TENANCY IN “ANTICOMMONS”? A THEORETICAL
AND EMPIRICAL ANALYSIS OF CO-OWNERSHIP
Yun-chien Chang1
ABSTRACT
This article argues that a resource held in tenancy in common is likely to be underused
and underinvested, and is thus better characterized as anticommons. Nevertheless, tenancy in common does not necessarily create tragedy, as under most legal regimes each
co-tenant has a right to petition for partition at any time, and after partition, new owners
are likely to utilize the resource more efficiently. Using data from Taiwan, this article finds
that cooperation among co-tenants does not fail as often as the literature has suggested.
In 2005–2010, at least 82.5 percent of the co-ownership partitions were conducted
through voluntary agreements, while only about 7.5 percent of the partitions were
ordered by the court. In addition, using multinomial logistic regression models, this
article finds that the court tends to order, and the plaintiffs tend to petition for, partition
by sale when partitioning in kind or partial partition would create excessively small plots.
(JEL code: K11)
1
Assistant Research Professor of Law and Deputy Director of the Center for Empirical Legal Studies,
Institutum Iurisprudentiae, Academia Sinica, Taiwan. E-mail: [email protected].
J.S.D., New York University School of Law.
I thank the helpful comments by the two referees for this journal, two anonymous referees for CELS,
Anne van Aakan, David Abrams, Jennifer Arlen, Lisa Bernstein, Thomas Eger, Ted Eisenberg, Lee
Anne Fennell, Yehonatan Givati, Kristoffel Grechenig, Michael Heise, Dan Ho, Bert Huang,
Kuo-Chang Huang, Mao-Zong Huang, Mark Ramseyer, Ronit Levine-Schnur, Katarzyna
Metelska-Szaniawska, Eric Talley, Mark Ramseyer, Issi Rosen-Zvi, Alessandra Rossi, Dan
Rubinfeld, Dan Simon, Henry Smith, Eric Talley, Wen-Yeu Wang, Wolfgang Weigel, and participants of the 22nd Annual Meeting of the American Law and Economics Association at Stanford Law
School, the 28th European Law and Economics Annual Meeting at University of Hamburg, the 2011
Conference on Empirical Legal Studies at Northwestern Law School, and Contracts – Economic,
Behavioral and Empirical Perspectives Conference at Hebrew University Faculty of Law.
Jung Chen, Yea-Shou Chen, Yi-sin Chen, Yu-chih Chen, Man-Ting Chien, Po-jen Huang, Yu-June
Tseng, and Hsien-Yung Yi provided wonderful research assistance. Funding by Academia Sinica and
National Science Council of Taiwan is greatly appreciated. I also wish to express my gratitude
toward the Society for Empirical Legal Studies for awarding me the first CELS Best Poster
Presentation Prize.
ß The Author 2012. Published by Oxford University Press on behalf of The John M. Olin Center for Law, Economics and Business
at Harvard Law School.
This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License
(http://creativecommons.org/licenses/by-nc/3.0), which permits unrestricted non-commercial use, distribution, and
reproduction in any medium, provided the original work is properly cited.
doi:10.1093/jla/las011
Advance Access published on August 9, 2012
516 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
1. INTRODUCTION
“The tragedy of the anticommons” has received considerable attention in property law since Heller (1998) popularized the idea.2 Before Heller’s work, “the
tragedy of the commons” (Hardin 1968) had concerned generations of property scholars.3 Basically, open-access commons arise when no one has the legal
right to exclude, whereas anticommons emerge when many parties have the
legal right to exclude. Because the right to exclude is one of the three essential
elements of property rights (Chang & Smith 2012), open-access commons,
technically and legally speaking, are not property rights.4 The discussion of
commons can thus be linked with the two most influential law and economics
articles (Coase 1960; Calabresi & Melamed 1972)—two pivotal studies on
(in)complete property rights and assignment of entitlements. Since these articles, the property literature has tended to hold the view that if transaction costs
are low or zero, as long as entitlements are assigned, no matter to which party,
voluntary transactions will achieve allocative efficiency. Put differently, property rights are considered a good thing, a prerequisite for efficient transactions,
as long as the costs of establishing property rights justify the benefits (Demsetz
1967). It was in this context that Heller (1998) suggested too many property
rights (anticommons)—in the same, contiguous, or complementary resource—
might hamper economic efficiency.
Heller’s (2008) recent book further provides a myriad of examples of anticommons in various legal fields in many countries. Heller (2008) has become
influential,5 though his theory has its share of critics (Claeys 2011; Epstein
2011). None of the theoretical criticism, however, focuses on tenancy in
common. Moreover, no empirical study has been conducted to test a fundamental factual question: how prevalent is the tragedy of the anticommons?
Heller (2008, 44) himself observes that “[a]nticommons theory is now
well established, but empirical studies have yet to catch up. How hard is it to
2
The idea of anticommons can be traced back to at least Augustin Cournot’s work in the nineteenth
century (Kominers and Weyl 2011). In the legal academia, Michelman (1982) and Ellickson (1993,
1322 fn. 22) discuss anticommons issues before Heller (1998).
3
Now there are also rich discussions of “semicommons” (Smith 2000; 2005a; 2008; Fennell 2011a, b),
referring to properties that are partly privately owned and partly collectively owned.
4
Limited-access commons, in contrast, are “property on the outside” (Rose 1998, 144).
5
For example, Volume 53, Issue 1 of the Arizona Law Review collects conference papers dedicated to
the discussion of Heller (2008).
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 517
negotiate around ownership fragmentation?”6 In this article, I provide a theoretical critique of Heller’s and others’ evaluation of the inefficiency of tenancy
in common. In addition, I conduct two empirical tests to examine whether
tenancy in common creates the tragedy of the anticommons.
The theoretical necessity of re-evaluating the efficiency of tenancy in
common is apparent. On the one hand, some scholars assert that tenancy in
common produces the tragedy of the commons (Craig-Taylor 2000; Dagan &
Heller 2001; Mitchell 2001), which is commonly characterized as a resource
being overused by commoners. On the other hand, Heller (2008) considers
tenancy in common as creating the tragedy of the anticommons, suggesting
that a co-owned resource is underused. The decline in the number of Black
farms in the USA due to tenancy in common is used by both sides as evidence
for their respective claims. One might ask, what tragedy does tenancy in
common create?
This article categorizes the efficiency concerns regarding tenancy in common
into two types: fragmentary share and fragmentary land. The fragmentary share
problem, discussed in Section 2, arises when a resource is held in tenancy in
common by numerous parties. Heller (2008) and others suggest that because of
high transaction costs, cooperation among co-tenants often fails, and failed
cooperation then causes underuse of, and underinvestment in, co-owned properties. A resource held in tenancy in common is thus better characterized as an
example of anticommons, rather than one of commons—I call “tenancy in
common as anticommons” as “tenancy in anticommons.” Nevertheless, this
article argues that “tenancy in anticommons” does not necessarily become
tragic, because co-tenants are not stuck in the suboptimality of underuse and
underinvestment; instead, each co-tenant has a unilateral right to petition the
court for “partition”7 and end co-ownership. If the court orders partition by
sale, it will solve the fragmentary share problem and avoid the fragmentary land
problem. If the court orders partition in kind and tiny pieces of plots are
created, a fragmentary land problem (or, for that matter, the tragedy of the
anticommons) emerges.
6
For discussions of empirical evidence of anticommons in patent law, see the literature cited in
(Barnett 2009, 428–429).
7
Partition “is the remedy available to one or more of several co-owners when at least one of them
seeks to separate his ownership and control of the asset from the other co-owners, and it results in
the ‘division’ of the asset. Sometimes legal partition of real estate entails the physical division of the
asset into as many shares/pieces as there are owners, according to their interests; if that cannot be
done equitably, the asset is sold for the best obtainable price, and the proceeds distributed according
to ownership interests. Physical division is called partition in kind, whereas sale of the asset is known
as partition by sale” (Baucells and Lippmant 2001, 1195).
518 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
This article also empirically examines Heller’s (2008) claim that, because of
high transaction costs, cooperation among co-tenants often fails. It is difficult
to measure transaction costs among co-tenants or quantify their cooperation in
every respect. This article thus tries to capture co-tenants’ cooperation in one
particular context: partition of co-owned properties. If co-tenants’ transaction
costs for reaching a voluntary solution of partition are low enough, co-tenants
will prefer “partition by consensus”8 (cooperation) to “partition by court”
(non-cooperation) (Table 1), as the former ensures that every co-tenant is
satisfied with the partition plan. As transaction costs increase,9 co-owned properties are more likely to be partitioned by the court. Observing the distribution
of partition methods thus enables us to get a sense of whether transaction costs
among co-tenants, at least in the partition context, are often high relative to the
gains from voluntary trade (partition by agreement).10 Using data from Taiwan,
this article finds that more than 90 percent of the time co-tenants were able to
partition their properties by consensus, suggesting that cooperation among
co-tenants may not fail as often as the literature has suggested.
The fragmentary land problem, discussed in Section 3, often arises after
co-owned properties are partitioned in kind—thus, partition rights are the
solution to the fragmentary share problem but could be the instigator of a
fragmentary land problem. Heller (2008) worries that tenancy in common
gives co-tenants strong incentives to “share chop;” that is, carving co-owned
properties into tiny, useless pieces of land. “Big-inch” plots—as Heller (2008)
colorfully put it—would not create as much value as they would have had if the
8
By “partition by consensus” I mean that co-tenants reach a voluntary agreement to partition the
property in kind, by sale, or through other approaches. Therefore, mediation and settlement during
the litigation process will be counted as “partition by consensus” in this article. The registration
system in Taiwan requires all partition actions be registered to be effective. Thus, all partitions by
consensus will be registered and thus included in my dataset.
9
Following Allen (1991, 2000), I separate information costs and transaction costs. But it seems to me
that imperfect or asymmetric information is not a big issue in co-ownership partition, as all parties
are owners, and they should have roughly the same prior information and should be able to garner
necessary information in the capacity as a co-tenant. Put differently, most failed cooperation to
partition voluntarily should be attributed to high bargaining costs (a type of transaction costs), not
imperfect or asymmetric information.
10 Throughout this article, I describe transaction costs (or more specifically, bargaining costs) as high
or low in relative terms; that is, as compared with the gains from voluntary transactions. Transaction
costs here cannot be computed and compared in absolute terms, because the gains from trade vary
from resource to resource. For example, the gains from voluntary partition regarding a
one-million-dollar land are potentially higher than those regarding a one-thousand-dollar land.
