Understanding Private Property and Property Law: The Right to Exclude and Own Resources - , Study notes of Business and Labour Law

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Chapter 7: The Property-Based Legal System

Property Law

“The hallmark of a protected property interest is the right to exclude others.” -The Supreme Court Property is the legal right to exclude others from resources that are originally possessed or are acquired without force, theft, or fraud. Property indicates legal ownership , that something is recognized by law as being “mine” or “yours.” It indicates exclusiveness. The United States operates under a private property system. Private Property protects private persons and allows them to exclude others, including in most instances the state, from interfering with their resources. You can do most anything with your property, but there are some restrictions. Some restrictions include: -You can’t break the law with your property -Zoning restrictions -Imminent domain (where the government comes in and takes your property) Private property is easy to transfer and sell without government intervention. Benefits of a Private Property System

1. It increases the availability of resources.
2. It is generally associated with a more free and democratic government
3. It promotes incentive a. With private property, people have an incentive to work for they get to keep and benefit from what they produce
4. It generates capital formation a. Capital formation is producing new or different resources. (A house equity into cash) b. Most common with loans c. Class Example: 2004: buy home for $400, Go to Bank #1 for the $400,000 loan (the house is the loan collateral) In 2005, you owe $390, The value of the house is now $450,

The increase of the value + the amount you paid off = your equity. Equity = $60, However, you can’t really access this $60, You can do a home equity loan with another bank. Go to Bank #2: home equity loan of $60, Now, you tangibly have the $60, If you were to foreclose with a house value at $450,000, Bank #1 gets paid first $390,000. Bank #2 (who foreclosed) gets the rest $60, If you were to foreclose with a value of $250,000 while still owing $350, Bank #1: you would still owe $100,000; Bank #2: owe $50, These banks can seek a defiance judgment and can sue you to pay. This forces you into bankruptcy.

5. It increases prosperity by making resources easy to sell and divide Why capitalism fails everywhere but the west? This is most likely due to a non-secure system of property law. The laws in these countries do not adequately guarantee property in these resources, and affordable collateral- secured loans are unavailable. The lack of an adequate property law system may not account totally for poverty in less developed countries, but it is arguably the most important contributing factor. There are 2 types of Property: o Real property = Ownership and interest in land.  Includes fixtures: Things that become real property by association with actual real property  Think: molding, spindles, things that won’t leave a house when the owner does become real property. o Personal property = All other types of moveable resources  Tangible personal property: things you can touch such as clothes, cars, and food  Intangible personal property: stocks, copyrights, and patents Methods of Acquiring Property:  Acquisition through exchange o Most popular, think bartering  Acquisition through possessions

o Rule of First Possession  First person to possess an unowned item becomes the owner  Class example: meteorite crashed into rental property at the feet of the tenant. Tenant, not landlord, owns it for the tenant was the first to own the property o Abandonment  If an item is abandoned, the first to possess it afterwards then owns it.  Class example: baseball story, after baseball was hit, it was abandoned. o Lost Property  The finder of a lost item becomes its owner after following statutory procedure of the state and waiting a set time period  Mislaid Property: If an item is on a table of some sort, it is mislaid, not lost. The rightful owner of the property then belongs to the owner of the land on which the item was mislaid, not the finder. o Adverse Possession  Obtaining ownership of land (only) belonging to another through continuous possession  Requirements:  Open and notorious: owner could see it  Actual and exclusive: must be using it  Continuous: Must not lapse in time of using it  Wrongful: can’t have permission  Last for the prescribed period of time: 20 years in Georgia  Acquisition through Accession o Accession = addition  Whoever owns the original property owns the addition of that property  Book example: Suppose a thief steals someone’s plane engine and builds a plane around the engine. Then, if the thief were to be caught, the airplane would go to the original engine owner.  Acquisition through Gift o Terminology:  Donor: The person giving the gift  Donee: The person receiving the gift  Testamentary gift: A gift made through a will o This is the 2nd^ most common acquisition of property

o 2 kinds of gifts:  Intervivos: Gift while the donor is alive  Testamentary gift: donor receives property in will  No will? It is then called check recording o It is a valid gift if there is intent to give the gift and delivery of the gift o Gift delivery can be actual or constructive  Actual: the item itself (class example: Car)  Constructive: not the tangible item (class example: Keys, title) Types of Ownership  Fee Simple o 2 types (these names usually found in wills)  Fee simple absolute: You receive the gift and have complete control with no conditions  Class example: Grandpa conveys farm “to A.” “A” can keep it a farm, make it a mall, etc.  Fee simple defeasible: You receive the gift with conditions and risk losing the gift if breaking the conditions  Class example: Grandpa conveys farm “to A so long as land used for agricultural purposes.” o If condition is breached, the farm goes back to grandpa. If grandpa is dead, it goes to his heirs. (The act of the property going to his heirs is known as an automatic reverter). o If “A” then gives the land to “B,” the fee defeasible stays intact. This can go on be passed down for 100 years and the owners are still liable. If they ever breach it, the heirs can take it back. The heirs are the monitors.  Life Estate o Grants ownership of property for lifetime of a specified person o Class Example: Dad conveys property “to Mom for her life.”  If it just says this, this it goes to Dad’s heirs after her life.  This typically doesn’t happen. Usually it says “then to the kids” o Why this? Why not Dad’s will: “to Mom” and Mom’s will: “to kids.”  Taxes. Both are fee simple absolute. You pay more taxes with fee simple absolute than you do with life estate.

