PropertyProf Blog

Editor: Stephen Clowney
Univ. of Kentucky College of Law

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Saturday, February 2, 2013

What would de Soto say?

Thanks to Steve and the rest of the PropertyProf Blog team for having me as a guest on the blog this month.  I'll be blogging largely about comparative property law issues I'm working on, as well as other events involving property that strike my fancy over the month, and that I think might strike yours.

I conduct most of my fieldwork in Colombia, which is in the early stages of carrying out a nationwide land restitution program as part of its efforts to transition to peace from its decades-long, ongoing civil war.  The program seeks to restore possession of land expropriated or abandoned in the conflict to displaced people who lived on it, as well as grant formal title to the land, whether or not it was formally titled prior to its expropriation.  The scale of this program is massive.  Nearly 30 million acres are subject to restitution, an estimated 3.9-5.2 million people are internally displaced (more than any other country in the world), and thousands of claims have been filed within the first year of the program's existence.  (See this New York Times article about the program and a recently decided restitution case.)

For many observers, this restitution program might look like a classic Hernando de Soto move, straight out of The Mystery of Capital handbook.  And to a certain extent, it is.  The program is structured to restore prior possession and grant private title to land to people displaced as a result of the conflict.  (For an excellent discussion of competing points of view regarding the extent to which the program should have a more redistributive bent, see this piece by Rodrigo Uprimny and Camilo Sánchez.)  Access and stable title to land will then theoretically improve the well-being of Colombia's displaced, who mostly suffer from deep poverty.  It sounds like de Soto.

But is it?  While this program and de Soto's approach might share ends - economic development of a certain sort - do they share means?  His theory is often boiled down to the following idea: that the granting of private title to informally held assets will allow poor people to bring those assets into the capitalist economy, leading to economic development.  (There are of course also excellent, more nuanced approaches to de Soto, such as this volume edited by D. Benjamin Barros.)  What is excised from this general approach to de Soto, however, is how exactly he thinks countries ought to accomplish this, a subject to which he devoted years of research and a significant portion of his scholarship. 

De Soto's prescription for how to get there involves not a flat granting of private title to informally held assets, but rather the incorporation of what he calls "extralegal" local practices regarding property into the formal property system, such that the formal legal system reflects the way people "actually arrange their lives" (The Mystery of Capital p. 108).  The conclusion he draws from his years of research with a battery of research assistants on local customs and practices of property in places like Peru, Egypt, the Philippines, and Haiti (it turns out de Soto is something of an anthropologist) is that the vast majority of people regulate property through normative practices - he calls these their "social contract" - that are outside formal law.  His prescription for this involves "a threefold task: We must find the real social contracts on property, integrate them into the official law, and craft a political strategy that makes reform possible" (The Mystery of Capital p. 151). 

The restitution program in Colombia employs a bureaucracy full of lawyers who spend hours with displaced claimants investigating the who, what, where, and when of their displacement, including the informal arrangements related to their prior possession of particular parcels.  For those claimants who are found to be victims of displacement as a result of the conflict, the program then aspires to convert this prior informal possession into formal title through a judicial restitution process.  The problem, however, is that Colombia has been and continues to be in the middle of a conflict that has long had at its base contestation over land and territorial control.  This means that nearly every restitution case is shot through with competing claims, few of which are easily resolved by simply granting formal title to one prior informal possessor who was displaced.

Here is one brief but iconic example.  In the 1960s and 1970s, a wealthy family owned a large estate in a fertile part of Colombia's banana-growing region.  Lacking access to land, a group of peasants, with the help of armed guerrillas, appropriated a section of this property in the 1980s.  They used this land for subsistence farming, though the wealthy family still held formal title until the late 1990s, when the state extinguished title due to the time that had ensued since their last occupancy of the property.  The peasants continued to farm on the land, some of them transferring parcels informally to other farmers.  In the meantime, members of the wealthy family were swiftly rising in the ranks of growing paramilitary organizations in the region.  In the early 2000s, they returned to the property as powerful paramilitary leaders, armed, to reclaim and demand payment for the lands.  The majority of the peasants fled to other areas.  Some of these peasants have since presented restitution claims.  The wealthy landowner-paramilitaries have also made public statements regarding their own status as victims of expropriation.

