Tuesday, January 28, 2014
Like many nerds tech-savvy people, I have an alert set up with WestLaw to send me any new law review article or case that even mentions the phrase "conservation easement." It sends me a lot of fluff, but every now and then I find a gem that seems to have eluded the 5,000 SSRN lists I get. When I saw an article entitled "Environmental Preservation and the Fifth Amendment: The Use and Limits of Conservation Easements by Regulatory Takings and Eminent Domain," I just couldn't resist dropping everything and reading it immediately.
I was surprised that I didn't know the author (Beckett Cantley of Atlanta's John Marshall Law School) because well the conservation easement crew is a small one. Turns out that Cantley is an interesting combination of a tax law prof who also teaches property. As the title suggests, the article focus on standard 5th Amendment takings analysis. Unsurprisingly, this involves a large focus on exacted conservation easements. As I am sure all none of you know, my 2005 dissertation was entitled Exacted Conservation Easements, and I have a small obsession with the phenomenon.
Cantley has an interesting take on the issue.
First, he asks whether there is a market for conservation easements. He contends that a landowner's ability to voluntarily sell a conservation easement constitutes an "economic use for regulated land that could help avoid a regulatory taking by lessening the economic impact of environmental and land use regulations." I assume the argument goes this way: The government entity enacts a land-use law that restricts development. The landowner argues that this violates the 5th amendment under a Lucas-style total deprivation of value argument. The government entity says no we haven't totally deprived you of value because you could still donate or sell a conservation easement on your land. Of course, it would be pretty tricky to find a willing buyer for such a conservation easement but probably not impossible to find someone willing to accept the donation (depending on the features of that parcel). But what would be the value of the donation? Would it be zero? Well the current regulations do not allow development, but conservation easements can extend regulations (making them more stringent, giving them certainty, extending the restriction in perpetuity). So the value of the conservation easement while low, is probably not zero. Cantley suggests that such a conservation easement market would be so speculative that it would not be enough to defeat a Lucas-style takings claim.
Second, Cantley analyzes the ability of a government agency to create a conservation easement with eminent domain. This is a tricky issue. As a threshold, it would only work where the government entity had eminent domain power. Some states prohibit creation of CEs via eminent domain explicitly. In other places, it is just politically sensitive (not to mention potentially hard to calculate). The best example of this phenomenon was when the Highway Commission in Wisconsin exercised eminent domain over holdouts for scenic easements along the Great River Road. One of the confusing points for me here has to do with the fact that when a parcel encumbered by CE is condemned, most jurisdictions acknowledge the CE is compensable and they pay the CE holder for their lost property interest when they pay the underlying landowner just compensation for her property interest. Do such payment policies mean that the jurisdictions recognize CEs as something one could take via eminent domain without taking the fee title? Just an interesting way to do parcel by parcel regulation? Spot zoning with compensation? Something several folks have speculated about but few governments seem interested in pursuing just to amuse us academics.
Now, on the exacted CE front, Cantley notes that generally Nollan and Dolan analysis apply but in some places there is a bit of trickiness with what constitutes an "exaction" meriting Nollan/Dolan analysis (i.e., nexus + rough proportionality) versus just a regulatory act with the less demanding Penn Central balancing test. I have written about this weirdness before in New York where the case of Smith v. Town of Mendon held that conservation easements are not actually "exactions" even where they are er... exacted. As I speculated in a recent piece for the Environmental Section of the New York Bar Association, I think the broad definition of exaction in Koontz overrules Smith v. Town of Mendon and makes it pretty hard to argue that you can't exact conservation easements. One bone I have to pick with Cantley is his description of exacted conservation easements as being required donations. I think we really need to remove the donation language from our talk about such CEs. Landowners are sometime surprised that they can't (or well at least they shouldn't) get tax benefits from these exactions because they associate all CEs with tax breaks. It also looks to me like Cantley must have written his article pre-Koontz (unsurprising considering the pace of law review publication). I think that case may change his assessment that failed exactions are not cognizable takings... or maybe it depends on how/when we assess failure.
Interesting stuff! The artcle doesn't appear to be available for free on SSRN or elsewhere, but those of you with access to various legal databases can find it at
Beckett G. Cantley, Environmental Preservation and the Fifth Amendment: The Use and Limits of Conservation Easmeents by Regulatory Taking and Eminent Domain, 20 Hastings W.-N.W. J. Envtl. L. & Pol'y 215 (2014).
Sunday, September 8, 2013
Lee Fennell (Chicago) critiques and enhances Brian Lee's Columbia Law review article entitled Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, blogged about here earlier this summer. In her concise on-line response, Just Enough, 133 Colum. L. Rev. Sidebar 109 (2013) (pdf here), Fennell moves through the positive and normative aspects of the tripartite analysis of how Fair Market Value (FMV) purportedly fails to fully compensate property owners whose interests are liquidated through eminent domain proceedings. As she lays it out in her intro:
Like other scholars, I have previously observed that the FMV measure of compensation leaves an increment of value uncompensated:
The uncompensated increment is made up of three distinct components: (1) the increment by which the property owner’s subjective value exceeds fair market value; (2) the chance of reaping a surplus from trade (that is, of obtaining an amount larger than one’s own true subjective valuation); and (3) the autonomy of choosing for oneself when to sell.
Lee argues that appropriate amounts of both subjective value and the chance of gains from trade are included in FMV, leaving only interference with autonomy categorically uncompensated in a manner that would implicate fairness concerns. This Part focuses only on the positive question of what does and does not get included in FMV, leaving the normative questions to the next Part. Part I.A considers subjective value and Part I.B turns to the last two components of the “uncompensated increment.”
