The Tragedies of the [Strata] Commons
Or, when common property becomes a strata tragedy and an anti-tragedy …
The overuse and misuse of pithy catchphrases is commonplace and annoying. So, when strata stakeholders glibly refer to the tragedy of the commons in thier buildings what are they saying and what do they really mean? It’s probably not what you [or they] think, and it may in fact be the exact opposite.
[11.25 minutes estimated reading time, 2242 words]
Introduction
I’ve been thinking about various strata myths or strata platitudes recently to see whether or not they hold up to scrutiny and if they should be debunked.
So, I previously wrote critically about the idea that strata title was ‘a fourth tier of government’ in the article Is Strata a Fourth Tier of Government? arguing, against that well-worn expression, that it wasn’t.
Today, I’m considering the idea that there is a tragedy of the commons going on in strata title, what that means, and, whether and/or how it exists.
What is the ‘tragedy of the commons’?
The tragedy of the commons is a concept from environmental science and economics that refers to the depletion of a shared resource when individual users act in their own self-interest, without considering the impact of their actions on the larger community. This phenomenon was first described in a seminal 1968 article by ecologist Garrett Hardin, in which he used the example of a common pasture, shared by multiple farmers, to illustrate the problem.
You can read his article here.
Hardin says, that in the absence of any external controls, each farmer will attempt to maximize their own profits by overgrazing the pasture and adding as many cattle as possible. This behaviour leads to the degradation of the pasture, reducing its capacity to support a healthy herd and ultimately making it less valuable for all the farmers.
The tragedy occurs when individual actions lead to a negative outcome for the community as a whole, even though the individuals may have acted rationally and in their own self-interest.
The tragedy of the commons is a problem in many areas, including fishing, logging, and the depletion of groundwater aquifers. In many cases, the depletion of a common resource can lead to serious ecological and economic consequences, such as the collapse of fish stocks, deforestation, and water scarcity.
There are several potential solutions to the tragedy of the commons, including government regulation, private property rights, and market-based mechanisms. Government regulation can help to prevent the overuse of a common resource by setting limits on the amount that can be taken and enforcing those limits. Private property rights can help to prevent overuse by giving individuals an incentive to conserve the resource for their own use in the future. Market-based mechanisms, such as tradable quota systems, can also help to prevent overuse by creating a market for the right to use a common resource.
So, when applied to strata title, it’s the concept that the multiple owners and occupants of a strata building will overutilise the common areas and facilities such that they ruin availability, usefulness, and amenity for everyone, including themselves. And, things like strata laws and strata building by-laws are the controls that exist to prevent that overuse and the negative consequences on all strata stakeholders.
Who says there’s a strata tragedy of the commons?
Quite a few scholars, commentators, and others involved in strata title have posited that there’s a tragedy of the commons in strata title buildings. And superficially, it makes sense.
Here are just a few examples from Australia and around the world where it’s been referred to.
In a survey and case study in the Journal of Property Research by Megan Walters and Paul Kent called Institutional Economics and Property Strata Title.
In an article in The Atlantic by Megan McArdle called Property Rights and the Tragedy of the Commons.
In a paper by Susan J. Smith in the International Encyclopedia of Housing and Home.
In a chapter of the book Multi-Owned Property in the Asia-Pacific Region: Rights, Restrictions and Responsibilities edited by Erika Altmann, Michelle Gabriel.
Even I referenced it in my work on the NCCARF research project and paper, Adapting Strata and Community Title Buildings for Climate Change.
And, probably, the best analysis of the principle’s application to strata title is by Professor Cathy Sherry in her paper Lessons in Personal Freedom and Functional Land Markets: What Strata and Community Title Can Learn from Traditional Doctrines of Property in the UNSW Law Journal.
But, what about the idea of an ‘anti commons’?
You might be surprised that there’s an opposite or complementary phenomenon that’s been identified since the 1970s called the ‘anti-commons’.
