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A Law and Economics Exam Question
In Virginia the common law has long held that if a neighbor's tree encroaches on your yard you may cut the branches as they fall over the property line but any damage the tree does to your property is your problem. Your neighbor can even sue if your pruning kills the tree. Last week the Virginia Supreme Court overruled this 70 year-old precedent so that now it's your neighbor's duty to prune or cut down the tree if it is a "nuisance."
Discuss. Which rule is better the new rule or the old? What does this ruling imply about Posner's hypothesis about the efficiency of the common law? What would Coase say?
Posted by Alex Tabarrok on September 18, 2007 at 07:10 AM in Economics | Permalink
Comments
The question to ask is whether the neighbour would have the same objections to your trimming the tree - or if you would have the same objections to the damage caused - if the tree bore apples or plums, which you were also regularly partaking of, in the process. I think such normative framing would challenge Posner's common law efficiency hypothesis and change the determination of whether the tree indeed is a "nuisance"..
Posted by: Shefaly at Sep 18, 2007 8:15:58 AM
Hmm, well, assuming the owner of the property decides where to plant the tree and what tree to plant, they can avoid damaging their neighbours' property by changing how they plant trees. The neighbour can reduce damage from trees by changing where they build stuff, but I would think that on average the costs of changing building location is higher than the costs of changing tree locations (there may be some exceptions, eg for wind-break trees).
Furthermore, a landowner could deliberately choose to plant a tree where it would impose costs on their neighbour and have reasonable chances of succeeding in their aim. The cost of planting a tree is pretty minimal compared to the damage it can do, especially if the landowner's house is far away from the boundary compared to the neighbour's house.
This obviously creates opportunities for extortion by threatening to plant really intrusive trees (long root systems, etc) along the boundary line.
Between this and my intuition that the landowner is the least-cost avoider, and the trouble of transaction costs, I'd say that the "landowner pays" rule is more efficient than "neighbour pays" for new trees.
For existing trees, the analysis is a bit less clear. Clearly under Coasian bargaining the neighbour could pay the landowner to have the tree removed if that was cheaper than fixing the damage caused - the property right allocation changes the wealth transfer but not overall efficiency.
However I can foresee a lot of arguments down the track about whether a tree was existing or new, so I'm inclined to favour the rule change regardless of the age of the tree.
If the neighbour benefits from the tree being by the property, eg gathering fruit from it, then they can come to whatever agreement with the landowner they like. The legal problem only appears if the neighbour decides the damage caused by the tree to their property is greater than any benefits.
Anything I'm missing?
Posted by: Tracy W at Sep 18, 2007 8:56:35 AM
The new law is more efficient because it iternalizes the cost of planting a tree. The owner of the tree can agree to pay the neighbor for the nuisance or choose to trim the tree. This allows for efficient bargaining, where the owner can either pay the neighbor to encroach on his property or prevent such an encroachment.
Under the previous law, the neighbor would only trim the neighbors tree if the cost of the nuisance plus the potential for damage to his land was greater than the cost of pruning plus potential to kill the tree. The neighbor is not the best person to make such a deicsion.
Posted by: Nick at Sep 18, 2007 9:03:15 AM
Under the former rule, growing a tree benefits A, but he is not burdened with its full costs – the damages or nuisance caused by runaway branches are incurred by neighbor B (externalities). The new rule, it seems, internalizes this cost to A, which might lead to the optimal amount of tree growing. So the new rule seems more efficient (but I guess we should also consider if A is, in fact, the least cost avoider of those damages – which he probably is, since he is the one that figures out the best place to plant the tree and how to grow it).
This conclusion implies that the old rule is not efficient, which would undermine Posner’s argument. However, I believe Posner never said all common law rules were efficient – only that “most rules” were. So the ruling doesn’t seem to affect his theory (of course, one might criticize his “most rules” position as too vague or not falsifiable – but that, I think, is a different discussion).
Finally, Coase might regard the ruling as irrelevant to determine the outcome of the conflict – A and B can always contract around the rule (the ruling will affect who has to pay to whom, but not the ultimate fate of the tree).
Posted by: CrisD at Sep 18, 2007 9:05:52 AM
So on your exams, you essentially want students to write an MR blog entry? Neat.
Posted by: josh at Sep 18, 2007 9:08:48 AM
***Pruning Alone***
“An inefficient rule makes the people it affects on net worse off, giving them an incentive to keep trying to contract or litigate around it. Eventually the water wears down the rock; after enough law cases, a court finally gets the right answer.”
-- David Friedman (Law’s Order)
It took 70 years for this rule to change. If it was inefficient, what took so long? My guess is that transaction costs have been low for the majority of these past 70 years, and thus people have preferred to contract around the rule (ala Coase) rather than bring their grievances to court. However, sometime in the recent past, the cost of contracting rose relative to the cost of litigation. Why? We stopped socializing with our neighbors.