Even after demonstrating, contra Lee, that existing owners' subjective attachments are not necessarily baked in to market valuations, she helps out by showing that a prevalence of rooted homeowners together with zoning-induced supply contraints might support the kind of extended sellers' market that diminishes the difference between market prices and the reservation prices of most homeowners.
Tuesday, August 6, 2013
In summer, I like to put aside an hour or so each work day to read various articles and books that I have stumbled across during the busy semester but lacked time to review. Today, the top of my stacks were an article from The New American and a book by Glenn Beck. It was really just coincidence that these two hit the top of my piles today, but it has made for a surreal afternoon.
First up is an article from The New American (the publication of the John Birch Society) by Tom DeWeese, entitled Conservation Easements and the Urge to Rule. You know an article is gonna be good when the first sentence mentions the Green Mafia. DeWeese's piece argues that conservation easements are the biggest threat to small family farmers out there. I don't want to spend too much time on his article, because it is just so chock full of problems and errors that it would take too long. He conflates conservation easements and zoning law and seems to rest everything on one case study whose facts are unclear in his piece. My favorite line though is where he compares land trusts to commodity traders buying and selling conservation easements at a significant profit. That sentence on page 2 is where he really lost any credibility he might have had with me. While not an adherent of the John BIrch Society, I have been a vocal critic of the uses of conservation easements. It is always surprising to me when I see them attacked from the right. In many ways, they embody fundamental conservative ideals of promoting and protecting private property rights. Instead of saying landowners can freely enter into any contract regarding their land that they like (a clear libertarian approach), DeWeese seems to be suggesting that any limitation on property rights (even voluntary ones) should not be permitted. Without giving too much credence to DeWeese's writing on this, I am just generally befuddled by the lack of consistency in the property rights movement.
I wish I could also share an interview with Becky Norton Dunlop of the Heritage Foundation on Fox News from February 2010 where she amusingly asserts conservation easements are akin to eminent domain, but the clip no longer appears available.
After zooming through that little article, I picked up Agenda 21 by Glenn Beck. Wow is this a crazy book. Now I don't have cable tv (and would unlikely be tuning into FoxNews if I did), so I have a general understanding of who Glenn Beck is but haven't really seen much more than clips. This may explain why I had no idea what I was in for. I was looking for a book to give me the conservative take on Agenda 21 conspiracy. I gave a talk at the Western New York Land Conservancy earlier this summer, and the Conservancy chose not to advertise the talk in the Buffalo News for fear of Agenda 21 protesters. I am super a bit embarrassed to admit that I was unfamiliar with the conservative Agenda 21 battle cry. My take on Agenda 21 thus far is that it is pretty toothless. Lots of big ideas with little action. So I was pretty surprised to hear that some radical right groups appear afraid of it. Clearly they must fear what it symbolizes rather than what it actually does. Enter Glenn Beck. Someone told me that Glenn Beck wrote a book about Agenda 21 and it is a fast read. What that person failed to mention is that it is a 1984-esque sci fi novel set in a future where Agenda 21 has led to a dystopia. Wanna hear my secret? I kinda love it. It is completely ridiculous, of course, but a great beach read ... if you were willing to let people see you reading it in public.
Wednesday, June 19, 2013
Brian Lee (Brooklyn) has posted Just Undercompensation: The Idiosyncratic Premium in Eminent Domain, 113 Colum. L. Rev. 593 (2013). Lee presents an interesting challenge to recent scholarship recognizing "confiscation of the uncompensated increment" to use Lee Fennell's terminology. The article does not reject above-market compensation altogether but instead criticizes premium approaches for redistributing wealth to the already well-off. Here's the abstract:
When the government exercises its power of eminent domain to take private property, the Fifth Amendment to the U.S. Constitution requires that the property's owners receive "just compensation," which the Supreme Court has defined as equal to the property’s fair market value. Today, a well-established consensus exists on three basic propositions about this fair market value standard. First, the standard systematically undercompensates owners of taken property, because market prices do not reflect owners' personal valuations of particular pieces of property. Second, this undercompensation is unfair to those owners. And third, an appropriate way to rectify this problem is to add fixed-percentage bonuses to the amount of compensation paid. Several states have recently enacted laws requiring such bonuses, and prominent academics have endorsed their adoption. This Article, however, argues that all three of these widely accepted propositions are false. First, examining the economics of market-price formation reveals that fair market value includes compensation for more subjective value than previously recognized. Second, much of what market value leaves uncompensated should not, in fairness, receive compensation. Third, although justice may require paying compensation above fair market value in certain situations, this Article argues that the solution favored by academics and recent state legislation is itself unjust, undermining the civic and moral equality of rich and poor property owners by relatively overcompensating the rich while undercompensating the poor for losses which have equal value to rich and poor alike. The Article concludes by showing how an alternative approach can avoid these fairness problems.
Tuesday, June 11, 2013
Carol Zeiner (St. Thomas) has posted A Therapeutic Jurisprudence Analysis of the Use of Eminent Domain to Create a Leasehold, forthcoming in the Utah Law Review (2013). The abstract:
Therapeutic jurisprudence provides an excellent tool to analyze and guide the development of the law on the use of eminent domain to create leaseholds. The objective of these takings is for the condemnor to become a tenant under a “lease,” rather than the fee simple owner.
I am perhaps the only scholar who has written extensively on the topic of takings to create a leasehold. In a previous work, I provided an exhaustive analysis of the conclusion that government can use eminent domain to create a leasehold. That work went on to conclude that there are circumstances in which government should use eminent domain to create a leasehold, but that difficult problems can arise in such takings. They necessitate refinements in arriving at just compensation.