One of the best expositions of it is by Michael A Heller in The Tragedy of the Anti commons: Property in the Transition from Marx to Markets.
The concept of an ‘anti-commons’ refers to a situation in which multiple individuals or entities have legal rights to exclude others from using or accessing a resource, asset, or piece of property, but the excessive fragmentation of these rights leads to underutilisation or inefficient use of the resource.
In contrast to a traditional commons, where resources are collectively managed and shared, the anti-commons represents a scenario where too many ownership claims, rights, or restrictions hinder productive and efficient use to everyone’s detriment.
Key characteristics of an anti-commons include the following.
Excessive Ownership: In an anti-commons, there are numerous individual rights holders, each with the authority to control access or usage of a specific portion of the resource. This fragmentation can result from intellectual property rights, land ownership, patents, or any legal entitlement that grants exclusivity.
Inefficient Use: Because of the multitude of ownership claims, it becomes difficult for interested parties to negotiate and coordinate access, leading to underutilisation of the resource. Potential users may be discouraged from pursuing productive activities due to the complexity of obtaining permissions and/or paying royalties or fees.
Transaction Costs: High transaction costs, such as legal fees and negotiation expenses [as well as time delays], are associated with resolving conflicts, reaching agreements, or obtaining permission from numerous rights holders. These costs can further deter individuals or organisations from making efficient use of the resources.
Negative Economic and Social Impacts: The anti-commons phenomenon can have adverse economic and social consequences. It may stifle innovation, hinder research and development, and limit the availability of essential resources or technologies that could benefit individuals, groups, and society as a whole.
Efforts to address the anti-commons problem often involve legal reforms, such as streamlining property rights, creating licensing mechanisms, or facilitating collective management to reduce fragmentation and encourage more efficient use of resources. The goal is to strike a balance between protecting individual property and other rights whilst promoting the common good to avoid the negative consequences associated with excessive ownership claims.
Can you also see how this concept might also apply to strata title buildings and stakeholders where everyone often has a say [and sometimes a veto] over things?
Arguably, it’s at least as common and problematic as overuse and misuse under the tragedy of the commons.
Applying the tragedy concepts to strata title buildings
The concepts of tragedies and anti-tragedies of the commons can apply to multi-owner strata apartment complexes in obvious and less obvious ways in relation to common spaces such as elevators, stairwells, hallways, and grounds; but also in relation to strata owners’ and occupiers’ use of their own apartments and operational matters.
On the one hand, each strata owner has an incentive to maximise their own use of these shared spaces without considering the impact of their actions on the rest of the strata stakeholders.
For example, if a strata owner constantly blocks the elevator with their large furniture, it becomes difficult for other residents to access their apartments. If another strata owner does not clean up after their pet, it creates unpleasant odours and potentially hazardous conditions for others. Or, if strata owners don’t take care of the common areas, they become damaged and run down, and the appearance of the strata building becomes unsightly.
In a more structured example, when one strata owner takes over part of the common property for their own use [like under an exclusive use by-law] that common property becomes unavailable to every other strata stakeholder forever regardless of the circumstances applying when the sole use occurred and/or changed circumstances in the strata building in the future.
These individual actions lead to a negative outcome for the strata building and stakeholders as a whole, even though the individuals may have acted rationally and in their own self-interest. This can result in a decline in amenity, decreased satisfaction, increased inter-strata owner animosity or conflict, and reduced property values. It can also increase future strata building operational and management costs.
To prevent the tragedy of the commons in strata buildings, it is important to establish clear rules and regulations for the use of common spaces and facilities and to carefully consider the medium and long-term consequences of permitting excessive use of shared spaces and facilities.
It’s also important to enforce existing controls over excessive use of shared spaces and facilities and/or to create new controls when overuse is identified.
Plus, market-based mechanisms, such as fines, penalties, or legal action for violating controls, can also provide an incentive for strata stakeholders to consider the impact of their actions on the strata building and strata community.
