You think that’ll impress me?

So far, in examining the ruling (available here in .pdf) that remanded back to district court a series of actual questions about whether the Paradise Park residents were entitled to the New Jersey Mobile Home Protection Act, we’ve seen that the appellate court – even though it cannot rule on facts – gave the residents multiple Christmas presents:

The more we read the decision, the more presents we found!

1. A definition of ‘in contemplation’ that it appears certain the factual record will support – meaning that the residents’ right of first refusal should be triggered.

2. A finding that the seller, Mr. Somers, has to form a good faith view – meaning that more than likely, Mr. Somers will agree that notice should have been given.

3. A road map for plaintiff counsel as to what evidence to put before the trial court as to whether a change in use was ‘in contemplation, and some heavy dicta indicating the appellate court thinks it was.

On March 4, 2005, the parties passed papers, and on March 5 the seller gave notice to the residents that they had a new park owner.

All hell broke loose:

On April 1, 2005, the residents of the Park filed a certificate of incorporation formally creating the Paradise Park Homeowners Association.

Behind the scenes, the residents were frantically rushing about to organize themselves.  This takes time.

Three days later, the Association filed a notice of rights under N.J.S.A. 46:8C-16(b), with the office of the Monmouth County Clerk. The notice was formally recorded on April 26, 2005.

As a public-policy matter, I really favor notice provisions.  Statutory rights are useless unless they are manifested by action, and the beneficiaries of those rights, who are normally just plain folks, have no reason to be expert in the real estate business and no justification for coming together as a group until they are galvanized by an external event/ threat.  So it takes them time to get their act together, find out what rights they have, assemble a team to help them with those rights, and become a viable counterparty.  A notice period is entirely appropriate, provided hat notice doesn’t turn into obstacle (as in Mitchell-Lama) or pillory (as in LIHPRHA).

I was just trying to exercise my contractual rights

Meanwhile, as a practitioner, I have sometimes spent a lot of management strategic time debating whether our client has to give a notice, and if so when, and what the notice should say.  A notice once given cannot be ungiven, and a notice that imprints people’s consciousness with fear does damage even if one’s motives are entirely pure. 

From May to August 2005, the sellers made several attempts to record the deed.

From this, I cannot infer whether the buyers had or hadn’t paid the cash consideration; sellers have the obligation to record title because they are the owner of record and the county clerk won’t recognize someone who isn’t on the current title.  Because the residents’ association had filed its notice of rights, the county clerk also was doing what he or she should have

The Clerk’s office rejected these attempts because the deed did not contain the affidavit required under the Act. The deed was finally recorded on August 2, 2005.

The record is silent on how that one got recorded.  Sometimes a clerk’s office just slips up.

Hope that’s not recorded

Ever since then, the plaintiffs have been suing Mr. Bollerman, seeking to secure what they believe is their right of first refusal to purchase the land, and hence to preserve their homes.  They previously lost on summary judgment in district court, in an opinion remarkable for its narrow-mindedness:

The motion judge accepted defendants’ arguments. Referring first to the exemption in N.J.S.A. 46:8C-13(a), and the affidavit filing requirement under N.J.S.A. 46:8C-14, the court then reasoned as follows:

[T]he contemplation of the parties is not just what the parties to the transaction will tell the Court they intended. Instead it is also reflected by the contract as well as the consideration paid at closing.

Here, the consideration paid at closing was identical to that provided for in the contract. As such, the contract was clearly not a ruse for a different deal.

As we saw above, the appellate court blew up this syllogism.  As it said:

Try another argument

We also hold that the trial court improperly narrowed the focus of its analysis to the “four corners” of the written contract between Bollerman and Somers, thereby ignoring a wealth of probative evidence of defendants’ state of mind concerning the future use of the Park property.

Not content to demolish one trial court conclusion, the appellate court tackles another one, the trial judge’s conclusion that:

In addition to that, I accept the certifications everyone filed saying that they have no intention of changing the use, no intention of doing anything further.

The appellate court blew this up also, citing the need to consider all the evidence.

Keep trying …

If I thought for one minute there was one scintilla of evidence here that they were trying to do this deal to circumvent the law, I would not be making the decision that I am making here today. There is no evidence in this record anywhere that that was the case. It is clear to me from the consideration paid and the language of the contract that that’s not the case.

Jaw.  Drop.

Evidently the appellate court was as stunned as I was, for its ruling says early on:

Plaintiffs now appeal, arguing that the trial court erroneously limited the focus of its analysis to the terms of the contract for sale, thereby ignoring a plethora of evidence showing defendants’ true state of mind.

Specifically, plaintiffs argue that the trial court should have considered Bollerman’s conduct during contract negotiations in light of his attempts to change the property’s zoning scheme to permit high-end residential development. According to plaintiffs, this, together with Somers’s refusal to modify the contract to reflect the buyers’ true future intent, amounted to clear evidence that the sale was made “in contemplation” of changing the property’s use as a mobile home park.