What would de Soto say about a case like this?  Should the bureaucracy endeavor to find the "social contracts" that were formed over time and integrate them into formal law?  What kind of order would this produce?  And how would even the most conscientious reformer craft it?  These are not trivial questions, as the stability of the outcome of these cases depends in large part upon the extent to which the results are accepted by the communities they affect - a precept which is at the heart of de Soto's method for reform.  There are of course in the case above some characteristics of the less ambiguous "extralegal," informal practices of property that de Soto describes - such as informal transfers between farmers - but there is also layer upon layer of transfers by force, formal extinguishing of title, and ambiguous victimhood.  I would argue that these are indeed aspects of a normative structure, and not mere "lawlessness," but that integrating them into the formal legal system would not necessarily create a stable outcome.

I think the fact is that de Soto doesn't actually have much to say about a case like this.  And that has less to do with the uniqueness of the case - its complexity and general characteristics are anything but unique in Colombia, and I would venture to say are also common in other conflict situations - than it has to do with de Soto.  Despite his years of fieldwork on local practices and his own experience crafting legal reforms in conflict zones (most notably in his home country of Peru during its struggle with the Shining Path), the means that de Soto describes to reach the end of economic development at times simply don't speak to the complexities of those places, and those practices.  Carol Rose notes that this is a relative silence to the very real problem of contestation over scarce resources.  It is also a relative silence to complexities like competing claims and expropriated-turned-expropriator that are the everyday realities of life in Colombia after decades of violence.  And even to those that emerge, though thankfully with fewer guns, in the ongoing dispute between my father and his neighbor over the use of a five foot strip of land which joins their back yards.  Simply put, it is a silence to the complexities of conflict.

I don't think that it simply all boils down to "it's complicated."  This would be an abdication of the very real need to at least attempt to forge stable solutions to conflicts like Colombia's.  But these solutions need to be in recognition of, rather than in spite of, the competing claims and ethically ambiguous figures that populate conflicts, in addition to the less ambiguous informal practices of property that de Soto describes.  It's too early yet to tell how this will play out in Colombia's restitution process; while many cases have been filed, only a handful have been heard and determined by restitution judges.  But it's not too early to say that while de Soto's theory might provide a model in broad strokes for something like Colombia's restitution program, implementing the means he prescribes would be unlikely to produce the ends that de Soto and the Colombian government might share. 

Meghan Morris

February 2, 2013 | Permalink | Comments (1) | TrackBack (0)

Friday, February 1, 2013

Introducing Guest Blogger Meghan Morris

Meghan1I'm thrilled to announce that anthropologist/lawyer Meghan Morris has agreed to guest blog during the month of February and share some of her insights about comparative property regimes.  Meghan is a doctoral student in the Department of Anthropology at the University of Chicago.  Her dissertation project focuses on property and land restitution in Colombia, and she has also conducted research on Cuban agrarian reform.  She holds a J.D. from Harvard Law School and a Masters in International Relations from The Fletcher School (Tufts), where her research focused on intellectual property regimes related to plants.  Meghan has been involved in environmental justice and human rights work in South America since the early 2000s, and she is a researcher at the Bogotá-based Center for Law, Justice and Society (Dejusticia).

Welcome, Meghan!

Steve Clowney

February 1, 2013 | Permalink | Comments (0) | TrackBack (0)

Blumenthal on the Endowment Effect

JeremyBlumenthalJeremy Blumenthal (Syracuse) has posted Group Deliberation and the Endowment Effect: An Experimental Study (Houston Law Review) on SSRN.  Here's the abstract:

The “endowment effect” (EE) — the tendency to value an asset more when it is possessed — has been empirically studied in detail at the individual level. The prices individuals demand to sell a good they own is significantly higher than what they offer to buy it. No published study has examined the EE at the group level, however, despite implications ranging from attorney-client and international negotiation, to land use decisions, to corporate as well as legislative decisionmaking. Accordingly, this experimental study investigated the influence of group deliberation on individuals’ expression of the EE: Does group deliberation attenuate or exacerbate the EE, or does it have no effect? Further, is the EE exhibited at the group level?

