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Título Can Formal Property Titling Programs Ensure Increased Business Investments and Growth?
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Can Formal Property Titling Programs Ensure Increased Business Investments and Growth? October 11, 2004

Abstract

Even though many developing countries have implemented titling programs to secure property rights, such programs often aren’t enough to foster private sector growth because they provide little security of ownership. Although some believe more regulations are needed to strengthen property rights, others say they only increase uncertainty, transactions costs and chances of fraud. The question is not whether more regulation is good or bad in itself: it all depends on the ideological background against which such regulation is contrasted and interpreted.

 

Pese a que muchos países en desarrollo han implementado programas de titulación para asegurar los derechos de propiedad, estos no han sido suficientes para fomentar el crecimiento en el sector privado porque proveen de poca seguridad en la propiedad. Aunque algunos creen que más regulación es necesaria para fortalecer los derechos de propiedad, otros dicen que sólo aumentan la incertidumbre, costos de transacción y oportunidad para el fraude. La pregunta no es si la regulación es buena o mala en sí misma: depende del trasfondo ideológico con el que se le contraste e interprete.



Keywords: property rights, derechos de propiedad, registration systems, sistemas de registro, property description, descripción de la propiedad, land registry systems, sistemas de registro de la tierra,  property registry, registros de propiedad, World Bank, Banco Mundial, fiscal cadastre, catastro fiscal, physical cadastre, catastro físico, Guatemala, Mexico, Méjico, Bolivia, Honduras

 

 

 

http://rru.worldbank.org/Discussions/Discussion.aspx?id=45

Discussion:

Can Formal Property Titling Programs Ensure Increased Business Investments and Growth?

Even though many developing countries have implemented titling programs to secure property rights, such programs often aren’t enough to foster private sector growth because they provide little security of ownership. And formal titles quickly revert to informal status because registration procedures are costly and time-consuming. Although some believe more regulations are needed to strengthen property rights, others say they only increase uncertainty, transactions costs and chances of fraud.

Questions: What are some other types of reforms needed to register property easily, and how should they be implemented? Although countries can’t overhaul the entire business environment along with property titling programs, what are some smaller steps they can take? Can the use of technology be an effective way of streamlining registration procedures in developing countries? Do you think that more regulation and a formal property registration process are needed to secure property rights in developing countries?

Click here for Caralee McLiesh and Richard E. Messick's introductory remarks and links to topic background documents.

Discussion was closed for comments on October 11, 2004.

There are 40 comments in this discussion (most recent appear first).

1

Formal Property Titling Programs

 

Author: ENRIQUE RAJOY BREY
Posted: 10/13/2004

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Organization: CINDER

Part 1 of 2
Let’s not get this wrong: It is true that having graphic bases, especially bases you’ve prepared yourself, favors the identification of the property, which is the object of the rights. But I’d like to make three subtle points: A good literary description does the same job, especially for urban property (or do we hand out maps to our friends when we’re telling them how to get to our home and what our building looks like?). Second, the problem, as has already been stated, is the added value and the efficiency of the proposed investment; and third, registration systems in all the developed countries have functioned successfully for a long time under these conditions.

I have to ask, if the conditions of many of the third-world countries resemble what our conditions were years ago, why, instead of letting them try, do we start overwhelming them with maps and state-of-the-art technology? Might it not be that what’s going wrong is something else? For example, all advanced registration systems honor what we call the principle of determination, under which, if a property’s description does not enable you to identify the property out in the field, you’ve got to refuse registration. This principle has not been applied or has not been correctly applied in many countries, and what we ought to be stressing is teaching how the principle works, and teaching the rest of the principles that have enabled the developed countries to become developed.

Author: ENRIQUE RAJOY BREY
Posted: 10/13/2004

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Organization: CINDER

Part 2 of 2
My proposal therefore is to prioritize those things that have enabled us to advance to the status of developed countries, which can be summarized as the correct application of the principles given in the La Antigua Declaration. Nevertheless, I do believe it is useful to equip each registration office with an orthophoto of the land its district encompasses, at the largest possible scale, and every time an entry is made, to locate the position on the map. If there are any doubts, the entry can be made and, where appropriate, the person in question can be called in to locate the property, or a warning can simply be attached to the document so that steps can be taken to clear the matter up. If there is any overlapping with another piece of property, a judge can be called in. The process is slow, and it certainly is less glamorous and "sellable," but it’s also more reliable than the processes currently being implemented, which seem determined to have developing countries solve in one day a problem that we in the developed countries have not yet finished solving for ourselves.

Author: Nicolás NOGUEROLES
Posted: 10/13/2004

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Organization: REGISTRARS OF SPAIN

In my view, Doing Business’s recommendation of a unified cadastre/registration system raises a false dilemma that has no empirical support.

1. How registries and mortgage markets work has not demonstrated that unification is more efficient. In land registries systems that offer the greatest legal certainty, what one sees is not unification, but coordination. We can find examples to illustrate every side of this point.

2. The problem is not whether to have one agency or two, unification or non-unification; the real problem is whether the registration system’s activity is subordinate to the cadastre or not - whether legal changes are made in a registry and then notified to the cadastre, or, to the contrary, a change has to be effected first at the cadastre before it can be made in a registry. In other words, is it necessary to wait for the maps to be changed before making changes in registration? This is terribly important in areas where there are heavy international investment and constant changes in ownership.

3. The first thing to do in order to coordinate the cadastre and the registration system is to gain a clear grasp of their radical differences.