That work also concluded that there is at least one situation in which government should not be allowed to use eminent domain to create a leasehold. I labeled such takings Kelo-type takings, wherein the government uses its power of eminent domain with the objective of creating a leasehold that it will then transfer to a private party for private use. My argument that the use of such Kelo-type takings to create leaseholds should not be allowed was based primarily on public policy considerations. I concluded that the problems arising from takings that create private leaseholds are much worse than those encountered in situations such as Kelo, in which government acquires a fee simple from the condemnee and then makes a transfer to a private party, because the form disrupts the social contract between government and the people.
Any such conclusion demands reexamination on theoretical grounds, which is done in this Article. In order to re-examine the question, it formally extends the jurisprudential philosophy of therapeutic justice to eminent domain in general and specifically to takings to create leaseholds. The principles underlying therapeutic jurisprudence, as well as the illuminating insights derived from its application, confirm the prior conclusion.
It's time once again for the "Professors' Corner" teleconference sponsored by the ABA's Real Property, Trusts, & Estates section. This month's call features different recent cases to be discussed by John Orth (North Carolina), Tanya Marsh (Wake Forest), and yours truly (South Texas). See the writeup below for details on the call-in and the cases. Also, if you're a property or land use prof who might be interested in participating in future calls (I recommend it), get in touch with Tanya.
Professors’ Corner: Wednesday, June 12, 2013
Professors’ Corner is a monthly free teleconference sponsored by the ABA Real Property, Trust and Estate Law Section's Legal Education and Uniform Laws Group. Each month’s call features a panel of law professors who discuss recent cases or issues of interest to real estate practitioners and scholars. Members of the AALS Property Section are invited to participate in the call (as well as to join and become involved in the ABA Real Property, Trust and Estate Law Section).
Wednesday, June 12, 2013
12:30 p.m. Eastern time (11:30 a.m. Central, 9:30 a.m. Pacific). Call is ONE HOUR in length.
Call-in number: 866-646-6488
This month’s program involves some recent case developments on issues of interest to both Real Property and Trust and Estate practitioners. Our featured speakers will be Professors John Orth, Tanya Marsh, and Matt Festa.
John Orth is the William Rand Kenan Jr. Professor of Law at the University of North Carolina School of Law in Chapel Hill, NC, where he has taught since 1978. He teaches Property, Advanced Property, Trusts and Estates, and Legal History. He has published extensively on the subjects of property, legal history, and state constitutional law. Prof. Orth is a contributing author to the treatise Thompson on Real Property for the subject of concurrent estates, and has served as an Associate Editor and a contributor to the American National Biography series. Prof. Orth will be discussing Reicherter v. McCauley, a Kansas appellate decision addressing whether one joint tenant can effect a “secret severance” of a joint tenancy via a quitclaim deed to himself via a deed executed in anticipation of death. Time permitting, he will also discussBridgeview Bank Group v. Callaghan, a recent Florida appellate decision addressing whether a creditor may introduce evidence to rebut the presumption that a deed to a married couple was intended to create a tenancy by the entirety. Here’s a link to Reicherter: http://www.kscourts.org/cases-and-opinions/Opinions/CtApp/2012/20120713/106622.pdf
And to Callaghan: http://www.flprobatelitigation.com/uploads/file/4D11-631_op.pdf
Tanya Marsh is an Associate Professor of Law at the Wake Forest University School of Law in Winston-Salem, NC, where she began teaching in 2010, following ten years practicing real estate and corporate law in Indianapolis, Indiana. She teaches Property and Real Estate Transactions, and is a contributing editor to the Property Prof Blog. Prof. Marsh is the incoming Chair of the Real Property Division Legal Education Committee for the ABA Real Property, Trust & Estate Law Section. She will be discussing In re Estate of Whalen, a recent Iowa Supreme Court decision addressing whether Iowa’s Final Disposition Act allows a surviving spouse to disregard the deceased spouse’s written burial instructions. Here’s a link to the Whalen decision: http://www.iowacourts.gov/Supreme_Court/Recent_Opinions/20130222/12-1927.pdf
Matt Festa is a Professor of Law at the South Texas College of Law in Houston, TX, where he has taught since 2007. He teaches and researches in the areas of property law and land use, state & local government, energy & environmental law, trusts & estates, legal history, and national security law. He is the editor of the Land Use Prof blog. Matt will be discussing a Texas Supreme Court decision, Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline — Texas, LLC, in which the Court addressed whether a “common carrier” pipeline company with statutory authority to exercise eminent domain may do so for the construction of a private pipeline. Here’s a link to the decision: http://www.supreme.courts.state.tx.us/historical/2012/mar/090901rh.pdf
Monday, May 27, 2013
The U.S. tradition of Memorial Day has a long and complex relationship with land, history, and memory. This post has some thoughts on the subject from last year.
Today was Memorial Day in the US. There are lots of land use issues that we can associate with Memorial Day, which, stripped to its essence, is designed as a day to remember the military members who died in service to the nation. There is the obvious land use issue of cemeteries, and the related legal and cultural norms governing how we memorialize the dead (check out any of the interesting blogposts or scholarship by Al Brophy and Tanya Marsh on cemeteries). It gets even more relevant when we start talking about government-owned national or veterans' cemeteries, and the attendant controversies about First Amendment and other issues. [The photo is from last year's Memorial Day ceremony at Houston National Cemetery, which my daughter attended to honor fallen Marine Lance Corporal Matthew Sauer Medlicott.] Of course, there are always land use and local government issues involved with things like parades and public ceremonies, and in many communities there are specific rules that govern the "summer season" informally commenced on Memorial Day weekend.