[Big snip]

According to plaintiffs, these letters and subsequent negotiations leading to the extension of the due diligence period are probative of the parties’ true state of mind with respect to the future development of the Park property. Plaintiffs argue that the trial court’s dismissal of this evidence in the context of deciding to grant defendants’ motion for summary judgment amounted to reversible error.

*

We agree with plaintiffs’ position.

That, dear readers, is what victory reads like.

I love the smell of judicial decisions in the morning

Why is this important?

Aside, that is, from the very human story of the residents who are fighting to preserve their homes?

We keep trying to attract attention

This is a big decision, for listen to how the appellate court speaks to the policy issues:

Although not expressly stated in its text, it seems clear that the Legislature adopted the Act to promote and enhance the ownership of mobile home parks by the residents of such parks. Toward that end, the Act provides for the formation of self-governing boards or associations by mobile home owners.  N.J.S.A. 46:8C-15.  Continuation of the use of park lands for such purposes is the indispensable adjunct driving this public policy.

Whether or not you like a mobile home park in your town, says the court, the legislature has decided that existing mobile home park residents are entitled to protection, and the law must carry out that policy conclusion.

Judicial review of individual statutory sections of the Act must, therefore, be guided and informed by these two overarching legislative policies:

1.  Tto continue the use of mobile home parks on lands currently used for such a purpose; and

2.  To encourage and promote ownership and self-governance by the residents of these parks.

The residents have to have a chance to organize and use the rights the legislature has granted, else the legislative intent is frustrated.

So much for legislative intent

A consistent theme running throughout these exemptions is that none of the transfers or conveyances carry a significant risk of changing the property’s use to something other than as a mobile home park. That is, if properly carried out in good faith, none of these transactions undermine the Legislature’s commitment to encourage park-ownership by mobile home residents, and self-governance in mobile home communities.

In other words, for a sale to be exempt from triggering resident rights, it must not increase the threat to those rights.

This is an entirely sound public-policy principle, one that finds its expression in numerous affordable housing preservation statutes.

Mobile homes are the dark matter of the affordable housing universe – significant, important, and ignored.

Good faith is the linchpin of this analysis. If courts permit interested parties to utilize these statutorily recognized transactions as legislative loopholes, i.e., as a means of circumventing the procedural and substantive rights bestowed to mobile home park residents in N.J.S.A. 46:8C-11 and N.J.S.A. 46:8C-12, then the public policy rationale embodied in the Act is frustrated.

Conclusion

The decision is well reasoned, complete — much useful information in the framing in Sections I and II.  The parol evidence of Mr. Bollerman’s history of negotiating with Mr. Somers to buy the park only after securing significant victories on uncorrectable easements is very powerful in undermining the presumption that the Somers-Bollerman sale price represented true market value … and hence did not have ‘in contemplation’ a change in use.

The court’s clarity of standard about legislation intent, where the burdens of exemption light, and how to construe ‘contemplation,’ are important advances in terms of making this law adjudicable and enforceable.

Since any summary judgment request requires that all facts in question be construed against the asker, the judge could not give the residents summary judgment.  However, the judge’s findings as to substance are very important and make it highly likely the residents will win on the retrial of the factual issues.

The residents won as much as they possibly could win at this stage.  While 2009 will see more litigation, for now the court has given the Paradise Park residents a huge Christmas present

Reversed and remanded for further proceedings consistent with this opinion.

Thank you, Your Honor – you know my clients are always the good guys

Merry Christmas, and Happy New Year, Paradise Park.

Say goodbye to 2008

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In the bold action of a man confident of his politics and his policy, Florida governor Charlie Crist has pulled the trigger on what looks like a long-term masterstroke.  As reported in The Washington Post:

In the stillness is the act …

In an ambitious maneuver to help restore the Everglades, the state of Florida has struck a tentative deal to buy U.S. Sugar Corp. for $1.75 billion and turn many of its 187,000 acres of farmland into reservoirs.

The price is $9,300 an acre which, based on the very quickest perusal of a Florida land Web site, isn’t a premium, and a drop in the bucket compared to the value of coastal Florida land like Briny Breezes.

By buying the company, the state of Florida also controls development of all that land.  It’s well within the realm of possibility that smart-growth subdivisions peppered within a preserved area could fetch high prices and contribute to ecological and environmental stability.  It would also substantially recoup the state’s capital, a trick often used (by such as Marvin Davis and Kerk Kerkorian) when a public company (like US Sugar) has vast real estate holdings that are undervalued by the capital markets.

The same trick was pulled more recently, in Blackstone’s purchase of Equity Office, as I documented extensively at the time in Barbarians at the REIT? and Barbarians, the aftermath: Part 1, the overture.

Who was the mastermind? 

Governor Crist:

From the Washington Post: Robert Buker, chief executive of U.S. Sugar Corp., left, walks to a news conference with Florida Gov. Charlie Crist and Shannon Estenoz, vice chair of the South Florida Water Management District Board, in Palm Beach County.

The plan, described by Gov. Charlie Crist as the largest conservation purchase in Florida’s history, envisions restoring some of the natural flow of water to the Everglades from Lake Okeechobee.