Author: Victor Endo
Posted: 10/13/2004

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Organization: Instituto Libertad y Democracia

Part 1 of 3
In the developing world, when illegal occupiers, or owners who develop land without complying with urban regulations, reach a critical mass, eviction and enforcement become difficult and exceptional legal regimes are created over time. Usually they try to assimilate the standards of traditional property systems to the emerging situation, producing cumbersome, expensive and discriminatory "extraordinary" procedures. A first effect of a titling program is enhanced citizenship, because a substantial part of the population can be incorporated into the rule of law by recognizing their possessory rights. Security of tenure can be obtained through mere peaceful possession or by other means, for example a President visiting a settlement to offer water and sewage indicates the State tolerance to the settlement. In this sense, a property titling program represents an incremental step in getting security. For those able to produce surpluses, a formal title is an opportunity to increase the value of the property and eventually its interchange value. Transactions on property occur every day in the informal sector, but restricted to the limited network of family and friends. Land is bought and sold, and even used to secure credit, but neither transactions nor mortgages are registered. In other words, there exists a land market, but limited in the number of players who trust each other and restricted in time horizon, and therefore inefficient.

Author: Victor Endo
Posted: 10/13/2004

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Organization: Instituto Libertad y Democracia

Part 2 of 3
Formal property titling programs can contribute to increased business investment and growth, inasmuch subsequent transactions are maintained within the Registry. Two basic conditions are needed: (1) owners need to be aware of the benefits of registering and (2) transaction costs need to be kept low. The benefits are higher when the registration system is effective and accrues the conditions discussed by Nogueroles and Arrunada, and especially for those entrepreneurs with linkages to formal markets. If the policy objective for titling is not only enhanced security but increased business environment, reforms should be comprehensive and include simplification of the registration system to make it more accessible.

2. Simple reforms to simplify registries
McLeish-Messick suggest whether simple administrative reform as opposed to legislation are possible to simplify the registration systems. Reforming the registration system by administrative reform is difficult to envisage because of vested interest fixed in the laws. Titling programs usually create a special track to register formalized titles, but do not touch traditional registration procedures. In the case of Peru and many legal systems from the civil law tradition, registries have evolved over the years giving raise to vested interests, such as of the notary profession whose added value to the system is limited to verifying identities of the parties, but who have a monopoly in the creation of notarized deeds, deemed by the Civil Code as the sole instrument to input information to the Register.

Author: Victor Endo
Posted: 10/13/2004

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Organization: Instituto Libertad y Democracia

Part 3 of 3
Two reforms can be suggested, although it might be difficult to get them without legislative change:
-Abstract prevail over deed. In many registration systems, the property record is both the deed containing the transaction details AND the abstract made by the registrar out of the relevant information from the deed. Often, in the case of discrepancy, what is valid is the information contained in the deed. This produces legal costs of title searches going back 10 - 20 years. A simple reform could give full legal effect to what is written in the abstract, by transferring the responsibility of checking the abstract to the parties who assume the consequences of eventual errors.
-Simplified forms instead of notarized deeds. One of the main sources of interpretation -and therefore a source of errors- is the fact that the Registry information input is cumbersome: i) Lawyers draft unnecessary complex contracts; ii) Notaries transcript them; and iii) Registrars interpret and abstract for the registry records. Most of the transactions over land are standard. In fact, lawyers have their standard contracts in the computer with blank fields that are adjusted to the specific situation, i.e., lawyers actually use formats, but there exist one format for each lawyer. If the format was the abstract itself, there would be less room for interpretation, less transcription errors, and more important, reduced discretion for the registrar. The issue is that the players would have to find different ways to justify their fees.

Author: Mario Rietti
Posted: 10/11/2004

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Organization: COFINSA

No doubt at all that this discussion highlighted the urgent need to identify practical, innovative solutions to implement titling programs to secure property rights, especially reforms needed to register property and how they should be implemented. I have read all the comments to date, and I support Nicolás Nogueroles's contribution identifying the value of data, the relationship between the registration system and a cadastre and many other important elements, such as independence, training, financing, controls on acceptance for registration, liability and the system's relationship with the courts, in making a registration system efficient and effective.

The challenge facing the development community in property titling programs is to find solutions that work at nation- and city-wide scales. The collection and dissemination of reliable data about slum dwellers is an important way of putting the urban poor on the map in international and national development dialogues, such as this one. Efforts should be focused on looking for local solutions, pilot projects, and best practices. For example, the National Congress of the Republic of Honduras recently approved new property legislation, which is completely different from the present titling system. In the new model of Folio Real, the title itself is not legally binding until it is registered in the Property Registry. Therefore, we need to evaluate the strengths and weaknesses of the property rights system, including the innovations introduced by the new law, and propose measures with which the government can mitigate problems associated with the absence of legal titles and property registration.

Finally, in Honduras and some Latin American countries, the registration system and the cadastre system are used as a tool for tax purposes. Transparency and accountability are important factors in this aspect for property titling programs and cadastre sustainability.

Author: Koffi Alinon
Posted: 10/11/2004

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Organization: LandNet-Togo

I got an overview of the conclusion of the World Bank survey in which our organization participated. Congratulation to the authors. My first opinion is to acknowledge the fact that titling can bring greater investment. We observe that this works in urban and peri-urban areas.
However I am feeling uncomfortable with the emphasis you are making on the expression "formal property titling". In rural lands in Sub-Saharan countries, there is no formal freehold/leasehold arrangement. let me quote the types of rights that govern such land:
- the “right to cultivate” (droit de culture) a certain portion of the collective land recognized to every member of the community. This cannot be assimilated to the western legal notion of usufruct (even if it seems comparable) mainly because it is transferable and the owner acts during its usage quite like a proprietor.
- the bubble of rights contained in what is called the indirect use system (faire-valoir indirect) or derived rights (cf. Lavigne Delville, P, Toulmin, C, Colin, J.P, Chauveau, J.P, 2001, Securing secondary rights to land in West Africa, London, IIED, Issue Paper 107, P. 4).
Few formally recorded agreements do exist. They gain greater interest and are required by new migrants to their “tutor” in cash crops zones of the Plateau region of Togo for example.

Any policy promoting the recognition of informal property rights must be encouraged (e.g. the Plans Fonciers Ruraux are giving currently positive outcomes in West Africa). So, there are many ways to explore apart from formal titling. We all remember that exclusive liberal opinion promoted by the World Bank has resulted in disastrous land policies in previous years. The last PRR of the Bank (cf. Deininger, K., 2003) represented a more balanced consideration on the subject.

