Thursday, April 29, 2010

The Blazed Locust Tree

I haven't been blogging that much lately, in part because my wife and I are in the process of buying a new house.  The house was built in 1810, and the property is in a pretty rural area.  The property description includes these gems:  "BEGINNING at a point immediately southeast of a white oak tree . . . thence by same, South 60 degrees East, 278.25 feet, more or less, to a blazed locust tree . . ."  We're having a survey done . . .

Ben Barros

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April 29, 2010 in Real Estate Transactions | Permalink | Comments (2) | TrackBack (0)

Tuesday, April 20, 2010

Sandercock and Lebovits on NY Landlord-Tenant Law

Margaret B. Sandercock and Gerald Lebovits (St. John's) have posted New York Residential Landlord-Tenant Law 101 for the Transactional Attorney on SSRN.  Here's the to-the-point abstract:

This article discusses the basics of New York residential landlord-tenant law for the transactional attorney.

Ben Barros

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April 20, 2010 in Landlord-Tenant, Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Friday, April 2, 2010

Moringiello on Mortgage Modification

Juliet M. Moringiello (Widener) has posted Mortgage Modification, Equitable Subordination, and the Honest but Unfortunate Creditor on SSRN.  Here's the abstract:

Mortgage foreclosures are at an all-time high and property values in many parts of the country have declined precipitously. Yet bankruptcy, which is often a last resort for individuals in financial distress, provides little relief to a homeowner who finds that her mortgage debt exceeds the value of her home. The reason for bankruptcy’s inadequacy in this regard is the Bankruptcy Code’s prohibition on the modification of home mortgages, a prohibition that became part of bankruptcy law in 1978, when most home mortgage loans were 30-year fixed rate loans made by savings and loan associations. While most secured loans can be stripped down in bankruptcy, reflecting the payment that the lender would receive if it were forced to foreclose on the collateral, a home mortgage loan must be paid in full, giving the lender more than it would receive under state law.

In recent years, abusive mortgage practices have proliferated. These abusive practices, which have prevented homeowners from building equity in their homes, harm not only the debtor, but also the debtor’s other creditors. Despite their behavior, however, home mortgage lenders who engage in these practices continue to receive favorable treatment in bankruptcy. In this paper, I argue that creditors should be denied special treatment in bankruptcy unless they behave in an “honest but unfortunate” manner. Judges can deny this special treatment by using a time-honored bankruptcy principle, the principle of equitable subordination, to subordinate the unsecured portion of a home mortgage loan to all secured and priority claims. While equitable subordination, by itself, will not solve the foreclosure crisis, it may, by reducing the claims of abusive mortgagees, deter abusive lending practices in the future.

Ben Barros

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April 2, 2010 in Mortgage Crisis, Real Estate Finance, Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 16, 2010

Oliveri on Discriminatory Housing Advertisements On-Line

Rigel Christine Oliveri (Missouri) has posted Discriminatory Housing Advertisements On-Line: Lessons from Craigslist on SSRN.  Here's the abstract:

The Fair Housing Act makes it illegal to publish discriminatory housing advertisements. This has long been applied to newspapers, which have effectively screened all discriminatory housing ads from sight. However, in 1996 Congress created a loophole when it immunized website operators from liability for the content posted to their sites by third parties. Without publisher liability, websites have no incentive to screen out discriminatory housing ads. The result is that such ads are proliferating in cyberspace.

While this situation is problematic from a fair housing standpoint, it presents a valuable opportunity. For the first time in a generation discriminatory housing advertisements are out in the open and available for analysis. This article contains a comprehensive review of discriminatory housing ads appearing on the popular website craigslist, which yields a number of interesting findings, including: (1) The vast majority of those who post discriminatory on-line advertisements for housing are placed by people seeking roommates. (2) The overwhelming majority of problematic ads discriminate on the basis of familial status. There are very few that discriminate based on race, ethnicity, or religion. (3) The few roommate ads that do mention race, ethnicity, or religion are more likely to discriminate in favor of minority groups. Thus, they appear more as expressions of individual diversity of backgrounds and beliefs than exclusionary tools of a majoritarian power structure.

This information can and should inform changes to the legislative and enforcement regime for dealing with discriminatory housing advertisements. For example, we should recognize that the roommate relationship is different from traditional rental housing, and accord roommate-seekers protection from the law – protection which is currently given to small landlords (who arguably do not need it) but not co-lessees. Fair housing advocates also must address the unique problems presented by familial status as a protected category, both in terms of public awareness and acceptance of the law.