Findings showed that where the EE exists for individuals, group deliberation exacerbated the individual effect; that is, post-deliberation individual judgments showed the EE even more strongly than pre-deliberation judgments. Contrast analysis confirmed that the EE grew larger after group discussion, as a result of an increased preference for retention of an initially allocated right. Further, the EE existed in groups’ judgments.

The findings have implications in at least two broad areas: decisionmaking by groups (e.g., by boards of directors) and negotiation between groups (e.g., by attorney, political, or business teams). They also raise questions and challenges about the possibility of ameliorating the EE (e.g., education and market experience). Accordingly, the study identifies, for the first time, relevant practical applications, and lays groundwork for further research.

Steve Clowney

February 1, 2013 | Permalink | Comments (0) | TrackBack (0)

Thursday, January 31, 2013

Selling Hurricane Damaged Property "As Is"

The N.Y. Times looks at attempts to market and sell properties in the hurricane ravaged Rockaways area.

The buying and selling of homes in the Rockaways slammed to a halt right after Hurricane Sandy, but a few homes and plots of land are on the market today. And while under more normal circumstances, properties put up for sale are buffed and polished to their highest possible shine, many of the most badly damaged homes are being offered to buyers more or less as the hurricane left them.

“People ask me, ‘Should I fix my house and then put it up?’ But I don’t know if the value will be there. So I say let’s put it up as is, and let’s see what happens.”  One such experiment is 135 Beach 142nd Street, a house of pale yellow brick built right on the ocean, which is listed for $3 million. It has spectacular open views of the water, which can still take your breath away — but most of the walls on the side of the house that faces the water have been torn off, leaving a jagged, gaping hole.

Steve Clowney

January 31, 2013 | Permalink | Comments (0) | TrackBack (0)

Ligatti on Tenant Hoarders and the Fair Housing Act

Chris Ligatti has posted Cluttered Apartments and Complicated Tenancies: A Collaborative Intervention Approach to Tenant 'Hoarding'under the Fair Housing Act (Suffolk Law Review) on SSRN.  Here's the abstract:

This article briefly describes the Fair Housing Act and the Fair Housing Act Amendments of 1988 and the problem of tenant hoarding in society and under the law. This article discusses the problem of hoarding, its current classification in the medical field, and the possibility of the use of reasonable accommodation law to assist tenant hoarders. This article will conclude that reasonable accommodations for tenant hoarders are unlikely to be successful without a collaborative approach from the social services, medical, and legal fields.

Steve Clowney

January 31, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 30, 2013

What Should the City of Austin Do With All the Stuff Named After Lance Armstrong?

Lance bike

A conversation begins in the nation's fastest growing city:

The marks of Armstrong are all over downtown Austin, from Mellow Johnny’s Bike Shop (maillot juane — yellow shirt) to the Juan Pelota  — Johnny One-Ball — Cafe. And then there’s the Lance Armstrong Bikeway, which runs down Cesar Chavez St down by the river on the city’s southern downtown side.

Mayor Lee Leffingwell has consistently said that he has no plans to rename it, and after Armstrong’s interview aired on Oprah Winfrey’s network last night, he issued a statement reiterating that position.

[But] It’s a path that commemorates a cheater, and a particularly devious and evil cheater. All seven of his Mellow Johnnys are tainted and have been stripped. Armstrong built the sport of cycling in central Texas and across America with his story of overcoming all odds to become a champion. He has now destroyed that sport and its reputation for a generation. Armstrong destroyed the reputation of anyone who dared to expose him, with smears and lawsuits. The very cancer that Mayor Leffingwell cites in his statement is probably Armstrong’s own fault, a side effect of his doping.

Steve Clowney

January 30, 2013 | Permalink | Comments (1) | TrackBack (0)

Map of the Day: Everybody Is Rooting for the 49ers

A county-by-county map of which Super Bowl team has the most "likes" on Facebook:

Supermap

Steve Clowney

January 30, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 29, 2013

Is a Seller Required to Disclose a Home's Bloody Past?

Home

Yahoo! News picks up on a case bubbling up through the Pennsylvania courts:

A Pennsylvania woman has appealed to the state Supreme Court in her suit against a home seller and real estate agent who failed to disclose that a murder-suicide had taken place in the home she purchased.

