attached to the land. Requiring notice is often justified by

lawyers on the ground that it would be unfair to hold successors to promises

they did not know about. Holding unknowing successors liable would in

addition create an incentive and opportunity for promisors to free themselves

of the promise by selling land to an unaware buyer, who might place a lower

value on the burdened land. Notice goes to the heart of voluntary consent.

Without meaningful opportunity for parties to know of the burdens they

assume, we cannot be sure that the exchange of an interest in land makes a

Pareto improvement. Dilution of the notice requirement, as has occurred in

some jurisdictions (see Winokur, 1989), undermines the economic

foundation of servitude doctrine.

 

Horizontal Privity

According to many authorities, the original parties must have a special

connection, called ‘horizontal privity’, for their covenant to run to either of

their successors. Parties are in horizontal privity if they have simultaneous

interests or successive interests, that is, at the time of the covenant one party

conveys to the other an interest in the dominant or servient parcel. The

horizontal privity requirement prevents neighbors from creating a real

covenant to keep their lawns mowed without their exchanging some interest

in their lands at the same time. Thus, this element imposes substantial costs

on parties attempting to create a real covenant. The legal world is still

waiting for a convincing policy analysis explaining why courts should, by

requiring horizontal privity, continue to impose costs on neighbors wishing

to exchange running promises.

 

Vertical Privity

A promisor and his successor are in ‘vertical privity’if the promisor transfers

his entire estate in land to the successor. Only in such cases is the successor

bound by a real covenant. A possible rationale for the traditional

requirement of vertical privity will be suggested in the section on equitable

servitudes.

 

Termination

Real covenants terminate if all dominant and servient tenements come under

the same ownership and also may terminate automatically by their own

terms. Alternatively, judges will sometimes refuse to enforce a covenant on

the ground that the holders of the dominant tenement have abandoned the

covenant or acquiesced in its violation. In England there is a statutory

procedure for discharging obsolete or destructive covenants. Additionally,

real covenants can be terminated privately if the holders of the benefit waive

their rights or release the burdened parties from their obligations. When real

covenants involve a number of owners, holdouts will often prevent such

private termination. For that reason, many modern covenants include a

provision that the covenants can be terminated by the vote of a majority or

supermajority of the parties.

 

Real covenants are also terminated if the government condemns the

servient parcel and uses it in violation of the covenant. The issue arises as to

whether the holder of the dominant parcel should obtain a portion of the

condemnation award and, if so, how much that award should be. Cases

limiting the total compensation awarded to the value of an unrestricted fee

simple would seem to ignore the possibility that the value of the sum of the

divided interests is higher than the value of the unencumbered fee. Such

cases also undercut the allocative-efficiency rationale for requiring

compensation, which is to make sure that the rights taken by the government

are worth at least as much to the government as to the private land owners.

 

8. Equitable Servitudes

 

Courts of equity, which have now merged with courts of law, have enforced

promises stuck to land at least since Tulk v. Moxhay (1848). When a court

sitting in equity enforces a promise attached to land, the promise is called an

‘equitable servitude’, ‘equitable restriction’, ‘servitude’, or even ‘restrictive

covenant’. The court applies the requirements of intent, touch and concern,

and notice in much the same manner as when it sits at law and enforces the

promise as a real covenant.

 

Changed Conditions

Judges have refused to enforce equitable servitudes under the

‘changed-conditions’, ‘change of conditions’, ‘changed-circumstances’, or

‘changed-neighborhood’doctrine. This doctrine says that injunctive relief

will be denied if conditions in the area affected by the covenant have so

changed that the covenant can no longer achieve its purpose. Stake (1991)

noted that the doctrine creates inefficient incentives. By destabilizing

servitude law, it invites litigation and deters parties from beneficial

exchanges of rights or shunts them to more reliable but clumsier legal

mechanisms such as defeasible estates. If no other form of restriction is

satisfactory, a seller may refuse to sell at all, in which case society loses the

gains from trade that would have been possible had the seller been confident

that the necessary restriction were enforceable.