Crist, who has been mentioned as a possible running mate for presumptive Republican presidential nominee John McCain, made the announcement Tuesday after months of secret negotiations with the sugar company.

Like many another coup, it was hatched in private.

“It was a really well-kept secret. I think the Pentagon would be jealous of how well it was kept,” said Susan Kennedy, executive director of the Everglades Coalition.

[Governor Crist] called the purchase “as monumental” as the founding of Yellowstone National Park.

Yellowstone Lake 1875

The patchwork of farmland totals 292 square miles, about equal to the land area of New York City’s five boroughs.

New York and Dallas-Fort Worth, for comparison

That much land at $9,300 an acre?

The surprise effort is aimed at halting the degradation of the Everglades, which at 1.5 million acres is the third-largest national park in the lower 48 states, behind Death Valley and Yellowstone.  Over the years, water from areas north of the massive marsh has been diverted to the fast-growing cities of South Florida and for agriculture, and pollutants from sewage and farming have flowed in.

Loss of the Everglades is a classic example of tragedy of the commons – that any common resource which can be exploited for private gain is a risk of overuse and exhaustion:

Boston Common, 1875

Preserved against overgrazing

To defend the commons against private predation, a higher regulatory body – usually government – steps in and enforces managed use.  Kudos to Governor Crist for seeing that such a move was necessary here, or the watershed area would continue being whittled down.

This used to be the glades

Restoration has been a state and federal priority for years and is the goal of a troubled $11 billion program that, until now, had envisioned the construction of hundreds of high-tech wells and huge aquifers in an elaborate re-engineering of South Florida’s hydrology. Critics have called the plan impractical and say it has little relationship to the pre-development ecosystem. The project has fallen behind schedule since it was approved eight years ago.

The Okeechobee dike

It’s so hard for government to think of buying out private actors that government adopts a mental workaround of developing a fantastic and uneconomic technological protection.  (Would that, rather than compromising nature, we had simply bought out all the below-sea-level parts of New Orleans the day after Katrina!)

The sugar company buyout puts a new and simpler option on the table: Water can flow from the lake into filtering marshes. The cleaner water could eventually be sent onward into the “sea of grass” at the southern end of the peninsula. A direct lake-glades connection, even one comprising levee-lined retention areas, has long been a dream of environmentalists.

Sometimes it’s so much easier just to buy back the private rights.

“You’ve got to do something to transition lake water to the Everglades,” said Carol Wehle, executive director of the South Florida Water Management District, the independent agency that supervises the network of canals, levees and waterways in the lower third of the state. She said the primary goal of the U.S. Sugar buyout will be Everglades restoration, rather than providing water for sprawling urban areas in South Florida.

“It will be a structured, managed system, but it will definitely connect Lake Okeechobee with the Everglades,” she said.

Lake Okeechobee from space

Restoring the land to public hands creates all sort of public-benefit options.  And the buyout is a non-recoverable cost, funded out of taxpayers’ money – the sort of big infrastructure purchase that only government can do. 

Some company assets could be sold to other sugar companies, leaving some cane fields and orange groves still under cultivation. Because the U.S. Sugar holdings are scattered, the state will try to swap land with other sugar cane companies to create a single corridor for water to flow into the reservoirs and on to the Everglades.

Rationalizing checkerboard holdings benefits everyone – as we saw in the history of railroad land grants, a checkerboard approach to grants creates an immediate market and leads to a natural consolidation with money as the winding sheet.

“Acquiring this large swath south of Lake Okeechobee will be an historic turning point for the largest watershed project in the world,” Interior Secretary Dirk Kempthorne said.

Environmentalists, who only days earlier had been infuriated by Crist’s reversal of his longtime opposition to offshore oil drilling, were thrilled and surprised by the pact, which was first reported on Monday by the Palm Beach Post.

And we locals are pretty happy too!

U.S. Sugar is based in Clewiston, “America’s sweetest town,” on the west bank of Lake Okeechobee. The company was founded in 1931 by auto executive Charles Stewart Mott, who saw riches in the muck that bordered the lake.

Charles Stewart Mott, 1915

By the end of World War II, it was the biggest sugar company in the United States. Today it employs 1,700 people and produces 700,000 tons of cane sugar annually.

But the industry has been blamed for many of South Florida’s environmental problems. Agriculture has dramatically changed the ancient landscape, and fertilizers have polluted the water.

Human development is subject to Paracelsus’ principle: nothing is poisonous, the dose makes the poison, or its modern form, mice kept in a laboratory always get cancer.

Pour enough of that stuff through you and you too will get cancer

From beginning to end, the prime mover was Governor Crist:

U.S. Sugar Senior Vice President Robert Coker said the plan originated with Crist last fall in a meeting with company representatives in Tallahassee when the governor made a statement seemingly out of the blue: “I just think we ought to buy you out.”

Lightning strikes!  American history is full of such moves using money to buy land:

Thomas Jefferson’s 1803 Louisiana purchase, which we bought from Napoleon rather than tussle with Britain for it.

