An Economic Analysis of Adverse Possession Statutes -- The Case of China and Germany

Abstract

Adverse possession, a doctrine whereby a possessor of land who is not the true owner acquires title to the land without the consent or compensation of the "true" owner, while simultaneously appearing to be a trespasser's possession of the land adverse to the owner's interests from an economic perspective. This paper explores the economic implications of adverse possession statutes, focusing on China and Germany. It provides an overview of adverse possession, comparing relevant national laws, particularly those of Germany. Despite its economic efficiency, China has not established an adverse possession system. The analysis examines the current legislative status in China and explores inherent reasons for its absence. Evaluating the necessity for China to adopt such a system, potential problems are identified, including issues related to homeless individuals seizing property and challenges in replacing existing systems. However, the study highlights the economic benefits, such as enhancing transaction certainty reducing costs, and preventing errors through adverse possession.