And of course, the number of co-tenants, the distribution of shares, etc., will influence the expected
gains from voluntary partition, too. My goal here is a modest one; that is, to show that transaction
costs among co-tenants are often low enough (i.e., lower than the gains from trade) to make
voluntary agreements feasible.
Winter 2012: Volume 4, Number 2
Table 1.
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Journal of Legal Analysis ~ 519
Typology of partition actions
Partition methods
Partition approaches
Divide
Sell
Hybrid
Voluntary
Involuntary
Partition in kind by consensus
Partition by sale by consensus
Partial partition by consensus
Partition in kind by court
Partition by sale by court
Partial partition by court
neighboring big-inch plots were owned by a single owner. In addition, high
transaction costs would make land assembly by developers very difficult.11
Therefore, partitioning co-owned properties in kind may lead to the tragedy
of the anticommons.
This article holds a different view. Co-tenants do not have strong incentives
to share-chop, as acquiring big-inch plots usually does the opposite of maximizing wealth. Thus, theoretically, partition in kind by consensus is unlikely to
result in fragmentary land. Nevertheless, if judges are not sufficiently aware of
the disutility of share-chopping, partition in kind by court may lead to the
tragedy of the anticommons. The second empirical study in this article sets out
to test whether the court and co-tenants as plaintiff are inclined to share-chop.
Using multinomial logistic regression models to analyze randomly sampled
court cases from Taiwan, this article finds that both the plaintiffs and the
judges in partition lawsuits tend to use partition by sale when partition in
kind or partial partition would produce fragmentary land. In other words,
neither courts nor co-tenants prefer to share-chop.
2. THE FRAGMENTARY SHARE PROBLEM
This section deals with the fragmentary share problem. Section 2.1 explores the
theoretical aspect of this problem, particularly whether tenancy in common is
an example of commons or anticommons, finding that tenancy in common is
anticommons, but not necessarily tragic. Section 2.2, using partition data from
Taiwan, empirically examines whether cooperation among co-tenants has often
failed.
11 Even the government, with eminent domain power or the power to re-adjust land (prevalent in
countries such as Taiwan and Japan), cannot always easily combine big-inch-level land parcels
together.
520 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
2.1. Theory: Tenancy in Common—Commons or Anticommons?
A majority of the commentators have portrayed tenancy in common as
limited-access commons, and they link tenancy in common (especially with
regard to heir property) to a tragedy—even a new term “the tragedy of the
tenancy in common” has been coined (Rivers 2007, 50–52). Most prominently,
Hanoch Dagan & Michael Heller (2001, 551–552), in their important work,
Liberal Commons, use tenancy in common in the American law as a major
example of the tragedy of the commons.12 In contrast, Heller (2008, 108), in
his recent book, Gridlock Economy, portrays co-ownership and partition law as
suffering from a “share chopper dilemma,” a type of anticommons. Below I
engage in this debate, concluding in favor of the anticommons camp.
2.1.1 Overuse or Underuse?
The major theoretical reason tenancy in common may create overuse is that
co-tenants can possess and use the co-owned property without paying rental
value to other nonpossessory co-tenants—this is the rule applied in a majority
of states in the USA (Stoebuck & Whitman 2000, 205; Dagan & Heller 2001,
611; Dukeminier et al. 2010, 357). Each co-tenant thus would have an incentive
to possess the co-owned resource and to overuse, as she would obtain the full
use value while bearing only part of the costs (assuming that the possessory
co-tenant can ask non-possessory co-tenants to contribute to the general
upkeep costs13). In other states, however, when a possessory co-tenant derives
income from her sole possession of the co-owned property, she has to account
to other nonpossessory co-tenants for the reasonable rental value of the property (Stoebuck & Whitman 2000, 205; Dagan & Heller 2001, 611).
All other doctrines regarding tenancy in common should generally lead to
underuse. First, if the possessory co-tenant receives fruits or yields from the
co-owned property or collect rents from third parties, she must “account to
[non-possessory] cotenants for the amount received” (Dukeminier et al. 2010,
357),14 and their time and expenses for managing the revenues will not be fully
credited or reimbursed. Internalized costs along with externalized benefits
12 While Dagan & Heller (2001, 611) emphasize that the common-law doctrine of tenancy in common
“facilitates a race to overuse,” Dagan & Heller (2001, 614) also point out that “absent partition,”
tenancy in common will lead to underuse.
13 Dukeminier et al. (2010, 357) point out that a possessory co-tenant cannot ask for contribution of
paid taxes or interest if she is in sole possession of the property and the use value she enjoys surpasses
the cost.
14 “In the final accounting incident to every partition action, each cotenant may be charged with rents
and profits actually received by him in excess of his pro rata share” (Stoebuck & Whitman 2000,
220).
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 521
naturally lead to underuse. Moreover, possessory co-tenants who go too far as
to exclude or oust other co-tenants would have to pay damages (Stoebuck &
Whitman 2000, 203–204). Finally, for co-tenants who dislike using co-owned
properties unilaterally, it takes a consensus to manage the co-owned property
(Dagan & Heller 2001, 614). The transaction costs of reaching unanimous
decisions will bar some opportunities to use the co-owned property.
In a similar vein, resources held in tenancy in common will be underinvested,
too, as a co-tenant who unilaterally improves the co-owned property takes a
significant risk that she will not be fully reimbursed (Dagan & Heller 2001,
612–613). Stoebuck & Whitman (2000, 208, 220) observe that during the partition procedure, “improvements (to the extent they have increased the value of
the property)” will be credited to the co-tenants who improve. The qualification (increasing value) and the delayed reimbursement would further reduce
co-tenants’ incentives to invest, not to mention that when improvements cost
more than they yield in terms of market value, the improver will not be compensated (Dukeminier et al. 2010, 358). In addition, it is difficult for all
co-tenants to reach a unanimous agreement on investing in the co-owned
property. Moreover, as Dagan & Heller (2001, 606) have pointed out, the
threat of partition will also render co-owned properties underinvested.
In sum, while whether the incentive to underuse will outweigh the incentive
to overuse is eventually an empirical question, theoretically it appears that
underuse of co-owned property is the more likely result. Underuse, along
with underinvestment, is generally regarded as the trademark of anticommons
(but compare Fennell 2011a, 42–43).15 Hence, if one has to choose between
commons and anticommons to describe tenancy in common, anticommons
appear to be a better fit than (limited-access) commons (Holderness 2003,
76).16 One caveat, however, is in order. Sticking to just one label (anticommons) could be misleading, as the (overall) underuse or overuse of resources
held in tenancy in common may depend on the exact doctrines in the jurisdiction, the number of co-tenants, the social norms regarding cooperation among
15 I agree with Fennell (2011a) that the anticommons (underuse) versus commons (overuse) dichotomy is oversimplifying. However, since it is still the common way to label, and I am responding to
the literature that uses this conventional dichotomy, I will still call tenancy in common as anticommons because it tends to create underuse of resource. The more important point should be that
resource held in tenancy in common tends to be underused and underinvested, rather than how we
label this phenomenon.
16 In addition, unlike under typical commons, under tenancy in common, any co-tenant can, without
previous agreement to the contrary, break up the commons unilaterally by petitioning the court to
partition the co-owned property. Moreover, in commons, “each group member has the unilateral
ability to transfer commons resources to herself” (Fennell 2004, 916), whereas a co-tenant can only
do so under limited circumstances in some jurisdictions.
522 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
co-tenants, etc. Put differently, tenancy in common’s general tendency to produce underuse should not entirely overshadow its occasional inclination to
produce overuse.17
2.1.2 Not Necessarily Tragic
Co-owned resource tends to be inefficiently under- or overused and underinvested,18 no matter tenancy in common is labeled commons, anticommons,
or a mixture of both. However, the more critical point is that “tenancy in
anticommons” (or any other label) is not necessarily tragic. Commentators
have argued that anticommons and commons are not always tragic, because
some resources are better unused or widely used (Heller 1998, 673–675; Fennell
2004, 912–913; 2011a, 35–36). And Ostrom (1990, 91–102) has demonstrated
that commons can be successfully managed to avoid tragedy.
Here I view this claim from a different angle: anticommons is not tragic when
the parties involved can easily get out of it. For tenancy in common to be tragic,
co-tenants have to be trapped in the low-level equilibrium of underuse
(or overuse) and underinvestment, because of strategic behaviors or high transaction costs generally. In the tragedy of the anticommons, customs, legal rules,
and regulations that can resolve or greatly ameliorate the extent of underuse are
absent or malfunctioning. Tenancy in common, however, is not tragic because
each co-tenant’s right to petition for partition can end the inefficient use.19
Hence, ordinarily co-tenants do not face gridlock, or the “tragedy” of the
anticommons.
2.1.3 The Decline of Black Farms
Commentators often use the massive farmland loss among African Americans
as evidence that tenancy in common and partition law create either the tragedy
of the commons (Craig-Taylor 2000, 772; Dagan & Heller 2001, 551; Mitchell
2001) or the tragedy of the anticommons (Heller 2008, 121–125). Their story
goes that African Americans seldom leave wills so their estates become heir
17 I thank the anonymous referee for pushing me to clarify this point.
18 Not all over- or underutilization of resources held in tenancy in common is inefficient, though. For
example, when co-tenants reach an agreement to preserve the co-owned land—intentionally
“underuse” it—it is not inefficient. Inefficient underuse arises when co-owned properties would
have been used in their most valuable way, had it not been for the high transaction costs that hinder
agreements of all co-tenants.
19 Tenancy in common can also be nontragic if co-tenants can cooperate. Whether this condition holds
is still open to question, and the following empirical study aims to examine the frequency of
cooperation among co-tenants. Scholars have different opinions as to whether the threat of partition
may facilitate (Merrill & Smith 2007, 643) or hamper (Heller 2008, 124) cooperation in using and
investing among co-tenants.
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 523
properties, co-owned by numerous descendants. Over generations, a farm that
was once owned by one person becomes a property held in tenancy in common
by dozens of people. Any co-tenant can petition for partition by the court,
which prefers partition by sale. Eventually, the court will order an auction,
in which White Americans will buy the property. A lot of Black farms are
therefore lost.
The decline of Black farms does not demonstrate that tenancy in common
produces either tragedy. Claeys (2011, 34–35), and even Dagan & Heller (2001,
604–606) themselves, doubt whether tenancy in common and the partition law
are to blame for the loss of Black farms. Even if they have contributed to the
decline of Black farms, it is not necessarily “tragic”—indeed, quite the contrary.
