Asymmetric Information and the Structure of Servitude Law

Abstract

This article explains the structure of servitudes on land using key ideas from the economics of information. Our focus is on easements and covenants and the rules governing their formation and application. The legal doctrine on servitudes has long been viewed as a Byzantine tangle of doctrine emanating from property law, contract law and courts of equity. 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 illogical limits on the use of servitudes. Our model uses information costs to explain variations in legal doctrine over time and across space, particularly comparing servitudes in America and in England. An alternative approach to explain servitude doctrine based on the "anticommons," is seen as a special case of the more general problem of information asymmetry arising from measurement costs in land. This is the first paper to model adverse selection issues attached to land law.