Contracting Communities

Abstract

Private residential developments governed by homeowners associations have rapidly proliferated in recent decades. The servitudes that form the backbone of these private developments are usually viewed as autonomy- and value-enhancing private contractual arrangements that are presumptively valid. The appealing contractual justification for private land use regimes seems to have shut down many of the usual paths of inquiry into the ability of the resulting arrangements to deliver on consumer preferences. In this article, I focus on several factors that can drive a wedge between homeowner preferences and the private land use regimes that the market provides.

The analysis proceeds in six parts. I begin by sketching the conceptual underpinnings of private developments, after outlining some key features of the legal landscape in which they are presently flourishing. Part II examines the problems that arise from the fact that servitudes are typically uniform - and uniformly enforced - across an entire community. Part III examines two dynamics that might push servitude regimes towards a stricter convergence point than many individuals might desire: the potential for adverse selection into lenient regimes, and the path dependence of community formation. Part IV considers some additional obstacles to the realization of consumer preferences in servitude regimes, including gaps in consumer understanding and difficulties that consumers may have in effectively sending market signals to developers. Part V considers the implications of a contract-based and association-administered regime for the development and deployment of norms and social capital within a community. Part VI presents some concluding observations that suggest how we might begin to address these difficulties.