Check out the whole post for some info about a couple of little-known and interesting events from the early history of Memorial Day and land use, including what may be the first Memorial Day celebration, by African-Americans in Charleston on the former planters' racecourse, and a U.S. Supreme Court case about eminent domain for historic preservation on Gettysburg National Battlefied.
We hope you had a safe and happy Memorial Day.
Saturday, May 18, 2013
Here's another recently-posted paper from Stephanie Stern (Chicago-Kent): Protecting Property Through Politics: State Legislative Checks and Judicial Takings, forthcoming in the Minnesota Law Review. The abstract:
In the 2010 Supreme Court case Stop the Beach Renourishment v. Florida Department of Environmental Protection, a plurality of the Court launched judicial takings in political and scholarly debate and laid the groundwork for expanding the Fifth Amendment to encompass court decisions. This Article explores a neglected institution in the debate over judicial takings — state legislatures. In the comparatively rare instances when state courts overreach, state legislatures can revise state court decisions and restore private property rights. Through case studies of state legislative checks of judicial activism, I examine the comparative institutional advantages, and the potential gaps, of situating primary responsibility for state court revision in state legislatures. In view of takings federalism and the costs of judicial takings, I contend that the existing balance of state legislative checks and state court restraint works well enough to police against state court property activism.
May 18, 2013 in Caselaw, Constitutional Law, Eminent Domain, Judicial Review, Politics, Property Rights, Property Theory, Scholarship, State Government, Supreme Court, Takings | Permalink | Comments (0) | TrackBack (0)
Friday, February 22, 2013
Steven J. Eagle (George Mason) has posted "Economic Impact" in Regualtory Takings Law, forthcoming in the West-Northwest Journal of Environmental Law & Policy. The abstract:
In Penn Central Transportation Co. v. City of New York the Supreme Court stated that the existence of a regulatory taking would be determined through “essentially ad hoc, factual inquiries,” and that one of three factors of “particular significance” was the economic impact of the regulation on the claimant. This article examines the conceptual problem whereby the Fifth Amendment requires compensation for the taking of property and not a fraction of its owner’s worth. The fact that economic impact of stringent regulations is greater when parcels are smaller has led to a complex “parcel as a whole” test that conflates impact with another Penn Central test, owner’s expectations. Furthermore, application of the impact test to parcels held as investment property might vitiate the temporary taking. The Federal Circuit’s recent abandonment of its prior “return on equity” approach is emblematic of this problem.
Measuring the economic impact upon owners also is complex where government condemns part of an owner’s parcel, leading to difficulties in computing severance damages. Broad assertions that “offsetting benefits” conferred upon property owners by government actions reduce the impact of regulations also requires clarification.
The article concludes that unresolved issues and complexities in adjudicating the “economic impact of the regulation on the claimant” test provide an additional reason why the conceptually incoherent Penn Central doctrine must be replaced.
Tuesday, October 9, 2012
This month's installment of the ABA Section on Real Property's "Professor's Corner"--a free monthly teleconference featuring scholars' takes on important new property cases and issues--will feature a really hot topic, the proposal for municipal governments to take property by eminent domain to combat the mortgage/foreclosure crisis. The info, via David Reiss (who also recently posted a related public comment):
The program is Wednesday, October 10, at 12:30 pm EDT; 11:30 am CDT; 10:30 am MDT; 9:30 am PDT.
Participant Passcode: 5577419753
This month’s topic is Can/Should Municipalities Use Eminent Domain to Take Mortgages to Facilitate Mortgage Modifications? This conference call will be moderated by Professor James Geoffrey Durham, University of Dayton School of Law. Professor Steven J. Eagle, Professor of Law, George Mason University School of Law, is one of the nation’s leading scholars on eminent domain and regulatory takings. Professor Eagle will discuss whether it is possible for local governments to use eminent domain to acquire notes secured by mortgages in order to resell them to a private party which will then modify them, both under the 5th Amendment to the U.S. Constitution and also under state constitution taking clauses as they have been limited by amendments and statutes seeking to define what is a public use. Professor Robert C. Hockett, Professor of Law, Cornell Law School, is the scholar who in June proposed that municipalities could use eminent domain to acquire mortgages, in order to facilitate mortgage modifications to benefit underwater homeowners, in his article: It Takes a Village: Municipal Condemnation Proceedings and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation, and Local Economic Recovery (download paper). Professor Hockett will discuss his proposal, which has received widespread attention. Professor Dale A. Whitman, James E. Campbell Missouri Endowed Professor Emeritus of Law, University of Missouri, Columbia, School of Law, is one of the premier experts on American property law and one of the nation’s foremost mortgage law scholars. Professor Whitman will discuss the impact that implementation of Professor Hockett’s proposal might have on the mortgage markets.
Check out the free telecast on this very interesting and current issue.
October 9, 2012 in Conferences, Eminent Domain, Financial Crisis, Housing, Local Government, Mortgage Crisis, Mortgages, Property, Real Estate Transactions, Scholarship, Takings | Permalink | Comments (0) | TrackBack (0)
Thursday, October 4, 2012
David J. Reiss (Brooklyn) has posted Comment on the Use of Eminent Domain to Restructure Performing Loans, which was submitted to the Federal Housing Finance Agency (No. 2012–N–11) (2012). The abstract:
There has been a lot of fear-mongering by financial industry trade groups over the widespread use of eminent domain to restructure residential mortgages. While there may be legitimate business reasons to oppose its use, its inconsistency with Takings jurisprudence should not be one of them. To date, the federal government’s responses to the current crisis in the housing markets have been at cross purposes, half-hearted and self-defeating. So it is not surprising that local governments are attempting to fashion solutions to the problem with the tools at their disposal. Courts should, and likely will, give these democratically-implemented and constitutionally-sound solutions a wide berth as the ship of state tries to right itself after being swamped by a tidal wave of mortgage defaults.