A farm co-owned by many shareholders will not be used and invested as efficiently as it would be if owned by a single owner. The partition sale (loss) of
Black farms transfers the underused co-owned property to the highest bidder
who, probably as a sole owner, has the capacity and incentive to use and invest
optimally. In other words, the sale (or, for that matter, loss) of Black farms
actually avoids underuse and underinvestment, rather than creating them.
Therefore, the loss of Black farms might be tragic for African Americans, but
it is neither a tragedy of the commons nor a tragedy of the anticommons.20
2.1.4 Partial Solutions to Underuse and Underinvestment
Even though tenancy in common does not necessarily produce tragedy,
nonintentional underuse and underinvestment of co-owned properties are
still inefficient. Two scenarios will cause underuse and underinvestment:
Co-tenants cannot reach a deal, and co-tenants can reach a deal with each
other but cannot bind later transferees. This subsection explores a few partial
solutions that might ameliorate the underuse and underinvestment.
Although partition can resolve the underuse and underinvestment, the threat
of partition may impede use and investment.21 Any agreed use of the co-owned
property, with an agreement to waive the right to partition, could be disrupted
when one co-tenant (strategically or not) sells her share to a third party who,22
20 Nevertheless, the loss of Black farm may reduce social welfare because diffuse ownership (co-owned
Black farms) might decentralize political power and facilitate democratic governance (I thank the
anonymous referee for this point). Besides, the auction price may be below fair market value (not to
mention economic value), and thus the auction winner does not necessarily value the property
more. I will address this issue in another work.
21 This theoretical claim is subject to debate, see supra note 19.
22 The parties may include an agreement not to sell. But if one co-tenant does sell her interest to a third
party, other co-tenants are unlikely to ask for specific performance (revoking the sale), and a contractual obligation not to sell does not automatically run to the third party—as a property right does
(Chang & Smith 2012).
524 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
not bound by the prior agreement among co-owners, requests a different management of the property or requests partition outright.23
There are legal tools to neutralize the threat. Some civil law countries,
including Germany (Civil Code §§746 and 1010I), Taiwan (Civil Code
§826-1I), and the Netherlands (Civil Code §3:168IV) enable the “covenants
to use co-owned property and not to partition” to run with the land if such
covenants are registered (Chang & Smith 2012). This solution, however, may fit
uneasily into the current US law,24 as the recording system adopted in the USA
would make it more difficult for transacting parties to locate such covenants
(compared with the registration system adopted in the civil law countries),
creating high information costs. In addition, covenants that common
law allows to run with the land seem not to include those between co-tenants.25
Even if they were included, such covenants do not always conform with
the common-law requirements to run (Hovenkamp & Kurtz 2005, 341–342;
Krier 2006, 323–349), such as horizontal privity. If this civil-law tool can be
imported through statutes, this could be used to ameliorate underuse and
underinvestment.26
Such covenants, however, may also create under- or overuse if lasting too
long.27 The original co-tenants who make the covenant may not be able to
envision the most valuable use, say, fifty years later. The once highest and
best use could over time become an inefficient choice. If the law allows such
covenants to last indefinitely, this would create a serious “assembly problem,”
which Fennell (2011a, 41) argues is the nature of the anticommons problem, as
later-generation, more numerous co-tenants could adjust the suboptimal use
only through unanimous agreement to amend the original covenant.
23 Stoebuck & Whitman (2000, 216) suggest that co-tenants can waive their and their successors’ rights
to force judicial partition within a reasonable time. Nevertheless, the two cases they cite do not
support the claim that co-tenants can waive their successors’ rights.
24 Mitchell, Malpezzi, & Green (2010, 616) discuss “tenancy in common agreement” in which
co-tenants waive their partition rights, but do not indicate whether such agreements bind future
transferees.
25 Hovenkamp & Kurtz (2005, 341) is the only literature to my knowledge that mentions (in passing)
such covenants between co-tenants.
26 This legal tool may even slow down the loss of Black farms. The first few co-tenants can agree not to
partition the family farm and use it in a certain way. Even the numerous co-tenants nowadays may
be able to take advantage of this tool, agreeing to authorize, say, the elderly aunt, to manage the
family farm and not to partition.
27 “Covenants to use co-owned property and not to partition” is a type of the “governance” regime.
See Smith (2002) for the distinction between exclusion and governance. Smith (2005a, 310) points
out that flexibility is needed when a governance regime has outlived its usefulness.
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Journal of Legal Analysis ~ 525
To prevent this type of anticommons, two different methods have been used
in civil law countries: Germany (Civil Code §749I) allows such covenants to last
indefinitely, unless there is a compelling reason for the court to end them.28
Other countries such as Switzerland (Civil Code §650II)29 and Taiwan (Civil
Code §823II)30 place a thirty-year time limit on the covenant. The latter model
allows co-tenants to reconsider the most valuable use of their properties at least
every thirty years. Nevertheless, it also reduces the value of the original covenant, because even if the covenant stipulates the most efficient use for years to
come, it is valid for at most thirty years. As the number of co-tenants usually
increases over time, there is no guarantee that the new generation can always
manage to reach a joint decision. In contrast, the former model perpetuates an
efficient covenant but could be too rigid for later co-tenants to remove outdated
covenants—unless the court also thinks economically and has enough information about market price, etc. Neither approach, therefore, is necessarily more
efficient than the other.
Since underuse and underinvestment are unlikely to be eradicated altogether,
we might consider preventing the formation of tenancy in common, at least
those of involuntary nature. Many co-owned properties are heir property
(Holderness 2003, 88). Supposing that the default rule of inheritance is changed
to primogeniture, ultimogeniture, or any regime that gives only one daughter
or son the whole real estate,31 people who die intestate will have their estates
transferred to only one descendent, thus avoiding the creation of tenancy in
common.32 This policy end, however, will be achieved at the expense of egalitarianism regarding inheritance, and may reduce social welfare if, say, the eldest
son under the primogeniture regime is not the descendent who values the
inherited properties the most.
28 Official English translation of German Civil Code available at http://www.gesetze-im-internet.de/
englisch_bgb/englisch_bgb.html#BGBengl_000P749. Dagan & Heller (2001, 619) translate
“compelling reason” as “serious cause.”
29 English translation of Swiss Civil Code by the Swiss government is available at http://www.admin.ch/
ch/e/rs/2/210.en.pdf. See also Dagan & Heller (2001, 619).
30 Official English translation of Taiwan Civil Code available at http://law.moj.gov.tw/Eng/LawClass/
LawAll.aspx?PCode¼B0000001.
31 See Chu (1991) and Parisi (2002, 600) for an economic analysis of primogeniture and
ultimogeniture.
32 Heller (2008, 129–130) attributes the Irish potato famine in the 1840s partly to Ireland’s inheritance
rule—all male heirs inherit.
526 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
***
In sum, as long as co-tenants keep their right to petition for partition, tenancy
in common should suffer from neither the tragedy of the commons nor the
tragedy of the anticommons. Resources held in tenancy in common, however,
are still underused and underinvested, as compared with a resource under the
control of a single owner. How serious the underuse and underinvestment are
depends on whether transaction costs among co-tenants are high. The next
section will provide a preliminary answer to this empirical question.
2.2. Empirics: Does Cooperation among Co-tenants Often Fail?
Heller’s (2008) compelling narrative leaves the impression that cooperation
among co-tenants has often failed.33 This section, using data on Taiwanese
co-tenants’ choices of partition methods, tries to provide an initial assessment
of how frequently cooperation among co-tenants has failed.34
It takes a unanimous (or, in some jurisdictions, a majority) decision to use,
manage, sell, or partition-by-consensus co-owned properties. Ideally, we can
observe meetings and communications among co-tenants in all co-owned
properties and then calculate how often co-tenants reach a consensus (or a
majority decision) in using and managing the co-owned resource. It is, however, very difficult to know how often all kinds of negotiations among
co-tenants fail—for instance, a co-owned plot may be unused because
co-tenants cannot reach a consensus or because they intend to preserve the
plot by not developing it.
Measuring the level of cooperation among co-tenants can be done through
observing co-tenants’ choices of various partition methods. It should be reasonable to posit that, if transaction costs are negligible, co-tenants prefer partition by consensus (cooperation) to partition by court (non-cooperation),
because partition by consensus ensures that every co-tenant is satisfied with
33 For example, Heller (2008, 108) argues that “[o]nce there are too many owners, cooperation fails,
and the farm is sold.”
34 One of the anonymous referees contends that most property lawyers, unlike Heller, would have
assumed that, owing to the unilateral right to petition for partition, most partition disputes end in
partition by sale by agreement. Personally, I do not have such strong a prior. I do not claim that most
property lawyers would be a follower of Heller’s theory and thus my empirical study that demonstrates frequent cooperation would have converted many people. Rather, I think Heller has advanced
a plausible thesis and it should have persuaded some lawyers (perhaps non-property folks) that
infrequent cooperation is a real issue; the contribution of my empirical inquiry is thus to provide
evidence that the hunch of many property experts (according to the referee) is correct—cooperation
among co-tenants does not appear to be a very serious problem.
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 527
the result.35 Nevertheless, when transaction costs among co-tenants are high—
higher than the expected welfare gain of cooperation and litigation costs
combined—not reaching a consensus and leaving the court to determine the
partition plan makes more economic sense. Accordingly, partition by consensus
represents cooperation, denoting relatively low transaction costs, while partition by court means failed cooperation, indicating relatively high transaction
costs. The relative frequency of partition by consensus vis-à-vis partition by
court thus provides evidence for whether transaction costs among co-tenants
are high—put differently, whether cooperation among co-tenants has often
failed.
Granted, one can question that when Heller and others lament the lack of
cooperation in tenancy in common, they are referring to co-tenants’ inability to
cooperate in using and managing the co-owned resource, not in dissolving
co-ownership; and my empirical inquiry of partition cannot prove that
co-tenants are cooperative in using and managing. My responses are that,
first, as mentioned above, there could be other, difficult ways to empirically
investigate the level of cooperation in use and management of co-owned resource, and my inquiry of partition is a worthwhile approach toward further
understanding the issue of cooperation among co-owners. Second, partition is
an “end game” situation in which agents are more likely to behave strategically
and non-cooperatively.36 If my empirical results show that co-tenants are cooperative in partitioning, they are likely to cooperate in using and managing
co-owned resource as well. Finally, Heller’s (2008, 108) narration (quoted in
supra note 33) suggests that in his view partition is one of the aspects that
co-tenants fail to cooperate in.
