Governance property.

• Author: Alexander, Gregory S.

INTRODUCTION I. GOVERNANCE PROPERTY INSTITUTIONS A. The Domestic Sphere 1. Marriage/Domestic Partnership 2. The Home or Household 3. Neighborhoods and Communities a. Common Interest Communities b. Leaseholds 4. The Commercial Sphere II. THE ANALYTICAL STRUCTURE OF GOVERNANCE PROPERTY A. Commons and Governance Property Shared Features 1. Equality 2. Concurrent Privileges B. Features Unique to GP 1. Verticality of Relationships 2. Nonconcurrency of Enjoyment III. CONFLICTS AND COORDINATION IN GOVERNANCE PROPERTY INSTITUTIONS A. Conflicts of Interest Among GP Interest Holders 1. Consumption and Enjoyment of GP Assets 2. Preservation and Managerial Control of Assets 3. Membership B. Coordination: Norms and Mechanisms 1. The Heterogeneity of Coordination Norms and Devices 2. Norms 3. Management Mechanisms IV. GOVERNANCE PROPERTY: VALUES AND VIRTUES A. Governance Property Values B. Governance Property and Virtues CONCLUSION INTRODUCTION

Is property a black box? Is it best understood in terms of the relationship between owners and nonowners, without regard to the internal dynamics of property stakeholders? Exclusion theorists of property think that the concept of property properly concerns only the relations between owners and nonowners--that is, the external relationships of owners, or what we might call the "external life" of property. (1) From this perspective, the internal relationships among property stakeholders--the "internal life" of property (2)--are irrelevant from a conceptual point of view, even though these relationships are often very significant to property as a doctrinal matter. To exclusion theorists, all that matters conceptually is the owner's right to exclude nonowners from using, possessing, or interfering with the owner's asset. Therefore, what happens within the box--between or among the persons having a property interest in the asset--is of no concern to property law. (3) The law of property, built around the right to exclude, concerns itself primarily with the owner's relationship with the rest of the world.

This is a distorted and misleading view of property, however. To reveal this misconception, I will distinguish between two types of property, which I call exclusion property (EP) and governance property (GP). Exclusion property, according to exclusion theorists, consists of one owner with virtually all control over the asset; therefore, a defining characteristic is that the owner's rights are in rem in nature. (4) Elsewhere, I have argued that ownership is more complex than this concept of property would suggest. (5) However, for present purposes, I assume for the sake of argument that a category of property, here called exclusion property, exists that fits the exclusion theorists' characterization. Governance property, by contrast, is multiple-ownership property. Because of the relationship between an owner's rights and interests, GP requires governance norms--the devices regulating ownership's internal relations. Those rights may be as robust as full ownership rights, including coterminous rights to use, possess, manage, and transfer the asset; the rights could also be more limited, such as use rights with respect to assets owned by others. The fragmentation of various sorts of coincident rights with respect to some asset is what distinguishes GP from EP and creates the need for norms that govern the exercise of those rights.

Governance property and exclusion property are theoretical concepts. No actual property institution or ownership arrangement is purely one or the other. Rather, actual property institutions occupy various positions along a spectrum between GP and EP. It is useful, nevertheless, to discuss GP and EP as ideal types, for they illuminate the conceptual and normative differences between two prominent property theories in recent legal scholarship: the exclusion theory (6) and the human flourishing theory. (7)

Governance property appears in a wide variety of forms. The multiple owners may be concurrent, sequential, or combined. They may concurrently own certain portions of the total property while individually owning other portions, thereby combining GP with EP. In other multiple owner arrangements, some of the owners may have only nonbeneficial rights, privileges, and powers, while the remaining owners have beneficial interests. Examples of GP include concurrent estates; marital and domestic partnership property; common interest communities, including condominiums and housing cooperatives; certain forms of business organizations, including partnerships and close corporations; leaseholds; and trusts, including statutory trusts (e.g., pensions).

Although the concepts of governance property and the commons overlap to a considerable degree, they are not identical. (8) Governance property does not include open-access resources, which constitute a kind of nonownership regime. Therefore, GP and commons would only potentially overlap in limited-access regimes. There are differences between the two concepts even within the limited-access context, however. Notably, some limited-access regimes are characterized by two features that are sometimes absent in GP: first, a horizontal relationship among the co-owners, implying relative equality of legal rights, privileges, and powers among them; and second, concurrency of the privileges of possession, use, and enjoyment of the asset. (9) These two distinctions between GP and commons create conflicts of interest that differ from the familiar problems facing commons co-owners. (10) I discuss norms that respond to these problems in Part II. Governance property also differs from commons within the context of agency. (11) Agency does not seem to occur in the context of commons, but it does occur in many GP institutions, particularly those with vertical relationships of power. (12) Agency requires trust on the side of the principal, and responsibility or loyalty on the side of the agent. (13) I consider this aspect of GP further in Section III.B and Part IV.

This Article has two main theses: one is positive, the other normative. The positive thesis is that governance property, not exclusion property, is the dominant mode of ownership today. The rise of governance property reverses what Charles Donahue calls "the agglomerative tendency," (14) defined as the "tendency to agglomerate in a single legal person, preferably the one currently possessed of the thing that is the object of inquiry, the exclusive right to possess, privilege to use, and power to convey the thing." (15) I argue that the emergence of GP as the predominant form of property means that the right to exclude can no longer be considered the core of private ownership. The right to exclude, although important, is not central to GP; rather, internal governance mechanisms are essential. The exclusion theory of property cannot account for GP; at best, it can only account for EP. EP is Blackstonian property, (16) man-in-his-castle property, owner-versus-the-world property. Therefore, EP involves only external relationships with third parties and raises no internal governance issues because all rights and privileges are consolidated in one person. By contrast, GP involves both types of issues--internal governance and external relations. The internal governance issues may be quite complex as compared to issues involving the multiple owners' relations with third parties. Because dealing with third parties is less complicated, the right to exclude is less central to GP than it is to EP. (17)

The normative claim of this Article is that ownership of governance property, as opposed to exclusion property, contributes to the development of certain virtues that promote human flourishing. (18) These virtues include community, cooperation, trust, and honesty. (19) Virtue development is a distinctive characteristic of governance property, and GP inculcates these important virtues more effectively than EP. It is difficult to understand the prevalence of GP institutions in a wide variety of social and economic spheres except in relation to those institutions' role in facilitating the development of certain virtues that are necessary for human flourishing. As I discuss in Part IV, human flourishing is the moral foundation of governance property.

Peering inside the box of property, I analyze GP in all of its rich variety. Governance property institutions can be very diverse and are therefore measured along two spectra. One spectrum measures the relative complexity of GP institutions. Some GP institutions are quite simple and pose few governance problems. Others are very complex and require comparably complex norms and devices for their smooth governance. I will examine these norms and devices in Part III of this Article. The second spectrum concerns the functions of particular GP institutions. The purposes of GP institutions are varied, including financial, commercial, personal, familial, charitable, civic, and religious organizations. Putting these two spectra together, what emerges is a picture of GP as a remarkably diverse mode of ownership that affects every aspect of human activity. It is no exaggeration to say that governance property is the form of ownership that matters most in modern society.

The Article proceeds in the following order. Part I surveys some of the major governance property institutions to illustrate the diversity and ubiquity of these institutions in American society. Part II describes the analytical structure of GP institutions. Despite the wide diversity in form among GP institutions, they all share certain core features. I identify those core features shared by these institutions and further identify what GP institutions share with common property and what distinguishes GP from commons. In Part III, I discuss the economic and social advantages and disadvantages of GP institutions, and I then identify norms by which participants in GP institutions govern...