A concise and thoughtful public comment on what is emerging as a hot, hot issue.
October 4, 2012 in Constitutional Law, Eminent Domain, Finance, Housing, Local Government, Mortgage Crisis, Mortgages, Property Rights, Real Estate Transactions, Scholarship, State Government, Takings | Permalink | Comments (0) | TrackBack (0)
Monday, September 24, 2012
Alexandra B. Klass (Minnesota) has posted Takings and Transmission, forthcoming in the North Carolina Law Review. The abstract:
Ever since the Supreme Court’s controversial 2005 decision in Kelo v. City of New London, courts, state legislatures, and the public have scrutinized eminent domain actions like never before. Such scrutiny has focused, for the most part, on the now-controversial “economic development” or “public purpose” takings involved in the Kelo case itself, where government takes private property for a redevelopment project that will benefit another private party as well as increase the tax base, create new jobs, assist in urban renewal, or otherwise provide economic or social benefits to the public. By contrast, until recently, there has been little change in law or public opinion with regard to takings involving publicly-owned projects such as hospitals or post offices or “use by the public” takings that involve condemnation for railroad lines, electric transmission lines, or other infrastructure projects. However, recent changes in electricity markets and the development of the country’s electric transmission system have raised new questions about the validity of “use by the public” takings in the context of electric transmission lines. With some transmission lines now being built by private, “merchant” companies rather than by publicly-regulated utilities, and with the push to build more interstate transmission lines to transport renewable energy to meet state renewable portfolio standards, what was once a classic public use is now subject to new statutory and constitutional challenges. This Article explores the potential impact of these developments on the use of eminent domain for electric transmission lines. Ultimately, it suggests that states should ensure that their eminent domain laws governing transmission lines are consistent with their policy preferences surrounding energy development in the state, and it outlines some ways for states to accomplish this goal.
I think you could make some analogous analysis about the newly-hot issue of eminent domain and pipelines, for example the controversy over the acquisition of rights of way for the Keystone Pipeline. Interesting issues.
Friday, September 21, 2012
John Martinez (Utah) has posted From Pyramids to Stories: Cognitive Reconstruction of Local Government Authority. The abstract:
This article describes a cognitive science approach to law, uses it to critically evaluate conventional "pyramid" legal analysis of local government authority, and suggests stories as alternative models for defining such authority. The article suggests that stories better reveal what is at stake in regard to local government authority and thus helps us to arrive at better solutions. The article illustrates the storytelling analytical approach in three situations: a local government's condemnation of private property for resale to a private developer, the delegation of land use control authority to neighborhood groups, and local government attempts to zone out nontraditional families.
The paper offers an alternative approach to classic local government questions about land use. Interesting ideas to ponder while some of us are here at the Local Government Law Workshop in Milwaukee.
Wednesday, August 15, 2012
The New York Observer has a list of the 15 Most Fascinating NY Real Estate Cases of the 21st Century, based on a survey of NYC real estate lawyers. Although most involve contracts or financing gone awry, a few involve zoning and land use disputes. They also make use of Sherlock Holmes-esque titles, like "The Case of the Mischievous Mall Developer."
Of particular interest are "The Case of the Masterpiece & The Condo Ad," involving a dispute over advertising, public art, and landmarking. The "Case of the Museum and the Architect" involves a building designed by Jean Nouvel next to MOMA, as well as zoning, landmarking and air rights issues. "The Case of the Brooklyn Basketball Arena" gives a very truncated summary of the series of legal battles over eminent domain and the construction of a new arena for the Brooklyn Nets. (For a more detailed account in response from critics of the development see the Atlantic Yards Report). And "The Case of the Abused J-51" details the legal battles over rent regulation following the $5.4 billion purchase of Stuyvesant Town.
Saturday, August 11, 2012
There has been some discussion over the past couple of months over an innovative proposal to have governments use the eminent domain power to take ownership of underwater mortgages, to decrease the risk of default and then refinance the obligations, all to promote the common good. Here are some links to give you a sense of the major points of this debate.
The launch of this idea comes from a proposal by Law Professor Robert C. Hockett (Cornell) in his piece It Takes a Village: Municipal Condemnation Proceedings and Public/Private Partnerships for Mortgage Loan Modification, Value Preservation, and Local Economic Recovery. The abstract:
Respected real estate analysts now forecast that the U.S. is poised to experience a renewed round of home mortgage foreclosures over the coming 6 years. Up to 11 million underwater mortgages will be affected. Neither our families, our neighborhoods, nor our state and national economies can bear a resumption of crisis on this order of magnitude.
I argue that ongoing and self-worsening slump in the primary and secondary mortgage markets is rooted in a host of recursive collective action challenges structurally akin to those that brought on the real estate bubble and bust themselves. Collective action problems of this sort require duly authorized collective agents for their solution. At present, the optimally situated such agents for purposes of mortgage market clearing are municipal governments exercising their traditional eminent domain authority.