Author: Anonymous
Posted: 10/11/2004

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Organization:

In the Georgia (South Caucasus) land reform example, it is quite obvious that even formal property titling programs are capable of increasing business investments. Starting from 1998 till present, the prices of land and real property in rural and/or urban areas have increased. The registration system established in Georgia allowed property owners to use legally registered property at best use, as an owner deems appropriate. The growing number of transactions and the price increases were results of actual demand and supply. But again, a market-oriented government policy contributes most to growth in investments in a country. Since the Rose Revolution that took place in Georgia last November, further reforms of the legal-regulatory framework serve as the best prerequisite in encouraging business investments in the real property market area.

Author: Nicolás NOGUEROLES
Posted: 10/8/2004

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Organization: REGISTRARS OF SPAIN

Part 2 of 2

III. THE VALUE OF DATA
Registration systems attribute a different value and binding force to legal data (such as owner name, liens and mortgages) than to physical data (such as the property’s surface area).

IV. FREEDOM OF THE GRAPHIC BASE
The graphic base may be provided by the cadastre, but other institutions or surveyors are equally able to do so. The cadastre, as Jolyn Sanjak says, may serve very useful purposes for public policies, but it does not necessarily have to do with the protection afforded by registration.

V. TOO MUCH ATTENTION
The relationship between a registration system and a cadastre is only one aspect. There are many others that are more important in making a registration system efficient, such as independence, training, financing, effects, controls on acceptance for registration, liability and the system’s relationship with the courts. If the courts do not uphold registration entries, the system is not worth much.

Author: Nicolás NOGUEROLES
Posted: 10/8/2004

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Organization: Registrars of Spain

Part 1 of 2

I. THE FISCAL CADASTRE
The registration system and the cadastre have different functions. The primary function of the registration system is to protect property ownership and to make private transactions secure. The cadastre, however, has a function that is eminently fiscal in nature, tied in to the collection of taxes. When the registration system is distorted into a means of collecting taxes, it becomes inefficient. The registration systems with the most inefficiency and the highest transaction costs in Europe are those where the two functions have been mixed up. The same occurs in some Latin-American countries, where registration systems are used as a tool for collecting taxes and financing the state. Citizens are not going to trust in a registration system that cannot protect their ownership rights and, on top of that, charges them more taxes.

II. THE PHYSICAL CADASTRE
It is a key element in a registration system to have an adequate method for identification of properties. A graphic base can be useful for this purpose. The problem lies in how much identification is required. Is perfect measurement and delimitation of boundaries necessary before a property can be registered? This raises some problems:
a) Economic costs. How much owners will be willing to spend on thorough identification depends on how much the property is worth to them. In some title programs, the cost of identification is higher than the value of the properties at issue.
b) Legal costs. A photograph or measurement alone is not enough to solve boundary problems. The consent of the parties involved must be secured, and that may entail a higher cost. For registration systems, boundaries are a legal problem, not just a physical problem.
c) Property will have to be identified in different ways, depending on whether it is rural or urban.

Author: Otabor Isaac
Posted: 10/7/2004

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Organization: Univeristy of Birmingham

I think that more regulation and a formal property registration process may not necessarily secure property rights in developing countries, but effective and efficient regulations and formal property registration may secure property rights in most developing countries, if not in all of them. Also, I think there is no one best regulation and formal property registration process suitable for all the developing countries. The best regulation and formal property registration process for any country should take into consideration the culture of the people and the cost/benefit of property registration.

Author: ENRIQUE RAJOY BREY
Posted: 10/7/2004

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Organization: CINDER

Congratulations on the creation of this forum. I would like to make a few comments about the integration between land registration systems and cadastres. Why do you think that, after Quebec’s cadastre reform that integrated the land registration and cadastre systems for the deigned purpose of guaranteeing legal certainty (a reform that was, by the way, stoutly defended by some of this forum’s participants at the first Latin-American Congress held in Lima in November of last year), financial institutions have made title insurance a necessary requirement for mortgage loan applicants? Simply because the market demands a kind of security that the reform failed to provide. True, since in Canada, as in the other developed countries, there is an alternative to ensuring ownership through registration, credit has not ceased to exist; it has just become more expensive. However, in developing countries this is not what happens. When reform fails in a developing country, it does not mean some corrective mechanism will spring into place; it means that the creation of a market where there is room for everybody is postponed for several years, and the country’s poverty becomes even more profound. Why, then, do we insist on financing and promoting something that has proven to be ineffective here and always has been ineffective?

Let’s call to mind the words of Hernando de Soto: “Programs to create property ownership will continue to fail as long as governments think creating property ownership only requires handling physical things, as long as they think photography, surveying, measuring and computerizing their inventories of physical assets provide all the information required to issue property titles”.

Author: Sean Johnson
Posted: 10/7/2004

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Organization: Trinidad Ministry of Agriculture Lands and Marine

A few more words about 'cadastre' (with apologies to David Stansfield - these arguments have not been settled in many countries) because of the costs and difficulties involved: Issues relating to identification of property, as distinct from rights and proprietors, can consume 75% of a titling program budget. It can get worse - requirements for demarcation and survey can lead to complete failure, the most notable example being the first attempt to introduce land registration in England in 1862. This initial failure was not entirely due to boundary issues; antiquated land law and stakeholder resistance contributed. The first obstacle was removed (not circumvented by adopting some new surveying technique) by taking a radically different approach: Even though parcels of land are defined by their boundaries, it is not necessary to define the boundaries to delineate the parcel and identify it unambiguously.