In addition, educating strata stakeholders about the importance and value of maintaining shared spaces and the potential consequences of their actions will also help to prevent the tragedy of the commons in strata apartment complexes. By promoting a sense of community, encouraging cooperation among stakeholders, and explaining collective benefits that accrue, it is possible to maintain the quality of common spaces and ensure positive experiences for everyone.
Conversely, when restrictions are imposed on the activities of strata owners and other stakeholders, they often create an anti-commons where the shared spaces and facilities are underutilised, or not utilised at all.
In fact, I suspect this happens in strata title buildings way more often than overuse.
So, here are a few obvious and less obvious examples.
Strata buildings with common amenities such as swimming pools, gyms, or rooftop gardens typically apply strict and tight controls to address infrequent and/or potential problems or to address the historical bad behaviour of a strata owner or resident. But, if access to these amenities and facilities is tightly controlled, there’s underutilisation of those amenities by strata owners and residents seven though they could benefit many more of them. In extreme cases, the facilities are closed off to strata owners and residents completely.
Because the responsibility for maintaining and repairing common areas in strata buildings is typically shared among all strata owners, they must approve the work and pay for it. There are usually a range of processes and controls on work and strata levy approvals that are designed to protect individual strata owners from adverse decisions: such as requiring multiple quotations, money limits on approvals, higher decision thresholds, etc. However, these controls create and exacerbate disagreements or disputes about maintenance and repair that lead to delays in essential maintenance and repairs, causing further deterioration of the strata building, increased costs for the works, and exposure to strata damages claims.
When strata owners want to make renovations or alterations to their apartments that affect shared walls or structural elements, there are increasingly complex approval requirements they must navigate before doing that work. The approval requirements make sense as they protect the building structure from damage and unacceptable changes and ensure compliant work is performed. But, because the approval requirements typically involve majority or super-majority votes from all strata owners, they give other individual or minority strata owners outsize control over renovations which can be exercised irrationally, illogically, and unfairly to prevent the renovations. When considered at a larger strata complex level, limiting or preventing strata apartment renovations and improvements stops the overall upgrade of the strata building to increase amenity, value, and desirability. Plus, it can lead to conflicts and legal disputes among the stakeholders.
A less obvious example involves parking spaces or storage units. In most strata buildings, individual strata owners and residents have rights to specific parking spaces or storage areas in a common parking lot, garage, or building area. This can lead to inefficient use of parking and storage resources in the strata building where some spaces are rarely used by thier owners while others need additional spaces; so there’s an underutilisation of total spaces and/or conflicts over parking and storage space allocation.
Finally, here’s a link to an interesting example of anit commons in a building from D_Alex called A kind or reverse "tragedy of the commons" - any solution ideas?
It’s likely that most strata stakeholders don’t typically recognise the anti-commons impacts of these and other strata situations because of the compliance and control mindset that pervades strata building operations and thinking.
Mitigating the tragedy of the anti-commons in strata buildings requires more effective governance structures, clearer rules and regulations, transparency, open communication among strata owners and stakeholders, and more nuanced and balanced thinking about permissions, approvals and decisions.
Doing so can improve the efficient and productive use of shared strata resources as well as reducing the wastage of strata building resources in unproductive delays and conflicts and the resulting inter-strata stakeholder animosity it creates.
Conclusions
Let’s not fall into the strata trap of using platitudes like the tragedy of the commons [or anti-commons] to generalise about what happens in strata title buildings.
Whilst they may be convenient characterisations, they do not adequately address the complexity of interactions between strata owners and residents with each other and the collective strata corporation and the more difficult balancing act required between overusing shared strata resources and underutilising or wasting those shared resources.
Both tragedies concepts apply in most strata buildings to create a tension that needs balancing in the circumstances that exist from time to time.
Perhaps that’s way too optimistic.
Francesco ...
October 17, 2023