When Janet Milliken, 59, moved from California after her husband died, she had hoped to start a new life with her two teenage children in Pennsylvania near her family. She bought a home in Thornton, Pa., for $610,000 in June 2007. She learned a few weeks after she moved in from a next-door neighbor that a murder-suicide had occurred the year before in her home.

She sued the seller and the real estate agent for fraud and misrepresentation, saying they made a "deliberate choice not to disclose the home's recent past," according to a court document. The trial judge granted summary judgment in favor of the defendants, saying state law does not require agents to disclose such events.

Steve Clowney

January 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Prum on Construction Lending for Green Buildings

Darren-PrumDarren Prum (Florida State) has posted Greenbacks for Building Green: Does a Lender for Sustainable Construction Projects Need to Make Adjustments to Its Current Practices? on SSRN.  Here's the abstract:

In the development of real property, the availability of money to secure construction resources becomes an important factor for success. The construction loan plays a central role in providing funds to erect a building on real property, but a lender faces numerous exposures that might result in a loss. In evaluating a project to determine its viability and to uncover any exposure it might present, a lender will conduct an extensive underwriting review process and will use mitigation techniques through the construction loan agreement and disbursement requirements to reduce the perceived risks to an acceptable business level, for those developments deemed worthy. With the recent transition into more sustainable construction practices, many lenders will fail to recognize that the construction of a green building differs from a traditional one. The meaningful distinctions between these different methods merit an evaluation of their own in order to properly assess and manage the risk associated with a construction loan for a green building. Accordingly, this article seeks to address the unique issues associated with a construction loan for a green building and provide solutions that can mitigate the exposures presented to acceptable levels.

Steve Clowney

January 29, 2013 | Permalink | Comments (0) | TrackBack (0)

Monday, January 28, 2013

A Free-Market Island Utopia in Detroit?

Belle

The return of the enterprise zone:

As the broken city thinks big and radically about its future, a developer is stepping forward with a revolutionary idea: Sell the city's Belle Isle park for $1 billion to private investors who will transform it into a free-market utopia. The 982-acre island would then be developed into a U.S. commonwealth or city-state of 35,000 people with its own laws, customs and currency.

Under the plan, it would become an economic and social laboratory where government is limited in scope and taxation is far different than the current U.S. system. There is no personal or corporate income tax. Much of the tax base would be provided by a different property tax — one based on the value of the land and not the value of the property.

It would take $300,000 to become a "Belle Islander," though 20 percent of citizenships would be open for striving immigrants, starving artists and up-and-coming entrepreneurs who don't meet the financial requirement.

Steve Clowney

January 28, 2013 | Permalink | Comments (0) | TrackBack (0)

Lewinsohn-Zamir on Monetary Versus In-Kind Remedies

DafnasDaphna Lewinsohn-Zamir (Hebrew University) has posted Can't Buy Me Love: Monetary Versus In-Kind Remedies (Illinois Law Review) on SSRN.  Here's the abstract:

The choice of appropriate remedies is a major concern in all legal spheres, yet little has been done to determine which remedies people actually prefer. Scholarly debates on this issue are typically based on theoretical arguments and intuitions rather than experimental or empirical data. It is often assumed that people are indifferent between in-kind and monetary remedies of equal pecuniary value. Consequently, some scholars have argued, for instance, that people ordinarily view a contractual obligation as an option to either perform in-kind or pay expectation damages.

This Article challenges the conventional wisdom that monetary remedies are usually a satisfactory substitute for in-kind redress. It presents new experiments that examine the choices laypersons and experienced businesspeople make between remedies and entitlements. The findings establish that members of both groups strongly prefer in-kind entitlements and remedies over monetary ones. For example, they would rather be given the very thing to which they were entitled than receive a monetary substitute, however accurately calculated. It is therefore possible that damages routinely fail to provide adequate compensation, even when they pertain to fungible, easily quantifiable assets.

Since promoting individuals’ welfare is a major concern for legal policy-making, ignoring the preference for in-kind redress may lead to both inefficiency and unfairness. The Article offers various normative implications of the experimental findings, through the discussion of such in-kind remedies as specific performance of contractual obligations, injunctions for wrongful interference with property, compensation in development rights for takings of land, and apologies in defamation cases.

Steve Clowney

January 28, 2013 | Permalink | Comments (0) | TrackBack (0)