Law Commons^™

Crypto In Real Estate Finance, R. Wilson Freyermuth, Christopher K. Odinet, Andrea Tosato

Faculty Publications

Blockchain and cryptocurrencies have ushered in a digital gold rush. But all that glitters is not gold. The latest fad is the use of non-fungible tokens (NFTs) to purchase and finance real estate. Typically, crypto real estate transactions begin with the transfer of title for a residential property into a dedicated business entity, such as a limited liability company. Thereafter, an NFT is ‘minted’ and used to represent the ownership interest in that entity. The real property is then marketed online specifying that, to acquire it, one simply purchases the relevant NFT via a blockchain transfer. Crucially, buyers are expected …

Structural Precarity And Potential In Condominium Governance Design, Andrea Boyack

Faculty Publications

In the early hours of June 24, 2021, half of Champlain Towers South Condominium, a thirteen-story multifamily building located in the Miami suburb of Surfside, collapsed without warning. The Miami Herald called the collapse “unprecedented” in that one wing “simply caved in––for no obvious reason.” The collapse killed ninety-eight people and was the deadliest multifamily building engineering failure in US history. After an arduous search and rescue and safely dismantling the rest of the structure, inquiries sought to determine why this deadly collapse happened. Who was to blame, and what could have been done differently?

Within six months of this …

Responsible Devolution Of Affordable Housing, Andrea Boyack

Faculty Publications

The federal government has been heavily involved in promoting housing affordability since the 1930s and continues to have a critical role to play. Over the past several decades, the federal government has financed affordability by promoting development and income subsidies, but specific allocation decisions have devolved. Housing inequities can best be addressed locally, but only if localities are held to high standards of fairness and regional coordination is facilitated. Successful and sustainable local solutions to housing affordability will also require a substantial financial investment, one that the federal government can and should reliably and adequately provide. Each year, Congress permits …

Residential Mortgage Default And The Constraints Of Junior Liens, R. Wilson Freyermuth, Dale A. Whitman

Faculty Publications

Our purpose in this Article is to show how and why junior liens impose these constraints on the process of resolving residential mortgage loan defaults, and to suggest some changes in the law that can restore a measure of desirable flexibility for borrowers and servicers in negotiating default resolutions. At the same time, these suggestions take into account, as they must, the need for fairness in respecting the legitimate rights of junior lienholders.

Sustainable Affordable Housing, Andrea Boyack

Faculty Publications

Sustainable real estate development is an essential component of intergenerational justice, in part because the real estate sector creates more than 20% of the world’s carbon emissions. Governments, recognizing that environmentally sustainable real estate development involves higher upfront costs, have encouraged green building by offering publicly funded incentives such as tax credits, grants, reduced approval fees, and streamlined permitting. Using market measurement innovations such as the Dow Jones Sustainability Index, investors can promote environmentally sustainable development by prioritizing real estate developers that embrace environmentally conscious practices. Even though real estate in general still underperforms in many other sectors in terms …

The New Model Negotiated Alternative To The Foreclosure Act, R. Wilson Freyermuth, Dale A. Whitman

Faculty Publications

One of the many painful lessons learned from the mortgage crisis that began in 2007 is that foreclosure is often a costly, slow, inefficient, and uncertain process. The additional cost and uncertainty for lenders are magnified when the balance of the mortgage debt exceeds the value of the collateral (that is, when the borrower is “underwater”), and thus full recovery by the lender of its investment is unlikely. Ways to avoid this misery are for the lender (usually represented by the servicer for a secondary market purchaser or a securitized trust) and the borrower to enter into a deed in …

Limiting The Collective Right To Exclude, Andrea Boyack

Faculty Publications

For decades, society’s disparate interests and priorities have stymied attempts to resolve issues of housing affordability and equity. Zoning law and servitude law, both of which have been robustly empowered by decades of jurisprudence, effectively grant communities the legal right and ability to exclude various sorts of residences from their wealthiest neighborhoods. Exclusion by housing type results in exclusion of categories of people, namely, renters, the relatively poor, and racial minorities. Although our society’s housing woes may indeed be intractable if we continue to treat a group’s right to exclude with the level of deference that such exclusionary efforts currently …

Side By Side: Revitalizing Urban Cores And Ensuring Residential Diversity, Andrea Boyack