 

 

On the other hand, there are other efficiency benefits from applying the

changed-conditions doctrine. Reichman (1978) stated that there is a large

difference between an interest expected to promote land utilization and a

right having no value other than its negative capacity to prevent efficient

land utilization. He said the changed-conditions doctrine applies only to

promises of the latter sort. Judges can efficiently reallocate land-use rights in

situations where strategic behavior would prevent the parties from privately

terminating the servitude. Surely the productivity of restricted land is

improved by the changed-conditions doctrine so long as the doctrine is

applied only if the challenged restriction generates no conceivable benefit to

neighbors and is being asserted only to capture some of the gains from

changing the use of the servient parcel. It is not clear whether judges will

also apply this doctrine to real covenants. Stake (1991) argued that there is a

reason not to do so. Adhering to the distinction between law and equity and

allowing the holders of dominant tenements to assert rights only to damages

reduces the distributional unfairness that would attend complete termination

of the promise.

 

Privity

The primary difference in requirements for real covenants and equitable

servitudes is that courts of equity require neither horizontal nor vertical

privity. Because the equitable servitude doctrine does not include privity

elements, it is easier for a promisee’s successor to assert the benefits of a

promise in equity than at law. Any real covenant may also be enforced in

equity as an equitable servitude, but some equitable servitudes cannot be

enforced at law as real covenants. At first blush, this seems anomalous

because the usual rule is that a court will grant equitable relief (an

injunction) only if the legal remedy (damages) is inadequate.

 

The practical consequence of enforcement of a servitude in equity is that

the court will issue an injunction against the covenantor’s successor,

requiring him to do, or not to do, an act, while it might not order him to pay

damages. This distinction between legal and equitable enforcement of

promises has been attacked by Winokur (1989) as being indefensible. But

there is an economic defense, as follows. Suppose Ben promises neighbor

Sara that Whiteacre will not be used for a business, and then leases the land

to Jake. In equity, the court will order Jake not to operate a business on

Whiteacre. By contrast, the remedy (at law) for violation of a real covenant

is money damages. Sara can seek money damages from the landlord, Ben,

rather than from Jake (see Dunham, 1965). Making Ben liable for any

monetary damages caused by the business use of Whiteacre seems

appropriate, especially if Ben failed to tell Jake about the covenant. But Sara

can enforce the equitable servitude directly against Jake, who is in

possession, rather than having to find Ben and get him to control Jake’s use

of Whiteacre. Thus, it is possible that this arrangement of burdens

approximates what parties would choose for themselves if they thought about

it. Moreover, when the vertical privity requirement does not yield results

that fit the parties’ needs, the parties can often privately mitigate the effect

of the requirement. For example, if Ben wants Jake to be liable at law for

damages for breach of the promise, Ben can put that term in his lease.

 

If the burdened owner passes his entire interest to a successor, the

successor is bound by the promise in both law (in the US) and equity.

Assuming that the original covenanting parties were not landlord and tenant

(and assuming in England that the transferor is not the original covenantor),

the transferor is released from any burden of the promise. It would unduly

burden commerce in land if owners were to remain forever liable for breach

of covenants attached to lands they once owned. But where the servient

owner has not stepped out of the picture entirely by completely transferring

his interest, it may be desirable to create an incentive for him to inform his

tenant or other successor about the covenant. Making him liable for damages

at law upon a breach maintains that incentive for the transferor.

 

Homeowners Associations

One important use of covenants and servitudes is in the creation of

homeowners, or ‘community’, associations. Thousands of such associations

have been set up to regulate uses of realty and to provide for the

maintenance of realty. They often operate on near-democratic principles,

such as each house or condominium having one vote in the various decisions

to be made.

 

Because these organizations are geographically based and have powers to

tax, spend and regulate, homeowners associations are in many ways like

private governments, as was noted by Epstein (1988). Fischel (1987)

compared homeowners associations to local governments and found some

advantages for private regulation of land use. The advantages of associations

include unanimous consent and a contractual basis for development. The

power to contract regarding uses to which lands may be put in the future is

sometimes not available to municipalities because of judicial decisions

invalidating attempts by municipalities to bind themselves by such

agreements.

 

Winokur (1990) and Korngold (1990) have disagreed as to whether the

consent to be governed by community associations is voluntary or coerced.

However, even if association governance is initially and meaningfully

unanimous by virtue of the fact that everyone governed has bought land

governed by the association, opportunities arise for the majority to take

unfair, and possibly inefficient, advantage of the minority. To prevent this,

courts sometimes impose a reasonableness requirement on the actions of the

majority. Applying this requirement, courts have struck down rules that

reduce the market value of minority interests or stop a minority member

from doing something he has long been doing or cannot stop doing. In

determining whether a majority has treated a minority unfairly, courts

benefit from a natural advantage homeowners associations have over nearly

all governments - they govern areas of land that are comparatively

homogeneous in their use. For that reason, it is often readily apparent to

courts when the association attempts by majority rule to place unfair burdens

on the minority. Because characteristics and uses of land within the

jurisdiction of a local government vary so widely, it is much more difficult

for courts to identify situations in which the majority has increased its

wealth at the expense of the minority.