I sketch a plan pursuant to which municipalities, in partnership with investors, can condemn underwater mortgage notes, pay mortgagees fair market value for the same, and systematically write down principal. Because in so doing they will be doing what parties themselves would do voluntarily were they not challenged by structural impediments to collective action, municipalities acting on this plan will be rendering all better off. They will also be leading the urgently necessary project of eliminating debt overhang nationwide and thereby at last ending our ongoing debt deflation.
Professor Hockett's idea was then promoted in the media by, among others, Prof. Robert J. Shiller (Yale--Economics & Finance), in the New York Times Piece Reviving Real Estate Requires Collective Action. As the title indicates, Schiller theorizes the mortgage crisis as in part a collective action problem that can be addressed by Hockett's proposal to use eminent domain to seize underwater mortgages.
But eminent domain law needn’t be restricted to real estate. It could be applied to mortgages as well. Governments could seize underwater mortgages, paying investors fair market value for them. This is common sense too. The true fair market value for these mortgages is arguably far below their face value, given the likelihood of default, with its attendant costs.
Professor Hockett argues that a government, whether federal, state or local, can start doing just this right now, using large databases of information about mortgage pools and homeowner credit scores. After a market analysis, it seizes the mortgages. Then it can pay them off at fair value, or a little over that, with money from new investors, issuing new mortgages with smaller balances to the homeowners.
Yesterday in The Atlantic Cities, Amanda Erickson published an excellent overview story about the proposal, Can Eminent Domain Solve our Mortgage Woes?. Of note to us are the comments by the eminent eminent domain expert (that's not a typo) Prof. Thomas Merrill (Columbia).
It's a clever idea. But is it legal? "It's very unusual," says Thomas W. Merrill, a law professor at Columbia University who specializes in property law. But, he notes, "this doesn't mean it's unconstitutional."
Before the landmark 2005 Kelo vs. New London decision, Merrill says, there's little doubt that the courts have upheld this kind of law. "Before Kelo, courts took a hands-off approach," Merrill says. In the 1984 case Hawaii Housing Authority vs. Midkiff, the Supreme Court ruled that the Hawaiian legislature could take a property controlled by landlords and sell it back to leasees. "Condemning a landlord's interest in property to transfer to a tenant is not too different," Merrill says.
But Kelo changed that. In that case, the Supreme Court ruled that cities could use eminent domain to transfer land from one private owner to another, and that doing so for economic development purposes constitutes a public use. "At this point, I guess you'd have to say all bets are off in terms of what is and isn't eminent domain," Merrill says.
And finally for now, Prof. Richard Epstein is critical of the idea. From More Nonsense on the Home Mortgage Front: Don't Let Municipal Governments Condemn Mortgages at Bargain Rates:
The idea has already been rightly panned by the Wall Street Journal. But the entire proposal needs still further consideration. First off, Hockett and his group insist that there is a huge collective action problem that prevents the rationalization of mortgage matters. And there is. It is called local government regulations that have blocked the foreclosure measures set out above. Handle those and the externalities to which they refer disappear. No longer do we have owners neglecting property or clogging the courts with endless motions.
Again, this post is just to give you some links to look at the arguments. From my perspective, these are some fascinating arguments that illuminate not only the mortgage crisis but also the general debate over eminent domain.
August 11, 2012 in Constitutional Law, Eminent Domain, Finance, Housing, Local Government, Mortgage Crisis, Mortgages, Politics, Property Theory, Real Estate Transactions, Scholarship, Takings | Permalink | Comments (1) | TrackBack (0)
Thursday, July 26, 2012
Ramon P. DeGennaro (Tennessee--Finance) and Tianning Li (Hood College) have posted Business Formation in the Wake of States' Responses to Kelo. The abstract:
On June 23, 2005, the U.S. Supreme Court ruled in Kelo v. City of New London, 505 U.S. 469 (2005) that the Public Use Clause allows governments to take private property for transfer to new private owners for the purpose of promoting “economic development.” Our theoretical model identifies the circumstances under which Kelo and subsequent state laws affect business formation. We show that business creation can be encouraged, unaffected, or discouraged as the probability of takings increases, depending on the level of compensation for the takings and the magnitude of the owners’ public use benefits. We also show that utility-maximizing entrepreneurs’ choices of investment depend on the probability of takings and the level of government compensation for the taking. Our empirical results yield three insights. First, states and municipalities can pass laws protecting property rights without fear of retarding business formation. Second, we identify explanations why Kelo and these laws do not measurably affect business formation in our empirical work. Specifically, we believe that either government entities correctly compensate entrepreneurs for the disruption in their businesses through eminent domain legislation, or that the change in the probability of such takings is very small, so that any effect on business formation is too small to measure. Third, takings open the possibility for political corruption and distortions in the economy by encouraging overpayment or underpayment for takings. Under this interpretation, local laws against takings are not pro-business laws or anti-business laws. Rather, they are anti-corruption laws.
Wednesday, July 18, 2012
Garrett Power (Maryland) has posted Property Rights, the 'Gang of Four' & the Fifth Vote: Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection (U.S. Supreme Court 2010), 25 Widener Law Journal (2012). The abstract:
In 2010 The U.S. Supreme Court decided the case of Stop the Beach Renourishment v. Florida Department of Environmental Protection (SBR v. Fla. EPA). Justice Antonin Scalia announced the judgment of the Court. All Justices agreed that Florida had not violated the Takings Clause of the Federal Constitution’s Fifth Amendment. But then in a plurality opinion Justice Scalia joined by the Chief Justice Roberts and Justices Thomas and Alito proposed profound changes in the law of “regulatory takings.” As the spokesman for the Court’s property rights absolutists Scalia advanced two novel legal propositions. First he argued that federal courts had the power to collaterally attack and reverse state court decisions which evaded the requirements of the Taking Clause with pretextual background principles of the State's law of property. Second he opined that each of the “essential sticks in the bundle of rights that are commonly characterized as property” was a separate distinct property right, and that any deprivation of an “established property right” was a compensable Taking under the Fifth and Fourteenth Amendments. If the “Gang of Four” can find a fifth vote, the law of regulatory takings will be radically revised.
