Thanks for joining this episode of the number 86 lecture series in which Professor Richard Epstein discusses the key components of property law. This lecture is part of a series with Professor Epstein on how simple common law principles give us tools we can use to deal with complex technological and social challenges. Professor Epstein is one of the most prominent legal scholars of our day. He is the inaugural Lawrence A. Tisch Professor of Law at NYU School of Law. a senior fellow at the Hoover Institution, and professor of law emeritus and a senior lecturer at the University of Chicago.
As always, the Federalist Society takes no position on particular legal or public policy issues. All expressions of opinion are those of the speaker. What is property?
What sort of rights are inherent in the ownership of property? How is ownership established? In dealing with the systems of property, It is important to understand that there is sometimes a grievous mistake in the conventional wisdom which refers to property as an arbitrary constellation of rights and duties that therefore can be changed at will by the state because there's nothing of deep substance there.
The correct view on this subject is exactly the opposite. If you're talking about a system of property that is acquired by a system of first possession, what you want to do is to make sure that the owner has a useful bundle of rights that permit for its maximum development and use. And so with respect to land, it has the following dimensions.
Property has to be infinite in duration, because if there's a time limit, you can never quite figure out when that time limit expires and what should be done after it expires. So infinite horizons essentially allow for development. Property is also in three dimensions, and so the first basic approximation is that he who owns the soil owns the depths and owns the air. That allows for integration to take place.
You can now mine on the one hand, build foundations for your house on the other, and also build upwards so that you're not confined to simply a plane. And then what happens is the property that you have is often in need of disposition. And what the basic rules provide for is that you can so divide that particular property that you have.
And the way you can divide it is in a whole variety of arrangements. You can divide it by leases. You can divide it by life estates. You can divide it by mortgages.
And the theory is, as you start to divide these particular interests, what happens is the gains from trade that you can have are greater than if the only choices you had were an outright ownership transfer on the one hand or no transfer at all. So divided interest in property are, in fact, the devices by which social gains start to take place. Once it turns out that you've acquired property over time and in three dimensions, the next question is how you use it. And the basic rule on this is you may do with your property what you please because you will gain from that particular use and other peoples will not harm. But the major qualification on that should be instantly apparent, which is that you're never allowed to use your property in ways which make it impossible for other people to use theirs.
And so what happens is the use of property which is allowed in the first instance is subject to a series of boundary constraints, namely that you're not allowed to commit nuisances against your neighbors. Generally speaking, people agree that once you own what property is, you have the right to exclude others. There's much more controversy as to whether or not you could use your property. But the simple point here is that exclusion without the right of use leaves property valueless.
So virtually every legal system says that all individuals are entitled to use their property as they see fit. And that in turn is then subject to another qualification, namely that you cannot use it in a way that injures other individuals, typically by creating nuisances, noises, filth, and stench that essentially make it impossible for neighbors to make the like use of their own property. Once it turns out that we define what property is, both in space and in time, it becomes clear that it has to involve more than the right to exclude. Property which you cannot use is worthless, and so therefore the conventional uses of property are not worth it. property for farming on the one hand, mining and for building on the other are generally built into the basic common law definition of property rights.
In order to understand how this system works, there are many key cases in property that you have to pay attention to. Perhaps the first and most famous of these is Pearson v. Post, in which the question is how it is that you acquire ownership of a fox. And there's a very learned discussion as to whether or not the first possession rule... is in fact created either by custom on the one hand or by positive law on the other. Then after you deal with that, you have to figure out how you protect these laws.
And there are famous cases which deal with the issue of exclusivity, of which the most famous perhaps. is Jacques B. Steenburg, and the issue is here as to whether or not a person in desperate necessity is entitled to use the property of another for his own advantage over the opposition of its particular owner. Then there are going to be cases on the disposition of property over time, and this gets involved with what is commonly called the rule against perpetuities, in which the state starts to impose limitations on the way in which you can divide property over time so that you so fracture the interest. that you cannot combine them for resale or for valuable use.