I will use a comprehensive, official dataset from Taiwan (a civil-law country)
to conduct the empirical study. In many empirical studies, researchers can only
observe cooperation/noncooperation, like settlement/litigation. The Taiwan
database, however, enables researchers to divide cooperation/noncooperation
into four phases (see Figure 1)—bargaining, mediation, settlement, and litigation—and later phases suggest a higher degree of noncooperation. In addition,
the empirical results and their implications should also be illuminating for
other civil law countries, such as Germany, France, the Netherlands, Japan,
and China, as well as the USA, where partition laws are similar: Each tenant
in common has a separate but undivided interest. A co-tenant can sell her share
at will and on her own timetable, but the co-owned property can only be sold
35 A co-tenant may not care about the welfare of her fellow co-tenants, but due to the court’s large
discretion in partition matters, she will not be sure whether the court will rule in her favor.
36 I thank Ronit Levine-Schnur for raising this point.
528 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
Figure 1.
Four phases of co-ownership partition in Taiwan.
when there is a consensus among co-tenants.37 Without a consensus, any
co-tenant can still petition the court for partition at any time, except when
there is a prior agreement to the contrary by co-tenants.38
Following the standard assumption in Law and Economics, I assume that
co-tenants are rational, self-interested, and responsive to incentives in Taiwan
as well as in other countries. It should be reasonable to infer that co-tenants
outside Taiwan will behave similarly under a similar legal framework of tenancy
in common, unless a special culture or other institutional factors significantly
change the costs and benefits of (non)cooperation between co-tenants—in my
observation, no such cultures or institutional factors exist in Taiwan.39 At the
37 China’s Property Law is an exception, requiring only a super-majority (two-thirds) vote to sell the
co-owned property. See China Property Law §97. An unofficial English translation of China
Property Law is available at China: Property Rights Law of the People’s Republic of China,
http://www.lehmanlaw.com/resource-centre/laws-and-regulations/general/property-rights-law-ofthe-peoples-republic-of-china.html.
38 For US law, see Merrill & Smith (2007, 634–637). For German law, see German Civil Code §§743,
747, 749, and 750; Raff (2003: 193). For French law, see French Civil Code §§815, 815-3, and 815-9;
Aynes (2008, 159). For Dutch law, see BW §§3:169, 3:175, and 3:178 (English translation available at
http://dutchcivillaw.com/civilcodebook055.htm). For Japanese law, see Japan Civil Code §§249,
251, and 256 (English translation available at http://www.japaneselawtranslation.go.jp/law/detail/?id¼1928&vm¼02&re¼02&new¼1). For Chinese Law, see China’s Property Law §§94, 97,
and 99. For Taiwanese Law, see Taiwan Civil Code §§818 and 819.
39 I do not think that Taiwan has a cultural preference for harmony, consensus or litigation avoidance.
Even Japanese, who have been characterized as particularly litigation-shy, may have avoided going to
court for economic or institutional reasons (Ginsburg & Hoetker 2006). Hence, litigation avoidance
cannot explain the high cooperation rate found in Taiwan.
Besides, it is unlikely that co-tenants in Taiwan cooperate because they can predict what the court
will order. As Figure 4 demonstrates, the partition decisions by the district courts in Taiwan are not
very predictable, as a majority of the cases end in a variety (to be exact, thirteen types) of partial
partition. On the other hand, Ayres & Talley (1995) make a case that unpredictability in entitlement
may facilitate bargaining. In either theory, we still need to know the (un)predictability of the court’s
partition decision in other countries, in order to determine whether the empirical findings in Taiwan
are generalizable, but such knowledge is not available yet.
I thank Kristoffel Grechenig for raising these two questions.
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 529
very least, an empirical study on Taiwan’s tenancy in common provides initial
empirical examination of Heller’s (2008) seemingly universally applicable thesis
that cooperation among co-tenants often fails.
Subsection 2.2.1 provides an overview of Taiwan’s co-ownership partition law. Subsection 2.2.2 discusses the empirical strategy and introduces the
data. Subsection 2.2.3 reports the results and discusses the implications.
Subsection 2.2.4 responds to challenges to my interpretations of the empirical
findings.
2.2.1 Overview of Co-ownership Partition Law in Taiwan
As Figure 1 demonstrates, there are four phases of co-ownership partition in
Taiwan. Initially, the law requires that co-tenants try to reach a deal before
bringing the case to the court (Taiwan Civil Code §824). If no voluntary agreement to partition can be reached in the bargaining phase, any co-tenant can
request that the land administration agency in the city or county government or
the local mediation committee intervene and mediate. This aforementioned
mediation procedure is optional, but if the partition dispute is brought to
the court, Taiwan’s Code of Civil Procedure §403I requires a mandatory mediation (either before a judge or a local mediation committee assigned by the
court).40 If mediation still fails, litigation starts. During the litigation process,
the court may encourage settlement at any time (Taiwan’s Code of Civil
Procedure §377I). Note that “settlement” in this context narrowly refers to
co-tenants’ voluntary partition agreement that has been approved by the
court.41
Before January 2009, Taiwan Civil Code Article 824 authorizes the court to
partition co-owned properties in kind or by sale, without preferring either
approach. When the court decides to physically divide the co-owned property
and some co-tenants do not receive property according to their shares, monetary compensation (called “owelty” in common law) will be ordered. Article
824 was revised in January 2009 (the new rules went into effect in July 2009).
The new law prefers partition in kind, but at the same time allows the court to
order several more types of partial partition,42 when physically dividing the real
40 Official English translation of Taiwan’s Code of Civil Procedure is available at http://law.moj.gov.tw/
Eng/.
41 Of course, at the litigation stage, the parties can settle without the court’s approval. But a
court-approved settlement can be enforced more easily, so the parties have incentives to seek the
court’s approval—which is a routine procedure in partition matters.
42 For partial partition in the USA, see Dagan & Heller (2001, 617).
530 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
estate pro rata is not feasible. To give an example of partial partition, suppose
ABCD co-own Blackacre and ABCE co-own Whiteacre; the court may, upon
ABC’s request, partition Blackacre and Whiteacre together. The verdict could
look like the following: ABCD continue to co-own part of Blackacre; ACE
co-own half of Whiteacre; each of ABCD receives some part of Blackacre, but
not according to their shares, so AB have to compensate CD; and the other half
of Whiteacre will be auctioned and ABCE will divide the proceeds pro rata.
2.2.2 Data and Empirical Strategy
My empirical strategy is to compute three percentages: the percentage of “partition by agreement”43 to all partition actions (showing the narrowly defined
cooperation rate); the percentage of partition by consensus to all partition
actions (showing the broadly defined cooperation rate); and the percentage
of partition by court to all partition actions (showing the noncooperation
rate).44 The prerequisite for the computation is to know the number of various
types of partition methods and approaches during one particular period. Below
I will separately discuss my data source for partition by sale and other types of
partition.
An available, official database records the number of partition in kind and
partial partition. As all partition actions have to be registered to be legally
effective, this database include all non-by-sale partition actions, including
those taken through “partition by agreement.” Taiwan adopts the Torrens
registration system45 to track titles and property interests in land and buildings—titles to land parcels and buildings are separate in Taiwan (Civil Code
§66). Taiwan’s Ministry of the Interior Affairs (MOIA) maintains an electronic
database that tracks real estate title transfers. The database is not open to the
public. Upon my request (as a researcher in a public institution), the MOIA
provided me with a spreadsheet containing all partition-related registrations
from January 1, 2005 to October 4, 2010—this will be the research period in this
43 As defined in supra note 8, “partition by consensus” refers to all partition actions that are not
resolved in court. “Partition by agreement” is defined as partition actions with no third party (such
as mediators and judges) involved. That is, the number of partition by agreement, partition through
mediation, and partition through settlement equal the number of partition by consensus.
44 To simplify the narratives, I only compute these percentages for land partition, which is far more
numerous than building partitions. As Figure 3 suggests, the story for building partition would be
similar to that of land partition, though note that unreported statistics show that the court almost
always orders partition by sale or partial partition for building partition.
45 See Arruñada (2003) and Arruñada & Garoupa (2005) for comparison of the (Torrens) registration
system and the recording system which is prevalent in the USA (Merrill & Smith 2007, 917–918).
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 531
empirical study.46 The spreadsheet breaks down the data by year and to
local-registry levels—there are 109 registries in Taiwan, whose territory is
about 13,974 square miles, roughly the size of New Jersey and Connecticut
combined.
Every local registry has to register changes in titles and interests in a standardized way prescribed by the MOIA. Five types of standardized registrations
are dedicated to register partition in kind and partial partition for tenancy in
common: partition by consensus, partition through mediation in land administration agency, partition through mediation before a judge or a local mediation committee, partition through settlement in court, and partition by court.
For simplicity, in Figures 2 and 3, I combine the observations of the two types of
mediation, as partition through mediation in land administration agency happens only sparingly (less than 1 percent of all partitions) and the distinction is
not critical for my empirical inquiry.
Partition by sale is registered differently (as ordinary sales or auctions) in the
MOIA database. To correctly estimate the frequency of successful cooperation
among co-tenants, I estimate or assume the number of partitions by sale in the
following ways (see also Table 2).
2.2.2.1 Partition by sale by agreement.—Partition by sale by agreement is
registered as an ordinary sale in the MOIA database, and there is no way to
tease out sales of co-owned properties from those of solely owned properties.
To be conservative, I assume that there is zero partition by sale by agreement.
The unavailability of the exact number of partition by sale by agreement should
not pose a huge problem for my inquiry, however. My findings will show that
co-tenants frequently cooperate in partition matters. Not including some of the
cooperation—partition by sale by agreement—in my numerator will only
underestimate the cooperation rate.
One anonymous referee indicates that partition by sale by agreement outnumbers other types of partition actions; thus, the real cooperation rate should
be much higher than what I will report below. I acknowledge that the incomplete nature of my data renders my estimates inexact and I certainly agree that
the actual number of voluntary sales is far larger than zero (what I assume). But
as I will demonstrate below, consensual agreements dominate even within the
truncated universe where data exist; thus, the inferences drawn from my empirical analysis should still be valid.
2.2.2.2 Partition by sale by court.—Partition by sale by court is registered as an
auction in the MOIA database, and is mixed with, for example, auction of
46 Data in 2010 are incomplete. This at least partly explains why the observations in 2010 in Figures 2
and 3 are fewer than those in the previous years.