A different process or approach may only be possible by changing the law, overcoming stakeholder resistance, or both. It took over half a century to reform the law in England and only now with resistance on the wane and more compulsion will all land become registered and the full benefits realized. What chance then for less developed countries? Different situations need different approaches, but realities are the same - opposition of stakeholders (legal opposition to law reform); high costs (surveyors demanding precise cadastral surveys); and, beneficiary apprehension (greater State role and necessary compulsion). Lessons are similar too - get the message out; get the start-up costs down; overcome the vested interests - all easier to say than do, except if you are a politician and able to shape the law. This all pre-supposes that formal titles are appropriate, which they may not be in some situations; the fact that some form of land registration or documenting of land rights is needed is usually more self-evident.

Author: Kenroy Dowers
Posted: 10/7/2004

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Organization: IFC

I think it is generally agreed that improvements to property registration could, but not necessarily foster reform in recognition of a tradable asset that is wealth enhancing, particularly for emerging countries, where the allocation of an individual's wealth could be skewed more toward liquid forms of assets (e.g. land). However, this is not a necessary condition, as it is as good as the regulation that underlie the recognition of property rights and the capacity to enforce the recognition of these rights. This requires a more global change at all levels (grass root, governmental and municipal). The latter reference to municipal is particularly important, given for many countries the responsibilities of registration and recognition of property rights are governed by municipalities. Mexico is a good example of this, and this has led to significant differences in recognition of the efficiency and the capacity to perfect transfer of property. A clear impact of this in Mexico has been the reaction of financial institutions in their willingness to assume risks in municipalities where there are huge transfer costs or cost inefficiencies.

An important ingredient to the reform process could be the potential role for the private sector in supporting reform of property registration processes. Their are recent examples in the case of IFC for the support (East Asia) for private sector companies becoming involved in the process of upgrading the system for retrieval and recordation of titles. This however, is possibly reserved for countries that have truly made the commitment to the total reform process and where there is adequate protection over manipulation and control by a single private company. We also have the possible involvement of the private sector in providing title insurance as a stop-loss measure and could be another avenue to be explored (refer to Costa Rica).

Author: William Armstrong
Posted: 10/5/2004

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Organization: IDB

I read with interest the comments of messrs. Arruñaga and Johnson on the relative unimportance of the cadastre for determining ownership. Their explanation of this resides in part on the lack of successful modernizations of cadastres and the money wasted in the process. This has left those registry offices that require cadastral descriptions without an effective way for describing the property's boundaries. Question: In the absence of good information from the cadastre, what means can a registry office use to describe a property's boundaries and therefore provide the judicial security that is required to know who owns what? I am aware of systems that rely on the "from the big rock to the oak tree" descriptions, but this is presumably not good enough.

Author: Kiran Rajashekariah
Posted: 10/1/2004

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Organization: University of Oxford

Thanks for opening this intriguing debate on property titling. While the idea of streamlining property titling is laudable in emerging markets, I believe that the process shouldn’t just be confined to technical garb just to foster business investments, but rather be a spin-off of a social justice program. Given the financial clout and lobbying power of the business community, it’s often an easy ride for businesses in newly formed ‘fast track single window’ clearance institutions in developing countries where the results are often flaky. I believe it is of the utmost important to ensure ‘definitional rights to property,’ which include the customary rights of the stakeholders, or the community or individual (as far as it doesn’t intrude on the social norm: law of torts may be helpful).

At the local level, its important to encourage banks and other financial institutions to recognize property as an ‘asset’ worth exchanging and to ensure quicker provision of loans at minimized transition costs. Land reforms also make the activity of policymakers, regulators and financial institutions more akin to ‘market principles. Caution needs to be exercised to ensure that the titling program does not politicize the process itself, which often is the case where there are many new claimants coming in for an earlier non-extent ownership, breeding rampant corruption. In summary, minimizing complex regulation processes not only cuts transition costs but also increases the opportunity cost of time, which when put to use, can open new vistas for development. An initiative of this kind under the ‘Bhoomi’ program by the Karnataka and Andra Pradesh governments in India seems to be going well, so far.

Author: Benito Arruñada
Posted: 10/1/2004

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Organization: Universitat Pompeu Fabra

William Armstrong objects to my claim that “cadastres are close to irrelevant for the functioning of legal registers” because the cadastre avoids duplication in defining boundaries. Of course, we would be better off without any duplication. But optimal design in nature, machines and institutions often duplicates to achieve specialized and enhanced performance. Property institutions are no exception. A market in land and the use of land as collateral require transactions on property rights. These transactions require publicity of deeds or rights and judicial enforcement. For both, publicity and enforcement, the particular property has to be identified. However, different transactions and properties require different degrees of identification: the more valuable the land, the more perfect the identification needed. Identification costs also vary—e.g., rural land versus apartments. Therefore, the optimal degree of identification varies across properties and transactions.

More to the point, identifying specific properties has little to do with identifying all properties. For example, a cadastre is unnecessary for registering or for judicially purging the title for the Bolivian plot mentioned by Tony Burns in his comment. What is needed is updated physical identification for that property and that specific judicial procedure, identification, which can be produced by different means, not necessarily mandated by law and open to competition. If this triggers some duplication because geographic information might be needed in some cases for other purposes, it is a trivial cost, which should not condition or delay the functioning of the whole legal system of property rights.

Summing up, the cost of duplication is very small compared with the cost of supplying more physical identification than is needed. Not to mention that many cadastres perform so poorly that hardly provide any useful identification for private transactions.

Author: Sean Johnson
Posted: 10/1/2004

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Organization: Trinidad Ministry of Agriculture Lands and Marine

Creating appropriate, effective, and sustainable property rights recording systems requires commitment and resolve to overcome the obstacles and objections that impede or inhibit implementation. In the context of registration of title, Simpson (in his book Land Law and Registration) lists: existence of an effective system of deeds registration; opposition of the legal profession; ignorance, apathy and apprehension of landowners; and, cost, difficulties and drawbacks of introduction. To this list I would add ‘demands of the surveying profession,’ which corroborates the point made earlier by Benito Arrunaga that property rights recording doesn’t need the cadastre. But, as Peter Rabley states, an unambiguous description of the land is very necessary. So, how do you reconcile these two apparently conflicting demands? The short answer is: you don’t go round the problem or obstacle; you remove it.