And then you have to deal with rules that have to do with the mortgaging of property and the extent to which property can be subject to foreclosure without giving adequate notice and protection to various individuals. So each of the divided interests in property then create an elaborate set of rules and a coherent course figures out how each of these relationships, how sales, how leases, how mortgages, how easements work separately. And then a sophisticated understanding is how you put them together into common unit developments where all of these devices are, in fact, deployed simultaneously.
The best case which deals with this is a case called Neponset, and it's concerned with the governance structures of planned unit communities, which essentially are a development of modern times. We're given the high price of property. You're trying to figure out how to get many people together in a given area, and you need to have very elaborate rules regulating. both their private interests on the one hand and their common interests on the other. When one is dealing with these particular systems, it's important to understand that oftentimes government interference, whether it be by statute on the one hand or by common law rule on the other hand, can seriously disrupt voluntary arrangements.
Perhaps the best illustration of this in modern times has to deal first with leases and then with mortgages. And when you have a particular system in which judges require an implied warranty of habitability, it can often be the case that the standards are so stringent that the entire voluntary market will shut down because no tenant can afford to pay the landlord the amount of money that is required under the positive law to bring property up to certain standards. If you have a system of rent control which keeps rents artificially low, it turns out that property will not move to its highest value user.. and furthermore, that the landlord strapped for cash, will generally speaking be not able to make sufficient repairs of the property in question.
To figure out where the major departures take place, consider, for example, a system of rent control where rents are fixed at maximum levels. Under these circumstances, the tenants who are sitting in possession have automatic renewal. The properties cannot therefore be moved to higher uses.
Landlords become reluctant to create new properties. And, in fact, the entire thing results in a regulatory struggle as to what kinds of rent increases can be made to deal with the increased cost that the landlord incurs. Similarly, when you turn to mortgages, the paperwork can be overwhelmingly difficult and block the transactions from taking place.
And the rules on foreclosure can be so arduous that tenants could remain in possession of the property for very long periods of time such that it turns out to... depreciate in value as it is not cared for. One needs to have prompt removal of defaulting tenants in order for the system of lending to work well.
You've discussed some of the rules that govern property ownership. Can you say more about how people acquire property of various types? How does private acquisition work when you start from a common pool of resources? In dealing with natural law principles, One often invokes something known as the harm principle, which says that no individual is entitled to do those actions which harm other people. It's important to understand both the use and the misuse of that principle.
This principle makes perfectly good sense when you're trying to prevent the use of force and fraud, because those activities, when done by all individuals, reduce overall wealth and satisfaction in society. But it is extremely dangerous to use that principle, to the extent that one competitor loses customers to a new entrant, Because under those circumstances, the harm principle now, in effect, stops those particular transactions that improve overall social welfare. So the key understanding is force and fraud are covered by the harm principle, but competitive losses are not.
In dealing with the acquisition of property, one has to take into account that there are different kinds of assets that are acquired by different rules. So with land, the simple rules you occupy it and mark off the boundaries. With respect to chattels like clamshells and so forth, you just pick them up and put them into your hands.
The difficulties with wild animals that can start to run away, and the general principle is that he who captures the animal is its owner. And the elaboration on that is if I wound an animal and somebody tries to swoop it up before I can capture it, it is generally regarded to be mine. So what happens is the rules of acquisition of property are sensitive to the nature of the assets that are being acquired.
Now, these rules of captures with respect to animals are also subject to further refinement because all animals are not alike. A fox can typically be captured by one person. A whale is a much more complicated animal and often extensive levels of cooperation are needed in order for the capture to take place. So with the whales, what happens is you develop other kinds of rules, and they're of two sorts.
The first type of rules is consensual. You send a boat out, and all of the members of the crew are involved in the capture. What will happen is the captain will develop a system in which each of the particular seamen will get his fair share of the take. But oftentimes when you're dealing with whales, one boat will essentially wound the whale, and somebody else may capture it. And then you have to develop systems which could allocate the gains between the two parties.