Now, instead of your friends Fred and Ethel living next door that you can comfortably talk to, you have these strangers with *their* darn tree on *your* property. “Honey, how can I ask these people if I can cut up their tree, I don’t even know them!?” Trees go un-pruned, problems ensue, what to do? Call in a third party. They have their lawyers, you have yours. It’s all very civil and impersonal. Eventually the water wears down the rock. Who ever said social anxiety couldn’t be a transaction cost?
Posted by: Student at Sep 18, 2007 9:20:34 AM
The old rule probably reflected the fact that in the past people rarely built their structures so close to the property line as to make them vulnerable to damage from a neighbor's tree. Nowadays, people build much closer to the property line and the chances for such damage are higher.
It seems to me that it becomes more important to have an efficient rule when the likelihood of loss is higher. So I assume that the new rule is more efficient. The old rule seemed to divide the "property rights" between the two parties. Each had a right to do as they pleased with the portion of the tree on or overhanging their property. The new rule gives the property rights (and associated loss liability) entirely to one party. This strikes me as cleaner and probably transaction-cost reducing.
Posted by: henry evans at Sep 18, 2007 9:29:02 AM
Old law clearly best as it erred on the side of over-pruning, and trees grow back but houses don't.
Posted by: dsquared at Sep 18, 2007 9:57:42 AM
The new law is considerably better. Under the old law the planter / owner of the tree held no responsibility to their actions of where the tree was planted with no negative consequences. They had an incentive to plant the tree on the property line to force the neighbor to do much of the maintenance work and bare the risk if the tree caused damage. Under the new law the planter / owner of the tree bares most of the responsibility of his/her actions and is responsible for the maintenance.
Posted by: Steve Roberts at Sep 18, 2007 10:06:56 AM
I rarely cut the branches of my neighbour's mango tree, because I get sweet "Malgova" mango every now and then during the mango season of April to July.It provides positive externality to me in many ways:first,as Prof.Meade has long ago said, my honey bees do not have to fly farther away to collect honey during the blossoming season,second,the tree provides a nice shade to me also and I can have a good nap below it in afternoons, and thirdly,during season those mangoes which fall inside my property will some times exceed my need so that I could sell the surplus.
My neighbour,though he knows that my bees provide a service to his tree through pollination, is about to cut the branch of his tree leaning inside my property.
Posted by: GVV at Sep 18, 2007 10:20:43 AM
I'm not sure which side I fall on in the debate, but I think analytically we should include the fact that not all tree inhabiting property owners planted them, and that many trees if cut down won't be replaced in similar form in the lifetimes of the parties. Further it is very possible that the tree existed before the neighbor's house. I understand that most nuisance law doesn't care if you move into a known hazard, but I've never been analytically comfortable with that.
Posted by: Sebastian Holsclaw at Sep 18, 2007 10:30:55 AM
That encroachment (the nuisance, not the hazard dsquared, according to the neighbor) [who needs to encroach back], possibly that perfect stranger as Student notes, could be something other than plums and apples (but who knows whose hands have been on those innocent looking fruits...and what inorganic sprays?)[Anyone can be a nuisance...with the appropriate legal prodding.]
Could be that over the years, the tree has just grown beyond providing shade and shelter from the blazing hot sun...and blocked the neighbor's view...not to mention spawning early onset dementia from living in the dark...as his well-tanned legal counsel prepares to mount his case.
But the guiding light on this rule is not its fairness (to be teased out in court) but its "efficiency" in circumventing this expensive and socially corrosive process.
Posted by: calmo at Sep 18, 2007 10:48:57 AM
The old law appears to have been designed to resolve a majority of cases without the need for the parties involved to take matters to another authority (the courts). Only in cases where pruning actually kills the tree would the neighbors have to call on the state. Under the new law, someone who finds his neighbor's tree oppressive has no recourse (assuming the tree owner declines to cooperate) but to take matters to court. I like the old law better, simply because it allows for easy resolution of the majority of cases. The new law may be more equitable if perfectly administered, but it's more of a hassle.
By way of example, my neighbors had a hedge that ran right alongside my driveway. Over time this hedge (which was planted/rooted on their side of the line) grew large and extended a couple of feet into my driveway. The driveway was narrow to start with, and this made driving up it increasingly difficult. Now, I don't actually know enough about Pennsylvania law to say who is responsible for fixing this state of affairs. But supposing that my neighbors are truculent and lazy, so that even if they are responsible their compliance will never be very satisfactory (hedge trimming is a pain after all): it's a lot easier if I can just trim the thing myself rather than try to bludgeon them with the law.
Posted by: bbartlog at Sep 18, 2007 10:49:02 AM
I think this is a terrible change to a law that for the most part worked for 70 years.
Basically the allows property owners to force other property owners to do yard work.
What if my neighbor is an 80 year old woman? Can I force her to cut down branches on my yard?
Or what if it's a poor family unable to afford a landscaper?
And now that I can have my neighbor cut down branches it sure will make life easier than doing it myself. So you just gave the death sentence to a lot of nice looking trees.