The application of technology to a problem is an example of going around the obstacle; using GPS can reduce costs but the costs still remain unaffordably high. Alternatively, you can reform the process and remove the problem completely (e.g. do away with the ‘cadastre’). However, reforming the process isn’t easy, which is why we usually take the technological option, or, as suggested by the discussion moderators, try alternative administrative reform. The obstacle in question here is the law; not just archaic laws and regulations, but also ineffective enforcement, an inaccessible judicature, and even, as Simpson intimated, a conservative and aloof legal profession. In the words of Albert Einstein: “the significant problems we face cannot be solved by the same level of thinking that created them.” It was, after all, a customs officer called Robert Torrens who introduced the world’s first effective land registration and conveyance system, and over the objections of the legal profession; more significantly perhaps, he was also a politician.

Author: Caralee McLiesh & Richard E. Messick -- moderators
Posted: 9/30/2004

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The argument that mapping and cadastre reforms are unnecessary to secure property rights has prompted several comments. The consensus response so far is that cadastre reforms are important. It will be interesting to hear if others have alternative views as the discussion progresses. But even if they are important, as highlighted by Tony Burns there are examples of spectacular failures. What makes mapping and cadastre reforms effective? Jackie Coolidge suggested granting surveying licenses to many competing private survey firms rather than relying on one public sector agency for such surveys. Has this worked in practice, and what else matters?

Peter Rabley asked what we meant by the quality of information in the registry – accuracy, access, amount of information, how complete it is, etc. In our previous comment on “computerizing garbage” we referred to quality in the narrow sense of accuracy of the information. But other dimensions are at least as important. The Doing Business research suggests that access to information in the registry is critical. Countries with the most efficient registration processes are also the countries that provide open access to information in the registry. There was no such relationship with the number of types of information stored in the registry. Does this fit with experience – is access to the registry more important than the amount of information contained?

Jolyne Sanjak emphasized the need for “framework” laws to integrate fragmented rules on property security use and transfers. Several other participants stressed the need for legislative change. And in the Doing business surveys many respondents agreed that conflicting and outdated laws and regulations were a significant obstacle. But such reforms take time. To what extent can property rights be improved through simple administrative reforms as opposed to new legislation?

Author: Jolyne Sanjak
Posted: 9/30/2004

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Organization: USAID

There is a big need to understand the gambit of laws that affect property security, use, and transfers; and then determine how to simplify, clarify and ensure that the laws yield incentives for using the registry system -- i.e., issue of regulation goes beyond making registration easier to sustainability. And, many places have too many laws that create more problems than they solve - sometimes a new 'framework' law is most effective way to clarify relations, add things and validate uses of new technologies and link institutions.

True, cadastre is not needed for legal security in many places, but as Tony said, it can be a convenient way to get there. There are also other value-added services from cadastre --- land-use planning, taxation, location analysis for business development, disaster management; even for niche marketing of crops, etc. The costs are not as high anymore either. So, we need to think cost against benefits --and, not just from -- but including -- security of rights perspectives. Sometimes the costs of projects are high not from technology but from under-use of local sources of work or bloated bureaucracies, etc.

I also firmly believe that in many LAC countries, similar to Bolivia, the cadastre exercise is pretty important to 'cleaning the slate' from a past of conflict, corruption and generally poor governance of property rights and related informational records. In fact, cadastre might be disfavored by some because it creates transparency. Mexico, outside the agrarian reform sector i.e., in the private land half of Mexico, is taking an interesting approach that mixes systematic cadastre and sporadic tenure regularization approaches (on-demand when the economic incentive is right as Rogier's Powerpoint suggests), arguing that this will keep costs down and the reform process manageable.

Author: David Stanfield
Posted: 9/29/2004

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Organization: Terra Institute

1) Titling:
Many programs around the world attempt to give holders of land (and buildings) a document that recognizes their rights to the properties they hold, with the force of law behind that document. There are many ways to describe the properties in the title document to which the rights are attached, with the simplest being verbal descriptions of the place where the property is located. There are more precise and expensive options. I once asked a colleague in Germany why they used geodetic technology to locate parcel boundaries with an error of 1 mm, and he said "because we can". There has to be a better linkage between cost of establishing and maintaining property descriptions and the abilities of poor people and their governments to pay.

In conditions of informal settlements, it may not be prudent to describe the boundaries of the held properties until the community examines the layout of the settlement and makes the necessary re-arrangements of holdings to provide better access and better public services. The line does not have to go somewhere. In some instances, establishing legally entrenched property boundaries creates more problems later on and more costs for infrastructure installation and public services delivery.

2. Registration:
The archiving and using of property documents to back up claims of ownership and other rights can also take many forms. The designers and modernizers of such information systems are moving away from debates over title versus deed registration, fixed or general boundaries, Ministry of Justice administration versus Ministry of Finance, and computerization versus physical record management. They are now focusing on how to deliver registration services to the disadvantaged and how to minimize corruption in the administration of those services. At least I hope they are!

Author: Rogier Van den Brink
Posted: 9/29/2004

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Organization: The World Bank

In the Africa region, we would like to step up our engagement on land issues, both urban and rural. In the process, we will need to assess the role of titling. Attached you will find the slides (in draft) dealing with land titling, which we hope is a fair and balanced assessment. Comments are welcome.

