Talbert Black, a Citizen Reporter for The Nerve who lives in Lexington, recently posed questions to state Rep. Garry Smith, R-Greenville, the sponsor of S.C. House bill that would allow property to be seized by the government and given to someone else to repair or demolish, at the expense of the original owner.
While neither Smith’s bill, H. 4628, nor a companion bill in the Senate, S. 1117, appear likely to make it into law this session, both have generated strong feelings among grassroots activists in the state.
Black, who has a particular interest in personal freedom and property rights issues, conversed with Smith by email regarding the House bill.
The following is from their correspondence:
Black: I can understand the desire to address a problem with abandoned and dilapidated buildings; however, the unintended consequences of this bill are great. It encourages property taking with no risk, charging the original owner for improvements to his stolen property, plus 10 percent.
Smith: That is not true. It provides a free market alternative to the only method now available which is condemnation and demolishing property.
Black: Please explain to me how it is a free market solution. Here is what I see as a free market: Someone sees an opportunity to make a profit that outweighs the risk of loss and buys the property from its rightful owner at a price both the owner and buyer freely agree upon. The new owner then assumes all risk of loss or benefit of profit based on his skill (or lack thereof) in making improvements that a future buyer is willing to pay for. That is a free market solution.
This bill sets up a system that is anything but a free market solution. The receiver has absolutely no risk whatsoever; the court takes the property by force. There is no mutually agreed upon selling price between the original owner and the receiver. The court gives it to the control of a receiver, who then charges the owner the difference between what he can make on his receivership and his cost, plus 10 percent. The receiver is guaranteed 10 percent profit over cost. What is his risk? How is that free market? There is no incentive to control cost. In fact, the incentive is to spend as much as possible in order to maximize profit, which is 10 percent of cost. It also extinguishes any prior liens on the property after the legal theft takes place. So what about the poor lien holder? The guy with the original note gets the shaft, too. That is nothing like any free market I want to be a part of.
Smith: Talbert, under the law presently the property is forcibly taken and demolished. What is left is often less valuable than when the process started. What I am trying to do is exactly what was done in Texas and has been copied by others since: offer an alternative that uses free market principals instead of the present heavy hand. As a result of a hearing on the bill we are drafting amendments to protect lien holders, and looking at ways to assist the owner further. I disagree that the receiver does not have any risk. The receiver risks that the value of the property afterwards does not reach the level of their expense or that someone is not willing to purchase it for a profitable price.
Black: When all is said and done, the receiver bills the original owner for the difference between what he makes and his cost, plus 10 percent profit. The original owner is liable for the receiver’s profit. I hope you will remove government impediments to the free market. This bill is one. I agree that the current situation that you describe of the property being forcibly taken and demolished is bad. Under what guise is the property taken? What makes this theft legal?
Unless the property is being taken by a lien holder, then that needs to be changed. But not changed to be something equally bad or worse. If the poor property owner can’t afford to “fix up” the property on his own, he surely shouldn’t be forced to pay the thief who took it for the thief’s cost plus 10 percent. How is that better than just having the property stolen and demolished? Legal or not, having your property taken against your will, unless it is according to the terms of a contract that the owner willingly signed (as in a mortgage), then it is thievery. Legal plunder is still plunder, as Bastiat wrote back in 1850 in The Law.
Smith: I am trying to correct what I think is a bad situation at this time. This solution may not be the answer, but if we do not ever attempt to put something forward we will never get to the right answer. The owner paying is an option at the end. There are a lot of opportunities and steps from beginning to that end. In the beginning a city or county must have provided numerous notices of a public hazard. If these have failed to correct the hazard they must be able to convince a court that there is a problem that constitutes a major or imminent public hazard. In an example I used that I was familiar with from my experience in the early ‘80s it had to do with an abandoned hotel near downtown Aiken. In this situation the hotel had an elevator shaft with a large motor being held up by a rotting board, among other such hazards. Kids and others were routinely trespassing. The owners (multiple heirs mostly out of state) had not been able to find buyers and none had enough controlling interest to act.
If the courts felt the situation warranted intervening they then could appoint a receiver, if one is available and willing. If this happens it would keep the property in private hands. At the end the receiver accounts for the renovation to the court. Property owners and lien holders have the opportunity to take over and the cost may be expenses plus up to 10 percent.