 

Despite the potential gains, community associations are not universally

appreciated and a substantial number of persons would prefer to live outside

their control. Winokur (1989, 1990) makes a case that, left alone, the market

has produced community associations that serve poorly the interests of many

of their members. He does not discuss the possibility that the market will, as

it matures, correct some of the defects that have made previous purchasers

unhappy. Winokur argues that servitude regimes generate inefficiency,

conflict, and excessive restraints on individual liberty and expression, and

for those reasons the government should impose limits on the duration of the

servitudes that form the legal basis for community associations.

 

The somewhat complicated legislative scheme Winokur proposes would

reform the procedures for terminating or adjusting servitudes rather than

change the rules governing what is an allowable servitude under the touch

and concern doctrine or change the termination of servitudes under (rare)

modern statutes limiting duration or under the changed-circumstances

doctrine. Winokur proposes that servitudes not be enforceable beyond twenty

years unless, by the terms of the servitude, fewer than eleven parcels have

the right to enforce the servitude. This would assure that any owner wishing

to negotiate freedom from a twenty-year-old servitude would not have to deal

with too many other owners. On the other hand, such a law would, as

Korngold points out, terminate beneficial servitudes and would do nothing

to cure problems during the first twenty years of the covenant. In light of

Winokur’s concern for the difficulties of negotiations among multiple

parties, it is somewhat odd that under his proposal servitudes could be

modified after twenty years only by unanimous consent. Winokur does not

provide a mechanism for protecting other neighbors outside the group from

negative externalities of uses allowed by the ten neighbors, externalities

which are much more likely if the restricted party is allowed to buy his

freedom with payments to the ten. While he establishes that community

associations are causing problems and makes proposals that might well be

incorporated into the instruments establishing an association, the case for

legislative limitation is less compelling. Winokur’s mix of temporal

limitations and subsequent unanimous consent by a subgroup is not so

obviously right for all developments that it should be imposed by law. As

usual, this area of law calls for default rules rather than limiting rules.

 

9. Personalty

 

As seen above, the common law has developed an elaborate system for

dividing rights in land, with numerous fine distinctions that make at least

some economic sense. English and American law have not developed an

equally extensive system for dividing rights in personal property. However,

rights in personalty are not beyond decomposition. Personal property can be

placed in a trust, which allows all of the divisions possible for realty, and

can be divided temporally by lease, which for personalty is essentially a

matter of contract law. Corporation and partnership laws can also be seen as

sets of rules for decomposing personal property.

 

The law of wild animals has been characterized by Lueck (1995) as

divided ownership. The division of property in wild animals is, however,

different from the decomposition of land property discussed above. The

fundamental issue above was how private owners might decompose their

rights. By contrast, a key issue in the law of living, uncaptured, wild animals

is whether there is any owner at all. For many purposes, uncaptured wild

animals are unowned. The federal government is not liable as an owner for

damage done by wild animals (see Sickman v. United States, 1950).

Moreover, the US refrained from asserting ownership of wild animals on

federal land even in a Supreme Court case where doing so might have saved

a federal statute from being declared unconstitutional, although the statute

was upheld on other grounds (Kleppe v. New Mexico, 1976).

 

Lueck employs a transaction cost framework to examine the variation in

the rules governing wild animals over time and geography. He confirms that

efficiency explains the development of the rules. His analysis does not justify

complacency, however. Transaction costs, including strategic behavior, may

prevent the creation of a system of property in wild animals. And in the

absence of a system of rights, it makes little sense for a person to refrain

from capturing a wild animal worth more than the private costs of capture,

which do not fully include depletion. For animals such as falcons and whales

that roam or migrate in a range larger than the optimal (or actual) area of

land ownership, the absence of a property system could result in extinction.

The difference in remaining numbers of domesticated animals and

endangered species suggests that the harvesting of some wild animals has

been inefficiently high. Perhaps a rational whale would rather be owned.

 

Acknowledgments

The author thanks Indiana University School of Law-Bloomington for

supporting the production of this entry. He also thanks Michael Alexeev,

Ann Gellis, Val Nolan, the Encyclopedia editors, and two anonymous (to

him) referees for their comments.



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