Posted by: Fever at Sep 18, 2007 11:07:09 AM
According to Coase, whether this is efficient will depend on the transaction costs of negotiating with your neighbor. I've always felt like transaction costs in asking a neighbor to prune their tree are somewhat high, as it's embarassing to get antagonistic with a neighbor. I spoke with my neighbor once about trimming his limbs (not knowing what the law actually said, I asked him to do it since it was his tree on my property), and the whole thing was awkward. Which of us will realistically threaten to sue your neighbor if they don't agree to prune their tree - which is really the only credible threat you have.
But, then again, I might be a special case. I'm highly non-confrontational, which is why the tree limbs still hang low on my property from my neighbor's house, even though we had this conversation a year ago...
Posted by: jason voorhees at Sep 18, 2007 11:47:56 AM
Or you could apply the "OLD Chicago School" approach to the problem:
http://cbs2chicago.com/westsuburbanbureau/local_story_206180646.html
Posted by: Corey at Sep 18, 2007 11:56:25 AM
jason voorhees post lends anecdotal weight to my answer. w00t!
In terms of policy implications of "social anxiety" as a transaction cost, I think we should clearly subsidize bowling leagues. Clearly. :)
Posted by: Student at Sep 18, 2007 11:57:02 AM
Maybe we should not see this as an issue between the two neighbors but among the two neighbors and greater society. Because the new law requires that the tree be trimmed only if it is a nuisance, the new law (to be more precise, the unpruned tree) benefits greater society by making for a greener environment. That is, the tree may grow and grow and therefore provide carbon offset benefits up to the point of nuisance. This is better than under the old law. Under the old law, the tree could grow and grow up to the neighbor's line, and its carbon offset ability was limited. Of course, this all requires a measuring of the carbon offset of one tree against the irritation (and eventual nuisance) experienced by the encroached neighbor. It may be the case that this one tree's carbon offset does not outweigh the neighbor's irritation; however, if we add up all such trees, then the greater benefits may outweigh such irritation...especially if some encroached neighbors could care less and therefore have no irritation that may be factored! Just having a bit of fun with this post!
Posted by: Mark at Sep 18, 2007 12:05:08 PM
As a VA resident who recently had the top of a neighbor's tree fall over my fence, I'm sympathetic to the new law; however, I worry that it will encourage people to use the law more than they should. This is the sort of situation where actually being a good neighbor and talking to the owners of the offending tree will usually be far less costly and more pleasnt than any legal option, and the old law encouraged that. I'm certainly happier having talked to my neighbors both in that situation and another that's similar to what Bartlog describes than I have been in any case where I've dealt with the law.
Posted by: Some Random Economist at Sep 18, 2007 12:13:38 PM
The old law was better.
I agree with bartlog in general plus a few concerns.
Will the courts now need to decide when a tree has become a nuisance?
An added risk to the owner of the tree is that a hostile neighbor can drag you into court over the tree, when the real issue is that the complaining neighbor is just a general nuisance. The complainer may be too lazy to trim a tree but they are happy to force you to defend yourself in court. For these people, you have lowered the cost of being a nuisance and they may be much pickier about invasions of their property. Under the old law, the tree had to be enough of a nuisance that the complainer would actually go through the trouble of removing the offending branches.
Fewer or smaller trees may be planted. The potential cost of owning a tree has just increased to the detriment of society.
I currently have six trees that have grown outside my property line. Neighbors seem to enjoy the benefits. I have two neighbor trees that have crossed my property line. I prune one neighbor tree very two years because her tree has dropping branches that makes mowing my lawn difficult. I would not want to prove in court that because her tree slows me down when I mow, that is a nuisance tree. I also run the risk of retaliation. If I force her to pay for the removal of branches she can sue to force me to prune my trees. My trees are much larger and would be very expensive to prune. If I lost in court, the cost effective alternative with be tree removal (otherwise I am forced into annual tree trimmings). Worst case, the community loses eight trees because I don't want to bump my head when I cut the grass.
Posted by: DanC at Sep 18, 2007 1:18:18 PM
For Coase, both rules are equally good as soon as the rule is clear .It give the right to suit to one part , wich one does not matter.
Posted by: juancarlos at Sep 18, 2007 1:59:53 PM
To juancarlos, I think you are correct that people will adjust based on the rules given to get an optimal outcome for them. Regretfully, the new rules make owning a tree more expensive. To the degree that trees create positive externalities for the community, the new rules will have a chilling effect on the planting of trees by homeowners and a loss to the community.
Posted by: DanC at Sep 18, 2007 6:06:14 PM
I would put a shotgun on fence when he is outside and smile and say: Tree falls by accident? Gun goes off by accident. Oh, is that your cute puppy outside running about near my property?
Posted by: Leon Trotkey at Sep 18, 2007 6:59:05 PM
Student has done very well so far so I'll just agree with him.
Posner's reasoning isn't invalidated here simply because, as the student pointed out, it just hasn't been that big of deal. Otherwise this silly law been cleaned up already.
Posted by: Ray G at Sep 18, 2007 8:26:56 PM
"It took 70 years for this rule to change. If it was inefficient, what took so long?"
It took 70 years for the trees to grow big enough to reveal the inefficiency of the old law.
Posted by: bruce rogers at Sep 18, 2007 8:27:30 PM