Critics said he had no authority to make the purchase …

… and at the time, the Treasury didn’t have the money

Said Coker: “I was very surprised. I’ve been dealing with Everglades issues for 27 years with this company, and nobody’s ever taken that kind of bold stroke, to say we’re going to solve this thing once and for all.”

US Minister to Mexico Gadsden’s 1853 purchase of southern Arizona:

South of the Gila, west of the Rio Grande 

He bought it via treaty …

Under the agreement, the company will continue operations for six years. Then it will hand the state 155,000 acres of sugar cane, 30,000 acres of orange trees, a commercial short-line railroad, a private railroad for hauling cane from field to factory, a sugar mill, a sugar refinery, and a just-completed orange juice plant.

William H. Seward’s 1867 purchase of Alaska:

Bought for two cents an acre

We paid by check (the actual check for $7,200,000)

Lincoln’s rival, later his Secretary of State

With six years to plan, and the state’s credit behind the purchase, all sorts of value-additive possibilities open up. 

“We’re turning over lock, stock and barrel,” Coker said.

It’s a brilliant stroke – and it raises another possibility in my mind.  Want to formalize slums?  Just buy everybody out.

Good for you, Governor.

A man who thinks he made a good deal

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The idea is as old as the Roman army, as American as the Homestead Act, and as timely as formalizing slums in the global south via urban homesteading.

Now for a little more fun: could you use it to stimulate private colonization of the Moon? 

See any plots you particularly like?

That’s the question posed by Drake Bennett in The Boston Globe

One of the more straightforward models for celestial private property has been put forward by Wasser. He made his case most recently in an article in the winter issue of the Journal of Air Law and Commerce: The United States and other national governments, he argues, should pass what he calls “land claim recognition” legislation.  Under such laws, courts would recognize private property claims on the moon or other celestial bodies so long as the claimant has established a settlement there. 

In a phrase, Lunar homesteading.

Wasser proposes limiting [aggregate? – Ed.] lunar property-holders to plots the size of Alaska – that leaves plenty for others, but also is big enough that selling it off would turn a profit even after what are sure to be the enormous expenses incurred getting to the moon in the first place.

Don’t forget, while the Moon has no beaches, it has a lot of surface area: although its area is only 7.4% of Earth’s, Earth is three-quarters water.  The Moon’s surface area is about 30% bigger than all of North America.

By the way, what is the good land on the Moon?  Let’s apply basic real estate thinking.

How much would the settlement rights be worth?

Communications links matter.  The Moon always keeps the same face toward Earth, and for most people communication with Earth would be useful.  So Nearside is for vacationers and retirees, and Farside is for interstellar astronomers.

Tourist attractions add value.  Anything near a historic site – like Tranquility Base – would be an immediate draw.  Valuable, too, would be abutting a planetary or lunar park – you always want barriers to competition.

After that, it’s pretty much wherever the infrastructure gets established.  Nobody thought land in southern Nevada would be worth anything either.

In fifty years, from this:

… to this …

… to this!

What makes land valuable?  Development. 

A key stipulation, though, would be that space property ownership deeds would require the owners to sell people rides to whatever celestial body the property was on – thereby speeding up the process of settlement and spreading around the benefits of whatever space-travel breakthroughs had been arrived at by the property holder.

The reasoning is just like railroads, telephone networks, and cable TV – you build it, you own it, you can rent it, but you cannot deny carriage to your competitors.

“The point of all this is to open the frontier for everyone,” Wasser says, “and obviously being willing to sell rides to the settlement would be a way of accomplishing that.”

Another model, proposed by the Houston-based lawyer Wayne White, would make ownership contingent on physical occupation.  

That’s another variant of homesteading.

A company could claim ownership of a piece of space only as big as its employees could physically occupy, and only so long as they were actually there. Such a limitation would, he has argued, prevent people from claiming more property than they could develop.

That could get tricky; what does it mean to ‘occupy’ the space?

In Smithtown, Long Island, it meant ‘ride around it on a bull in one day.’

A third model tries to ensure that the most advanced national and private programs wouldn’t scoop up all the available celestial property as soon as it became accessible. The extraterrestrial property regime envisioned by Glenn Reynolds, a professor and space law specialist at the University of Tennessee Law School, and Robert Merges, a professor at the University of California at Berkeley’s Boalt Hall School of Law, would be, in most ways, a basic first-come, first-served system. But it would have one key condition: A portion of the total available property would be set aside for a period of time to give developing nations a chance to catch up and to bid once they’d reached the point at which they were technologically and financially able.

It is far too early to know how valuable such property claims would be, but scientists and engineers point to a few potential sources of value in the celestial bodies currently within our reach. A medium-sized asteroid, for example, can contain trillions of dollars of gold, platinum, iron, zinc, and aluminum – enough that whoever figured out how to profitably extract it and get it to Earth would single-handedly collapse world prices for those metals and still make out like Croesus.

Asteroid mining has long been the stuff of great sf pulp stories like Asimov’s Marooned Off Vesta or Doc Smith’s Lensman series.

