PropertyProf Blog

Editor: Stephen Clowney
Univ. of Kentucky College of Law

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Saturday, February 9, 2013

Tinkering with property, from Havana to Hershey

One of the most unlikely tourist attractions in Cuba is the tiny town of Hershey. Located about 40 miles east of Havana, Hershey was established by Milton Hershey himself in 1918 as a site to mill and refine sugar used in chocolate production. Like many other sugar towns in Cuba, Hershey had a sugar mill at its heart, with the town itself, housing for workers, and sugar fields built around it. Milton Hershey also constructed an electric railroad which ran from Hershey to Havana, allowing the company to bring the refined sugar to port. He sold the mill in 1946 to the Cuban Atlantic Sugar Company; it was then nationalized after the 1959 Cuban revolution, and continued to produce sugar for several decades. Today, however, Hershey is something of a ghost town. The Cuban government closed nearly half the country’s sugar mills in the early 2000s, including the Hershey mill, as part of a mass restructuring of the sugar industry. This left the town desolate and crumbling, with residents reminiscing about its glory days, while the lands once farmed for sugar became overgrown with dense thickets of marabú, a virulent, quick-spreading weed. (Hershey is, however, still accessible by the same ancient, rickety train, facilitating myriad tourist accounts of post-industrial decay reminiscent of the recent rise of American Rust Belt “ruin porn.”)

The mass closure of sugar mills created situations much like Hershey’s in towns across Cuba, where the growth of marabú on abandoned canefields began to seem to outpace that of edible crops on productive land, even as the country’s food imports rose to up to 80% of its domestic consumption requirements. While some proposed harvesting the marabú and turning it into a source of renewable energy – and indeed, there has been recent foreign investment in Cuba for renewable energy based on marabú – the Cuban government determined that the millions of acres it covered could be more profitably used for agriculture.  In 2008, Raúl Castro’s government passed Law 259, which granted 10 year renewable usufruct rights to individuals willing to farm idle land in a “rational and sustainable” manner.  Part of a string of dramatic reforms to property rules (including the lifting of restrictions on the sale of houses and cars which had been in place for nearly half a century), Law 259 came as close to allowing private property in land as the country had seen for decades. Rather than continue to restrict agricultural production to cooperatives or state farms, Law 259 allowed individual farmers to hold usufruct rights and farm independently.

Over the first several years that Law 259 was in force, the Ministry of Agriculture reported that nearly 170,000 farmers received usufruct rights. Successful ventures were featured in Granma, the state newspaper, with smiling farmers pictured next to their produce, extolling the virtues of individual usufruct. The reality of the impact of the reform, however, was more complicated. While it appeared on paper that thousands of individual farmers had received usufruct rights to the land, many of these concessions had simply expanded existing cooperatives or been made to individuals working collectively. Many farmers were uncertain about whether the state would take back land concessions based on ambiguous determinations of what was and wasn’t “rational” or “sustainable.” There was also confusion as to whether or not it made economic sense for farmers to build structures and live on land they held in usufruct. And in addition to these uncertainties, making the investment in farming idle land was costly. Marabú is a particularly tenacious weed, and can grow to the size of a tree, requiring heavy equipment for its removal. These were costs and uncertainties that were difficult to bear alone, but made some sense for certain cooperatives or groups of farmers to take on. So Cuban farmers took advantage of the opening provided by Law 259 to make productive use of the land, but in ways that skirted the letter of the law, and were often distinct from the expansion of individual farming the state had intended.

This type of creative practice in gray zones of legality is something that characterizes the relationship between social life and the law in Cuba more broadly. A common Cuban saying that reflects this is inventar - to invent - which is used to describe resourcefulness in the face of scarcity, as well as the creative skirting of the law through engagement in activities ranging from ambiguously to clearly illegal. Inventar could be what you do when there are no eggs left at the state-run market and you buy some from a black market shop. Or when you can’t buy car parts for your '57 Chevy that you use as an unofficial taxi, and you get the parts from a neighbor in exchange for extra ration cards you have for a grandson that now lives in the UK. Or when you marry someone in order to transfer a title to a house to them, evading prohibitions on home sales, and then immediately divorce. Or when you work at a state-run cafe, where you sell your own personal sodas to customers under the table to make a bit of extra cash. Or when farmers expand existing cooperatives through “individual” usufruct concessions, both taking advantage of and violating Law 259. These “inventions” are the creative practices that create markets in all shades of black and gray, keeping the economy moving both because of and in spite of formal property rules.

