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Sunday, July 4, 2010

The 4th of July and Property Rights

As we celebrate another Fourth of July, it's good to take a moment from the backyard barbecue and reflect on the true meaning of this great American holiday. For most, the Fourth of July is embodied by the second sentence of the Declaration of Independence, where it says, "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

These words stand as the foundation for our country and have come to define those non-negotiable freedoms that secure an American way of life. Yet, the simple concept of life, liberty and the pursuit of happiness has been constantly confronted by the scrutiny of interpretation. We continue to grapple with what each of those ideas means. When does life begin; when does it end? The dictionary defines liberty as the state of being free, although none of us really enjoy absolute freedom. And as for the pursuit of happiness, how far does that go? Can I pursue my happiness at the expense of yours? They're all big questions, and that's why we have politicians, scholars and a supreme court.

So, what does any of this have to do with real estate? Well, many of the founding fathers saw a connection between liberty and the concept of private property rights. It's a reasonable correlation, in that the basis for the Declaration of Independence was to secure our separation from Great Britain and establish the sovereignty of this land. Albeit by revolution and not reciprocity, the first 13 American colonies essentially exercised a bit of old English law known as "The Bundle of Rights

In real estate, ownership isn't really defined by the physical earth, rather it's a bundle of legal "rights" that are associated with your entitlement to the property. These rights include:

•The right of possession
•The right to control the property
•The right of enjoyment
•The right of exclusion (to keep others from using or entering the property)
•The right of disposition (the ability to sell, will or transfer the property)

As you can see, our own American revolution and the Declaration of Independence we celebrate today is grounded in many of the same principles that govern the ownership of real property. Hence, the ideals of life, liberty and the pursuit of happiness are closely related to the preservation of individual property rights.

Unfortunately, modern times have led to erosion of many real property rights; and along with that, some of our independence may have also been lost. In the 1994 book, "Lost Rights; The Destruction of American Liberties" by James Bovard, the author illustrates how the rights to private property has been increasingly diminished by:

•Asset forfeiture for alleged crimes
•Zoning Regulations
•Environmental and Wetlands Regulations
•Historic property confiscations and control
•Eminent Domain takings
•Conversion of land to National Parks and National Forests

Obviously, some invasion of personal property rights is necessary to provide for the greater good. We all want to safeguard lands of irreplaceable beauty, preserve the past and be good stewards of our environment. Along with some zoning regulations, these limitations are not only necessary to maintain a functioning society, they are social responsibilities we should uphold if the "bundle of rights" we enjoy today can be passed onto future generations.

Nevertheless, the balance between property rights and what some perceive as the greater good may have strayed from center. Most notably was the 2005 supreme court decision known as Kelo v. City of New London. The case was about eminent domain. Traditionally, the power of eminent domain was used by government to allow the taking of private land for a public project, usually some infrastructure need, like a road. In Kelo, the City of New London wanted to forcibly purchase Susette Kelo's property, and then sell it to a "private" developer who promised to enhance the City's tax revenues by building a complex of hotels, condos and retail shops. In a 5-4 decision, the Supreme Court sided with the City of New London, and the heavy hand of the government bullied its way into the private sector, establishing new government controls over what used to be free enterprise.

With this precedent, eminent domain had been expanded to a disturbing new level. And to top it off the developer who took Susette Kelo's property never came through with the 3,169 new jobs and $1.2 million in tax revenue he promised the city of New London. The development was never built, and the area now stands vacant and blighted, a fitting testament to why government shouldn't be using eminent domain in this manner.

In sum, the liberty we associate with Independence Day has many ties to personal property rights. To maintain one right, we must always be vigilant about defending the other. However, nothing is absolute, and the real key is striking the proper balance between the needs of society as a whole and individual freedoms. At one extreme, you have Karl Marx, who in The Commuinist Manifesto said, "The theory of the Communists may be summed up in the single sentence: Abolition of private property." We're a long way from that, but we must be careful not to start down that slippery slope. You can be comforted by the insight of another great philosopher, perhaps better known for his rock and roll - Frank Zappa - who simply said, "Communism doesn't work because people like to own stuff." So, enjoy your yard and your house and all the rest of your stuff on this Fourth of July. It's a big part of what makes for our life, liberty and the pursuit of happiness.

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