Valuing Historical Land Claims and Its Loss of Use

Fred Lazar and Eliezer Prisman

Journal of Real Estate Literature, 2013, vol. 21, issue 2, 317-325

Abstract: Historical land claims commonly arise in disputes between government and the former inhabitants of the land. These claims typically relate to a past damage caused either by inadequate compensation or by inappropriate taking of the land. There are opinions voiced in the literature that these claims should be valued differently by the prospective and retrospective approach, respectively. This paper shows the deficiencies and perverse motivation for claims including the optimal timing of the claim induced by the retrospective approach. A new way of valuing the damage that is in the spirit of the prospective approach rooted in modern financial theory and option pricing is suggested and justified. This approach alleviates some deficiencies and spares the need for a long sequence of historical asset prices that are not readily available. Hence, it makes settling such disputes easier and increases the likelihood of arbitration instead of costly court cases.

Date: 2013
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DOI: 10.1080/10835547.2013.12090363

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