In December 2012, the Cuban government issued Law 300, which replaced Law 259. Law 300 expanded the category of possible usufruct holders to include cooperatives, increased the acreage available through usufruct concessions, and sanctioned the building of structures on concessions, amongst other changes (see this piece in Spanish by Armando Nova González for a more thorough comparison of Law 259 and Law 300). These shifts incorporated the kinds of practices that farmers had been exercising under Law 259 - practices that had been in a gray zone of legality, but became authorized under Law 300. Much as Peñalver and Katyal describe in Property Outlaws, the illegal practices of farmers can be understood to have pushed needed legal reforms in a productive way.

I think that Law 259, Law 300, and the events in between also tell us a remarkable story about the role of not only illegal activity, but also of creativity, in legal change. On the one hand, the development and promulgation of Law 259 itself was an creative move in response to the burgeoning problem of agricultural production on the island. The Cuban state has explicitly described such recent moves as experimental, acknowledging the economic problems on the island, while conducting such legal experiments in order to "perfect socialism." But as historian of science Hans-Jorg Rheinberger notes, experimental systems also behave as generators of surprises. These surprises emerged in the form of an explosion of tinkering by the populace with the new property rules, which they selectively used and violated in order to “invent” solutions to the uncertainties and costs attached to the opportunities Law 259 provided. Many of these “inventions” were then codified in Law 300.

This brings me to a question I have been puzzling over in the wake of the recent promulgation of Law 300. If Law 259 is understood as a true experiment - which has no predetermined outcome, but is known to generate surprises - can we understand the Cuban state as having implicitly called upon the populace to tinker with its rules, generating solutions that might be more lasting and productive? Or should we understand the promulgation of Law 300 as the acknowledgement of an experimental failure of sorts, in which Law 259 simply didn’t have the desired outcome, and widespread illegal practices forced the state to adjust its strategy? Either way, the story of these recent reforms underscores the importance (which Adriana Premat notes in relation to urban agriculture) of examining both the activities of individuals and the work of the state in assessing recent property reforms in Cuba, understanding that changes in property rules emerge not only from Havana, but also from Hershey.

Meghan Morris

February 9, 2013 | Permalink | Comments (1) | TrackBack (0)

To What Extent Do You Teach IP?

Choosing whether to include any IP in a first-year Property course is an annual dilemma for me.  I suspect that for many of us Property profs, IP topics are outside our comfort zone.  I know a little about patents, a little more about copyright, a little less about trademark.  If something has to be cut -- and something always does -- then it is easy for me to cut IP.  I don't have to worry about what I don't know.

On the other hand, if there is one property issue young law students are likely to be interested in, it is IP, and especially copyright.  They live in a world of changing copyright boundaries, where sampling and mashing are celebrated, file-sharing is illegal but common place, and collaborating without attribution is a daily event on twitter but could get you expelled in law school.  

Profs can take what I think of as the Dukeminier approach: treat IP as just an example of obtaining first rights, akin to colonizing a continent, and move on without getting into the particulars of actual IP law.  I've done that, but it seems like a cop out to me.  These days, I either teach some IP or I don't.  Usually, I don't.  Probably, I should.

What do you do?

Mark A. Edwards 

 

February 9, 2013 | Permalink | Comments (1) | TrackBack (0)

Friday, February 8, 2013

House the Poor in Cages?