Faculty Publications

Fifty years ago, the Reverend Martin Luther King, Jr. expressed a hope that someday people of all races would “live side by side in decent, safe, and sanitary housing.” Residential patterns in America today, however, remain highly segregated by race and income. The Fair Housing Act outlawed overt housing discrimination and unjustified discriminatory impacts, but zoning laws and housing finance structures have continued to impede housing integration, leaving communities nearly as racially homogenous as they were in the mid 20th century. These separate neighborhoods are far from equal. The majority of people who reside in financially distressed city-center neighborhoods are …

Equitably Housing (Almost) Half A Nation Of Renters, Andrea Boyack

Faculty Publications

America’s population of renters is growing faster than the supply of available rental units. Rental vacancies are reaching new lows, and rental rates are reaching new highs. Millions of former homeowners have lost their homes in foreclosure and, due to today’s much tighter mortgage underwriting realities, will not realistically re-enter the ranks of owner-occupants. For a number of reasons – variety of incomes, different stages in life, and a range of personal preferences and lifestyles – homeownership is not for everyone. And yet federal government housing policy has consistently prioritized homeownership over renter-specific issues, such as affordability and rental supply …

A New American Dream For Detroit, Andrea Boyack

Faculty Publications

The problem of neighborhood deterioration is keenly visible in Detroit today, but Detroit’s housing struggles are not unique. Like most of America, the Detroit metropolitan area is racially fragmented, and minority neighborhoods are the most likely to be impoverished and failing. Detroit’s problems of housing abandonment and neighborhood decay are both caused and exacerbated by decades of housing segregation and inequality. The “American Dream” has always been one of equal opportunity, but there can be no equality of opportunity when there is such stark inequality among home environments. Detroit’s neighborhood decline is a symptom of the city’s population loss and …

Transferring Nonnegotiable Mortgage Notes, Dale A. Whitman

Faculty Publications

This article reviews what we know about transferring ownership and the right of enforcement of nonnegotiable notes. The focus will be on notes secured by mortgages, since this is likely the context in which most modern nonnegotiable notes are created. There has been a vast amount of litigation about the transfer of negotiable mortgage notes in the past half decade, greatly expanding our understanding, but there has been little development involving nonnegotiable notes. Hence, it is helpful to compare negotiable and nonnegotiable notes, with particular emphasis on how each is transferred. Perhaps ironically, this means that the bulk of this …

Bankruptcy Weapons To Terminate A Zombie Mortgage, Andrea Boyack, Robert Berger

Faculty Publications

Bankruptcy’s strongest public policy is the possibility of a fresh start for a borrower – a way for a debtor to free himself from the burdens of pre-petition obligations and re-commence his or her financial life. A debtor can surrender property burdened by a lien to the lien-holder and thereby release him or herself from ongoing obligations under the loan. This is true even in cases where the collateral’s value is less than the secured loan – for in bankruptcy, a lender’s secured claim is limited to the value of its lien. In chapter 13, a debtor who elects to …

American Dream In Flux: The Endangered Right To Lease A Home, Andrea Boyack

Faculty Publications

Homeownership in the US is on the decline and the percentage of the population that rents their residence is growing. Renters present a distinct demographic compared to owners, and most of the more vulnerable segments of society rent their homes. But the law prohibits renting a home in some neighborhoods. Occasionally, zoning provisions hamper the ability of would-be tenants and would-be landlords to rent. More typically, however, community restrictive covenants are what block rentals. Zoning prohibitions on rentals have been attacked as violations of property rights. But in condominiums and other privately governed neighborhoods, segregation of renters from owner occupants …

Muddying The Waterfall: How Ambiguous Liability Statutes Distort Creditor Priority In Condominium Foreclosures, Andrea Boyack, William E. Foster

Faculty Publications

Intentionally or not, every state’s law regarding lien priority and post-foreclosure liability allocates risk between mortgage lenders and privately governed “common interest communities” (CICs), such as condominiums. When lenders secure their interests with mortgages on property within a CIC, the mortgages may compete against the CIC’s interests for primacy in the lien hierarchy. Modern state regimes typically delineate the respective rights of mortgagees and CIC associations according to lien-priority statutes. Older condominium-enabling statutes, however, do not address CIC lien priority directly and speak only to continuing joint and several liability for subsequent purchasers. These older and more ambiguous statutes do …

Common Interest Community Covenants And The Freedom Of Contract Myth, Andrea Boyack

Faculty Publications

Courts take a hands-off approach with respect to the content of common interest community (CIC) covenants, reasoning that freedom of contract mandates their enforcement. But CIC covenants differ from voluntary private contracts in important ways, making deferential enforcement in the name of contract policy unwarranted. Covenants that run with the land are specifically enforceable and bind subsequent owners of the property, potentially in perpetuity. Furthermore, CIC covenants are contracts of adhesion, made up of completely non-negotiable, recorded terms bundled into home acquisition. Developers and lenders generally prescribe the content of such covenants, and they may not reflect community desires or …