And it turns out that these rules differ from one kind of whale to another. Perhaps the most famous case on this is a case called Gen V. Rich, in which the ship that disabled the whale was unable to capture it, and it floated ashore. And somebody who found the whale on shore removed from it its oil and sold it.
And now the owner of the original boat that killed the ship sued to recover the proceeds. And the court held... that you cannot sell the whale that you found on shore. What you had to do was to give notice to its owner so that it would capture it. And then to make sure that the notice was given, the fellow who gave it got some modest sum of money that covered his particular expenses.
So that what happens is when the capture requires the coordination of separate parties, what the common law developed quite cleverly was a rule which made sure that when you looked at the total value of the whale, It was a portion between the various parties so that everybody made a net gain, and this could not possibly be done if the fellow who found the thing when it came upon the shore could sell the oil and keep it to itself. As the court said, if the casual finder can keep the whale, nobody will be able to hunt them down in the first place. So essentially these rules of possession are not only specific to animals as against other things, but they vary from one type of an animal to another.
The rules of captures for whales and for foxes are subject to another problem. Any particular hunter who captures a whale or a fox is indifferent, relatively speaking, to the destruction of the entire species, so that whales can be overhunted to the point of extinction. And what happens is there's no way that you could alter the rules dealing with the possession of animals to prevent this from happening.
So you need to put into place other social institutions to deal with excessive capture. And these are rules that are essentially designed to solve what you call the common pool problem. And what you have to do, therefore, is to limit the number of animals that could be captured.
And the appropriate function of the state is to stop the tragedy of commons by limiting the total amount of the catch, and then further by assigning the amount that can be captured to individual actors so that they can remain in business. And this requires a large institutional framework that the common law cannot develop. One of the questions that one has to ask is, can you stabilize a commons? And the answer is yes. But the key element is to distinguish between closed and open commons.
So, for example, suppose you have a large number of people who own private parts of land, which they use for planting crops during the summer. But they also own animals, which graze in the mountains at that time. When they come back...
down, it turns out that the small parts of land are very bad for the animals in question. And what you do is you create a closed commons by taking down the separate walls, allowing the animals to roam within it. And the way in which you control the tragedy is each person is allowed to inject into that particular commons only that number of animals which is proportionate to the land value that he contributes. So if you can control entry, you can create a system of common ownership which is going to be efficient. Whereas if you insist that each particular person can only graze during the winter his crops on his own particular part of land, all will perish.
And what is quite striking is that very primitive cultures from a very early stage have figured out how to develop this situation where when you're growing crops, you treat the land as private property, and when you're husbanding animals during the winter season, you treat it as common property. And open commons cannot be stable. Because under those circumstances, anybody could send their animals onto the particular land, at which point the amount of forage will be quickly consumed, leading again to the overconsumption that turns out to be fatal. When one looks at the rules of first possession, it is easiest to understand it with respect to land.
One understands, in fact, that... Sooner or later you will have to have these common arteries, but in the state of nature what happens is one person goes, occupies a piece of land, gives notice to the world by marking it off, perhaps by putting stones at the court. And at that particular point what will happen is that the map will slowly fill in each person taking land and protecting it. There has always been a great question as to whether or not you're allowed to take as much land as you want. In a state of nature this tends not to be a problem.
Because if you try to make your land too extensive, you will not be able to defend it against wild animals. So what typically happens is that people choose land which gives them defensible borders. When you start to work in a more civilized society, oftentimes there are other ways in which you define the land.
So if you're dealing, for example, with the homesteaders, the basic rule was that everybody could essentially occupy a part of land which they acquired, but it would have a certain maximum size. say 160 acres associated with it. But the key point here to understand is that the individual acquisition is a decentralized method by which land is reduced to possession, and thereafter one has to superimpose upon it the grid which allows things to be connected one to another.
