Jagged edges.

• Author: Sipe, Matthew
• Position: Efficiency of adverse possession claims

Modern adverse possession doctrine appears to be in regular need of rejustification. There are now alternative methods of addressing innocent improvements or title defects, as well as increasingly robust and reliable recording systems. To the layperson, adverse possession appears to be legalizing theft. In this ongoing debate, a great deal of ink has been spilled justifying or criticizing adverse possession, particularly on the basis of its economic efficiency. This Comment provides a new lens for viewing the efficiency of adverse possession by examining the tendency for successful claims to reshape the regularity of boundary lines. As this Comment attempts to demonstrate, the short- and long-term economic effects of boundary irregularity raise significant questions regarding the suitability of adverse possession doctrine to contemporary needs, particularly for certain topographies. Moving forward, adverse possession doctrine may be able to incorporate considerations of these irregularity effects in order to improve efficiency at both a parcel-by-parcel and a community-wide level.

Part I outlines the predominant efficiency justifications for adverse possession and critiques of these justifications. Part II describes the effects of adverse possession on boundary regularity and the effects of boundary regularity, in turn, on land values, transaction costs, and long-term economic trends. Part III examines adverse possession doctrine and statutes, finding no evidence that courts currently take these concerns about boundary irregularity into account but identifying potential footholds for them to do so. Finally, Part IV notes how the effects of boundary irregularity differ across topographies in a way that may lend further explanatory power to the evolution of states' divergent adverse possession laws.

1. ADVERSE POSSESSION AND NOTED TENSIONS WITH EFFICIENCY

   One of the primary and longstanding justifications for the adverse possession doctrine is that it increases economic efficiency. Adverse possession, it is argued, results in higher-valued uses for individual parcels of land. (1) Some scholars have further claimed that adverse possession reduces transaction costs for the property market as a whole. (2)

   In response, other legal scholars have criticized adverse possession as inefficient on numerous grounds. First, it is claimed, if the purpose of adverse possession were to transfer titles to higher-valued uses, then use of a liability rule rather than a property rule would be far better at ensuring that adverse possession claims succeed only when the adverse possessor's value actually exceeds that of the original owner. (3) Second, with robust, reliable modern title recording systems, adverse possession's ability to clear aside stale or questionable claims is considered less useful. (4) In fact, potential adverse possession claims may actually "mak[e] the record less reliable ..., decreasing] the certainty" of ownership. (5) Third, requirements of good faith intent in adverse possession, as found in some states, arguably block efficient adverse possessors who are aware they are squatting while rewarding innocent but inefficient ones. (6) Finally, it has been pointed out that the focus on higher valued uses fails to take into account non-use utility, potentially undermining both environmental quality and broader social efficiency. (7)

   This Comment seeks to contribute to the ongoing analysis of adverse possession's efficiency. It examines how successful adverse possession claims, by redrawing the shape of property boundaries, can sometimes reduce market value, generate subsequent transaction costs, and cause larger systemic distortions. These findings further undermine the aforementioned characterization of adverse possession as efficiency-promoting. The fact that existing adverse possession doctrine does not take boundary regularity into account greatly reduces adverse possession's efficiency. Courts and legislatures, however, can potentially make adverse possession doctrine more efficient by incorporating boundary regularity into the doctrine.

2. THE EFFECTS OF ADVERSE POSSESSION ON EFFICIENCY DUE TO BOUNDARY IRREGULARITY

   1. Adverse Possession Affects Boundary Irregularity

      The requirement that adverse possession be actual (8)--defined as a person's "having or holding [the] property in one's power" and "exercis[ing] ... dominion over" it (9)--frequently results in pieces of land being carved out of the original owner's parcel rather than the transfer of the entire parcel. An adverse possessor might have actual possession of only a certain portion, such as a fenced-in area adjacent to the property line (10) or a campsite gradually constructed in an uncultivated area, (11) leaving the remainder to the original owner. As a result, adverse possession has the potential to make property boundaries more or less regular in different disputes. For example, one adverse possession might act to "complete the square," as it were, increasing regularity:

      Another adverse possession might cleave off a bizarre shape from an otherwise rectangular parcel, decreasing regularity:

      Finally, particularly in claims of constructive possession, where an occupier with color of title can adversely possess the entire parcel referred to in the title, (12) an adverse possession may neither increase nor decrease regularity:

      Consequently, adverse possession has the potential to alter the general level of regularity in land boundaries with every dispute. In the long run, adverse possession may contribute to a general trend toward or away from regularity. As outlined in the next section, the relative regularity of parcel boundaries has direct effects on land value, transaction costs, and property dispute frequency.

   2. Boundary Irregularity May Decrease the Value of Land, Increase Transaction Costs, and Cause Long-Term Distortions

      Boundary regularity can directly impact land values and transaction costs. Using a natural experiment in central Ohio--where land demarcated by metes and bounds like rivers and trees is interspersed with land demarcated by standardized rectangular borders--economists Gary Libecap and Dean Lueck demonstrate that per-acre land values are higher with regular, straight-line boundaries. (13) Parcels of land demarcated under this rectangular system also undergo fewer property disputes and more market transactions. (14) Hence, even if dividing a parcel in two has certain efficiency gains--say, by allowing one owner to use a riparian section for water access and another owner to use a forested section for logging when neither has the capital alone to do both (15)--these gains may be completely offset by the net reduction in land value and increased transaction costs if the division occurs in an irregular fashion.

      1. Boundary Irregularity May Decrease Land Values

         Applying Libecap and Lueck's results to the case of adverse possession, the effects of boundary irregularity are twofold. First, an adverse possessor may no longer value the disputed section of property more than the original owner does if carving out the disputed section with irregular borders reduces its market value. Second, the new irregular borders can also reduce the value of the original owner's remaining parcel. A numerical example lends some insight into how even a relatively small percentage decrease in value associated with border irregularity can result in a large total loss when experienced by both parties.

         Consider...