Optimal statute of limitations under land development timing decisions
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In a recording title system, a landowner faces two risks: the risk of a claim from a previously dispossessed owner and risk of being dispossessed by adverse possession, squatting, or encroachment. In this study, we build a real options model to investigate the issues regarding the optimal statute of limitations. In the absence of any uncertainty, a longer statute of limitations delays land development, and thus a regulator may allow for a more lenient policy of statutory limitations for land located in the suburb than in the city center. At any given location, greater uncertainty in urban rents will cause a landowner to wait longer. Anticipating this outcome, the regulator should shorten the statute of limitations to increase the likelihood for the current owner to retain title.
JEL ClassificationG13 G31 G32 R52
We would like to thank the editor (Euijune Kim), two anonymous reviewers, participants at both the Global Chinese Real Estate Congress (GCREC) 2015 annual conference and the Pacific Rim Real Estate Society (PRRES) 2018 annual conference for their helpful comments on earlier versions of this manuscript. We also thank Su Wei King for research assistance. Financial support under Grant 101R001-26 from the College of Social Sciences, National Taiwan University, is gratefully acknowledged.
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