Monday, May 10, 2010

Property Rights and Flooding, Part 1

In response to a post last week, a reader asked:
Why are the property rights of the affected residents any more important than the property rights of the upstream property owners who are flooded through no fault of their own due to increased stream flow from developments yet further upstream? Should the mid-Bayou residents try to sue to force the further upstream property owners to install retention ponds and other flood control devices, when it is not possible to determine which property is truly at fault?

How do you determine whose property rights are more important? Should the reluctance of a few be allowed to destroy the property of many?
These are very good questions. There may appear to be a conflict between the rights of the respective property owners--property owners along a waterway can impact the property of others. But this "conflict" is a mirage, and a proper understanding of property rights provides us with solutions to such problems while simultaneously recognizing and protecting the property rights of all. In other words, it isn't an issue of the rights of one individual (or group of individuals) superseding the rights of another.

The right to property is the right to own, use, and dispose of material values. Property rights provide the owner with a sanction to use his property as he chooses, so long as he does not violate the mutual rights of others. But what of those situations in which one owner's use does interfere with another's use, not through criminal intent, but through negligence or ignorance? More specifically, how do we address situations in which one property owner causes flooding on the property of another?

Before I address flooding in particular, an applicable principle must be discussed. That principle is: "first come, first served". This principle--with roots in both Roman and English common law--holds that first use of property establishes ownership and specific rights associated with that use. For example, let us say that I own a pig farm out in the country. Nobody lives nearby and the odors do not offend anyone. Years after I started my farm a number of people buy some nearby land and build homes. They soon begin to complain of the odor coming from my farm. My pig farm clearly interferes with their use of their property. Whose property rights should prevail? Should I be allowed to continue my pig farm, or should I be forced to cease operations? The principle of "first come, first served" provides the answer.

My prior use established my right to use my property for that use. In regard to the home owners, the offending odors were clearly evident before they built their home. The "nuisance" existed prior to the construction of their home, and by building a home nearby they "came to the nuisance" (a corollary principle of "first come, first served"). Any harm that they suffer could have been avoided simply by recognizing the existence of a nearby property use that they would find offensive and acting accordingly, and thus their claim that I am violating their property rights is invalid.

To regard their claims as valid would be to destroy all property rights. When purchasing a property, individuals have a responsibility to identify the existing conditions and insure that they are compatible with one's intended use. Further, one may not use that property in such a way as to interfere with the previously established rights of other property owners.

It is important to understand that this does not create a conflict between the rights of current and future property owners. A future owner may use his property as he chooses, but he may not arbitrarily demand that others cease their prior use--to do so would negate their rights. The current owner has established his rights via his use, while the future owner has yet to do so. The future owner must recognize those existent rights.
In short, if you don't like the odors that come from a pig farm, don't build a home next to a pig farm. And if you do build a home next to a pig farm, don't complain about the odors.

However, let us say that I decide to expand my farm to such an extent that the odors begin to reach a neighborhood that existed prior to my expansion. In this situation, the home owners have a legitimate complaint. When they built their homes no nuisance existed, and my subsequent property use created the nuisance. Their prior use established their rights, and my later use cannot interfere with the use of their property.

By applying the principle of "first come, first served" to property, many disputes over property rights--particularly those regarding nuisances--can be resolved. To repeat: Property rights provide the owner with a sanction to use his property as he chooses, so long as he does not violate the mutual rights of others. Once an individual has established a particular use of a property, he has a moral right to continue his use indefinitely. Individuals who come along later may use their property as they choose, but they may not interfere with the prior owner's use.

I should add that if I sell my pig farm to another individual, he gains all of the rights of that property. He does not need to tear down the pig farm and go to the back of the line. When I sell ownership in the property, I am selling my rights to that property, and subsequent owners may continue my established use. If they change the use of that property, they do go to the back of the line. And that brings us to the issue of flooding.

Admittedly, flooding is a more complex situation, but the same principle applies: The first users of land establish their rights, and subsequent property owners cannot interfere with those rights. Tomorrow, I will begin to apply this principle to the issues raised by my reader.


AMAI said...

As you can see, Brian, I'm making my way through the entire archive. I just wanted to say that this set of blogs is the kind of thing I was hoping to find - examples of the application of property rights.

You write really well. I'm enjoying this process of catching up immensely! I sure hope people in Houston are paying attention.

Brian Phillips said...

Thanks AMAI--
Unfortuantely, Houstonians aren't paying as much attention as I would like. But I'm working on it.