Publication Type

Journal Article

Version

publishedVersion

Publication Date

1-2004

Abstract

In this article, I made a comparative study on the laws regulating the restrictions established by developers or among property owners in common interest communities in the U.S. and Japan, as well as the cultural and social backgrounds against which they are created. It appears that similar rules exist in both countries to combat excessive restrictions on life in common interest communities, although the American law treats the ex ante restrictions somewhat differently from the ex post ones. Using a law and economics perspective, I argue that such disparate treatments make good sense given the feasibility of internalizing the effects of ex ante restrictions into the purchase price. Hence, the law can allow for more freedom in imposing ex ante restrictions insofar as they are not in conflict with overriding public policies. On the other hand, ex post restrictions must pass through more skeptical eyes of the court. In my view, the law should be structured to encourage negotiations among residents when ex post restrictions are to be imposed. In situations where no material externalities are involved, ex post restrictions should only be adopted if a consensus among residents is reached. If a consensus is not achievable, ex post restrictions may only be imposed upon activities with material spillover effects and the court must decide a proper compensation to those who will be negatively affected by such restrictions. In a nutshell, property rules should be used in cases without material spillover effects to protect residents against negative effects of ex post restrictions, while liability rules are necessary to facilitate adoption of ex post restrictions on activities with externalities.

Discipline

International Law

Publication

Civil and Commercial Law Review

Volume

32

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