532 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
Figure 2. Land partition in Taiwan 2005–2010. Y-axis: number of partitions per year in
parentheses. Number in legend represents observations; percentage of cases in parentheses. Data in 2010 only includes partitions in the first nine months. Data only
include partition in kind and partial partition, excluding partition by sale. N ¼ 57 326.
Yr 2005 (11,380)
Yr 2006 (10,918)
Yr 2007 (10,257)
Yr 2008 (9,749)
Yr 2009 (8,765)
Yr 2010 (6,257)
0
20
40
60
Percentage
80
100
Agreement: 50085 (87.4%)
Mediation: 2822 (4.9%)
Settlement: 792 (1.4%)
Verdict: 3627 (6.3%)
Figure 3. Building partition in Taiwan 2005–2010. Y-axis: number of partitions per year
in parentheses. Number in legend represents observations; percentage of cases in parentheses. Data in 2010 only includes partitions in the first nine months. Data only
include partition in kind and partial partition, excluding partition by sale. N ¼ 833.
Yr 2005 (158)
Yr 2006 (153)
Yr 2007 (137)
Yr 2008 (132)
Yr 2009 (143)
Yr 2010 (111)
0
20
40
60
Percentage
Agreement: 635 (76.1%)
Settlement: 45 (5.4%)
80
100
Mediation: 70 (8.4%)
Verdict: 84 (10.1%)
Winter 2012: Volume 4, Number 2
Table 2.
~
Journal of Legal Analysis ~ 533
The computed, estimated, and assumed number of partition actions
Partition by consensus
By agreement
Optional
Through
Through
mediation
other types
settlement
by land
of mediation
By court
Total
administration
agency
Partition in kind and 50 085 (computed) 284 (computed) 2538 (computed) 74 (assumed)
3627 (computed) 56 608
partial partition
Partition by sale
0 (assumed)
0 (computed)
2538 (assumed)
718 (assumed) 862 (estimated)
4118
Total
50 085
284
5076
792
60 726
4489
properties under foreclosure. To estimate the frequency of partition by sale by
court, I will randomly sample 25 percent of partition cases determined by
district courts in Taiwan on the merit between 2008 and 2010 (more on this
in Section 3.2.2), and then extrapolate the percentage of partition by sale verdicts to other years in my research period.
2.2.2.3 Partition by sale through settlement.—To estimate the frequency of
partition by sale through settlement in court, I rely on another database, provided by the Judicial Yuan (JY) of Taiwan, of which the main duty is judicial
administration. This database contains all partition cases (6797 cases in total)
rendered by the district courts in Taiwan from January 1, 2005 to September 20,
2010, which is two weeks shorter than my research period. In this JY database,
there are 713 settlements. At the same pace, there would have been 718 settlements during the research period.47
Since the JY database includes all types of partitions and the MOIA database
does not contain partitions by sale, the above estimated partitions through
settlement48 (718) should outnumber the not-by-sale partition settlements
(792). There could be several rationales for my data’s showing the opposite.
First, co-tenants who win the case in court may not enforce the judicial decision
in the same year. Second, some co-tenants may use the court decision to strike
another bargain with other co-tenants,49 and never register the partition
through settlement in the registry. Third, partition by sale through settlement
47 713/2089*2103 ¼ 718.
48 The estimated number of settlements here also includes settlements for building partition. Because
the number of building partitions is too small to affect my rough estimation, I ignore it in the
following calculation.
49 But compare Farnsworth (2000), who finds that acrimony between the parties become an important
obstacle to postverdict bargaining.
534 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
is infrequent.50 To continue my (rough) calculation, I have to make some
assumptions. To be conservative, below I assume that all of the 718 estimated
partitions by settlement are partitions by sale. To limit the total number of
settlements at 792, I assume that 792 718 ¼ 74 settlements as not-by-sale
partitions through settlement (see Table 2).
2.2.2.4 Partition by sale through mediation.—For the purpose of estimating the
number of partitions through mediation, mediation can be categorized into
two types: optional mediation by land administration agency in the city or
county government, and other types of mediation. Figure 2 shows that there
are in total 2822 not-by-sale mediation during the research period, of which 284
are optional mediation by land administration agencies, and 2538 belong to the
second type. It is easy to estimate the number of partitions by sale through
mediation by land administration agencies. That will be zero, because land
administration agencies are not allowed to suggest partition by sale.
It is more difficult, however, to estimate the number of partitions by sale
through other types of mediation. No data or statistics indicate the ratio of
partitions by sale to other types of partitions. I thus interviewed several staff
members of several district courts (which oversee mediation) and local governments. Their observations are consistent with my hunch that partitions by sale,
as compared with partitions in kind and partial partitions, are relatively few in
the mediation procedure, for the following reasons: There is only one way to
partition co-owned property by sale, while there are various ways to implement
partition in kind and partial partition. In Taiwan, each co-tenant’s share is
clearly registered, and presumably co-tenants all know they have the joint
right to sell the co-owned property and divide the proceeds pro rata. If partition
by sale is acceptable to co-tenants, they would have done so already—they do
not need to be reminded of this option by the mediator. In contrast, a new
partition in kind or partial partition plan may come up during the mediation,
facilitating the resolution of the partition dispute. Hence, I expect that partition
by sale through optional mediation before a local mediation committee should
be rare. Nevertheless, to be conservative, I will assume that the ratio of partition
by sale through mediation to other types of partitions through mediation equals
one. That is, I assume that there are 2538 partitions by sale through (the second
type of) mediation in my research period.
Table 2 summarizes the computed, estimated, and assumed number of partition actions discussed above.
50 As these two datasets are provided by the Taiwan government, using its electronic database, the error
rate should be low, and the data are presumably comprehensive.
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 535
2.2.3 Results and Implications
Figure 2 shows that in each full year (2005 through 2009) there are about 10 000
land partition actions (not counting partition by sale actions), and more than
85 percent of them are partition by agreement. In contrast, only a little more
than 5 percent of them are partition by court. Unreported figures would show
that this pattern persists in every jurisdiction each year.
Figure 3 shows that building partitions happen only occasionally, with less
than 160 partitions each year (again, not counting partition by sale actions).
There seems to be an increasing role for partition through mediation and partition by court, but we should not overinterpret the results based on a limited
number of observations. That being said, more than 70 percent of the partitions
in full years (2005 through 2009) are partition by agreement, consistent with the
results found in land partition.
As Figure 4 shows, in 2008 through 2010, the court ordered partition by sale,
partition in kind, and partial partitions 19.2 percent, 23.4 percent, and 57.4
percent of the time, respectively. Anecdotal evidence in the USA suggests that
the court in practice prefers partition by sale (Stoebuck & Whitman 2000, 223;
Dagan & Heller 2001, 607; Mitchell 2001, 513; Bell & Parchomovsky 2005, 601;
Merrill & Smith 2007, 117; Heller 2008, 124; Mitchell, Malpezzi, & Green 2010,
610). This is not the case in Taiwan. In addition, since the ratio of partitions in
kind by court to other partitions by court is 0.192: 0.808, and Figure 2 shows
that there are 3627 such other partitions by court, there should be around 862
partitions by sale by court during the research period.51
Based on the data, (unfavorable) assumptions, computations, and estimations described above, partition by agreement takes up about 82.5 percent of all
partition actions between 2005 and 2010—this is the narrowly and conservatively defined cooperation rate.52 Moreover, since mediation and settlement,
after all, can be reached only if every co-tenant agrees to cooperate, they can also
be counted as examples of cooperation among co-tenants. So broadly defined,
the cooperation rate increases to around 92.6 percent.53 In other words, only
about 7.4 percent of all partition actions are partition by court—this is what I
call the noncooperation rate. These statistics suggest that cooperation among
co-tenants, at least regarding partition, does not appear to fail very often.
51 3627/(1 0.192)*0.192 ¼ 862.
52 (50 085 + 0)/[(50 085 + 0) + (2538 + 2538) + (284 + 0) + (74 + 718) + (3627 + 862)] ¼ 82.48%.
also Table 2.
See
53 [(50 085 + 0) + (2538 + 2538) + (284 + 0) + (74 + 718)]/[(50 085 + 0) + (2538 + 2538) + (284 + 0) +
(74 + 718) + (3627 + 862)] ¼ 92.61%. See also Table 2.
536 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
Figure 4. Distribution of partition actions in Taiwan’s district courts in 2008–2010.
Number in Y-axis represent total partition actions during that period, with percentage
in parentheses. Number in legend represents observations; percentage of cases in parentheses. N ¼ 587. Partial partitions are divided into three bars: “In kind+compensation” means every co-tenant received part of the plot but not according to her share, so
compensation is also stipulated. “In kind+co-own” means part of the co-owned property remains co-owned by some co-tenants, whereas other parts are partitioned in kind.
“Other partial partitions” are those approaches that are different from the other four
specified approaches. The “old law” bar shows partitions between January 1, 2008 and
January 22, 2009. The “transition period” bar shows partitions between January 23,
2009 and July 22, 2009. The “new law” bar shows partitions between July 23, 2009 and
December 31, 2010.
Old Law: 186 (32%)
Transition Period: 85 (14%)
New Law: 316 (54%)
0
20
40
60
percent
80
100
Partition in kind: 145 (23.4%)
In kind+compensation: 39 (6.3%)
In kind+co-own: 175 (28.3%)
Other partial partitions: 141 (22.8%)
Partition by sale: 119 (19.2%)
Thus, transaction costs among co-tenants may not be as high as the literature
has suggested.54
This empirical result has further implications. If I am right that voluntary
partition seldom, if ever, creates fragmentary land (more on this in Section 3),
share-chopping can only happen in less than 7.4 percent of all partition actions—how frequent share-chopping takes place among those actions is the
topic of Section 3. In addition, supposing that co-tenants also cooperate, in
similar frequency, in using and investing the co-owned property, the extent of
underuse and underinvestment should be low, though not entirely eradicated.
54 Another theoretical possibility for the low noncooperation rate is high litigation costs, though I do
not think in Taiwan’s context litigation costs for partition lawsuits are a huge factor. More on the
issue of litigation costs below.
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 537
Why does not cooperation among co-tenants fail more often? First,
co-tenants are often relatives (particularly in the case of heir property) or business partners, not strangers. This could make bargaining a little smoother.55 In
addition, strategic non-cooperation should not be prevalent, because the
hold-out threat is not credible. Any co-tenant can petition the court for partition; thus, strategic non-cooperation by a few co-tenants will not block the
partition process. In addition, because co-tenants’ shares are generally clear-cut,
the court is unlikely to bestow disproportionally large plots or proceeds to any
co-tenant. Hence, the strategic co-tenants will not expect that their requests for
a lion’s share will be granted by the court. Thus, a similar request to their fellow
co-tenants will not carry the day.