Will Bill, meteor miner

There is, though, a surprising lack of consensus over the question of whether private citizens can today own property in space. The closest thing that space has to a constitution is the Outer Space Treaty of 1967, and while it forbids claims of national sovereignty in space, it doesn’t mention ownership by private citizens.

Heinlein’s Delos David Harriman would have had a field day with that!

Perhaps unsurprisingly, there have already been efforts to claim extraterrestrial property.

Most likely, from the same nutters who are always tried to secede their house from America so they can avoid taxes.

A Nevada-based company called the Lunar Embassy sells deeds to one-acre “prime view” moon plots for $19.99 – founder Dennis Hope claims to have sold more than $10 million worth of lunar real estate so far.

Wonder what the title insurance policy looks like …

The Outer Space Treaty could, with enough political will, be changed, but some space lawyers believe that would be a dangerous thing to do. The international space law regime may be outdated, says Leslie Tennen, a Phoenix-based lawyer who consults with government and industry on space law questions, but the system has been successful in its main goal: keeping space peaceful. Allowing private ownership claims in space has the potential to change that. In space there is no sovereign government to resolve competing territorial claims, and if the claimants are from different countries, he says, there’s a good chance their respective governments would feel compelled to get involved.

You know what’s going to happen, don’t you?  Settlement and possession are going to define the law.  Heinlein foresaw that as well, in The Moon is a Harsh Mistress.

Origin of the phrase, there ain’t no such thing as a free lunch

To understand it, you’ll have to read the book

“You’re going to export all of the problems that have plagued us on Earth regarding defending title, and all the innumerable wars that has led to,” says Tennen.

I don’t think the wars were about defending title …

To law professor Glenn Reynolds, these concerns are overblown, and ignore what to him is the great value of the property right: people take better care of something if they own it.

A one-man blogosphere

Absolutely.  People value what they pay for.

“If you give someone grazing rights on communally owned land, well, that’s the definition of the tragedy of the commons,” he says.

For thinkers like Wasser, celestial private property is important not simply because of helium-3 mining or moon-based solar arrays, it’s important because it would allow for large-scale colonization. In such a future, Wasser believes, it simply doesn’t make sense not to have private property in space, any more than it would make sense for people in the United States not to be able to buy and sell and inherit their homes.

If you want to make property improve, let someone own it.  That was true in Roman times, true on the American frontier.  It’ll be true on the Moon, and it’s true in urbanizing slum environments.

Hernando De Soto, meet Robert A. Heinlein

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Yesterday’s interplanetary riff about potentially sell land rights on the Moon, stimulated by a provocative Drake Bennett article in The Boston Globe, suggested that pre-selling future rights would stimulate not only investment but also exploration with a view to investment.  Hernando De Soto and numerous others (including me) believe that ownership of private property and land rights is critical to spurring investment in improving that property – and hence, to improving communities.  (I’ve already posted at length about Hernando de Soto, albeit with reference to the humble washing machine.)  Might similar prospective grants be used to stimulate upgrading in informal settlements and slums?

Now, Sherman, all things are relative

Let’s do a thought experiment for a burgeoning city in the global south, like Sao Paulo , where I recently spent nearly a week.   Let’s imagine an urban homesteading law:

If you settle it, you can own it

Big caveat: Having written this little summary, I realize that it exists in the land of make-believe where governments do what they say, administrative processes are swift and impartial, records are accurate and not forged, householders always tell the truth, and amnesties never have unintended consequences or create perverse incentives.  But as this is a blog post, we can dream, can’t we?

Second big caveat: I have deliberately elided the very real and legally complex issues of regularizing title over adverse possession – that’s lawyer-speak for “letting the squatter acquire ownership of the land on which he squats.”  The subject is a flashpoint – giving ‘amnesty’ to squatters generates outrage among formal government and property owners, with good reason, and the eminent-domain compensation can be a major financial exposure for government.  Yet time and again, starting with the American Homestead Acts, sooner or later government allows some diligent long-standing squatters to acquire title by virtue of incumbency and investment.  Here’s a chunk of my earlier post:

When the government factory first steamed into action, it took the invariable first step — enforcing prohibition:

As early as 1634 in Massachusetts, the General Court attempted to restrict squatting by ordering “that all land grants to freemen be recorded and a transcript be sent to it. Surveying was to be done in each town by a constable and four other freemen.” Page 114.

Nevertheless, just as with our high-rise washer-dryers, when people improved their property, they found means of informally entitling it, and then buying and selling these informal titles:

Squatters began inventing their own species of extralegal property titles known as ‘tomahawk rights,’ ‘cabin rights,’ and ‘corn rights.’ Page 116.

My tomahawk, my tree!

Rights were signified (and hence functionally established) by marking a boundary in trees, building a log cabin, or raising a crop of corn. All these rights involved physical inspection, physical possession and demarcation, and capital improvement — the critical purposes for which we invented title and property law.

Significantly, these extralegal rights were bought, sold, and transferred — just like official titles. Page 117.

