Effective ownership registration

 

Rationale | Key considerations | Assessment | Resources | Next

 

1.2  What steps has the government taken towards the progressive establishment of timely, secure and effective methods of ownership registration for land and other forms of property?


Rationale

Investors need to be confident that their ownership of, or right to use, property is legally recognised and protected. Secure, verifiable and transferable rights to agricultural and other types of land and forms of property give an incentive for investors and entrepreneurs to shift into the formal economy, entitle the investor to participate in the eventual profits that derive from an investment and reduce the risk of fraud in transactions.

 

An essential part of any system designed to protect property rights is the creation and maintenance of a registry of property ownership. A secure and verifiable system of property ownership rights carries an intrinsic economic value by encouraging new investment and the upkeep of existing investments. Land titles, for example, give an incentive to owners to promote productivity-enhancing investments. Reliable land titling and property registrars also help individuals and businesses to seek legal redress in case of property rights violations and offer a source of collateral, thus facilitating access to credit and on better terms.  This is particularly important in rural areas where barriers to credit are more pronounced.

 

Related PFI questions:

Question 9.8 on property registration

 

Key considerations

The question focuses on tangible forms of property, like land, buildings and manufacturing plants. (Protection of intangible assets is covered in Question 1.3, since it is often governed by separate laws.)

  • Access to the property-ownership registration system
    How well does the property registration system perform? If a formal system is not in place, how could one be designed? What obstacles deter the formal recognition of ownership of certain classes of asset (e.g. small-sized or low-valued property) or types of investor from using the registry system?

    Accessibility also depends on the ease with which information on the identity of the owner and the status of the ownership interest can be retrieved from the property registry. This is useful for lenders who wish to establish if a property has already been offered as collateral and for property owners who wish to pledge their property as collateral for credit.
     
  • Integrity of the property registration system
    Governments have a responsibility to build and maintain confidence in the security and accuracy of the property registration system. How secure is the property registry? How well does it avoid competing and fraudulent claims to ownership? Are users confident in the accuracy of the property registry. (See also Question 1.4 and Question 1.5 in this regard.)

    In some countries, there is an interplay between formal and traditional processes of recognising property ownership, especially for immovable property like land. The choice of system depends on culture, history and geography. How vulnerable is the system in place to conflicts between property titling methods that harm the overall integrity of the system.

 

Policy practices to scrutinise

Key issues when assessing the effectiveness of a country’s property ownership registration systems are whether the property registration system is open to all and how well it performs. The following policy practices and criteria ought to be considered:

  • The share of property formally registered in a country or region. A low rate of property registration is a prima facie sign that the system in place to register property is not functioning well but this needs to be interpreted with care, especially in countries where property ownership is asserted and held through informal processes.
     
  • To establish the reasons why property ownership titling is low, or limited to certain types of assets, the details of the processes involved need to be examined, including:
    • The fees charged and taxes levied to register or transfer a title to land and other forms of property, as well as the structure of these costs. For example, are they proportional to the value of the property or fixed in absolute terms? Do they vary according to the type and planned use of the property being registered? How do they compare with those in other countries at a similar level of economic development?
       
    • The time taken officially to register new property titles or transfer existing ones. This will depend on the number and types of procedures required, on the number of agencies (e.g. are registries limited in scope by geographic area, by type of property, by type of filing entity, by legal jurisdiction or along supervising ministries?) involved in the property registration process and when multiple agencies exist, whether they are linked by computer or feed into a central database. It also depends on whether the operational practices of the registrar office are capable of accepting and working with time-saving technologies, such as digitised records and online internet-based property registration.
       
    • The compliance costs of registering or transferring the title of property. This depends on the documentation requirements (e.g. providing proof of property surveys or tax payments), the number and complexity of regulatory requirements stipulated, taxes that are levied on property registration and transfer, how easily the documentation and information on all the property registration requirements is obtainable (e.g. via the internet) and whether electronic lodging is allowed. The time taken by a business or individual to register or transfer title is also a part of the cost of compliance. 
    • Do foreign individuals or corporations have the same rights as nationals to own and register land, and, if not, do the restrictions depend on the type of land (e.g. rural, residential property or industrial real estate) or its intended use? Are the administrative and compliance procedures for foreigners more burdensome or costly than for nationals?
       
  • When examining the practices of property registration offices it is important to obtain the views of their staff and management and users of their services. This helps to pinpoint potential organisational and management problems (e.g. human resource capacity, information technology limitations).
     
  • No single indicator sheds light on the integrity of the property registration system, but insights can be gained by examining the details of the dispute resolution process and their outcomes. Confidence in the system will depend on:
    • Whether entries in the registrar are open to public inspection and may be relied upon by third parties.
       
    • The ability to challenge the validity of an entry by filing an administrative appeal with the registrar itself or by bringing a court action against the registrar. In this case, whether the registrar office and, when called for, the judicial system provides an equitable, inexpensive and timely system for resolving property ownership disputes.
       
    • The incidence of fraudulent or duplicate claims to assets.
       
    • The number of disputes and the efficiency and speed with which they are resolved.
       
    • Analysis of the causes of dispute from court cases may also help to bring to light systemic weaknesses in the registrar system.
       
  • Where traditional and formal property ownership systems co-exist, the PFI user will need to assess whether there are clear boundaries and rules that delineate between the two systems. For instance, is each system responsible for distinct, well-defined classes of property or delineated on a geographic basis?

Further resources and case studies

  • One dimension of the World Bank Cost of Doing Business project covers the cost, relative to the value of the property, the number of procedures involved and the average time, measured in days, it takes to register property. The information is updated yearly and is available for a large number of countries, facilitating cross-country comparisons.
     
  • Even if property ownership rights are secure and verifiable, collateral laws may act to prevent banks from accepting business assets as collateral. The World Bank has produced a toolkit on Reforming Collateral Laws to Expand Access to Finance.

 

 

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