When one's dealing with land that is to be reduced to private property, the current system is one of decentralized acquisition. People go out and they acquire a piece of land and mark its boundary lines, and then other people come, perhaps somewhat later in time, and they do the same thing. And slowly what happens is if you look at the map, the vacant spots get filled in with individual pieces of ownership. And if you do that, the situation will clearly be stable, but it will not be self-sufficient because it does not provide for the infrastructure that is needed to make this coherent.
So, What you do on the map is you start with private possession, and then what you do is you develop the common elements, the streets, the highways, and the sewers, which allow you to link things together. One of the interesting features is when you're dealing with land, say, in a town, how do you make a plan for dealing with future development of the roads that link things together? And what one very clever device is, is that the city fathers, they do is they put down a grid.
which indicates where the highways are going to go and the small streets are going to go. They let people acquire whatever land they want, but make it clear to them that when the time comes to build the roads and the highways out, any private structure that they have is going to have to be removed. This very clever coordination devices means that people, when they build on their own parts of land, will not build where they think the streets and the highways are going to come. And so by a single device, you could have A decentralized acquisition of property on the one hand and a coordinated infrastructure on the other.
Can you tell us more about how property rules work? What happens when two people dispute ownership? How about property transfers? How do we deal with renting and leasing property? When we talked about the rules on the acquisition of property, we stressed first possession.
The person who acquires the property keeps it against the rest of the world. But oftentimes the system goes awry and somebody takes the property which somebody else previously owned. That second person is called the adverse possessor.
And immediately you have two questions that you have to solve. One is the question of how the original owner can recover the property against the adverse possessor. And the answer is, generally speaking, he can do so if he brings the suit within a period of time, a kind of a statute of limitations. And then the second feature is what's the position of the adverse possessor is against the rest of the world. And the answer there is the doctrine of eustertia, which says that as against everybody but the true owner, the adverse possessor can in fact exclude them.
Both of these rules are absolutely critical for the system. If in fact you do not allow the original owner to recover from the adverse possessor, you have a free for all for theft. And on the other hand, if you don't allow the adverse possessor protection against anybody else, it means that once property is taken from its true owners, it can never be secure because everybody could take from everybody else.
So again, these two rules are designed to prevent the property free for all. The basic maxim of common law has been prior in time is higher in right. It is not first in time is highest in right. And the reason you have to put it in that particular passion, Is that if it turns out that A first acquires property and then B takes it from A and then C takes it from B, you have to figure out what the relationship on ownership is going to be between B and C. And the doctrine of relative title says that B in effect prevails over C, even though A could prevail over both of them.
And the so-called doctrine of the just tertia, the right of the third person, says if B turns out to sue C, C cannot set up the title of A as a defense to the action. And again, this is absolutely critical for the operation of the system because it cannot be, once one act of adverse possession takes place, which is very common in primitive societies, no property rights will ever be stable. And the rule against just tertia makes sure that that won't happen.
by keeping the original party out of the dispute, so it's only the relative titles between B and C that matter. Thus far, we've been speaking about property as acquisition from below. But it turns out, historically, often property is acquired by conquest. And at that particular point, individual owners obtain their title, not by first possession, but by obtaining it from the conquering ruler.
The decisive act in English law was the conquering of England in 1066 by William the Conqueror. And what he then did was to create a system in which he rewarded his chief officials by giving them property. And essentially they were now property and service relationships held of the crown. The individuals who were his tenants-in-chief in turn managed to dissolve or to hand-discharge their obligations by creating further forms of sub-infudation. And this, in effect, is a top-down system.
in which what happens is that the rights of each of the tenants in the hierarchy are determined by the contracts that he or she have with the parties above them and the contracts that they enter into the property down below. And it's an elaborate set of rules. Now, people would say these rules are irrelevant, but in fact, the same thing happens today in connection with leases.
