Asymmetric Information and the Law of Servitudes Governing Land

Abstract

This paper explains the structure of the law governing servitudes on land using key ideas from the economics of information, focusing on easements and covenants and the rules governing their formation and application. We develop a model of land markets that incorporates asymmetric information (adverse selection) and specialization in ownership and use this to offer a rationale for the seemingly ad hoc limits on the use of servitudes. We stress the inability of sellers of land credibly to assure buyers that land is not encumbered by servitudes. Our model explains variations in legal doctrine over time and across jurisdictions, particularly comparing servitudes in the United States and in England.

Keywords: law and economics, property rights, servitudes

JEL Classification: K0, K11