Attachment: Land titling slides.ppt

Author: William Armstrong
Posted: 9/28/2004

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Organization: IDB

I am glad that Benito Arrunaga has thrown the cadastre question up for discussion. I am aware from working with Benito and other experts from Spain of the generally held view that the cadastral process is unimportant to determining who owns what. However, it has never been clear to me how this can be true unless we are talking about a situation where the cadastre and the registry have evolved separately for many years in a country that is large and rich enough to not be overly concerned with the inefficiency inherent in measuring boundaries twice. In these cases, perhaps, any effort to combine these institutions or coordinate them would be overly costly. However, the opposite is the case in most developing countries. The cadastre is supplying the boundary definitions to the registry. It makes economic sense to take advantage of this useful information provided by the cadastre. Furthermore, in some cases, the cadastre and the registry are in the same government entity, in which case it would not be possible to ignore the importance of the geographical information that the cadastre is providing. Given the vigor of the Spanish argument to the contrary, perhaps I am missing something. Benito, can you provide a bit more information on why cadastres may not be as important as we have thought they were?

Author: Andrew Stone
Posted: 9/28/2004

Email Author
Organization: World Bank

Two brief, non-technical observations on recent investment climate work of the World Bank:
1) When businesses identify their priorities, property rights are usually not rated at the top of the agenda, in part because they are subordinate to other pressing problems, but in part because they may not be seen as the root of other problems, such as financial access.
2) Nonetheless, investment climate assessments (ICAs) and enterprise surveys have shed interesting light on the issue in some cases. [FIAS might describe its own "ARCS" survey findings.] For example, the Algeria ICA found that 37 percent of surveyed manufacturing enterprises were searching for an industrial plot. The average search time was five years. Furthermore, 20 percent of responding firms had been searching for office space for more than 4 years. Local availability of land was rated the number one determinant of firm location.

Surveys of urban informal firms for the 2005 World Development Report suggested urban micro enterprises in a number of African countries, as well as India and Guatemala, are much more likely to rate access to land as a major constraint than are larger and formal firms, but this is not the case in other surveyed countries. The survey found in several countries that a substantial percentage of urban informal firms had to relocate recently due to insecure property rights, led by Tanzania, where 38 percent responded that they had to move due to insecure title to land or buildings.

Author: Tony Burns
Posted: 9/28/2004

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Organization: Land Equity International

A number of interesting points have arisen in this discussion and I want to respond to one of them: the comment by Benito Arruñada that ‘cadastres are close to irrelevant for the functioning of legal registers’.

I can understand where Benito is coming from. There are examples where projects to compile cadastres have been pushed almost as an end in themselves and resulted in little return for anyone other than survey/mapping suppliers. The two classic examples of this would be the World Bank-funded Northeast Rural Development Project in Brazil from the mid-1980s and the more recent EU-funded Hellenic Cadastre Project in Greece, both of which spent over US$100 million on mapping and produced few, if any, titles. However, there are also many countries where much of the uncertainty in rights in land is due to uncertainty in the location of the boundaries over which registered rights apply – the situation mentioned below by Vrajlal Sapovadia as ‘discrepancies in locating the piece of land with its title’. In Bolivia, I have been shown a deed with an A4-size sketch showing a rectangular parcel of land of about 5,000 ha that could have been anywhere in eastern Bolivia. Staff talk about ‘under-lap’ and ‘overlap’ problems and are seeking a GIS solution. This may be the solution, but other countries have sought to resolve the problem by undertaking systematic campaigns in the field to investigate rights and reconcile existing records with evidence of long-term, peaceful, community-accepted occupation.

I cannot see how you can ignore the cadastre. However, the cadastre should not become an end in itself and standards and procedures should not be dictated by the technician and what is technically possible. Procedures and systems should be determined by what is cost-effective in ensuring an unambiguous description of the registered right. Many of the most effective systems have a wide range of technical procedures to define land parcels.

Author: Peter Rabley
Posted: 9/27/2004

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Organization: International Land Systems

In response Caralee and Richard E., Item 3:
I think that an unambiguous spatial description of the property in question is essential. Without it, there is very little point in providing any paper describing rights. People need to know that the property they "see" is described in the paper they hold and that no one can dispute this. Not everything has to be surveyed, e.g. in emerging nations with rural land in particular, there is no need for high grade property surveys. They can be replaced with a combination of index maps and other spatial representations. But cumbersome legal descriptions that are open to legal interpretation is one of the main reasons that so many deed environments find themselves in such a mess. The bulk of the work is required to make sure that the current property in question is the one represented in the records on file--all of which have general and mostly ambiguous descriptions of the property in question. In Jamaica, the sketches maintained by the property valuation department, which were hand drawn onto old topographic maps to provide an approximate but seamless and unambiguous representation, has worked extremely well in producing the initial physical cadastral fabric from which to tie in with the legal registry.

Governments spend so much time and effort trying to manage, plan, tax, and secure property. Each of these functions is run by a myriad of separate agencies, all of which duplicate their record-keeping as they do not share information for the most part. They are all keeping records and performing functions around the same item - the property itself. This is a significant issue even here in the U.S. at the local government level, where all the land records are kept and there is a high degree of duplication and redundancy. The only way to improve is a clear and unambiguous spatial representation of the property.

Author: Peter Rabley
Posted: 9/27/2004

Email Author
Organization: International Land Systems

In response to Caralee and Richard E., Item 2:
Paper records are in poor condition - poor "quality" is a loaded description - because they are handled so often by human hands, mistreated due to fraud, and misplaced due to negligence. They are inaccurate in some cases - incomplete in most, and again "adjusted" for convenience of others. Nevertheless, they represent the best information available and in a lot of cases are legal evidence. So they cannot simply be discarded because they might not meet higher standards used elsewhere. They have to be secured so that fewer hands touch them and they can be more easily searched by a broader group of people. In most cases, demand for searching existing records is high. But, because they are in paper form, few people can get to them and access to the paper records becomes another "toll" point. In Jamaica, the first part of modernizing land records was to scan and index all existing documents. The main drivers were security/fraud, easier access by the public, and less burden on staff to provide access to the records. So yes, I think converting existing records (backfiles) to a computer system can greatly help. The systems do not have to be overly sophisticated either. With regards to improving the quality - can you be more descriptive? Do you mean more information, better access, more complete in the information they contain, more up-to-date, more accurate in their description of property, rights, owners, etc.?

