Property law usually reacts to encroachments with ejectment. Building encroachments differ, as restoring landowner’s property claims implies the reversal of often large costs sustained by the builder. The authority faces thus the following dilemma: either it stands by the landowner and faces the social costs of undoing significant investments, or it defends the investment of the builder at the cost of neglecting landowner’s claims. To address building encroachments, national property laws have deployed interestingly different remedies that range from a property rule in favor of the landowner to a property rule in favor of the builder with a variety of liability rules in between. The paper models the builder-owner conflict after the theory of optional law (Ayres, 2005), it frames different national solutions into a common analytical setting and it evaluates the different laws in their relative allocative and distributive outcomes. Moreover the paper offers support to the idea that property law may implement put-option types of remedies.
|Date of creation:||Apr 2008|
|Date of revision:||Apr 2008|
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National Bureau of Economic Research, Inc.
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