Markets, even informal ones, add and create value because they animate (and therefore mobilize) capital, which in turn leads to reinvestment. (A New York CIty building with washers and dryers, and the plumbing to support them, is clearly more valuable than one without.) At some point courts and policymakers realize that, as the servants of government that itself derives its income from a healthy economy, they want to encourage this.

In seeking to balance the rights of the well-capitalized passive owner with those of the enterprising possessor/ improver, courts have found a way of distinguishing what value belongs to whom:

As early as 1642, the colony of Virginia allowed a wrongful possessor to recover the value of any improvements from the true owner. Page 119.

I dream of property rights that never were, and say, whatever!

So let’s just imagine that such an Urban Homesteading Program exists.  (Programs from HUD or cities bearing this name were popular in the mid-1970s, in the aftermath of the urban riots, and although they largely died out, the concept has a natural resonance.)

Would it work?

Well, would it work in space, with the Moon?

Giving extraterrestrial property rights could be a powerful force, not only for exploration, but for the efficient development of the discovered and undiscovered resources of space.  

One crucial element is the possibility of substantial upside:

Celestial bodies such as the moon and the thousands of near-Earth asteroids may prove to be highly lucrative pieces of property – as sources of minerals and clean energy, venues for scientific experimentation and high-end tourism, or simply as open space for refugees from an increasingly crowded planet.

“Property rights will provide the only economic incentive that will possibly justify entrepreneurial space exploration,” says Alan Wasser, chairman of the Space Settlement Institute and the former CEO of the National Space Society. The exploration and settlement of space “benefits all mankind, but all mankind doesn’t want to put up the money.”

They’re also a budgetary asset.  In one of the more remarkable examples, the Federal government has periodically auctioned bandwidth, capturing billions of dollars in revenue for selling rights to frequencies.

It may never fly, it it looks so cool

Already, space is becoming the province of the private sector: hundreds of private satellites now orbit the planet.  And within a few years, private space travel has gone from concept to near-reality. Virgin Galactic’s Spaceshiptwo suborbital spacecraft is already taking reservations from aspiring space tourists, and hopes to start flights by 2010.  Amazon founder Jeff Bezos’s own space tourism craft is on a similar timeline.

People with vast sums to spend can take wild flyers, and even if their money dissipates (it doesn’t disappear, it just circulates back into the economy), their creations remain for us to admire.  Bob Bass built Biosphere Two, an expensive but intriguing white elephant.  Further back in time, Pope Julius commissioned the Sistine Chapel.  And then there were those pyramids …

Talk about non-recoverable capital cost!

The prototype of Las Vegas hotel billionaire Robert Bigelow’s “space hotel,” a private space station that he envisions could be rented out to everyone from wealthy vacationers to national space programs, has been in orbit since July 2006.

These successes have suggested to some space exploration proponents that private efforts, given the right incentives, might be capable of meeting far more ambitious goals, bringing new technologies, lower costs, and a swashbuckling attitude to a field traditionally dominated by public bureaucracies.

Whatever else, they will bring capital and risk tolerance – even risk infatuation! – to the enterprise.

There’s a variety of opinion as to how extensive extraterrestrial property rights should be – whether to allow, for example, the outright buying and selling of land, or whether to forbid ownership and instead rely on leases, trusts, and easements – but there’s nonetheless a growing consensus that some form of space property is inevitable and necessary.

In Homecoming, my third novel, I imagined Mars as a modern Australia or Oklahoma, minus the indigenous inhabitants:

Now You Don’t dropped into the lee of the canyon lip.  The arid prairie beyond Bradbury was acned with divots and spiked with ships like upturned bullets.  “Where is the landing field?” Peacoat asked.

“Ain’t one,” Atkins boisterously shouted, indicating randomly scattered rockets.  “You plop anywhere you can find a space.”

Capitalism is messy; order arrives after the fact; but it is energetic and experimental, and amid all the chaos, concepts are discovered and a few are proved.  Provided, of course, there are property rights:

In 2004, President Bush’s Commission on Implementation of United States Space Exploration Policy announced that a key component of the exploration of the solar system was assuring “appropriate property rights for those who seek to develop space resources and infrastructure.”

As a general matter, property rights are efficiently and peacefully enforced via governments.  Yet there is no government reach to the Moon … or is there?

And while the question of property on the moon remains, for the time being, an abstract one, for space property proponents it’s far from frivolous.

Now, some say, it’s time to look up.

“Look!  Up in the sky!”

We already have.  More than half a century ago, Robert A. Heinlein laid out the common-law argument for ownership of the Moon via a neat vignette of maid-and-butler dialog:

“What does a man own when he buys a parcel of land?  Suppose he buys the works, without splitting the rights; how far down does he own?  How far up does he own?”

“Well, he owns a wedge down to the center of the Earth.  That was settled in the slant-drilling and off-set oil lease cases.  Theoretically, he used to own the space above the land, too, out indefinitely, but that was modified by a series of cases after the commercial airlines came in.”

“George, you didn’t read those cases right.  Right of passage was established – but ownership of the space above the land remained unchanged.”