Author: Peter Rabley
Posted: 9/27/2004

Email Author
Organization: International Land Systems

In response to F. Martin:
I don't think the issue is so much with "the courts" as it is with an inefficient, moribund, old fashioned and corrupt administrative system managing the legal registry in the countries you mention. Germany and many other countries do very well with the courts running the registry. Certainly other agencies such as the cadastral agencies are often more progressive than their Justice counterparts and can form the basis for a new modernized agency to deal with land administration as a whole more effectively.

Author: Facundo Martin
Posted: 9/27/2004

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Organization: IFC

A few comments on the interesting issues raised so far in the discussion.

Regarding the use of technology, many of the reforms in the different areas covered by Doing Business are related to the introduction of technology to make more efficient the way the bureaucracy works. However, it is also mentioned in the property chapter that technology is not enough and that many systems, especially in poor countries, may not be ready in terms of organization for the introduction of technology.

As mentioned by Vaishali Patel, backlogs in the courts make registration of property extremely time consuming in India. This is true in almost all cases where the courts are involved in the registration process. This is especially a problem in the countries of the ex-Yugoslavia. In Croatia, the last and fifth step for registering property takes between 2 and 3 years since the property registry depends on the land courts (the courts in Zagreb have about 100,000 unsolved disputes per year). In Bosnia and Herzegovina, the last step may take up to 1 year since the courts in Sarajevo receive numerous applications, and in Slovenia it takes 1 year for the entry to be made in the registry. In Serbia and Montenegro, a reform is being implemented, taking registration out of the courts. The transition is significantly slowing down registration, but the system has the potential to be quite efficient once normalized.

Author: Caralee McLiesh & Richard E. Messick -- moderators
Posted: 9/27/2004

Email Author

Our thanks to all participants for a very interesting discussion to date. I have three comments at this stage, and will return to other points raised later.

1. It is true, as pointed out by Jackie Coolidge, that the ease of registering property is only one component of an effective property rights system. But it is an important one. What is the point of getting first title in a country like Senegal where it costs around 30% of the property value to transfer it? With such high fees, properties quickly become informal again, wasting all those resources put into expensive titling programs. This year’s Doing Business report presents indicators on the steps, time and cost to register property across 145 countries. Future editions will explore first-time registration, property disputes, and other aspects of property rights. We are hoping that this discussion will help guide the research.

2. Several participants have mentioned how technology can be used to improve property systems. One question is whether this works in poor countries, where the underlying property records are incomplete and inaccurate. If paper records are poor quality, can putting them in a computer help? Or can introducing new technologies help improve the quality?

3. I’d like to ask participants about the thoughtful and provocative comments of Benito Arruñada. In particular – how relevant is the physical cadastre for securing property rights? Development agencies have paid much attention to improving cadastres, mapping properties, etc – is this wasted effort?

Author: Peter Rabley
Posted: 9/27/2004

Email Author
Organization: International Land Systems

Very interesting discussion. Certainly, technology has its place in some environments - if nothing more than to secure whatever existing records may exist. Legislative adjustment to allow for streamlining of processes is important as is the simplification and standardization of data forms that describe property, rights, and persons for any given transaction. Working a lot in the FSU and EE we are constantly fighting the "5000 soil type in the bonitet" mentality i.e. the desire to add huge amounts of unnecessary data into the registry - particularly valuation.

I agree that taxation should be separate - but that is a hard sell - particularly when there is real utility in integrating data around the spatial description of the property in question and the registration process can be 'hijacked' for the collection of fees. I also agree with the need to drop the high fees for registration, particularly first time registration. They are a barrier, and of course, an excellent opportunity for rent-seeking. Unfortunately, they are often sold by those from more robust environments as a good way to move towards "self sufficiency" a la executive agencies. In the Caribbean, for example, the fees for registering a property average about 25%-30% of the value of the transaction. No wonder so much is registered in the informal sector.

Final point/question in this post - why is there so much emphasis put on the "ability" to gather funds through mortgages etc.? Can anyone cite me an environment in emerging nations where foreclosure (the often undescribed key element in mortgages and the ability to borrow and leverage an asset supposedly most have) actually works?

Author: Benito Arruñada
Posted: 9/26/2004

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Organization: Universitat Pompeu Fabra

Reverse engineering of titling systems, especially since the 19th century, taught me several lessons that are germane to today’s discussions:
1. Given that property institutions are catalysts of development, the quality of output is critical. Focus on imperfect indicators of “efficiency” is misguided. Most attention should instead be paid to simpler indicators of “effectiveness”—mainly, the robustness of titles to judicial scrutiny and alternative (i.e., non-state but real) sources of enforcement.
2. Cadastres are close to irrelevant for the functioning of legal registers. This flatly refutes today’s emphases on maps and computers: law design, legal expertise and registrars’ incentives are the true keys to a well-functioning system.
3. Most titling processes lasted more than a century: 67% of titles were still unregistered in England in 1981. Policy should therefore aim for very long-term results.
4. A “quick hit” in titling policy would be to separate taxation from titling. It would have been useful for the Doing Business 2005 to separate taxes and fees in its cost data.
5. Similarly, the DB data contains only 3 variables. Data on the types of titling systems and country details are necessary to answer the last of the opening questions.
See http://www.econ.upf.es/~arrunada/research/sec_public_registers.html.

Author: Kevin Davies
Posted: 9/24/2004

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Organization: Retired

Care needs to be taken with the national framework within which property rights are to exist and be managed. Multiple Agencies creating or administering rights without overall coordination of impact and information leads to chaos and increased cost for the consumer. This encourages more people to seek an informal solution. This problem may even exist in advanced economies. See http://www.anzlic.org.au/events_landsummit_Nov04.html

Author: Vaishali Patel
Posted: 9/23/2004

Email Author
Organization: Women Action Group

Transferring property titles is really time consuming in India. There are many of these cases pending in the courts. There should be an appropriate mechanism in GOVERNANCE and IMPLEMENTATION of the law. Corruption, ineffective governance and corrupt bureaucrats are having a bad effect on the system. Reforms are required. The tax structure for transferring title should be very simple, less expensive and less time consuming.