o Life estate pur autre vie is of/for another life.  Class example: “To Bob for the life of LeBron James.” LeBron James doesn’t own anything, he is a measuring stick.  Leasehold Estate o The property right granted to tenants by a landlord o You don’t really own it, you’re leasing it o Cannot do anything that substantially reduces the value of the land Title and Property Registration  Title: A document serving as evidence of ownership of property o Unbroken chain of title: A gives land to B, B > C, C > D, D > E, E > me. Does “E” really own this land? If there is a break (A > B, B > C, D > E, E > me), then “E” may not really own the land, and if the person who owned it at the break (C) said it was his land, that owner (C) would win the dispute.  Deed: A document of title transferring ownership of the land o Warranty Deed: promises the grantee that the grantor has good ownership and the full power to convey it  Always demand this type of deed. It means they fully own the property they are selling you. o Special Warranty Deed: specifies that certain legal claims against the land, like mortgages, exist but guarantees that no other claims exist o Quitclaim Deed: makes no guarantees other than that the grantor surrenders all claim against the land  This is the deed of no promises and should be avoided. Special Applications of Property  Easement: reserves a particular use of land o This is a right to cross over someone else’s land o Utility companies usually have an easement of 6 feet on your land so they can put in pipelines, cables, etc. o Affirmative Easement:

 In this picture, Parcel 1 has reserved an Easement to have an access road through Parcel 2’s land o Negative Easement:  Snyder has full legal right to build something. However, Smith can get a negative easement that Snyder will not obstruct Smith’s view. Usually, Snyder is paid since his lot loses value with a negative easement and it will sell for less.  Class example: Think solar panels. If they’re on your house and your neighbor plants huge trees, he is fully allowed to do that. You can get an easement with him to not plant those trees.  Bailment: the temporary transfer of one possession of personal property from one person to another o Bailor: Owner of the property o Bailee: Person with whom the property is left o Bailments fall into 3 categories:  Bailor benefit: for the sole benefit of the Bailor  Class example: someone watches your dog and does NOT get paid  Bailee owes slight degree of care towards property  Bailee benefit: for the sole benefit of the Bailee  Class example: you borrow someone’s car solely for your own benefit  Bailee owes high degree of care towards property  Mutual benefit: for the mutual benefit of both parties  Class example: dry cleaning business. Both parties gain from service  Bailee (dry cleaners) owes reasonable care towards the property o Book example: You go to a hotel, remove your expensive leather coat, and hang it on a hanger in a small room provided by the hotel. The coat

turns up missing. Is the hotel responsible as the bailee? The answer depends on whether or not the hotel has taken intentional possession of the coat. Since they merely provided a coat hanger, the hotel is not taking intentional possession of the coat. But if a hotel employee hangs up the coat for you, the hotel becomes a bailee. o When a bailee uses an object in a way not authorized or prohibited by the bailor, the bailee becomes absolutely liable as an “insurer” for anything that happens to it. Limitations on Property and the Common Good  Nuisance: A use of property that interferes with the legal rights of others by causing damage, annoyance, or inconvenience o Public Nuisance: Causes inconvenience or damage to the public o Private Nuisance: Causes inconvenience or damage to another citizen o Class Examples:  Dog barking: covered by nuisance law  Dog on property: not nuisance law; trespassing law  Odors: nuisance law  Christmas lights: nuisance law (this one has to be pretty bad) o Key for nuisance law: person is on their own property and they do something to annoy their neighbor o Factors courts use to decide:  Frequency  Intent  Severity  Utility of the behavior  Class example: a dog food factory may make smells, but it also employs many people and it significantly helps the city’s economy  Zoning  Class example: You can’t move to Times Square and complain about the noise  Typically, if you move to the nuisance, no remedy  Book example: Spur Industries had a big feed lot for cattle. A developer, Webb, begins building a big neighborhood next to the cattle feed lot. Webb sues Spur Industries for the smell and flies, asking for the court to order Spur Industries to move. Since so many people were effected,

the court ordered Spur Industries to move. However, since Webb brought the people to the neighborhood, Webb was forced to pay for the relocation of Spur Industries. o Remedy (once a lawsuit has begun): Injunction: not seeking money, just wants a court order to cease the nuisance  Zoning: The division of a town or county into separate residential, commercial, and agricultural areas o Book example: Zoning laws may restrict buildings in a commercial district to no more than eight stories in height. o Variance: a request to allow the use of land in a way not permitted under a zoning ordinance  Eminent Domain: The power of the government to take private property for public use after the payment of just compensation to the property owner. o Authorized by the 5th^ Amendment of the Constitution o The government gives you the money your property is worth and you have to leave o Typical public uses: Highways, railroads, public library, military base, hospital o Famous case: Kelo v. New London, CT (2005)  They city of New London has a waterfront area with privately owned houses there. The city contacted Pfizer and wanted the company to put their headquarters there at the waterfront. Pfizer tells them what they want, and New London uses Eminent Domain to get all of the 90 acres. Kelo, a private owner, sues that it was not for public use. New London’s argument was that it will be for economic development. The issue became: does economic development mean public use? This makes it all the way to the Supreme Court. It is a split decision 5-4. New London wins. Economic development can be a public use. If it was just for Pfizer it wouldn’t have been okay, but it was going to Starbucks, hotels, etc. as well. The dissent: O’Connor was very upset. O’Connor wrote how Eminent Domain is for highways and such, not for economic development. Thomas was also upset. Wrote about the 5 th^ amendment and said it was for public use, not public benefit.