While property scholars continue to debate property’s essence, the right to transfer – or, to use the preferred common law term, freedom of alienation – has long been emphasised by judges as of foundational importance. Freedom of alienation has been a central plank of the common law in respect of property at least since Quia Emptores in 1290, but has been relatively immune from the wider increase in regulatory control of the exercise of property rights, until now. Against the backdrop of global housing challenges, new types of public law restrictions on the transfer of land are emerging in common law jurisdictions. Such restrictions strike at the heart of private law conceptions of ownership, raising the question of how far-reaching they can be without having a systemic impact on property law.
The restrictions in question generally aim at broadly ‘progressive’ ends, for example widening access to housing, but present the risk of destabilising core expectations associated with private ownership. In this way, they cast into sharp relief broader tensions in property law and theory between the kind of fairness-focused regulation and re-shaping of property rights favoured by ‘progressive property’, and system-focused approaches to property law prioritising stability and predictability.
Worldwide, states are increasingly using transfer controls as a means of regulating property markets. These include restrictions on the purchase of real property by foreigners, whether absolute or qualified. For example, permission is required for foreign purchase of commercial, agricultural, and residential land in Australia. Ireland has restricted the ability of investment funds (whether domestic or foreign) to buy up new developments. Other jurisdictions have employed taxation to control the prospective pool of purchasers for real property. Another strategy is to focus on the use of purchased property, for example by taxing vacant properties and restricting short-term letting.
All of this occurs against the backdrop of housing crises in many common-law jurisdictions, particularly in urban areas where spiralling rents and property prices are prompting governments to contemplate more radical control of property markets. Another dynamic heightened by the COVID-19 pandemic is the purchase of rural property by urban workers who have switched to remote working while retaining ‘city’ salaries, thereby pricing out local purchasers. This raises the prospect of a wider replication of the ‘Silicon Valley’ dynamic of incoming, highly paid workers pushing local purchasers out of property markets, which may prompt legislators to consider more localised controls on transfer.
The predominant focus of scholarly criticism of these kinds of restrictions has been on their impact on purchasers. For example, Sarah Hamill has criticised identity-focused transfer restrictions on the basis that they create a risk of discrimination (paper on file with author). Commentators have also emphasised the limits placed on owners’ freedom of use, for example in respect of short-term letting. However, an underexplored consequence is the reduction in the pool of potential transferees caused by such interventions.
As an ‘incident of ownership’, transfer tends to be taken for granted as ‘core’ in most common-law jurisdictions. The kinds of restrictions that are emerging apace raise the question of what degree of regulatory control of incidents of ownership such as transfer is permissible before, reverting to Tony Honoré’s framework, a property system ceases to apply a liberal concept of ownership. For example, Avihay Dorfman characterises alienation as ‘the surface manifestation of the very idea of private ownership’, with outright elimination of that right going to the heart of private ownership. Can transfer rights be restricted in prescribed circumstances to secure progressive ends to a degree that does not alter or destabilise private ownership at an institutional level?
As I show in my recent book, Property Rights and Social Justice: Progressive Property in Action, Ireland offers a useful case-study on the relationship between rights-level and system-level changes to property law, capturing its private and public law dimensions. Ireland is experiencing a serious housing crisis affecting both the rental market and the sale of real property. Following public outcry about the acquisition of an entire new commuter-belt housing development ‘off plans’ by a real-estate investment fund, the Irish Government committed to stopping investment funds from bulk-buying new developments in the future. This decision was taken against the backdrop of a long-running shortage of affordable housing, particularly for first-time buyers. Responses considered included an outright ban on the purchase by investment funds of developments outside of city centre cores or high density areas. Provision was made to allow for future grants of planning permission to include conditions requiring the sale of a percentage of developed units to owner-occupiers.
What were the legal standards against which such responses fell to be assessed? As defined in Irish private law, ‘ownership’ includes the power to alienate or transfer real or personal property. In addition, individual property rights are constitutionally protected, with private ownership benefiting from ‘double protection’, both at an institutional level and through the prism of individual property rights. Perhaps most significantly, Article 43.1.2˚ of the Irish Constitution prohibits the State from abolishing the ‘general right’ to transfer, bequeath, or inherit property.
The impact of that provision in respect of transfer is not clear, as the limits of the State’s power to control transfer have not been tested through litigation. However, in a decision in 1984 (O’B v S  IR 316), the other ‘general rights’ recognised in the Constitution – bequest and inheritance – were considered by the Supreme Court. The Court interpreted the Succession Act 1965 to mean that illegitimate children could not recover property under the legal rules of intestacy. In finding that this did not unlawfully interfere with the Constitution’s protection for the right to inherit, the Court stressed that it is the general right to inherit property that is guaranteed, not any particular right to inherit, and that the State could accordingly prevent succession to property in appropriate circumstances without infringing on the institutional guarantee.
As such, the Constitution does not guarantee a protected core of rights of transfer, bequest, and inheritance for all owners in all circumstances, but rather prohibits the general abolition of these aspects of the institution of private ownership. As in Germany, private ownership (including the core incidents specified in Article 43.1.2˚) is made a permanent aspect of the social and political structure. The question is how far-reaching an interference with one of the protected aspects of ownership would need to be to constitute an unlawful interference with the general rights protected by the Constitution.
In the private law context, the Irish case-law on conditional fee simples – which impose a condition either prior to or subsequent upon the vesting of a freehold estate - provides some guidance. One basis on which the validity of conditions has been tested is their impact on freedom of alienation, where conditions purport to define or otherwise restrict the category of individuals to whom land can be transferred. Courts have generally been quick to invalidate such conditions. They have considered the breadth or narrowness of the range of persons to whom an individual can transfer property once a restriction is applied, with for example restrictions limiting sale or transfer to within particular families found void. Accordingly, one benchmark against which public law restrictions on the transfer of real property may be assessed is the range of prospective purchasers or transferees that remain once the restriction on transfer is accounted for.
The measures touched on here, for example preventing or limiting transfer to foreigners, or to investors, leave open other options for transferors, meaning that they do not nullify freedom of alienation. However, the range of transfer options remaining will likely vary depending on the type of property, its location, and other contextual factors. This leaves open the possibility of strong challenges to such measures in the years ahead from transferors, as well as from prospective transferees.
Such challenges would provide a welcome opportunity to reflect on the meaning and significance of freedom of alienation in highly regulated property markets. They would also provide a site for considering, as a general matter, how much regulation of individual property rights can occur without causing institutional change or destabilisation. As such, they could provide a useful new doctrinal lens through which to explore ‘progressive’ theories of property in action and to test the reality of critiques of such theories as destined to destabilise property law through an excessive focus on property’s ends rather than its means.
How to cite this blogpost (Harvard style):
Walsh, R. (2021) Transfer Restrictions: A New Lens onto ‘Progressive Property’ in Action. Available at: https://www.law.ox.ac.uk/research-and-subject-groups/property-law/blog/2021/10/transfer-restrictions-new-lens-progressive (Accessed [date])