Hkhome

That's the approach that Hong Kong as taken:

For many of the richest people in Hong Kong, one of Asia's wealthiest cities, home is a mansion with an expansive view from the heights of Victoria Peak. For some of the poorest, like Leung Cho-yin, home is a metal cage.  The 67-year-old former butcher pays 1,300 Hong Kong dollars ($167) a month for one of about a dozen wire mesh cages resembling rabbit hutches crammed into a dilapidated apartment in a gritty, working-class West Kowloon neighborhood.

Forced by skyrocketing housing prices to live in cramped, dirty and unsafe conditions, their plight also highlights one of the biggest headaches facing Hong Kong's unpopular Beijing-backed leader: growing public rage over the city's housing crisis.

Leung Chun-ying took office as Hong Kong's chief executive in July pledging to provide more affordable housing in a bid to cool the anger. Home prices rose 23 percent in the first 10 months of 2012 and have doubled since bottoming out in 2008 during the global financial crisis, the International Monetary Fund said in a report last month. Rents have followed a similar trajectory.

Steve Clowney

February 8, 2013 | Permalink | Comments (1) | TrackBack (0)

Thursday, February 7, 2013

Living With Landlord

The N.Y. Times takes a look at the pros and cons of living in the same building as your landlord:

For some, however, the landlord is not abstract. For better (he’s always around checking up on things) or worse (he’s always around checking up on things), the landlord is the upstairs or downstairs neighbor. It’s the durable stuff of movies and sitcoms, like the 1960s series “Hey, Landlord” and the ’70s series “Three’s Company.”

Life with the landlord has its own particular complications and compensations. These range from the too-much-in-your-face and too-much-in-your-business sort, to the homeowner whose table always has an extra place. If the relationship is contentious— well, you know where the door is. But if it’s harmonious, that could translate into attractive terms when the lease comes up for renewal.

Steve Clowney

February 7, 2013 | Permalink | Comments (1) | TrackBack (0)

Odinet on The Rise of Super Priority and the Fall of the Recordation Doctrine in Real Estate

Odinet_ChristopherChris Odinet (Phelps Dunbar) has posted The Rise of Super Priority and the Fall of the Recordation Doctrine on SSRN.  Here's the abstract:

The recordation doctrine serves as a principal backbone of real property transactions. We rely upon it to ensure that there is stability in the market and that parties are diligent and careful to establish and protect their rights. The system rewards the conscientious and the cautious, and punishes the tardy or the unwary. We make exceptions, however, for those right-holders whose activities serve a special societal purpose. The most prevalent exception is in the collection of real property taxes. The failure to pay property taxes results in a lien against the property, and such a security right is superior and deemed to prime any other security interest in the property, even those which have been previously established and recorded. We do this because public policy dictates that timely payment and prompt collection of property taxes is essential to the efficient operation of government and the common good. However, the ever-growing political movement to create public-private partnership in the development of real estate has caused an expansion of this general exception. In order to help individuals finance infrastructure and other foundational improvements in the development of private real estate, cities and municipalities have created special taxing districts that give the developer the ability to charge assessments on the property over time in order to pay for the improvements. By legislation, these assessments are given the same lien priority as real property taxes, priming any pre-exiting security rights of the developer’s lenders. Over the past several years, special taxing districts have been created across the country to fund a variety of improvements, including utilities, green infrastructure, sustainability, and transportation projects. However, the additional assessments add to the holding cost of the property and diminish any pre-exiting security rights. As a result of the massive decline in the housing market, many developers have been unable to sell their properties and the special districts have gone into default. For instance, between 2003-2008 Florida has created 438 special community development taxing districts, which have issued a total of $6.5 billion in municipal bonds to finance their improvement projects. Of these, over 168 districts have defaulted on nearly $5.1 billion worth of bonds. The continued rise of these special taxing districts, despite their significant failures, necessitates a reevaluation of our understanding of the core purposes of the public recordation doctrine, as well as the fairness to the position of secured lenders who invest in these real estate developments on the front end. This Article argues that we should reconsider the widespread delegation of super priority to these special taxing districts and calls for a closer examination as to if and when the government should allow private projects to be clothed with public powers, and, if and when they are allowed, how to better screen, evaluate, and monitor them.