Thursday, July 12, 2012
I’ve just returned from several weeks of travel, and thought I’d post on several items I saw along the way. The first of these was a utopian community in Copenhagen, Denmark, called Christiana. Christiana is on an island, Christianhavn, adjacent to the central city of Copenhagen that had been used for military purposes for centuries. When the Danish military closed a base on the island in the Sixties, some freedom-loving hippies and other radicals set up shop by squatting on the land, declared their independence from the Danish state (adverse possession is for sissies, apparently), refused to pay taxes, and otherwise have engaged in community- and ganja-based decision-making ever since. About 1,000 residents now call Christiana home.
There are several aspects of Christiana that I think land use folks will find interesting. First, after four decades of tolerating open rebellion in its midsts, the Danish government finally decided that it needed to do something about Christiana. You might be anticipating a “throw the bums out” approach; but remember, this is Denmark, not Rudy Giuliani’s New York City. Instead of mounting riot troops at Christiana’s borders, the Danish government sent in their lawyers with an ultimatum: Christiana’s residents could stay, but they would have to buy the land from the Danish government. But the Danish government did not demand the market price for the property; instead, they offered the property to Christiana’s residents for a song. In a sense, all the Danish government is seeking to do is to legitimate the ownership of the land; in other words, if Christian’s residents “own” the land, there is some acknowledgment of the government’s control and sovereignty over that land. But, of course, the Christiana residents disdain this idea of ownership even though they need to raise capital to purchase the land.
The result has been one of the most peculiar of solutions: a stock offering of nominal ownership that investors can purchase.
As the New York Times described it:
[Christiana's residents] decided to start selling shares in Christiania. Pieces of paper, hand-printed on site, the shares can be had for amounts from $3.50 to $1,750. Shareholders are entitled to a symbolic sense of ownership in Christiania and the promise of an invitation to a planned annual shareholder party. “Christiania belongs to everyone,” Mr. Manghezi said. “We’re trying to put ownership in an abstract form.”
Since the shares were first offered in the fall, about $1.25 million worth have been sold in Denmark and abroad. The money raised will go toward the purchase of the land from the government.
I found this struggle over the idea of ownership to be fascinating. After all, the amount the Danish government is seeking from Christiana is far below the market price of the land in the now trendy area of Christianhavn. However, what the government is doing is forcing the utopian community out of its stance of declaring “independence” from the Danish state, while Christiana’s residents attempt to use arcane legal structures to avoid sullying their hands with the prospect of “ownership.” Am I the only one who thinks of Johnson v. M'Intosh on these facts?
The second interesting issue in Christiana was a poster located on the community’s main meeting room, which establishes the community’s “common law.” A picture is to the right. Now, at first blush, this will not look much like common law, but rather a visual statutory scheme, or maybe even something like the Ten Commandments if written for a biker gang. But it was the kind of rules that interested me: they speak, I think, to the kinds of problems that must have evolved in Christiana over time: hard drugs, biker’s colors, firearms, and so on. Each of these rules, you can imagine, resulted from a particular incident, and so a “common law” evolved in this place where all decisions are made collectively. Such a common law speaks to the potentially rough nature of standing as a state independent from the protection of the sovereign. It made me think of the devolution of all of the United States’ utopian communities, from New Harmony on down. Is such a slide into anarchy, or the fight against anarchy, inevitable in such utopian movements? I don’t know, but Christiana remains, and it seems to continue to thrive despite its troubles. It eeks out a living on the sale of rasta trinkets and “green light district” paraphernalia. And even in this space where there is supposedly no sovereign, there is still some law, borne of hard experience, common to all. Its future, cast somewhere between lawfully-abiding property owner and anti-property ownership crusaders, between freedom and the "common law's" protections, will be interesting to watch in the coming decades.
July 12, 2012 in Aesthetic Regulation, Architecture, Community Economic Development, Comparative Land Use, Constitutional Law, Development, Economic Development, Eminent Domain, Globalism, Planning, Property, Property Rights | Permalink | Comments (0) | TrackBack (0)
Monday, May 28, 2012
Today was Memorial Day in the US. There are lots of land use issues that we can associate with Memorial Day, which, stripped to its essence, is designed as a day to remember the military members who died in service to the nation. There is the obvious land use issue of cemeteries, and the related legal and cultural norms governing how we memorialize the dead (check out any of the interesting blog posts or scholarship by Al Brophy and Tanya Marsh on cemeteries). It gets even more relevant when we start talking about government-owned national or veterans' cemeteries, and the attendant controversies about First Amendment and other issues. [The photo is from last year's Memorial Day ceremony at Houston National Cemetery, which my daughter attended to honor fallen Marine Lance Corporal Matthew Sauer Medlicott.] Of course, there are always land use and local government issues involved with things like parades and public ceremonies, and in many communities there are specific rules that govern the "summer season" informally commenced on Memorial Day weekend.
