A Private Idaho in Greenwich Village?
A Response To
Should a landlord and tenant negotiating the lease of an apartment in Greenwich Village be entitled to spurn New York law and instead agree that their relationship is to be governed by the law of Idaho? Bell and Parchomovsky (B&P) apparently would answer yes. Their potentially revolutionary proposal would allow participants in a consensual property transaction to create, as this example suggests, an oasis of red-state law within an otherwise deeply blue legal environment.
Before offering some doubts about the merits of B&P’s proposal, I heartily applaud the authors’ overarching objective and spirit of innovation. Like Justice Brandeis, they recognize the profound value of vigorous Tiebout-style competition among states. Their proposal also is likely to stimulate productive debate on a largely neglected topic—the long-established legal principle that an issue of land law is immutably governed by the law of the state where the land lies.
To assess the soundness of this law-of-the-situs rule (the formal name of the principle), it is first necessary to step back and consider the underlying issue of why states invariably have geographic boundaries. Jews, who for millennia lacked a territorial state, hungered to create one. Why so? A state conceivably could be organized according to associational links other than shared territory. One could imagine, for example, a state consisting of all Baptists, all law school graduates, or all members of the AARP.
States are territorial primarily because law is most efficiently provided on a territorial basis. For starters, physical boundaries easily enable law enforcement officials to identify the persons and properties that are subject to their power. The Idaho Highway Patrol readily knows whom it can arrest for speeding; a Baptist Highway Patrol would not. Also, a territorially organized government has comparative advantages in mobilizing its use of force because its efforts are physically concentrated, not scattered.
Even more important, many governmental policies are designed to generate territorially circumscribed benefits—that is, to enhance the quality of the within-state physical, social, and moral environment. Familiar examples of localized public goods are programs to provide public safety and infrastructure such as parks and transportation networks. When a government is organized territorially, it can subject all the beneficiaries of these efforts to its powers of taxation. By contrast, if the State of All Baptists were to engage, say, in policing efforts, it could not readily prevent non-Baptists from freeriding on those efforts.
In a system of territorial states, the application of the venerable rule that the law of the situs governs land disputes has significant merits. Local authorities have an inherent comparative advantage at carrying out factfinding and enforcement actions involving a site located within their jurisdiction. Even Larry Ribstein, whom B&P rightly identify as one of the staunchest advocates of freedom of contract in choice of law, has argued that a state should be entitled to make the law-of-the-situs rule immutable. Location matters far less in legal relationships that are not land-based. A corporation, for example, is a nexus of abstract contracts that can be performed anywhere. A corporation thus is not grounded, but instead exists in a virtual world (commonly one known as Delaware). Allowing incorporators to shop among state laws does not forgo significant inherent efficiencies in legal administration. The same cannot be said of allowing landowners to shop in like fashion.
In sum, there are great advantages in having territorially organized states and of giving them substantial autonomy to compete with one another in the production of within-state public goods. The B&P proposal, all in all, undervalues this state autonomy.
To illustrate, suppose that New York landlord-tenant law, unlike Idaho law, were to impose on a residential landlord a demanding and unwaivable implied warranty of habitability. New York lawmakers would have at least a rational basis for concluding that this limitation on freedom of contract would generate a number of territorially circumscribed public goods. (And Idaho lawmakers, for their part, similarly would have at least a rational basis for rejecting the New York approach.)
First, New York authorities might consider the implied warranty of habitability a useful tool for limiting harmful physical externalities. Slum housing poses risks of fire and infectious disease that threaten the welfare not only of tenants but also of neighbors. If a landlord and tenant bargaining in New York could import Idaho law on the issue of required housing quality, they might interfere with New York’s attainment of its slum-control objectives. Second, as B&P acknowledge, the importation of out-of-state property forms might interfere with New York’s interests in regularizing landlord-tenant relations within the state. As Merrill and Smith have famously argued, limits on the panoply of legal forms can reduce informational burdens on participants in a property system. B&P imply that the information-cost externalities created by a foreign import somehow would be reduced if the importing parties had to declare in a public registry what they had done. But registration does not necessarily reduce information costs. A judge of a New York housing court likely would be buffaloed to learn that a residential lease was governed by Idaho law, whether or not that fact had been registered.
Third—and of greatest general relevance—the importation of out-of-state law can interfere with a state’s efforts to create a distinctive moral climate. The prevailing view in Albany, for example, might be that a tough implied warranty of habitability would both appropriately redistribute wealth from landlords to tenants and also expressively signal official state dismay at the inordinate bargaining power of landlords. To allow private parties to create their own private Idaho at an apartment in Greenwich Village would be to pollute the normative atmosphere that New York was trying to create throughout the state.
Anticipating this line of objection, B&P would prohibit the “offensive use” of their idea. They imply that a consensual transaction can never be offensive. The implied warranty of habitability example, however, shows that a private deal can adversely affect the welfare of those outside the deal. Some New Yorkers surely would regard the importation of some out-of-state forms of interpersonal status, such as same-sex marriage with its associated property rights, as a threat to their values. Even a seemingly innocuous property form such as a conservation easement might offend those who believe that bundles of property rights should be kept simple. B&P probably don’t favor a broad interpretation of their “offensive use” exception, however, because that would eviscerate their proposal.
While sharing B&P’s admiration of federalism, I conclude that their proposal threatens federalist principles. Allowing the importation of external property regimes might stimulate legal innovation and certainly would enhance the diversity of regimes found within a given state. Those accomplishments, however, would come at the sacrifice of a state’s autonomy to develop and maintain a unique legal environment. A person shopping for a state in which to live would be deprived of unadulterated choices of deep blue and deep red, and instead have to settle for a speckled moral environment, one that would appear purple at a distance. To truly compete in Tiebout fashion, New York and Idaho must be entitled to develop their own distinctive legal approaches to land issues, free of contamination by unwanted imports.
Robert C. Ellickson, the Walter E. Meyer Professor of Property and Urban Law at Yale Law School, is the co-author of Ellickson & Been, Land Use Controls (3d ed. 2005) (with Vicki L. Been).
Preferred Citation: Robert C. Ellickson, A Private Idaho in Greenwich Village?, Yale L.J. (The Pocket Part), Oct. 2005, http://yalelawjournal.org/forum/a-private-idaho-in-greenwich-village.
Professor Ellickson's previous works in The Yale Law Journal include:
- Controlling Chronic Misconduct in City Spaces:Of Panhandlers, Skid Rows, and Public-Space Zoning, 105 Yale L.J. 1165 (1996)
- Property in Land, 102 Yale L.J. 1315 (1993)
- The Case for Coase and Against "Coaseanism," 99 Yale L.J. 611 (1989)