Sovereign Debt And The Three And A Half Minute Transaction: What Sticky Boilerplate Reveals About Contract Law And Practice, Andrea Boyack

Faculty Publications

The Three and a Half Minute Transaction: Boilerplate and the Limits of Contractual Design, by Mitu Gulati and Robert E. Scott, is a cautionary tale about modern legal practice where the protagonist is the standard sovereign debt contract. The book discloses an undeniable flaw in sovereign bond boilerplate (the widely used pari passu clause) that, in spite of expensive, sophisticated lawyering, perpetuates a risky disconnect between party intent and contract terms. The fact that boilerplate terms persist even in elite sovereign-lending practices suggests that the problem of over-reliance on standard form language is ubiquitous.When contract terms diverge from client risk …

Article 9 And The Characterization And Treatment Of Tenant Security Deposits, R. Wilson Freyermuth, William H. Henning

Faculty Publications

Each day, thousands of lessees enter into contracts under which they lease either real or personal property. Under the majority of these contracts, the lessee agrees to pay (and does pay) a "security deposit" to the lessor. The lessor typically agrees to refund the deposit at the conclusion of the lease term if the lessee fully performs its obligations under the lease contract. Is Article 9 relevant to this transaction? Has the lessor taken a "security interest" in the lessee's property to secure the lessee's obligations under the lease contract?

In Part I, we highlight two opinions representative of the …

Property Rights And Modern Energy, Troy A. Rule

Faculty Publications

This short article, written for a joint program of the Natural Resources and Energy Law and Property Law Sections of the American Association of Law Schools at the Association’s 2013 Annual Meeting, offers some general guidelines for adjusting property rights regimes to accommodate new energy innovations. This article suggests that, when feasible, policy actions that merely clarify ambiguities in existing law are often the simplest and most cost-effective way to respond when important technological advancements place pressure on longstanding property structures. When such policies are inadequate or unavailable, the most equitable and efficient adjustments to property arrangements tend to be …

Cross-Border Collective Redress And Individual Participatory Rights: Quo Vadis?, S. I. Strong

Faculty Publications

This article fills a critical gap in the commentary by undertaking a rights-based analysis of the various issues that arise in cases involving large-scale international litigation, focusing in particular on the Brussels I Regulation and what may be called ‘individual participatory rights’. In so doing, the discussion considers the nature and scope of individual participatory rights in collective litigation as well the ways in which these rights should be weighed and considered. Although the analysis is set in the context of European procedural law, this discussion is of equal relevance to parties outside the European Union, either because they will …

Cross-Border Collective Redress In The European Union: Constitutional Rights In The Face Of The Brussels I Regulation, S. I. Strong

Faculty Publications

This article considers the various issues associated with the creation of a system of collective relief in a region that has traditionally been hostile to the provision of large-scale private litigation. In so doing, the discussion focuses on the clash between certain constitutional rights relating to the ability of the plaintiff to choose the time, place and manner of bringing suit and the European Union’s primary form of legislation concerning cross-border procedure, Council Regulation 44/2001 on jurisdiction and on recognition and enforcement of civil and commercial judgments, commonly known as the Brussels I Regulation.

Empowering Settlors: How Proper Language Can Increase The Enforceability Of A Mandatory Arbitration Provision In A Trust, S. I. Strong

Faculty Publications

With hostile trust litigation reaching epidemic proportions, many people within the trust industry are interested in identifying new and less expensive ways to resolve trust-related disputes. Arbitration is often proposed as a possible alternative, although questions exist about whether and to what extent a mandatory arbitration provision found in a trust will be considered enforceable by a court. Up until now, most commentary in this area of law has focused on purely jurisprudential issues, with little attention being paid to the practical efforts that settlors can make to increase the enforceability of arbitration provisions found in trusts. This Article takes …

Arbitration Of Trust Disputes: Two Bodies Of Law Collide, S. I. Strong

Faculty Publications

This article considers the various issues that arise when two separate bodies of law – trust law and arbitration law – collide, using recent developments in the field of international commercial arbitration to address some of the more intransigent problems facing trust arbitration. The article focuses on five areas of concern: the potential for impermissible ouster of the courts, the operability and effectiveness of the arbitration provision, the extent to which the arbitration provision is binding on the party against whom arbitration is asserted, proper representation of parties and arbitrability. In so doing, this article introduces a number of new …