What makes cooperation fail? The more the messier, perhaps. In theory,
transaction costs are positively correlated with the number of co-tenants.
Thus, it is reasonable to posit that co-owned properties that are owned by
more people tend to end up being partitioned by the court. Figure 5 compares
the distribution of the number of co-owners in partition litigation with that of
co-owners in general (before any partition actions are completed). The former,
as compared with the latter, is a little skewed to the left, showing that properties
co-owned by more parties are indeed more prone to noncooperation.
Nevertheless, the two lines in Figure 5, except in the two end points, generally
resemble each other. Therefore, the number of co-owners should not be the
only driving force for noncooperation. Maybe higher value of co-owned property will make co-tenants’ bargaining more contentious. Unfortunately, I do
not have data to verify this thesis.
2.2.4 Challenges
It might be argued that my research underestimates the failed cooperation
between co-tenants, because if some co-owners cannot reach an agreement
due to high transaction costs, but cannot afford the litigation fee, their failed
cooperation is not reflected in my data. No doubt some co-owned properties
are not partitioned because not a single co-tenant can afford to bring the dispute to the court. Nevertheless, in Taiwan’s context, such incidents should be
few. First, the court fee for partition petition is assessed based on the value of
the plaintiff’s share, not the whole plot, alleviating the plaintiff’s burden. In
addition, when the court orders a partition, it will also order other co-tenants
55 This point is related to Ellickson’s (1991, 161–183; 1993, 1320) research on close-knit groups’
developing norms that maximize aggregate welfare.
538 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
Percentage
10%
20%
30%
Figure 5. Distribution of the number of co-tenants in partition lawsuits in Taiwan
versus distribution of the number of co-tenants. Data for the former include all partition
cases in which courts of the first instance in Taiwan have rendered decisions between
January 1, 2005 and October 4, 2010. Data for the latter reflect the number of co-tenants
in the whole of Taiwan on February 11, 2011.
2
5
10
15
20
Number of co-owners in one plot
25
>30
All co-owners of land on the day of Feb. 11, 2011 (N=17,457,684)
Litigating co-owners from Jan. 1, 2005 to Oct. 4, 2010 (N=6,790)
(the defendants) to share the court fee, usually according to their shares, further
reducing the burden of petitioning for partition. Moreover, because the court
has a large discretion and responsibility to decide how to partition, co-tenants
need not hire a lawyer,56 as there is not much legal reasoning involved in a
partition case.
It may also be argued that the high cooperation rate does not necessarily
denote low transaction costs; rather, it just demonstrates that co-tenants perceive a private solution as being more desirable than a court-ordered solution.
Nevertheless, if transaction costs are really high, cooperation will still fail even if
everyone prefers private solution. My empirical study aims to examine whether
tenancy in common often renders failed cooperation. The empirical results at
least demonstrate that transaction costs are not always insurmountable for
co-tenants.
56 The JY database described above shows that of the 6794 cases, plaintiffs hired lawyers in 3552 cases
(52 percent), while defendants did so in 1165 cases (15 percent).
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In a similar fashion, it may also be argued that given that the overwhelming
majority of civil cases settle, my empirical result—only about 7.4 percent of all
partition actions are resolved in court—is not surprising and tells us very little
about the anticommons problem. Nevertheless, “not surprising” is exactly my
point. If co-tenants really suffer from the tragedy of the anticommons and the
accompanying high transaction costs, cooperation rate (or, for that matter,
“settlement rate”) will be much lower than 92.6 percent. Therefore, the high
cooperation rate that I find actually denotes that disputes on co-ownership
partition are not different from other types of civil disputes, and thus “tenancy
in anticommons” appears not to be tragic.
3. THE FRAGMENTARY LAND PROBLEM
This section discusses the fragmentary land problem. Section 3.1 distinguishes
the fragmentary share problem from the fragmentary land problem and argues
that the latter creates the tragedy of the anticommons. Section 3.2 empirically
examines whether the co-tenants/plaintiffs in litigation and the court tend to
petition for and order physical division of co-owned land into tiny, useless
parcels.
3.1 Theory: Causes and Conditions
Fragmentary land is land parcels that are too tiny to be used in a more valuable
way that would be feasible if the land parcels were bigger in size. Thus, strictly
speaking, the fragmentary land problem is not merely a problem peculiar to
co-ownership, but one faced by owners of tiny plots—whether these plots are or
were solely or jointly owned does not matter. In this article, however, I will
focus on the fragmentary land problem arising from tenancy in common.
The fragmentary land problem exists only when (i) the size of the co-owned
land parcel is not large enough; (ii) there are too many co-owners; and (iii) the
co-owned property is physically divided. That is, if the land parcel is vast or the
number of co-tenants is small, partition in kind or partial partition still will not
result in big-inch-level land. If the first two conditions hold, the question then
becomes whether there are “strong reasons” for co-owners to carve land into
tiny pieces, as Heller (2008) suggests. Let me emphasize once again that partition by sale will not create “share-chopping” (i.e., physically dividing co-owned
land into fragmentary parcels) under any circumstance. Partition in kind and
partial partition may create fragmentary land, but it should be reasonable to
exclude voluntary partitions as a source of fragmentary land, as share-chopping
usually does not make economic sense for most co-tenants, and it takes
540 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
a unanimous agreement (not just a majority vote) to voluntarily partition
co-owned property.57
This leaves us with only one possible source of creating fragmentary land:
partition in kind by court and partial partition by court. The court has wide
discretion on partition approaches (Stoebuck & Whitman 2000, 222–223) and
can disregard the co-tenants’ preferred partition approaches. Moreover, Bell &
Parchomovsky (2005, 601) claim that the courts in the USA “have long exhibited a preference for partition in kind.”58 The court, thus, may order partition in kind and inadvertently create anticommons, merely to defer to the
law’s preference.59 To ascertain whether the court has shown an ill-advised
inclination to fragment land, I conduct an empirical study of partition decisions
by the court, reported in Section 3.2.
Heller (2008, 37) identifies a “share chopper dilemma” regarding
co-ownership. In Heller’s (2008, 121) own words, “[w]e risk creating a share
chopper dilemma whenever we give landowners strong reasons to divide land
down to big-inch level and provide no countervailing mechanism to bundle the
pieces back into productive use” (emphasis added).60 In my framework, the
share chopper dilemma refers to the tragic transformation from the fragmentary share to the fragmentary land.
Not all real-world examples of the share chopper dilemma that Heller (2008)
has discussed, however, concern the transformation. Heller (2008, 130) has
argued that “the African American, Native American, and Irish cases all
share a tragedy of the anticommons thread. The law encouraged farmers to
fragment their resources down to the big-inch level and offered them no tool
with which to aggregate land back to a usable scale.” These three cases, however,
would not be pooled together under my framework. The African Americans can
leave wills to assign their estates as they wish and avoid fragmentary shares and
57 Granted, a post-partition parcel may be of optimal size at the time of partition but becomes too
small in the future. The co-tenants may or may not take this possibility into account, depending on
whether sufficient information is available at the decision-making time.
58 Note that as mentioned above, in practice the courts in the USA often order partition by sale. See
also Merrill & Smith (2007, 643), observing that courts in the USA have increasingly favored partition by sale.
59 Or consider the following example: Suppose Peter, Paul, and Mary co-own Blackacre, a one square
mile plot; their shares are 99, 0.5, and 0.5 percent, respectively. Peter may insist on partitioning
Blackacre in kind, disregarding the fact that this will leave Paul and Mary with big-inch-level plots.
Either side can petition the court for partition. If the court rules for Peter, big-inch-level land plots
are created.
60 Heller (2008, 108) also has referred to the share chopper dilemma as “[o]nce there are too many
owners, cooperation fails, and the farm is sold.” Note that Heller (2008) does not specifically
indicate that the court chops shares. I examine partitions in kind by court nonetheless because it
is more likely to lead to share-chopping problems.
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fragmentary land altogether. Native Americans have neither the right to transfer
their shares nor right to petition for partition; hence, they face a fragmentary
share problem that never leads to a fragmentary land problem. Native
Americans suffer from the underuse problem discussed above. In contrast,
because Irish law stipulates that each male descendent has the right to inherit,
the Irish farmers have no choice but to equally divide their real estate among
sons; thus they suffer from the more serious fragmentary land problem and the
tragedy of the anticommons.61
3.2 Empirics: Do Physical Divisions Often Lead To Fragmentary Land?
In this section, I will empirically test whether the court tends to create fragmentary land through partition in kind and partial partition. I will also test
whether the co-tenants/plaintiffs are inclined to petition for partition in kind or
partial partition when doing so will divide the co-owned land into big-inch
parcels.62 I will use data on partition decisions by courts in Taiwan, for two
reasons.
First, courts in Taiwan may be more likely to share-chop than those in other
jurisdictions. In many countries, such as Germany, France, Japan, and China,
their laws in the books prefers partition in kind to partition by sale (German
Civil Code §753; French Civil Code §§815 and 827; Japan Civil Code §258;
China’s Property Law §100). In practice, however, courts may prefer partition
by sale—as mentioned above, this might be the case in the USA, too. My data
show that partition by sale was adopted by courts of the first instance in Taiwan
in only about 20 percent of the time. Therefore, if empirical studies on partitions by courts in Taiwan, which use partition in kind and partial partition
quite frequently, do not find share-chopping, it may not be a problem at all in
other jurisdictions.63
61 One of the anonymous referees bring to my attention that the source relied on by Heller (2008, 237)
to demonstrate Irish problem, Langer (1975, 56), in fact indicate that the small size of Irish farms
was due to subleasing, not inheritance.
62 One of the anonymous referees contends that the question I am empirically testing here is hypothetical, as share-chopping is rarely encountered in the real world and none other than Heller has
claimed that share-chopping would be a huge issue. Granted, there is no theoretical debate as to
whether fragmentation of co-owned land is a serious problem, but there is no existing empirical
study or theory that demonstrates that fragmentation is not serious, either—not to mention that my
empirical exploration will find that fragmentation rarely but does occur. Given Heller’s theory, its
influence, and the lack of empirical evidence, my study should be a worthwhile effort.
63 Besides, some other countries do not prefer partition in kind, thus further reducing their chance of
creating fragmentary land. For example, the Dutch Civil Code (§3:185) authorizes the court to
determine how to partition without preferring any division method. The Russian Civil Code (§ 252)
adopts a unique method: if partition in kind is inadvisable or infeasible, a co-tenant can force other
co-tenants to buy her share. For English translation of the Russian Civil Code, see (Butler 2002).