In the US domestic airspace, overflight rights are essentially a spatial easement of necessary, although it’s striking that in an international context they have to be individually negotiated and are considered a sovereign right of government.

If you’re going to overfly someone’s sovereign airspace, Gary Powers, don’t get shot down!

“But what of it?  It’s a purely theoretical matter.”

“George – who owns the Moon?”

“Delos, Earth laws don’t apply to the Moon.”

“They apply here.  The Moon stays constantly over a slice of Eawrth bounded by ;attitude twenty-nine north and the same distance south; if one man owned all that belt of Earth, then he’d own the Moon too, wouldn’t he?  And, by direct derivation, the various owners of that belt of land have title – good vendable title – to the Moon somehow lodged collectively in them.
“It’s fantastic!”

“George, when are you going to learn that ‘fantastic’ is a notion that doesn’t bother a lawyer?”

Pages 77-78 

As usual with his characters, Delos David Harriman is a surrogate for the grand old man himself
 

Heinlein’s hero thus reasons that (1) the rights exist ab initio even if latent and unclaimed, and (2) all rights not explicitly assigned to private property vest in the national government.  His reasoning of rights existence and vesting therefore still looks sound sixty years after he wrote it.
 

Throughout history, land grants have been used to encourage people to tame the frontiers.  
 

Whether it’s 16th-century English privateer-explorers or the Dutch East India Company, 19th-century American homesteaders or the building of the Transcontinental Railroad, privatization has a long history as a catalyst for discovery, development, and settlement. 
 

Couldn’t have said that better myself.
 

We have, among numerous examples:
 

100 AD: Roman soldiers or farmers who, upon retirement from the legions, could set up an estate in a province they conquered or pacified.
 

Land for the survivors!
 

1550: Most of the conquistadors were in pursuit not just of portable loot but also of vast ranchero grants.
 

1600; America was colonized under royal British land rights, as our states of Maryland, Virginia, and the Carolinas by their names attest.
 

“We’ve decided to call it, ‘Jamestown.’”
 

1700: In Colonial America, a patentee could obtain a grant of land on condition that he: 
 

was required to cultivate an acre of land and build a small house on the property, otherwise the patent would revert to the government.
 

1790: The British government granted land in Australia to released convicts.
 

Work it and you can own it
 

1830: Land grants fueled the private development of the US railroad network.  Listen to the language:
 

At first, states financed many projects, such as building roads and canals.  However, the massive investment needed to build transcontinental railroads was more than private rail companies were able or willing to do.  Since they were privately financed, rail companies seldom began unprofitable projects — they needed encouragement.  Political maneuvering and economic necessity thus combined to help pass the first of several land grant bills. These made government gifts of public land to the railroad companies in exchange for laying track in designated areas. In 1850, for example, the Illinois Central received a land grant of several million acres.  Standard procedure was to distribute land by alternate sections along the proposed railroad line, one section going to the company and the next kept by the government.  
 

This 1893 map of Franklin County, Arkansas shows the typical “checkerboard” pattern of railroad land grants. The dark shaded areas were granted to the Little Rock & Fort Smith Railway Company.
 

As land values increased, both the railroads and the government gained.  Railroad companies then sold their newly profitable lots and used the proceeds to pay for materials and labor to continue their expansion.

1865: During the Civil War, General William Tecumseh Sherman granted freed slaves forty acres and a mule.

William Tecumseh Sherman
 

Human beings are selfish creatures; we improve things that we think we own and from whose ownership we think we can profit.  As I wrote in an eminent domain post:

Without respect for private property, there is no wealth creation (sorry, Karl, it was no fun while it lasted),
 

“Who knew?”
 

no entrepreneurial engine, no innovation. We are primates, we mark and possess our territory. Ownership and defense of property are wired into our gene pool (”a man’s home is his castle”) and the American pioneering heritage (”forty acres and a mule“). We build respect for property into the fundamentals of our Constitution (the Fifth Amendment), and jurisprudence (citizens’ ability to sue the government). Respect for the citizen’s property is among our fundamental defenses against tyranny.
 

You sure know how to push my buttons
 

The grant of rights ought to work, both in the urban frontier, and in the interplanetary frontier.
 

But what might be good real estate on the Moon? 

[Continued tomorrow in Part 3.]

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If we really want to explore space, maybe we should sell it off to the highest bidders

By Drake Bennett

If the past few years have taught us anything, it is to not underestimate the intoxicating allure of property. Real estate, it turns out, brings out the adventurer in all of us.

And we’ll put the airtight swimming pool right over here …

It’s unsurprising, then, that a few enterprising thinkers are hoping to harness that power in a more exotic neighborhood: space.

Long way from the driveway to the front door, isn’t it?

No one, of course, owns space – not even the relatively tiny portion of it within humankind’s reach.