Mandatory Arbitration Of Internal Trust Disputes: Improving Arbitrability And Enforceability Through Proper Procedural Choices, S. I. Strong

Faculty Publications

Trusts and their civil law equivalents, often known as foundations or associations, play a large and increasing role in the global economy, holding trillions of dollars worth of assets and generating billions of dollars worth of revenue and trustees’ fees annually. Once considered nothing more than “mere” estate planning devices, trusts are now more often seen in commercial rather than in private contexts, and often feature sophisticated financial institutions as professional trustees. With favorable tax laws in various off-shore jurisdictions making international trusts increasingly popular and hostile trust litigation reaching epidemic proportions, arbitration would seem to be many parties’ dispute …

Airspace And The Takings Clause, Troy A. Rule

Faculty Publications

This Article argues that the U.S. Supreme Court’s takings jurisprudence fails to account for instances when public entities restrict private airspace solely to keep it open for their own use. Many landowners rely on open space above adjacent land to preserve scenic views for their properties, to provide sunlight access for their rooftop solar panels, or to serve other uses that require no physical invasion of the neighboring space. Private citizens typically must purchase easements or covenants to prevent their neighbors from erecting trees or buildings that would interfere with these non-physical airspace uses. In contrast, public entities can often …

Community Collateral Damage: A Question Of Priorities, Andrea Boyack

Faculty Publications

Today’s soaring mortgage default rate and the uncertainty and delay associated with mortgage foreclosure proceedings threatens to cause financial tragedies of the commons in condominiums and homeowner associations across the country. Assessment defaults in privately governed communities result in an inequitable allocation of upkeep costs, and current law provides no way to prevent this spillover effect. But the collateral damages caused by delayed foreclosures and insufficient recoveries can be minimized by gradually increasing the priority position of the association lien.

In a majority of states, association liens are completely subordinate to the first mortgage lien. At foreclosure of the mortgage …

Laudable Goals And Unintended Consequences: The Role And Control Of Fannie Mae And Freddie Mac, Andrea Boyack

Faculty Publications

The United States is struggling to emerge from an era of loose mortgage underwriting standards – lapses in credit analysis that led to origination and securitization of toxic loans. The fallout has been crippling, costing borrowers their homes, investors their money, and the government its taxes.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) passed last summer was the first comprehensive effort to address the problems in the system that led – in sequence – to the subprime crisis, the housing crisis, and the financial crisis. The Dodd-Frank Act, which contains over 2,300 pages of legislation, …

Private Transfer Fee Covenants: Cleaning Up The Mess, R. Wilson Freyermuth

Faculty Publications

The purposes for creating a "private transfer fee" covenant range from supporting community services to creating a future revenue stream for the developer. Traditionally, courts examined these covenants using the touch and concern standard. The Restatement (Third) of Property: Servitudes, however, rejects this standard. This Article discusses this new approach as it relates to private transfer fees. The author argues that private transfer fee covenants are contrary to public policy and encourages states to enact legislation limiting the enforcement of these covenants.

Crystals, Mud, Bapcpa, And The Structure Of Bankruptcy Decisionmaking, R. Wilson Freyermuth

Faculty Publications

A critical feature of any legal system is its formal dispute resolution mechanism. From the perspective of a transactions lawyer, the dispute resolution process should be structured to accomplish (or at least contribute positively toward) doctrinal clarity.

Eminent Domain Reform In Missouri: A Legislative Memoir, Dale A. Whitman

Faculty Publications

The Missouri General Assembly, like a number of other state legislatures, undertook to reform its statutes relating to eminent domain during the 2006 legislative session. This article is the story of that effort and an analysis of the result. I write from a personal perspective. I was fortunate to have been personally involved in many of the decisions that were made as the bill, House Bill 1944, made its was through the legislative process. This opportunity was, I think, fairly unusual for a law professor; in thirty-seven years of teaching property law, I had never previously been so closely engaged …

Adopting Restatement Mortgage Subrogation Principles: Saving Billions Of Dollars For Refinancing Homeowners, Dale A. Whitman, Grant S. Nelson

Faculty Publications

In eras of declining interest rates, millions of residential mortgage loans may be refinanced. When this occurs, it is customary for the refinancing lender to require a title examination and a new mortgagee's title insurance policy. This requirement is expensive, usually costing several hundred dollars or more, and the cost is invariably paid by the borrower. This Article proposes that in the vast majority of refinancings this expense can be substantially reduced or even eliminated. This result can be achieved through proper understanding, adoption, and use of the doctrine of equitable mortgage subrogation articulated in the Restatement (Third) of Property: …