542 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
The second reason to use Taiwan data is that there seems to be no dataset
regarding judicial partitions in the USA (Mitchell 2005, 598) or other jurisdictions. Moreover, the comprehensive, electronic database on judicial decisions in
Taiwan makes it very easy for researchers to get a firm grasp of the population
of all judicial partition cases.
3.2.1 Data
Between January 1, 2008 and December 31, 2010, the district courts (the
court of the first instance) in Taiwan rendered 2702 verdicts regarding
co-ownership partition.64 Limited by time, but also to ensure that my dataset
includes cases from all regions of Taiwan, I use stratified sampling—randomly
sampling 25 percent of court verdicts in each district court. I have to exclude
a small portion of the sampled cases because they lack the essential information, such as the partition approach ordered by the court, for this empirical
study.65
In principle, one court verdict becomes one observation. Nevertheless, when
multiple real properties are involved in one case and the court decides to partition them separately, a court verdict is divided into multiple observations, so
that in each observation, the court adopts one partition approach. Yet when the
court determines to partition multiple real properties together (“bundle partition”),66 the verdict will be coded as one observation. As a result, my dataset
includes 619 observations that can be used for analysis.67
Court opinions usually provide information regarding the size of the land
parcel to be partitioned (partitions of buildings are quite rare68), the numbers
and shares of plaintiffs and defendants,69 among others. Nevertheless, not all
64 Law Bank search system, http://fyjud.lawbank.com.tw/index4.aspx.
65 These cases include the following types of cases: (i) Cases in which the judge successfully mediates
the partition disputes. (ii) Appellate cases handled by the district court: for cases involving partitions
of low-value properties, a three-judge panel in the district court serves as the appellate court.
(iii) Cases that are dismissed for procedural issues. (iv) Cases involving partition of “joint ownership” (a type of concurrent ownership, but different from the “joint tenancy” in common law) into
tenancy in common.
In total, there are 132 such excluded cases, out of the 635 sampled cases. In other words, 79 percent
of the sampled cases (503) enter the final dataset, producing 619 observations.
66 Article 824 of Taiwan Civil Code stipulates that co-owners of several plots can petition the court to
partition them together.
67 The number of observations reported here has already excluded those types of cases listed in supra
note 65.
68 Only 28 of the 619 observations (5 percent) concern partition of co-owned buildings.
69 Co-tenants have to be listed either in the plaintiff side or the defendant side. Thus, the sum of the
number of plaintiffs and defendants is the number of co-owners.
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court opinions chronicle the exact shares of every co-tenant (especially when
the number of co-tenants is large), while the largest and smallest shares for
co-tenants on the plaintiffs’ side and the defendants’ side are almost always
available.
3.2.2 Methodology
I create two variables, “co-tenant’s minimum land size” and “plaintiff’s minimum land size,” to measure fragmentary land. “Co-tenant’s minimum land
size” stands for the size of the land that would be assigned to the co-tenant with
the smallest share among all co-tenants, had she been assigned by the court a
piece of land according to her share (that is, when partition in kind and some
types of partial partition are ordered). If “co-tenant’s minimum land size” is
large, there is no concern over share-chopping. If it is small, the court in that
case at least creates one big-inch plot. Similarly, “plaintiff’s minimum land
size” represents the size of the land that would be assigned to the plaintiff
with the smallest share among plaintiffs, had she been assigned by the court a
piece of land according to her share.70
These two variables, after transformation into a natural logarithm, are the
major independent variables of interest in their respective multinomial logistic
regression models. The dependent variable of the models has three levels representing the three partition approaches—partition by sale, partition in kind,
and partial partition.71 Other independent variables in the model that contains
“co-tenant’s minimum land size” (reported in Table 3) include: zoning dummies (dry farmland, wet farmland, construction land, and road; with other
types of land as references); two amendment dummies that specify whether
the case is decided before the enactment of new law in January 2009, after
the new law in operation in July 2009, or the period in between; natural log
of the number of defendants; natural log of the number of plaintiffs; and
dummies for defendant’s and plaintiff’s preferences (equaling one if petitioning
the court for partition in kind and zero if otherwise).72
70 In other words, co-tenant’s (plaintiff’s) minimum land size ¼ area of the co-owned plot * the share
of the co-tenant (plaintiff) who has the minimum share among all co-tenants (plaintiffs).
71 District courts in Taiwan have adopted thirteen types of partial partition approaches in the observed
three years. I choose to group all of them into one category because most types were used infrequently and for this article’s purpose, the exact type of partial partition approaches used does not
affect my thesis, perhaps with one exception. In nine observations, the court awards the co-tenant
with minimum share merely owelty and the plot to other co-tenants. For the former, this is essentially partition by sale. I have run the regression without these nine observations, but the coefficients
and signs are basically unchanged.
72 The regression model will not use all of the 619 observations. Instead, it uses the 477 observations
that partition only a single plot. That is, observations regarding partition of multiple plots (bundle
544 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
Table 3.
orders
Regression results for multinomial logistic models on court’s partition
Dependent variable: partition approaches ordered by the court
(partition by sale as the base)
Natural log of co-tenant’s minimum land size
Natural log of plaintiff number
Natural log of defendant number
Equal to 1 if any plaintiff prefers partition in kind
Equal to 1 if any defendant prefers partition in kind
Equal to 1 if construction land
Equal to 1 if wet farmland
Equal to 1 if dry farmland
Equal to 1 if road
Equal to 1 if before amendment was passed
Equal to 1 if after amendment was passed
but before effective
Constant
Pseudo R-square
N
Partition in kind
(1)
Partial partition
(2)
0.6189***
0.1646
0.9739*
2.6966**
1.4990y
0.5470
0.4654
0.3323
7.8115***
2.1777***
0.7255
0.5851***
0.3745
0.2582
1.6209y
0.2323
0.9460y
0.1847
0.8552
1.2657y
0.9204
0.8094
(0.1533)
(0.7081)
(0.4022)
(0.8469)
(0.8207)
(0.7308)
(0.4443)
(1.0591)
(1.4573)
(0.6030)
(1.2985)
2.2588* (1.0233)
0.5060
404
(0.0869)
(0.7293)
(0.2346)
(0.9708)
(0.8710)
(0.4846)
(0.4828)
(0.8368)
(0.7338)
(0.5761)
(0.6441)
0.1633 (0.7251)
Clustered by the eighteen district courts in Taiwan.
y
p < 0.1; *p < 0.05; **p < 0.01; ***p < 0.001.
The independent variables in the model that contains “plaintiff’s minimum
land size” (reported in Table 4) are similar, including the same zoning dummies; the same amendment dummies; natural log of the number of plaintiffs;
natural log of the number of defendants; and defendant’s preference (equaling
one if petitioning the court for partition in kind and zero if otherwise).
3.2.3 Results and Implications
3.2.3.1 The court tends not to share-chop.—Multinomial logistic regressions on
the court’s choice among partition approaches (reported in Table 3) show that
district courts in Taiwan tended not to share-chop. The variable of interest,
co-tenant’s minimum land size, has a positive sign and is statistically significant
partition) have to be excluded, because the court opinions almost never indicate whether the land
parcels allotted to the co-tenants or plaintiffs are contiguous, making the judgment of fragmentation
ungrounded. In addition, observations that involve partition of buildings are eliminated, because
the concern over preserving the buildings will push the court toward using partition by sale. These
two exclusion rules will not change my story, as bundle partition, as compared with dividing several
land parcels separately, usually increases co-tenants’ minimum land size, and auctioning off
co-owned buildings avoids share-chopping.
Winter 2012: Volume 4, Number 2
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Journal of Legal Analysis ~ 545
Table 4. Regression results for multinomial logistic models on plaintiffs’ partition
petitions
Dependent variable: partition approaches petitioned by the plaintiff
(partition by sale as the base)
Partition in kind
(1)
Natural log of plaintiff’s minimum land size
Natural log of plaintiff number
Natural log of defendant number
Equal to 1 if any defendant prefers
partition in kind
Equal to 1 if construction land
Equal to 1 if wet farmland
Equal to 1 if dry farmland
Equal to 1 if road
Equal to 1 if before amendment was passed
Equal to 1 if after amendment was passed but
before effective
Constant
Pseudo R-square
N
Partial partition
(2)
0.7000***
0.3034
1.0775***
2.6835***
(0.1593)
(0.8025)
(0.2543)
(0.6557)
0.6925***
0.3058
0.1093
1.1724
(0.1114)
(0.4870)
(0.1756)
(0.8472)
0.7754
0.7869*
1.1020
0.4435
1.3125**
0.3187
(0.7178)
(0.3762)
(1.5949)
(0.4996)
(0.4468)
(0.5995)
1.1140**
0.3174
1.7376y
15.6281***
0.3481
0.4559
(0.4299)
(0.4276)
(0.9464)
(1.6774)
(0.4173)
(0.7543)
2.8462*** (0.8368)
0.4144
396
2.8539*** (0.8160)
Clustered by the eighteen district courts in Taiwan.
y
p < 0.1; *p < 0.05; **p < 0.01; ***p < 0.001.
at the 0.1 percent level, suggesting that the court tends to order partition by sale,
rather than partition in kind or partial partition, when co-tenant’s minimum
land size is small. Granted, even if co-tenant’s minimum land size is small,
partial partition does not necessarily fragment land, as in theory the court
can, for example, award the co-tenant with the smallest share a big plot and
request that she compensate other co-tenants, or order other co-tenants to
compensate the co-tenant with the smallest share for receiving no land—in
practice, however, district courts in Taiwan rarely did so.73 In any case, the
court’s inclination to adopt partition by sale still makes the creation of fragmentary land more unlikely.
Figure 6 graphically demonstrates the effect of “co-tenant’s minimum land
size”74 on the court’s choice of partition approaches. As the boxplot shows, the
73 Unreported table shows that of the 224 partial partition observations with relevant information in
my database, the court only awards the co-tenant with the smallest share a larger plot in only ten
observations (4.5 percent), and awards the co-tenant with the smallest share purely compensation in
eight observations (3.6 percent). In a majority of the observations (119; 53.1 percent), the court
orders the co-tenant with the smallest share to remain a co-tenant.