Ben Barros

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March 16, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Sunday, March 14, 2010

Malloy on Mortgage Market Reform

Robin Paul Malloy (Syracuse) has posted Mortgage Market Reform and the Fallacy of Self-Correcting Markets on SSRN.  Here's the abstract:

The article discusses the mortgage market collapse in connection to the broader financial crisis. In developing the argument I proceed in several steps. First, I discuss the fallacy of self-correcting markets as a way of explaining the need for volitional and purposeful regulation in the housing and mortgage markets. This involves explaining that markets are not self-correcting; while Alan Greenspan and company waited for the invisible hand to appear and correct the mortgage markets, the system collapsed. Second, I provide an overview of the basic exchange relationships among the parties involved in the underlying real estate transaction, those in the primary and secondary mortgage market, and potential investors in mortgage related securities. Third, I explain the inapplicability of Hernado DeSoto's idea of parallel lives between underlying real estate transactions and the market for securities based on the mortgages in these underlying transactions. And, fourth, I suggest a series of regulatory and transactional reforms to consider for improving the soundness of the underlying real estate transaction and the operation of the primary mortgage markets. These reforms include: taking steps to reduce speculation in housing prices; eliminating incentives for over borrowing and over lending; and, adjusting the structure of the underlying real estate transaction to undermine an inverse prisoner’s dilemma problem. I also suggest that lawyers reassert themselves into doing basic real estate transactions and that real estate sales people and others be restricted to simply doing the sales work that they are trained to do.

Ben Barros

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March 14, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, March 11, 2010

Davidson on Housing and Community Development Policy

Nestor M. Davidson (Colorado) has posted Reconciling People and Place in Housing and Community Development Policy on SSRN.  Here's the abstract:

In housing and community development theory, scholars have long debated tensions between place-based policies and those that focus on fostering mobility. In practice, this is a false dichotomy and this essay explores ways in which place-based policies change the calculus of mobility, while mobility policies deeply shape both the communities people seek and those they leave behind.

Ben Barros

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March 11, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Fennell Lecture at Florida

On March 17, Lee Fennell (Chicago) will give the Third Annual Wolf Family Lecture in the American Law of Real Property.  The lecture will take place at 11:00 a.m. in the University of Florida's Levin College of Law Chesterfield Smith Ceremonial Classroom.  Professor Fennell's talk will be titled "Possession Puzzles", and according to the flyer, (Download Wolf Lecture Flyer 2010[1]) she will "use the housing crisis and waves of foreclosures and abandonments it has generated — in Florida and elsewhere — as a springboard for examining the surprisingly complex relationship between property rights and continuity of possession."

Ben Barros

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March 11, 2010 in Property Theory, Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

HOAs Consider "Reverse Foreclosure"

We just wrapped up our unit on promissory servitudes in my Property course.  As is the case every year, the discussion of Neponsit Property Owners' Ass'n v. Emigrant Industrial Savings Bank produced a lot of questions from the students.  Given that Neponsit concerns what are essentially homeowners' association dues, this time around I received a few questions about what HOAs might do to collect such dues on homes where the homeowners are in default with the bank.  (I have a pretty unique group this year, which includes a real estate developer, an HOA board member, a realtor, and a member of a local historic preservation commission, among many other interesting students.  A propertyprof's dream class!)

The problem, it seems, is that the bank will file a notice of foreclosure against the homeowner but will delay completing foreclosure because it doesn't want unmarketable, upside-down assets in its portfolio.  The defaulting homeowner usually stops paying her HOA dues, as well, and the indeterminate state of the foreclosure proceedings keeps the property in limbo.  HOAs are then stuck with unpaid dues, which affects community maintenance, etc.

A potential solution for the HOA was highlighted in this past Sunday's Miami Herald.  Apparently, several HOAs in Florida have started using a process called "reverse foreclosure" to force the bank's hand.  Under this procedure, the HOA forecloses on its lien resulting from the unpaid dues, takes title, and then renounces its claim, leaving the bank as the only player left to receive title.  Once the bank owns the property, it has to pay HOA dues (up to a certain capped amount).