Somebody owns a piece of property, and what they do is they now lease some fraction of it to a person. That person now has two choices. They can lease or sublease some fraction of it to a third person and then continue it on down.
Or they can assign their interest to somebody else. And so when you start to think about these things, what you do is you have chains of title. And what you must be able to do is to figure out the relationships between any two parties who are in direct contact with each other, so-called privity, and those which are further removed. So as to give a very simple example of how this works.
If it turns out that the head tenant is in breach of his obligations to the landlord and is evicted, the sub-tenant necessarily disappears from view as well, because his rights cannot rise above those of the landlord. And so hence it is, understanding the multiple intricacies of this system required a tremendous amount of ingenuity, and whether you're talking about the medieval feudal system or the modern lease system, the contractual devices that were used were designed to secure possession and security for everybody inside this elaborate framework. The next question is, when you talk about the division of property rights, one of the common forms of division is essentially to have concurrent owners, that is, two people who take possession of the property at the same time and who share between themselves in some kinds of proportions. And what the system of property rights does with respect to these common ownerships is to create two different sets of arrangements.
One of them is how all of the owners together can ward off the rest of the world. And essentially their combined rights means that the protection of their exclusive rights is going to be honored by the law. Strangers cannot oust them from possession. The much more difficult situation is the arrangement of the rights amongst those tenants who are in possession at the same time. Generally speaking, joint tenants are not tenants under a partnership agreement.
They owe no fiduciary duties to each other. And so what happens is each can take as much as he wants out of the particular arrangement until the other fellow starts to push back. Of these arrangements, there are two kinds, and it's important to understand their major difference.
One of them is a joint tenancy, usually between husband and wife, such that at the death of the first, the property then goes to the other under the right of survivorship. And typically, only in marriage do you find situations where the natural object of benevolence from one party is in fact the co-tenant. Typically when you have tenancies in common they're between brothers and sisters or between business partners and the rule there is that when one person dies he can devise his property to whomever he sees fit who then becomes a co-tenant of the surviving party.
And for business arrangement this is a much more efficient situation because it turns out that the testamentary objectives of a tenant in common usually do not involve the co-tenant. So you've got these dual forms operating side by side. And then the next thing that you have to worry about, as with corporations, is to figure out how you allocate the many governance duties.
Who maintains the property? Who repairs the property? proves the property, and typically these things are solved more by contract than by general rules because of the idiosyncratic nature of the relationships.
One of the great difficulties that one has with a section of property when you create either a landlord-tenant relationship or a feudal relationship between a lord and the vassal is what is it that the person down below is required to supply to the person above and also in the contrary direction. So with respect to feudalism, the original system was one in which somebody who received land from the king or from a superior lord had to supply services in the form of military assistance. And under these circumstances, the king would always want to make sure that his vassals provided it directly to him and did not want them to be able to fragment the obligation. So sub-infudation in which the chief lord kept all of his obligations and then divided it amongst his sub-tenants.
was the order of the day. When these arrangements became commuted into money, all of a sudden, the complicated structure of three or more tiers became very inefficient, and what you did is you had assignments of property interest to the new entrant, because it's much easier to divide financial obligations than it is to divide service obligations, and this was crystallized in England by a statute called Quirum Torres, which in the year 1290s forbid sub-infudation. and this statute only passed after the service obligations of the night service, as it was called, were commuted into cash.
When you're dealing with modern landlord-tenant relationships, landlord relationships are essentially of several types. Some cases, the leases are very simple, and the only thing that the tenant gets is bare possession of the property, and the landlord has no particular service obligations. This often happens with respect to agricultural lease.
And the general view is that each interest is separate, so that if the tenant is ousted from the property by a third party, he can't say to the landlord, you're responsible. It's as though he bought the property himself and now has to continue to pay the lease rent, just as he would not be able to recover the money if he had paid a lump sum at the beginning. But modern lease is typically a service arrangement in which the landlord undertakes a lot of obligations to supply heat, dormant, and so forth to the tenant.