The legal concept is terra nullus, land that is empty and unclaimed, hence available for the first valid claimant.  It was first used, erroneously as all the citations note, in the context of Australia and earlier in America:

Leaving aside the diminishing possibility that Gidney and Cloyd will come to reclaim their ancestral lands,

… we were just in reruns, waiting for values to rise

Who does own the Moon?  Or said in reverse, who could grant valid title to a piece of the Lunar landscape, and would such a grant of title stimulate not only investment but also exploration to perfect the claim?

While the space race may have been kicked off by Cold War politics, its rhetoric has always been fastidiously communal, eschewing talk of ownership.  “We set sail on this new sea because there is new knowledge to be gained and new rights to be won, and they must be won and used for the progress of all people,” President Kennedy intoned in a famous 1962 speech laying out the rationale for putting a man on the moon.

President Kennedy’s carefully non-territorial statements weren’t just idealism; at the time, the United States was facing a ‘missile gap’ as well as being behind in the space race, with the Soviets’ having put up Sputnik in 1957 and still leading the US, with extended orbital flights compared to our popgun Redstone sub-orbitals. 

Do you want your children to sleep by the light of a Communist Moon?

Nor had confrontation enabled the President to defuse Cold War tensions, what with first the Bay of Pigs and then the Cuban Missile Crisis. 

Ruing the day he approved the mission?

With the US number two in the space race, downplaying territoriality was simple prudence.

In other words, while exploring space has been a race, a mission, and an adventure, it has never been a business.

Recently, however, there’s been growing interest in changing that. In the small community of people who think seriously about space exploration, a few are arguing that exporting the idea of private property into space is exactly what we need to do to launch a bold new space race.

In The Man Who Sold the Moon, his most exuberant celebration of good old American capitalism, Robert A. Heinlein argued that you could acquire the Moon without even setting foot on it, by buying all the fractional or potential rights of all other claimants. 

Heinlein, 1950: “Some day, Virginia, all this could be yours.”

Space exploration remains a very risky, complex, and expensive endeavor.  

To Arthur C. Clarke, it may have been risky, but it was feasible

And while the number of at least nominal space nations looks to grow in coming years, here in the United States there’s a sense among space exploration enthusiasts that the government just isn’t willing to spend the money necessary to make projects like a permanent moon base or manned Mars expeditions succeed.

The reason is simple – to a government, establishment of a distant colony is not intrinsically revenue-producing.  Unless substantial benefits flow back to the homeland, it’s a revenue drain, and on the face of it, there’s nothing of sufficient economic value on the Moon to justify the expenditure of permanently setting up shop there. 

Better, some suggest, to rely on individual avarice to spur exploration, by allowing private explorers to stake a claim, like celestial Sooners, to the lands they reach.

From a private-investment perspective, there is all that luscious land, and billionaires keen to claim it.  And if the Moon were habitable, people would live there, for the view, for the peace and quiet, and for the one-sixth gravity (think of the relief on arthritic knees or hardened arteries).

From 1940 …

… through 1995 …

… to 2005, the imaginings get more practical

So if it costs a ton of money, and the government won’t pay for it, but some people will, to a banker, that spells:

Heavy long-term capital investment

Equity-type yields

I think you can get big yields out of that

For a banker, therefore, high-cost risky adventures are fertile territory for structured finance, and the creation and deployment of suitable structured-finance vehicles becomes a nationally strategic asset. 

Lest you think I’m merely daydreaming, history has faced precisely this challenge before, with the nautical exploration of the aqueous globe.  Columbus set off to explore the New World not for the glory of science, but to give Spain an alternative to the Portuguese stranglehold going the other way (Cape Town and Goa).  Then, once Magellan and others proved it was possible to circumnavigate the world, vast new unknown continents opened up for exploration, exploitation, and colonization, and among the Western European naval powers, mainly Portugal, Holland, and England, there ensued the seventeenth-century equivalent of the space race – a strategic contest to outfit the largest and most daring fleets, to sail the seven seas and plant the royal or republican flag in hot verdant places. 

National power was at stake, to be expanded by harnessing private enterprise, hence it is no surprise that in 1602 the Dutch East India Company was formed:

Vereinigte Ostindische Compagnie: United East-India Company

In financial terms, the Dutch East India Company is very significant, because:

1.  To protect the private capital to be invested, it was granted a government monopoly on the trade.

2.  It soon became a huge issuer or long-term bonds.

Dutch East India Company bond

3.  Because the ventures were extremely risky, the Company sold equity shares in the outgoing vessels, and the investors reaped speculative equity-type yields upon a successful return.

In fact, the process of assembling these ‘investment syndicates’ led to the development of the limited partnership as a legal form, and the emergence of the first public and quasi-public companies. 

In fact, the first years of the seventeenth century saw the financial equivalent of an arms race, as the English government commissioned the Honourable East India Company:

For King and country and profit

For two and a half centuries, the Company planted the flag of king and commerce around the world:

Great uniform: swap it for a crown?

What precisely does this have to do with housing, slums, and urbanization? 

Did I just read this post for nothing?

It depends on whether you can effectively sell a future right to property you don’t own – like the Moon, or like urban slum homesteading where the title is clouded.

[Continued tomorrow in Part 2.]

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