I am always trying to teach students to be creative in their lawyering, and this provides a nice example of "outside-the-box" thinking to advance a client's interests.  But I also try to teach students that there are sometimes larger costs to pursuing legal remedies.  I wonder whether the HOA's long-term interests are ultimately served by this strategy, which promises to result in a higher number of displaced homeowners and an increased number of listed properties in an already saturated market.

Mike Kent

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P.S.  Thanks to Stetson law student Quincy Bird for bringing the article to my attention.

March 11, 2010 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 10, 2010

Nelson on Federalization of Mortgage Foreclosure Law

Grant Nelson (Pepperdine) has posted Confronting the Mortgage Meltdown: A Brief for the Federalization of State Mortgage Foreclosure Law on SSRN.  Here's the abstract:

This Article argues for federal preemption of state procedures governing the foreclosure of mortgages and security interests in rents. While it also suggests that federal action limiting or prohibiting state anti-deficiency legislation may be appropriate, it leaves this issue to future consideration. Thus, its major focus is to advocate the congressional adoption of both Uniform Nonjudicial Foreclosure Act (UNFA) and Uniform Assignment of Rents Act (UARA) to make them available to all lenders nationwide. However, the federal government has a special stake in greater uniformity for its own account. This is especially the case as to mortgages on real estate. The fallout of the economic crisis of the past year and a half has made it the owner or guarantor of millions of mortgages. It will be confronted with an overwhelming number of foreclosures that will survive all attempts at modification. Given the fact that Fannie Mae and Freddie Mac are now wards of the federal government, the federal stake in efficient and fair foreclosure procedures has become compelling. Forcing the federal government to foreclose possibly hundreds of thousands of mortgages judicially in many states seems almost surreal. Given the enormous cost of this crisis to the federal taxpayers, the government should not be held hostage to arcane and outmoded foreclosure procedures. Even in nonjudicial foreclosure states, the federalization of Fannie Mae and Freddie Mac probably necessitates changes in some statutes to comply with constitutional due process mandates. At the very minimum, the federal Single Family and Multifamily Acts with minor modifications should be made available to all federal agencies.

Ben Barros

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March 10, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 23, 2010

A Different Kind of "Self-Help"

Over at PrawfsBlawg, Jack Chin (Arizona) has an interesting post (complete with links) about a man who bulldozed his house to keep the bank from foreclosing on it.

Mike Kent

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February 23, 2010 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 9, 2010

Mitchell, Malpezzi, and Green on Forced Sale Risk

Thomas W. Mitchell (Wisconsin), Stephen Malpezzi (Wisconsin), and Richard Green (USC) have posted Forced Sale Risk: Class, Race, and The 'Double Discount' on SSRN.  Here's the abstract:

What impact does a forced sale have upon a property owner's wealth? And do certain characteristics of a property owner such as whether they are rich or poor or whether they are black or white, tend to affect the price yielded at a forced sale? This Article addresses arguments made by some courts and legal scholars who have claimed that certain types of forced sales result in wealth maximizing, economic efficiencies. The Article addresses such economic arguments by returning to first principles and reviewing the distinction between sales conducted under fair market value conditions and sales conducted under forced sale conditions. This analysis makes it clear that forced sales of real or personal property are conducted under conditions that are rarely likely to yield market value prices. In addition, the Article addresses the fact that judges and legal scholars have utilized a flawed economic analysis of forced sales in cases that often involve property that is owned by low- to middle-class property owners in part because those who are wealthier own their property under more stable ownership structures or utilize private ordering to avoid the chance that a court might order a forced sale under the default rules of certain common ownership structures. The Article also raises the possibility for the first time that the race or ethnicity of a property owner may affect the sales price for property sold at a forced sale, resulting in a "double discount," i.e. a discount from market value for the forced sale and a further discount attributable to the race of the property owner. If minorities are more susceptible to forced sales of their property than white property owners or if there does exist a phenomenon in which minorities suffer a double discount upon the sale of their property at a forced sale, then forced sales of minority-owned property could be contributing to persistent and yawning racial wealth gaps.