Author: Sundararajan Parthasarathy
Posted: 9/23/2004

Email Author
Organization: independent consultant and researcher

The object of reforms in property titling programs in developing countries could ostensibly be to increase business investments. But any talk of beneficial impact on investment and growth has no meaning unless: the policymakers and regulators safeguard the fundamental right to private property; the country has an uncorrupt judiciary to deal justice to bona fide property owners; and the administrative machinery is streamlined to expeditiously deal with registration and transfer of titles. Some steps in the right direction are:

-computerization and data connectivity;
-coordination with tax authorities;
-simplification of the wording of title deed and delivery of a title card (for ex., a driving license with code that can be electronically checked;
-e-counters in all towns for quick registration;
-autonomous and independent organizations to verify ownership of property and dispose of applications for transfer;
-proper classification of urban and rural property;
-clear information for the public on respective jurisdiction of registration authorities so they do not go from pillar to post;
-a separate anticorruption vigilance cell;
-an ombudsman to consider disputes and cases against nefarious realtors working in collusion with government departments to defraud the public.

Author: Jacqueline Coolidge
Posted: 9/22/2004

Email Author
Organization: FIAS

This is an extremely important and complex topic. The treatment in Doing Business 2005 is useful, up to a point, but the biggest difficulties come in getting a parcel of land into a title registry to begin with. Yes, it's a shame if a title, once entered, is lost, or if transfer of title is slow, but the deal-killers all come before that - with settling disputed claims, getting the land surveyed, and getting past myriad government approvals before it can be entered into the title registry in the first place. In many places, only a tiny proportion of land is entered in the registry, so measuring the time/cost of the transfer of titles is measuring only the tip of the iceberg. Thus, in order to make a really meaningful difference, reforms are needed in the following areas, as a matter of priority (before worrying about, e.g., e-registration that helps for only a small fraction of the land plots of interest to business):

1) Mechanisms for settling disputed claims (e.g., criteria for establishing priority; rules of evidence, etc.).
2) Mechanisms for speeding up land surveys (e.g., granting licenses to many competing private survey firms rather than relying on one public sector agency for such surveys).
3) Minimum standards for transparency, for available land plots and procedures for applying for title.
4) Administrative procedures for applying for title, (including removing unnecessary procedures and ensuring transparency and consistency of enforcement for those that must remain). These procedures should be streamlined.

An example of a report and recommendations made by the Foreign Investment Advisory Service to Tomsk Oblast in the Russian Federation are attached.

Attachment: Report Tomsk Land Mar 2003 ENG DRAFT.doc

Author: Jan Scheele
Posted: 9/22/2004

Email Author
Organization: PT. Bali International Consultants

I agree with the comments of Ignacio De Leon where he states that "the question is not whether more regulation is good or bad in itself , as it all depends on the ideological background against which such regulation(s) is contrasted and interpreted" ( socialist oriented or pro-market , liberal oriented). In this respect, let us look at the Peoples Republic of China (PRC). It is an undeniable fact that the PRC is one of the last powerful communist bastions in the world economies, ruled by a national communist party (socialist oriented). However, at the same time, the PRC is one of fastest growing economies in the world, with one of the highest percentage points of inflow of Foreign Direct Investment. Despite its ideological background, the government of the PRC has recognized the importance of facilitating and regulating pro-market policies swiftly and duly implementing them, attracting business investment in general, and secured sustainable economic growth, including the implementation of clear policies concerning ownership of property and assets. In the current fast development of trade globalization, certainty of ownership rights is a prerequisite for increased business investment and growth in any part of the world.

Author: Vrajlal Sapovadia
Posted: 9/21/2004

Email Author
Organization: NICM

The utmost difficulty in registering property title, more specifically in developing countries, is the lack of consensus in describing, classifying and identifying property. There should be guidelines, and where possible, precisely defined rules. Even in the case of absolute immovable property of land, there are discrepancies in locating the piece of land with its title. Again, there should be a uniform law relating to transfer and transmission. In a country like India, it is based on religion. I agree with previous statement that those enforcing the laws should be trained. The dispute settlement mechanism should be predictable, transparent, efficient and effective. There should be enough room in the code to allow new kinds of property, more specially in the age of technology, to be accommodated on the doctrine of EQUITY.

Author: Ignacio De Leon
Posted: 9/21/2004

Email Author
Organization: Econlex Consulting

Congratulations for opening this interesting discussion. In my view, other reforms should be related to policies aimed at making the activity of regulators and policymakers more akin to market principles. All too often we think that property registration programs are related to the introduction of new technology and/or the provision of financial resources. We do not pay sufficient attention to the anti-market bias with which much of these programs are implemented in practice. Not surprisingly, the results are flaky. For instance, in many developing countries, the creation of a "fast-track window" has not decreased the number of steps that firms must comply with in order to become "legal," but has in fact created another step to be met. Moreover, developed countries could promote a pro market-friendly institutional environment without the technological resources that we enjoy today. Of course, technology is important, and useful, but not decisive. Thus, I believe that more instruction should be given to those in charge of implementing these programs in developing countries, regarding the institutional pro-market preconditions within which they would become fully operative.

Finally, the question is not whether more regulation is good or bad in itself: it all depends on the ideological background against which such regulation is contrasted and interpreted. More regulation in the hands of a socialist oriented policy maker would certainly halt the development of any pro-market institutions. It would lessen the rule of law, transparency, etc. On the other hand, more regulation in the hands of a pro-market oriented authority may give the scheme a healthy flexibility to adapt to unforeseen circumstances. In short, we should pay more attention to the ideological preconditions of market economies, before advancing policy recommendations.

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Contribuido por: Mariana Herrera
Fecha de Publicación 11 de octubre 2004
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