Steve Clowney

February 7, 2013 | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 6, 2013

Conference News: Association for Law, Property and Society

ALPS

The Association for Law, Property and Society announces that its 4th Annual Meeting will be held at the University of Minnesota Law School on April 26-27, 2013.  The conference website is here.  This is, without a doubt, one of my favorite conferences of the year and I hope to see many of you there. 

Here's the announcement:

The ALPS annual meeting attracts over 100 participants, approximately one third of whom come from outside of North America and a number of whom do interdisciplinary work.  Registration and paper/panel submission is available through the conference website or directly, here.

The deadline for submitting papers and panels is March 1, 2013, but registration for the conference will continue to be available after that date. Please do not submit papers and panels after March 1, 2013 as part of your registration without having emailed Hari Osofsky, [email protected] for permission to submit late. We will do our best to accommodate late submission requests, but can only guarantee that proposals submitted by the March 1, 2013 deadline will be able to be considered for the conference. 

This year’s registration includes an option to register to attend without presenting and an option to submit complete panels in addition to individual papers. As in previous years, we will have both draft paper panels and early works-in-progress panels dedicated to brainstorming scholarship at its beginning stages. We also plan to support early-career scholars in their development and in connecting to mentors through the conference events. A discounted early registration rate of $145 is available until March 1, 2013; after that date, the registration rate is $175. 

We welcome papers on any subject related to property law and from a diversity of viewpoints. Property related topics areas can include but are not limited to: · Civil Rights & Inequality (including Race, Gender, Religion, Income, Disability, etc)/Critical Legal Studies · Economics and Property Law · Energy/Environment/Climate Change · History of Property · Housing/Urban Development/Mortgages and Foreclosure · Indian Law/Indigenous Rights Law · Intellectual Property · International Property Law/Human Rights and Property/Cultural Property · Land Use Planning/Real Estate/Entrepreneurship · Property and Personhood/Concept of Home · Property Theory · Takings and Eminent Domain · Teaching Property

Steve Clowney

February 6, 2013 | Permalink | Comments (0) | TrackBack (0)

Serkin on The State's Obligations to Property Owners

Serkin_chrisChristopher Serkin (Brooklyn) has posted Affirmative Constitutional Commitments: The State's Obligations to Property Owners (Brigham-Kanner Property Rights Conference Journal) on SSRN.  Here's the abstract:

This Essay, prepared for the 2012 Brigham-Kanner Property Rights Conference, argues that social obligation theories in property generate previously unrecognized obligations on the State. Leading property scholars, like Hanoch Dagan, Greg Alexander, and Eduardo Peñalver, have argued that the institution of property contains affirmative duties to the community as well as negative rights. This Essay argues that those affirmative duties are two-way streets, and that moral bases for social obligations also generate reciprocal obligations on the State to protect property owners. The social obligation theories rely upon a dynamic not static vision of property rights. The community’s needs change, the conditions of ownership change, and the appropriate allocation of benefits and burdens within a society changes over time. Therefore, a legal obligation that is justified and permissible at the time it is enacted because it is consistent with moral obligations may become impermissible over time, even if the content of the legal obligation does not change. At the extreme, the State’s failure to respond to certain kinds of changes in the world can lead to a regulatory taking.

Steve Clowney

February 6, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 5, 2013

Map of the Day: The Property Tax Mess in Detroit

Picture 1

Gak! LOVELAND Technologies has created a map of the property-tax status of the entire city of Detroit.  The results are predictably depressing.  Yellow properties are tax delinquent.  Orange lots are subject to foreclosure based on tax problems.  And the red plots are properties that have already been foreclosed.  The gray/beige areas are property tax compliant.