Ben Barros

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February 9, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (1) | TrackBack (0)

Burkhart on Manufactured Housing and Real Estate Finance

Ann M. Burkhart (Minnesota) has posted Bringing Manufactured Housing into the Real Estate Finance System on SSRN.  Here's the abstract:

Eight percent of the United States population - more than 23 million people - live in manufactured homes (also called mobile homes). In some years, more than 30% of the new homes sold have been manufactured. Moreover, manufactured housing is the most important form of unsubsidized affordable housing in this country. Up to two-thirds of the new affordable homes built each year have been manufactured. However, the manufactured housing industry currently is struggling to survive a meltdown in its sales and finance markets. A tremendous obstacle to the industry’s recovery is that most manufactured homes are characterized as personal property, though they have evolved tremendously from their earliest ancestor, the travel trailer. Today, only 1% of manufactured homes are moved after being sited on a lot. Recharacterizing manufactured homes as real property would reflect modern reality and would provide purchasers and owners with access to the mortgage market, which would increase credit availability and affordability and would provide manufactured home owners the same legal protections that owners of site-built homes enjoy.

Ben Barros

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February 9, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, February 2, 2010

"The age of suburbanization . . . is over"

So says John K. McIlwain, Senior Resident Fellow and J. Ronald Terwilliger Chair for Housing at the Urban Land Institute.  You can find a synopsis of his predictions for the American housing market on the Wall Street Journal's real estate blog, which also contains a link to his larger report.

Mike Kent

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February 2, 2010 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Friday, January 29, 2010

Dorfman on Private Ownership

Avihay Dorfman (Tel Aviv) has posted Private Ownership on SSRN.  Here's the abstract:

The most powerful response to the growing skepticism about the intelligibility of the idea of private ownership has been cast in terms of owners’ rights to the exclusive use of an object. In these pages, I argue that this response suffers from three basic deficiencies, rather than merely explanatory gaps, that render it unable to overcome the spectre of skepticism. These deficiencies reflect a shared want of attention to the normative relationship that ownership engenders between owners and non-owners. In place of the right to exclusive use, I set out to develop an account of private ownership that seeks to defeat skepticism concerning this idea. The proposed account insists that the idea of private ownership picks out a special authority relation between an owner and a non-owner involving the normative standing of the latter in relation to an object owned by the former. I further demonstrate the important place of this idea in shaping the contours of normative disagreements about the point of ownership rights and responsibilities.

Ben Barros

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January 29, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, January 25, 2010

Rizzolli on the Law & Economics of Building Encroachments

The latest issue of the Review of Law & Economics has an article by Matteo Rizzolli (University of Milan - Bicocca) titled Building Encroachments.  Here's the abstract:

Property law usually addresses encroachments with ejectment. Building encroachments differ, however, as restoring a landowner’s property claims implies the reversal of often large costs sustained by the builder. The authority thus confronts the following dilemma: either it stands by the landowner, thereby facing the social costs of undoing significant investments and possibly supporting an opportunistic landowner that tries to hold up the builder, or it defends the investment of the builder thereby endorsing a kind of private eminent domain. In addressing building encroachments, national property laws have deployed different remedies ranging from a property rule in favor of the landowner to a property rule in favor of the builder with a variety of liability rules, often hybridized with property rules, in between. This paper models the builder-owner conflict after the theory of optional law (Ayres, 2005); it frames different national solutions into a common analytical setting; and it evaluates the different laws in their relative allocative and distributive outcomes and their capacity to constrain opportunistic behavior.

Ben Barros

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January 25, 2010 in Property Theory, Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, January 21, 2010

Home Sales and Fraudulent Concealment

I currently am teaching a brief unit on real estate transactions in my Property course, and tonight we are covering disclosure and fraudulent concealment.  As luck would have it, a recent article in the Wall Street Journal discusses this exact issue.  The article indicates that disclosure issues have taken on added significance in the current housing market because buyers cannot expect increasing home values to help them recover from mistakes made in the initial purchase.  Additionally, the article suggests that faulty disclosures may result not just from lying on the part of sellers, but also from the complexity of the disclosure requirements themselves.

Mike Kent

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January 21, 2010 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)

Wednesday, January 13, 2010

Mitchell, Malpezzi, and Green on Forced Sales

Thomas W. Mitchell (Wisconsin), Stephen Malpezzi (Wisconsin) and Richard Green (USC) have posted Forced Sale Risk: Class, Race, and The 'Double Discount' on SSRN.  Here's the abstract:

