Putting restrictions on a house title to keep it debt-free may not work well

In this exploration of debt-free housing, we had two scenarios:   buy a building and renting units, but bring the rents down because the units become debt free.   The other is to have people put a title restriction on their house so that it can not be remortgaged.

This second approach may not work well.     Janelle Orsi, a wonderful lawyer that works with those that want to share (turns out to be a legal minefield), showed me this very readable case.

Someone tried to effectively gift a property but with a limitation that it could not be sold or mortgaged in the giver’s lifetime, or it had to revert to the giver.    Turns out the courts did not like this, but it ultimately prevailed because it was a limited time and an understandable cause.    So putting title restrictions might not hold, and can be blow away by the courts if they think they are unreasonable.

So back to the renter ideal, which uses same mechanism that others use to keep debt ratched up (corporate ownership, in their case banks, in our case non-profits to keep the debt racheted down), because that approach is harder to undermine without the other guy’s approach being threatened.    I believe this is Richard Stallman’s insight on free software (open source) when he made sharing leverage copyright law.

From Janelle:

I thought you might be interested in this case and the two dissenting opinions – it’s about “unreasonable restraints on alienation,” which I’m thinking is a key concept to wrangle with if we want to remove housing and land from society’s big game of Monopoly. The interesting thing in this case is that the owner was prevented from mortgaging her property, but not prevented from selling it or giving it away. The court determined that it was fine and reasonable, but two of the WA Supreme Court judges voiced strong disagreement on that, which sheds light onto how courts generally analyze the whole restraint on alienation issue. The second dissenting judge said something to the effect of: “but mortgaging property IS how most people transfer land.”  Alby v. Banc One Financial, 128 P. 3d 81 – Wash: Supreme Court 2006


Janelle Orsi
Law Office of Janelle Orsi
1010 Grayson Street, Suite 2, Berkeley, CA 94710
Book and blog: www.sharingsolution.com

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