Steve Clowney

(HT: The Atlantic Cities Blog)

February 5, 2013 | Permalink | Comments (0) | TrackBack (0)

Contreras, Roth, & Lewis on Sustainable Building Materials Standards

Jorge Contreras (American), Hannah Roth, and Meghan Lewis have posted Toward a Rational Framework for Sustainable Building Materials Standard (Standards Engineering) on SSRN.  Here's the abstract:

An increasing public awareness of the impact that buildings have on human health, climate change, energy usage and environmental degradation have led in recent years to a growing interest in environmentally-sustainable building. One of the most significant factors affecting building sustainability is the sustainability of materials used in construction. Yet there is little coherence in the measurement and assessment of materials sustainability attributes, resulting in a landscape today that is littered with hundreds of competing, inconsistent and often imprecise eco-labels, standards and certifications. This discord has led both to confusion among consumers and commercial purchasers of sustainable building materials, and to the incorporation of inconsistent sustainability criteria in larger building certification programs.

In response to the need for greater clarity in evaluating the sustainability of building materials, we conducted an in-depth study of sustainability standards and certifications for selected categories of building materials and have developed a set of recommendations for government, standards-setting organizations and industry that, we hope, will bring a greater degree of consistency and rationality to this critical area. These recommendations include: (1) the development of a widely-accepted, uniform nomenclature for describing materials sustainability features, (2) the development of consistent and transparent methodologies for measuring materials sustainability features, (3) the adoption of a uniform, concise and user-friendly format for disclosing key materials sustainability features, along the lines of the FDA’s standardized Nutrition Facts Label, (4) the use of consistent and comparable materials sustainability measurements as criteria in broader certification programs and regulation, and (5) the development of a public database for materials sustainability information.

Steve Clowney

February 5, 2013 | Permalink | Comments (0) | TrackBack (0)

Monday, February 4, 2013

Jane Austen's Property

Volokh celebrates the 200th anniversary of Pride & Prejudice with a look at the role of property law in the novel:

Generations of English lit professors have spilled barrels of ink over this book; but, as far as I know, most of them haven’t placed much emphasis on the fact that the plot hinges on a point of property law.

The reason why it is so important for Mr. and Mrs. Bennet’s five daughters to find wealthy husbands is that they cannot inherit their father’s estate, since it is subject to the fee tail – a now archaic form of property estate that was required to pass through the male line. As a result, upon Mr. Bennet’s death, his land (which forms the overwhelming majority of his wealth) will go to his nearest male relation, the despicable Mr. Collins. In the early nineteenth century, few women could acquire significant wealth other than by inheriting it or marrying into it; thus the Bennets’ predicament. As Austen explains in Chapter 7:

Mr. Bennet’s property consisted almost entirely in an estate of two thousand a year, which, unfortunately for his daughters, was entailed, in default of heirs male, on a distant relation; and their mother’s fortune, though ample for her situation in life, could but ill supply the deficiency of his.

And, as Tanya has pointed out, the fee tail plays a major role in the plot of recent PBS sensations, Downton Abbey.

Steve Clowney

February 4, 2013 | Permalink | Comments (0) | TrackBack (0)

Borden & Reiss on the Securitization of Mortgages

Bradley Borden (Brooklyn) & David Reiss (Brooklyn) have posted Dirt Lawyers, Dirty REMICs (Probate & Property) on SSRN.  Here's the abstract:

It is appropriate that the day-to-day practice of real estate law did not touch on the intricacies of the securitization of mortgages, let alone the tax laws that apply to mortgage-backed securities. Securitization professionals did not, however, account for the day-to-day practices of real estate lawyers as they relate to the transfer and assignment of mortgage notes and mortgages when structuring mortgage-backed securities. The consequences of this may turn out to be severe for investors, underwriters, and securitization professionals.

One of the consequences of the sale of a negotiable note not done in accordance with the requirements of the holder in due course doctrine is that the purchaser of the note may not be free of the personal defenses that the note maker (borrower) would have had against the original lender. Another consequence of the sale of a note that is not done properly is that the beneficial owner (as opposed to the legal owner) may not be able to collect on the debt if the borrower is in default. And a third – and until recently hidden -- consequence of an improper sale of a note to a secondary market participant is that the purchaser may fail to comply with requirements necessary to obtain favorable tax treatment as a Real Estate Mortgage Investment Conduit, a REMIC.

Steve Clowney

February 4, 2013 | Permalink | Comments (0) | TrackBack (0)