What impact does a forced sale have upon a property owner's wealth? And do certain characteristics of a property owner such as whether they are rich or poor or whether they are black or white, tend to affect the price yielded at a forced sale? This Article addresses arguments made by some courts and legal scholars who have claimed that certain types of forced sales result in wealth maximizing, economic efficiencies. The Article addresses such economic arguments by returning to first principles and reviewing the distinction between sales conducted under fair market value conditions and sales conducted under forced sale conditions. This analysis makes it clear that forced sales of real or personal property are conducted under conditions that are rarely likely to yield market value prices. In addition, the Article addresses the fact that judges and legal scholars have utilized a flawed economic analysis of forced sales in cases that often involve property that is owned by low- to middle-class property owners in part because those who are wealthier own their property under more stable ownership structures or utilize private ordering to avoid the chance that a court might order a forced sale under the default rules of certain common ownership structures. The Article also raises the possibility for the first time that the race or ethnicity of a property owner may affect the sales price for property sold at a forced sale, resulting in a "double discount," i.e. a discount from market value for the forced sale and a further discount attributable to the race of the property owner. If minorities are more susceptible to forced sales of their property than white property owners or if there does exist a phenomenon in which minorities suffer a double discount upon the sale of their property at a forced sale, then forced sales of minority-owned property could be contributing to persistent and yawning racial wealth gaps.

Ben Barros

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January 13, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, January 11, 2010

Adams on Homeownership

Kristen Adams (Stetson) has posted Homeownership: American Dream or Illusion of Empowerment? on SSRN.  Here's the abstract:

In this Article, I endeavor to show that because Americans value homeownership so much — in fact, more than we should — we have placed ourselves in an untenable position as a country and now find ourselves in the midst of a well-documented housing crisis. In addition, we have used the primacy of homeownership as an excuse not to fulfill our country’s commitment to provide housing assistance to those persons who need it most. We have done this in part by undervaluing quality, affordable rental property (and quality renters) just as we have overvalued homeownership (and homeowners). Some have used the word “myth” in talking about the American view of homeownership; however, the word I prefer is “illusion,” which I intend to be less pejorative while still acknowledging that homeownership does not always deliver the benefits it promises, particularly for lower income homeowners. This Article is not particularly concerned with the question of who is to blame for the current housing crisis, because I believe fault in this context is too complicated to be laid at the feet of just one party or another. Part II of this Article examines the median American household, mortgage, and house, concluding that many Americans cannot afford the homes they have purchased. Next, Part III addresses the question of why our country overvalues homeownership to such an extent that it now finds itself in this position. In doing so, Part III examines the many benefits that homeownership supposedly provides to both individuals and society. Part IV contrasts society’s customary treatment of homeownership as a virtue with its stigmatization of renters, concluding that the latter is unfounded. Part IV also explores how the very interests that have promoted homeownership have also benefited most from its growth. Part V considers several factors that contributed to the real estate boom that culminated in the mid-2000s, including homeowners’ treatment of mortgage debt as wealth, financing options such as no-down-payment and interest-only loans, increased utilization of home equity loans, and certain features of subprime lending. Part VI concludes by suggesting that universal homeownership does not provide the benefits Americans have come to expect from it and proposing four steps policymakers should follow in creating healthier, more sustainable housing policy.

Ben Barros

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January 11, 2010 in Property Theory, Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Peck and Steadham on Land Description Errors

John C. Peck and Christopher L. Steadham (Univ. of Kansas) have posted Land Description Errors: Recognition, Avoidance, and Consequences on SSRN.  Here's the abstract:

Legal descriptions of land are used in many legal documents, including contracts, deeds, mortgages, and others. The article first describes several commonly used description methods, including the metes and bounds, U.S. Government Survey, plat reference, and surveyor's or angular description. A suggested method of drawing descriptions is provided. Many types of errors can occur in legal descriptions. Errors can be made because the description is too informal, is ambiguous, or contains mistakes in numbers. Sometimes errors are made when the description is valid in and of itself, but is not the one intended by the parties. Courts have devised canons and aids in construction of land descriptions that contain patent or latent errors. When errors are made, several parties may be adversely affected, including buyers and sellers, mortgagors and mortgagees, lawyers, and land surveyors. For lawyers, errors can implicate both legal and professional ethics violations. Surveyors may be liable in malpractice. The article concludes with some suggestions on methods to avoid making errors in land descriptions.

Ben Barros

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January 11, 2010 in Real Estate Transactions, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 9, 2009

How Do You Value Damage to a Tree?

Inquiring minds have wanted to know since Tiger Woods hit his neighbor's tree.  Christopher Beam explains at Slate.

Ben Barros

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December 9, 2009 in Real Estate Transactions | Permalink | Comments (0) | TrackBack (0)