And here, the two interests are no longer independent, but are dependent upon one another. And it is almost universally understood that if the landlord does not supply his particular obligation, the tenant is going to be relieved of his. Exactly what the relief takes is not always clear.
In some cases, it's a cessation of rent. And in other cases, you're allowed to vacate the premises under the circumstances. And in other cases, you're allowed to force them to provide it. There's a general lesson here, which is the law is. pretty clear when it comes to stating obligations, but once people go off the rails such that there's a breach, there is often a huge lack of clarity as to what the appropriate remedy is. Is it abandonment?
Is it damages? Is it requirements for specific performance? And the hardest thing for law students to understand is that even if the rights and duties are crystalline, it turns out the remedial choices are deeply complex.
Thus far, in speaking about the kinds of arrangements that exist amongst parties, we've tended to concentrate on two very small numbers of situations. It turns out as land becomes more valuable, it becomes very important to be able to increase the density of occupation, which means that there are many more shared obligations between parties. Instead of everybody having his own driveway, there's one driveway that's shared by numbers of people. And the question is, how do you organize these arrangements? As a matter of first principle, the correct answer is as follows.
First of all, what you do is you get a common owner. And then what that common owner then does is to create a series of contracts with other individuals which specify what units they're going to occupy and how they're going to fund their share of the common obligations and how the governance structure for the arrangement is going to take place. And then the second function is to make sure that when you do this with one person, that everybody else who wants to buy into the common association has notice of what the particular arrangements are so that they will not be misled as to the situation between the owner of the property on the one hand and the prior purchaser, say, of a condominium and cooperative units. And so what you need to do is to have an arrangement in which all of these things are recorded to give notice. and then basically freedom of contract in their organization.
It turned out under the classical law it was often very difficult to do this because there were a set of artificial limitations on freedom of contract with respect to the creation of the way in which land worked. So it was generally said for good reason perhaps that there could never be affirmative obligations on the part of people to take care of land. land of others.
The service obligation has nothing to do with the property transactions and everybody would want them to be covered independently. When you start dealing with larger associations and you have obligations with respect to the maintenance and care of unions, with a question of whether or not you purchase common resources from a central supply, this touch and concern requirement is essentially a nuisance. And what the judges did therefore was to make sure that in virtually every case where the The contract in question was promoting the efficiency of the operation. They were on it.
So the only covenants that essentially are dubious today have nothing to do with the law of property. They have to do with the use of covenants in violation of the antitrust laws by having cartels that restrict new entry into certain lines of businesses or covenants that have to do with racial discrimination, which are today governed by the public housing law. Well, if you're talking about affirmative obligations, you certainly don't want that to work. include the ability of a condominium or a cooperative association to give assessments against its members secured by their units. And sure enough, in this famous Neponset case, they essentially relaxed the requirement to allow these liens to take place.
The old rules used to say that only the party who owned the property could have a right with respect to a covenant or an easement. And that means that you could not create independent condominium associations to run the place. And sure enough, what happened is they relaxed that rule as well so that a condominium association could have powers of governance with respect to an organization, even though it was not a property owner under the circumstances. And what these adaptations prove is that a very simple model, give notice to the world of what you've taken and then have freedom of contract in the organization dominates.
And what the Neponset case further shows is the ability of the judges to sort of relax these rules. in a fashion which makes it possible for the entire system to work efficiently. Thank you for listening to this episode in the Common Law Unit of the No. 86 Lecture Series, where Professor Richard Epstein looks at long-established common law and regulatory patterns and lays out six core principles as building blocks.
His approach has roots in Roman law, Anglo-American common law, and early constitutional practice. These rules regulate human interactions in ordinary social life and deal with individual autonomy, property of first possession, freedom of contract, and tort. The spirit of debate of our founding fathers animates all of the number 86 content, encouraging discussion and critical reflection relative to how each subject is widely understood and taught in law schools and among law students. Subscribe to the number 86 lecture series.
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