Study on the Senior Citizens’ Property Management Legal System from the Perspective of Economic Analysis of Law
Date Issued
2015
Date
2015
Author(s)
Chang, Ping-Kun
Abstract
Population constitutes one of the fundamental elements of a state. With the development of economy and the progress of medical technologies, Taiwanese citizens have higher life expectancy. However, due to the decline of fertility rate and the rise of life expectancy, the development of less children and aging population in Taiwan have emerged. Many problems derive from population aging such as long-term care and health issues. From the perspective of property, the major concern for the senior citizens may lay in property management and inheritance planning. This study is conducted by the method of “Economic Analysis of Law” to explore relevant issues regarding the senior citizens’ property management and transfer under different economic theories: transaction cost, information asymmetry (adverse selection and moral hazard) and agency theory. The structure begins with relevant regulations involve property management and transfer under the Taiwan Civil Code such as “Daily Housework Substitution,” “Mandate,” “Guardianship for Adults” and “Inheritance.” Apart from adopting economic analysis to examine whether the aforementioned systems are feasible and suitable and whether they satisfy the needs of senior citizens, this study also use these systems as foundation to demonstrate the result if senior citizens do no arrange their property. Next, this study will address the government-promoted “Trust of the Elderly,” including the introduction of the concept and characteristics of trust, some important regulations of Taiwan Trust Law, and then examines whether such regulations are in line with economic points of view and whether trust could be adopted as a tool of senior citizens’ property management. Then will introduce the concept of “Caring Trust” for senior citizens and try to explore the reason of the gap between the willingness and the actual situation of “Caring Trust” for senior citizens. Last but not least, a discussion on the Government’s Population Policy White Paper as to “Taiwan Real Estate Reverse Mortgages System Pilot Program (or“living off one’s own housing after retirement” as it is called in Taiwan).” In this part, the author introduces potential risks and challenges which the borrowers (the elders) and the lenders may encounter in a reverse mortgage loan. The Ministry of Interior Affairs has announced the acceptance of such application twice in 2013, but applicants showed none. The competent authorities examined the reason for zero-application with the conclusion that: “the qualification for applicant is too strict” and “the elders are conservative in regard to reverse mortgages.” This study believes that the lenders may face risks of longevity, interest rate and housing depreciation in reverse mortgage loan. The risk of housing depreciation, in particular, cannot be predicted and cannot be dispersed by “law of large numbers” or through derivative products. Moreover, the reverse mortgage loan is a loan without the right of recourse, and that the only cash flow for such loan is the disposal of housing, if the potential loss problem of the lender cannot be solved, reverse mortgages system can hardly be enforced in Taiwan. Moreover, the Civil Code adopts the “principal of legality of right in rem,” which prohibits parties to create rights freely. Whereas there is no such concept as “reverse mortgages” in the Civil Code; therefore, reverse mortgages need to be exercised by means of general mortgage or maximum limited mortgage. Whether by ways of “disposition of mortgaged property by payoff” or the “auction,” it will be twisted and far-fetched in the law application if we apply the traditional concept of mortgage on the reverse mortgage. Furthermore, because Article 6 of the Tax Collection Act sets out that collection of taxes prioritizes general claims by mortgagee, it will also hinder the reverse mortgage system from practicing in Taiwan. In addition, issues such as uncertainty in transaction, high transaction cost and information asymmetry are other problems waiting to be solved. Therefore, the reverse mortgages system is hard to be enforced in Taiwan and there remains a long way to go.
Subjects
Economic Analysis of Law
Guardianship
Caring Trust
Reverse Mortgage
Property Management
Transaction Cost
Information Asymmetry
SDGs
Type
thesis
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