74 Note again that “co-tenant’s minimum land size” is the size of the plot that the co-tenant “would
have received” if the court had awarded the co-tenant a parcel according to her share. Thus, in the
“partition by sale” bar in Figure 6, the co-tenant in fact received owelty. In the “partial partition”
bar, what the co-tenant received was often different from what she would receive in theory.
546 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
median of co-tenant’s minimum land size for the ninety-three partition by
sale cases is about 100 square feet, while in about 75 percent of the 113 partition
in kind cases, the co-tenant’s minimum land size is above 1000 square feet.
The distribution of co-tenant’s minimum land size in partial partition cases
centers around 1000 square feet. Wilcoxon rank-sum test on the median of
the co-tenant’s minimum land sizes among the three partition approaches
shows that the differences in land sizes are statistically significant at the 0.1
percent level in each pair of comparisons. That is to say, when co-tenant’s
minimum land size is small enough to create fragmentary land, the court usually avoids partition in kind and even partial partition, and orders partition by
sale instead.
As for other independent variables, other things being equal, the number of
co-tenants should be positively correlated with the difficulty of partitioning the
property in kind or using partial partitions, while not correlated with the difficulty of partitioning the property by sale. Thus, I expect that the sign for the
coefficients of variables “natural log of plaintiff number” and “natural log of
defendant number” will be negative, as the increase of difficulty in partition
in kind and partial partition will decrease the court’s willingness to adopt it.
Table 3 shows that the signs are indeed negative, with “natural log of defendant
number” in column (1) being statistically significant at the 5 percent level. The
variable “natural log of plaintiff number” in both columns is statistically insignificant, probably because it lacks variation—in 85 percent of the observations,
the number of plaintiffs equals one.75
While the Taiwan Civil Code did not explicitly prefer partition in kind until
the new law came into effect in July 2009, the Taiwan Supreme Court has
preferred partition in kind at least since 2005. Thus, I expect that the district
courts in Taiwan would tend to order partition in kind when either the plaintiff
or the defendant requests it. Indeed, column (1) in Table 3 shows that the
plaintiffs’ and the defendants’ preferences for partition in kind have positive
and statistically significant effects (1 and 10 percent level, respectively) on the
court’s choice between partition in kind and partition by sale, as expected.
In contrast, the plaintiffs’ or the defendants’ preference for partition in kind
has a much weaker, and ambiguous, effect on the court’s choice between partial
partition and partition by sale, as column (2) in Table 3 shows.
The district court’s preference for partition in kind should be stronger after
the new law came into effect in July 2009. Thus, the sign for the coefficient of
75 The invariance is probably due to the legal rule that the court fee is assessed according to the value of
the plaintiff’s shares. Thus, co-tenants who agree with each other have incentives to choose the one
with the smallest share as the sole plaintiff, suing other like-minded co-tenants and co-tenants who
disagree with the aforementioned group.
Winter 2012: Volume 4, Number 2
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log10 of co-tenant's minimum land size (in square feet)
-2
0
2
4
6
Figure 6. Distribution of co-tenants’ minimum land size (in log 10 of square feet) by
partition approaches ordered by the court. N ¼ 477. This figure only includes observations that involve partition of one plot and no building. In the cases of partition by sale,
the co-tenant’s minimum land size represents the size of the land that the co-tenant
with the smallest share “would have received” if the court had ordered physical division
of the co-owned plot according to co-tenants’ shares. In the cases of partition in kind,
the co-tenant’s minimum land size accurately reflects the size of the land that the
co-tenant with the smallest share actually received. In the cases of partial partitions
(including every partition approach other than the two prototypical ones mentioned
above), the co-tenant’s minimum land size represents the size of the land that the
co-tenant with the smallest share “would have received” if the court had ordered physical division of the co-owned plot “according to co-tenants’ shares”. Depending on the
type of partial partition approach adopted by the court, the co-tenant with the smallest
share may receive simply compensation, remain a co-tenant after partition, or receive a
piece of land according to, or disproportionate to, her share.
partition by sale (93)
partition in kind (113)
partial partition (271)
the dummy “before amendment” is expected to be negative in the comparison
of partition in kind and partition by sale. Column (1) in Table 3 shows that it is
indeed negative and statistically significant at the 0.1 percent level. Because the
district courts have a wide discretion in determining partition approaches, and
the Supreme Court has preferred partition in kind for a long time, it will not be
surprising if the district courts start to be influenced by the new law right after it
was passed and before it was effective. Indeed, the dummy “after amendment/
before effective” in column (1) in Table 3 is not statistically significant, denoting that it is difficult to distinguish the court’s choice of partition approaches
between the transitional period (January to July 2009) and the new-law period
548 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
(after July 2009). Besides, the two amendment dummies in Column (2) in
Table 3 are statistically insignificant.
3.2.3.2 The plaintiffs tend not to share-chop.—As the regression results demonstrate (see Table 4), the story for the plaintiff’s choice between partition
approaches is similar. The plaintiff tends to avoid petitioning for partition in
kind or partial partition when doing so will leave her with a small piece of land
(the variable “plaintiff’s minimum land size” is statistically significant at the 0.1
percent level).76 It might be a little surprising that, in the choice between partition in kind and partition by sale, the plaintiff takes into account the number
of defendants, which has a positive sign and is statistically significant at the 0.1
percent level (see column (1) in Table 4). Probably having a large number of
defendants makes it difficult for the plaintiff to come up with a reasonable
partition-in-kind plan. It is also interesting that defendant’s preference for
partition in kind is also statistically significantly (at the 0.1 percent level).
Nevertheless, there could be a simultaneity problem, as defendants’ and plaintiffs’ choices may have affected each other (both sides would know each other’s
potential claim from pre-litigation negotiation).77 I do not have a good theory
to explain why the plaintiff would more strongly prefer partition in kind to
partition by sale before the new law was passed.78 What the law stipulates should
not have such a huge effect on the plaintiff’s preference.
***
The bottom line is that after controlling several factors that would affect the
court’s choice of partition approaches, the variable “co-tenant’s minimum land
size” and the variable “plaintiff’s minimum land size” are still highly statistically significant. Thus, the court and the plaintiff/co-tenant are not inclined to
76 To be exact, the independent variable of interest, plaintiff’s minimum land size, measures the size of
the land received by the plaintiff with the smallest share. But since in most cases (85 percent) there is
only one plaintiff, this variable mostly captures the size of the plot the plaintiff herself will receive. In
other cases, since the plaintiffs all agree to make the petition, the plaintiff with the smallest share
should regard the petition as beneficial to her.
I have also run the regression with only the 345 observations in which the number of plaintiffs equals
one. The variable of interests in this regression model is still statistically significant at the 0.1 percent
level.
77 In an unreported robustness test, I drop the defendant’s preference from the regression. Except for
one zoning dummy, the statistical significance of other variables is unchanged. The pseudo R-square
is reduced to 0.245.
78 Plaintiffs, or co-tenants in general, would prefer partition in kind to preserve subjective value. But
subjective value cannot explain the stronger preference for partition in kind in the old-law period.
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Journal of Legal Analysis ~ 549
share-chop.79 In this regard, Heller’s (2008) thesis that tenancy in common and
partition law give landowners (and presumably the court) strong incentives to
divide co-owed plots into tiny and useless parcels does not appear to be borne
out by data from Taiwan.
One caveat, however, is in order. It is difficult to ascertain the optimal size of
land (see also the discussion in supra note 79). Indeed, the optimal sizes for land
of different natures in different locations in different time certainly vary.
Suppose that the optimal size of land is, say, 5000 square feet, Figure 6
would suggest that courts in Taiwan order partition by sale too infrequently.
The issue of optimal size is beyond the scope of this article, and should be a
great topic for further examining Heller’s (2008) thesis.
4. CONCLUSION
The information technology has made turning unowned resources into properties ever more low-cost, which could increase the possibility of creating more
anticommons. The moral of this article, however, is that before we dub property
regime anticommons or call it tragic, careful theoretical and empirical analyses
are required. Anticommons may be prevalent, but not every form of property is
inclined to create the tragedy of the anticommons. Some authors have worried
that tenancy in common and partition laws create the tragedy of the commons
or the tragedy of the anticommons. This article shows that theoretically speaking, tenancy in common produces neither type of tragedy, even though resources held in tenancy in common indeed tend to be underused and
underinvested. Going beyond purely theoretical debate, this article conducts
two empirical tests, demonstrating that, in Taiwan, more than 90 percent of the
79 This article does not claim that district courts in Taiwan never share-chop. Local governments in
Taiwan have the power to determine, for land use purposes, the criterion for “fragmentary land.”
Among them, the strictest standard is 137 square meters (1475 square feet), whereas the loosest
standard is fifteen square meters (161 square feet). Of the 477 observations that involve the partition
of a single co-owned plot, in twelve observations (2.5 percent), the co-tenants’ minimum land size is
below fifteen square meters. It should be fair to say that the court share-chops in these cases. Indeed,
I cannot find economic rationales in the court opinions of these cases to justify the physical division,
other than that in some cases the co-owned land is already fragmentary, perhaps making partition by
sale not a viable option.
In seventy-eight observations (16.4 percent), the co-tenants’ minimum land size is between 15
square meters and 137 square meters. The plots awarded to these co-tenants may or may not fit
the fragmentary land standard set by the local governments, but I do not have sufficient information
to make this judgment. Note, however, that most of the time, the court in these cases implicitly uses
economic reasons to justify its decisions. For example, the co-tenant with the minimum share owns
an adjacent piece of land that can be used together with the tiny plot awarded in the case. Also, the
court often awards the co-tenant with the minimum share a small plot to preserve her building upon
that plot.
550 ~ Chang: Tenancy in “Anticommons”? A Theoretical and Empirical Analysis of Co-ownership
time, co-tenants can reach a consensus in partitioning their co-owned property,
which suggests that transaction costs among co-owners may be lower than the
literature has indicated. In addition, both the court and the plaintiffs have been
inclined to order and petition for, respectively, partition by sale, when physically dividing the co-owned property will create fragmentary land. These empirical findings underpin my theoretical contention that “tenancy in
‘anticommons’” is not only not necessarily tragic but its extent of inefficiency
in using and investing might have been a little exaggerated.
But one last caveat: my empirical finding that tenancy in common does not
produce serious anticommons problem does not imply that the tragedy of the
anticommons is an empty set. Indeed, the unilateral right to petition for partition and the court’s large discretion in determining partition approaches are
not often seen in other potential anticommons problem. Future empirical
studies on other examples anticommons are certainly warranted, and will
deepen our understanding of whether “too much ownership wrecks markets,
stops innovation, and costs lives” (Heller 2008).
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