Numerus Clausus Principle - Justifications

Question 1

Is there a straightforward justification

Answer 1

No

Question 2

What is the nc principle difficult to reconcile with

Answer 2

a ‘modern economic theory of property rights’
principle runs contrary to assumption that market transactions are the best way to ensure that resources are put to an efficient use

if the land is burdened - market will sell it for lower price - don’t need property law

Question 3

What are the 4 justifications for the nc principle

Answer 3

1. Lack of Notice
2. Information Costs
3. Sterilisation of Land
4. Controlling non-consensual imposition of duties

Question 4

Lack of notice
- what is it
- what does Rudden say about it
- case?
- responses (3)

Answer 4

Difficult for purchasers to find out what the new kinds of property rights are

‘One of the main reasons given […] for the numerus clausus of real rights is the problem a purchaser would face in finding out about fancies’

Lord Brougham in Keppell v Bailey -> it would be very hard to know what rights / obligations were incurred when acquiring a piece of land

1. Property rights can be established to be binding only if a purchaser is made aware of it
2. the problem is solved if a land registration system is set up -> which we have
3. ‘In no system…is notice either necessary or sufficient for the validity of all property rights’ - Rudden

Question 5

Information costs
- how does principle help
- responses (1)
- counter-response (2)

Answer 5

principle reduces cost of ascertaining what property interests are available in relation to certain assets

costs could be significantly reduced by requiring interests to be registered -> Land Registry

1. costs wouldn’t be completely eliminated -> need to pay to register & lay people need a lawyer to read the Register
2. even if interest is recorded, the purchaser still needs to understand what the right entails -> with the principle, each right has specific characteristics so we know roughly what the right entails

Question 6

Sterilisation of land
- how does principle help
- Response (2)
- counterargument for 2nd response

Answer 6

principle would ‘ensure that the efficient development of land be not sterilised by fancies’ - Rudden
a multitude of burdens over land may reduce marketability of land -> it will become ‘encrusted’ - limits what can be done to the land

1. why shouldn’t the market decide -> economic incentive for owner to not sterilise their land because value would decrease
2. excesses can be checked by a tribunal who can cancel them if necessary - Rudden

undermines certainty of law - can’t be sure what is ‘too much’

Question 7

Controlling the non-consensual imposition of duties
- what does McFarlane say about it
- how does principle help
- response
- counter-response

Answer 7

best justification, there isn’t a great counter-argument

controls imposition of duties on 3rd parties by controlling which rights are proprietary

3rd parties aren’t actually worse off because they already owed a duty to the owner to not interfere with the land

there are cases where the 3rd party can suffer some additional burden