For this post, though, I'll go back to the origins of the holiday. Interestingly, it started as a private or quasi-public endeavor (perhaps like most civic affairs in the nineteenth century). In the immediate aftermath of the American Civil War--and for much of the rest of the lives of the generations that fought it--Americans on both sides focused a great deal of attention on preserving its history and creating/controlling its public memory. In 1868 General John Logan, head of the Union veterans' organization the Grand Army of the Republic (a private society with a great deal of government involvement), issued General Order No. 11, creating what became known as Decoration Day:
The 30th day of May, 1868, is designated for the purpose of strewing with flowers or otherwise decorating the graves of comrades who died in defense of their country during the late rebellion, and whose bodies now lie in almost every city, village, and hamlet church-yard in the land. In this observance no form of ceremony is prescribed, but posts and comrades will in their own way arrange such fitting services and testimonials of respect as circumstances may permit.
Even though this Decoration Day was only adopted in Union states until after World War I (when it was renamed Memorial Day and formally associated with all American wars), the former Confederate states had their own versions to remember the war dead at cemeteries and public venues. And according to eminent Yale historian David Blight, the first Memorial Day celebration was performed in Charleston, SC, by newly-liberated blacks:
Thousands of black Charlestonians, most former slaves, remained in the city and conducted a series of commemorations to declare their sense of the meaning of the war. The largest of these events, and unknown until some extraordinary luck in my recent research, took place on May 1, 1865. During the final year of the war, the Confederates had converted the planters' horse track, the Washington Race Course and Jockey Club, into an outdoor prison. Union soldiers were kept in horrible conditions in the interior of the track; at least 257 died of exposure and disease and were hastily buried in a mass grave behind the grandstand. Some twenty-eight black workmen went to the site, re-buried the Union dead properly, and built a high fence around the cemetery. They whitewashed the fence and built an archway over an entrance on which they inscribed the words, "Martyrs of the Race Course" . . . . Then, black Charlestonians in cooperation with white missionaries and teachers, staged an unforgettable parade of 10,000 people on the slaveholders' race course. The symbolic power of the low-country planter aristocracy's horse track (where they had displayed their wealth, leisure, and influence) was not lost on the freedpeople.
Anyone interested in the contested history of these issues--with full attention to the negative aspects as well--should read the magnificent book by Prof. Blight (with a name like that, it's a shame he didn't go into land use!), Race and Reunion: The Civil War in American Memory. And a related part of this history, along with the Decoration/Memorial Day commemorations, was the incipient historic preservation movement. This confluence of impulses, as well as the also-new movement for environmental conservation, led to the novel idea of having the federal government acquire and administer large tracts of land for the purpose of preserving Civil War history. As noted in the fascinating monograph by the late National Park Service Historian Ronald F. Lee, The Origin & Evolution of the National Military Park Idea, this was a new and not-uncontroversial exercise of government power over land use:
The idea of the Nation acquiring an entire battlefield and preserving it for historical purposes was new in 1890. It is therefore not surprising that it soon engendered a serious controversy, which arose, fittingly enough, at Gettysburg. The controversy involved two questions of fundamental importance to the future of historic preservation by the Federal Government. Is preserving and marking the site of an historic battlefield a public purpose and use? If so, is it a purpose for which Congress may authorize acquisition of the necessary land by power of eminent domain? The circumstances of this dispute, which had to be settled by the Supreme Court of the United States, are of unusual interest and provide an appropriate introduction to our story.
Lee describes the case, United States v. Gettysburg Electric Ry. Co., 160 U.S. 668 (1896), in the on-line version of the book provided by the NPS. The case was brought by a railway which objected to the federal government's use of eminent domain to condemn their right of way for construction of a railway to take tourists to the significant "Devil's Den" area of the battlefield, "claiming that establishment of Gettysburg National Park was not a public purpose within the meaning of earlier legislation and that 'preserving lines of battle' and 'properly marking with tablets the positions occupied' were not public uses which permitted the condemnation of private property by the United States." [What a long way from Kelo that was!] Justice Rufus Peckham wrote for the unanimous majority in upholding the taking for preservation purposes (and not simply because members of the public could visit the park):
Such a use seems necessarily not only a public use, but one so closely connected with the welfare of the republic itself as to be within the powers granted Congress by the constitution for the purpose of protecting and preserving the whole country.
The Court thus established the constitutionality of taking land by the federal government for national parks, and struck an important legal blow for historic preservation generally.
So from cemeteries to public memory to national parks and historic preservation and much more, Memorial Day is tied to land use law in many ways. I hope that our US readers have had a good one, and with remembrance for those whom the holiday commends.
May 28, 2012 in Caselaw, Constitutional Law, Eminent Domain, Environmentalism, Federal Government, First Amendment, Historic Preservation, History, Houston, Politics, Property Rights, Race, Scholarship, State Government, Supreme Court, Takings | Permalink | Comments (0) | TrackBack (0)
Tuesday, May 22, 2012
Lynda J. Oswald (Michigan--Business) has posted The Role of Deference in Judicial Review of Public Use Determinations, forthcoming in 39 Boston College Environmental Affairs Law Review (2012). The abstract:
In Kelo v. City of New London, the United States Supreme Court emphasized its longstanding practice of deferring to legislative determinations of public use. However, the Court also explicitly acknowledged that the federal Constitution sets a floor, not a ceiling, on individual rights and that the state courts are entitled to take a less deferential approach under their own state constitutions or statutes. This manuscript examines: (1) the ways in which the role of deference in judicial review of public use determinations can vary between federal and state courts and among state jurisdictions; and (2) the difficult issues raised by the interplay between legislatures and courts in public use determinations. Because the Supreme Court’s deferential approach to public use disputes provides little succor to property owners challenging takings, state court challenges to takings are likely to assume increasing importance. Property owners, therefore, need to understand the issues raised by deference in judicial review of public use challenges in both federal and state courts.