Registering Property Methodology

Doing Business records the full sequence of procedures necessary for a business (the buyer) to purchase a property from another business (the seller) and to transfer the property title to the buyer’s name so that the buyer can use the property for expanding its business, use the property as collateral in taking new loans or, if necessary, sell the property to another business. It also measures the time and cost to complete each of these procedures. Doing Business also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution and equal access to property rights.

Image
What are the time, cost and number of procedures required to transfer property between two local companies

Efficiency of Transferring Property

As recorded by Doing Business, the process of transferring property starts with obtaining the necessary documents, such as a copy of the seller’s title if necessary, and conducting due diligence if required. The transaction is considered complete when it is opposable to third parties and when the buyer can use the property, use it as collateral for a bank loan or resell it (figure 2). Every procedure required by law or necessary in practice is included, whether it is the responsibility of the seller or the buyer or must be completed by a third party on their behalf. Local property lawyers, notaries and property registries provide information on procedures as well as the time and cost to complete each of them.

To make the data comparable across economies, several assumptions about the parties to the transaction, the property and the procedures are used.

Image
Figure 2 - Registering property: efficiency and quality of land administration system

 

 

Assumptions about the parties

The parties (buyer and seller):

  • Are limited liability companies (or the legal equivalent).
  • Are located in the periurban area of the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.
  • Are 100% domestically and privately owned.
  • Have 50 employees each, all of whom are nationals.
  • Perform general commercial activities.

Assumptions about the property

The property:

  • Has a value of 50 times income per capita, which equals the sale price.
  • Is fully owned by the seller.
  • Has no mortgages attached and has been under the same ownership for the past 10 years.
  • Is registered in the land registry or cadastre, or both, and is free of title disputes.
  • Is located in a periurban commercial zone, and no rezoning is required.
  • Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two-story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, building codes and other legal requirements. The property, consisting of land and building, will be transferred in its entirety.
  • Will not be subject to renovations or additional construction following the purchase.
  • Has no trees, natural water sources, natural reserves or historical monuments of any kind.
  • Will not be used for special purposes, and no special permits, such as for residential use, industrial plants, waste storage or certain types of agricultural activities, are required.
  • Has no occupants, and no other party holds a legal interest in it.

Procedures

A procedure is defined as any interaction of the buyer or the seller, their agents (if an agent is legally or in practice required) with external parties, including govern­ment agencies, inspectors, notaries and lawyers. Interactions between company officers and employees are not consid­ered. All procedures that are legally or in practice required for registering property are recorded, even if they may be avoided in exceptional cases (table 1). If a procedure can be accelerated legally for an additional cost, the fastest procedure is chosen if that option is more beneficial to the economy’s score and if it is used by the majority of property owners. Although the buyer may use lawyers or other professionals where necessary in the registration process, it is assumed that the buyer does not employ an outside facilitator in the registration process unless legally or in practice required to do so.

Image
Table 1 - What do the indicators on the efficiency of transferring property measure?

Time

Time is recorded in calendar days. The measure captures the median duration that property lawyers, notaries or registry officials indicate is necessary to complete a procedure. It is assumed that the minimum time required for each procedure is one day, except for proce­dures that can be fully completed online, for which the time required is recorded as half a day. Although procedures may take place simultaneously, they cannot start on the same day (again except for procedures that can be fully completed online). It is assumed that the buyer does not waste time and commits to completing each remaining procedure without delay. If a procedure can be accelerated for an additional cost, the fastest legal procedure available and used by the majority of property owners is chosen. If procedures can be under­taken simultaneously, it is assumed that they are. It is assumed that the parties involved are aware of all requirements and their sequence from the beginning. Time spent on gathering information is not considered. If time estimates differ among sources, the median reported value is used.

Cost

Cost is recorded as a percentage of the property value, assumed to be equiva­lent to 50 times income per capita. Only official costs required by law are recorded, including fees, transfer taxes, stamp duties and any other payment to the property registry, notaries, public agencies or lawyers. Other taxes, such as capital gains tax or value added tax, are excluded from the cost measure. Both costs borne by the buyer and the seller are included. If cost estimates differ among sources, the median reported value is used.

Quality of Land Administration 

Image
Table 2 - What do the indicators on the quality of land administration measure?

The quality of land administration index is composed of five other indices: the reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution and equal access to property rights (table 2). Data are collected for each economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

Reliability of infrastructure index

The reliability of infrastructure index has six components:

  • How land titles are kept at the registry of the largest business city of the economy. A score of 2 is assigned if the majority of land titles are fully digital; 1 if the majority are scanned; 0 if the majority are kept in paper format.
  • Whether there is an electronic database for checking for encumbrances. A score of 1 is assigned if yes; 0 if no.
  • How maps of land plots are kept at the mapping agency of the largest business city of the economy. A score of 2 is assigned if the majority of maps are fully digital; 1 if the majority are scanned; 0 if the majority are kept in paper format.
  • Whether there is a geographic information system—an electronic database for recording boundaries, checking plans and providing cadastral information. A score of 1 is assigned if yes; 0 if no.
  • How the land ownership registry and mapping agency are linked. A score of 1 is assigned if information about land ownership and maps are kept in a single database or in linked databases; 0 if there is no connection between the different databases.
  • How immovable property is identified. A score of 1 is assigned if there is a unique number to identify properties for the majority of land plots; 0 if there are multiple identifiers.

The index ranges from 0 to 8, with higher values indicating a higher quality of infrastructure for ensuring the reli­ability of information on property titles and boundaries. In Turkey, for example, the land registry offices in Istanbul maintain titles in a fully digital format (a score of 2) and have a fully electronic database to check for encumbrances (a score of 1). The Cadastral Directorate offices in Istanbul have digital maps (a score of 2), and the Geographical Information Directorate has a public portal allowing users to check the plans and cadastral information on parcels along with satellite images (a score of 1). Databases about land ownership and maps are linked to each other through the TAKBIS system, an integrated information system for the land registry offices and cadastral offices (a score of 1). Finally, there is a unique identifying number for prop­erties (a score of 1). Adding these numbers gives Turkey a score of 8 on the reliability of infrastructure index.

Transparency of information index

The transparency of information index has 10 components:

  • Whether information on land ownership is made publicly available. A score of 1 is assigned if information on land ownership is accessible by anyone; 0 if access is restricted.   
  • Whether the list of documents required for completing the registra­tion of property transactions is made publicly available. A score of 0.5 is assigned if the list of documents is accessible online or on a public board; 0 if it is not made available to the public or if it can be obtained only in person.
  • Whether the fee schedule for completing the registration of prop­erty transactions is made publicly available. A score of 0.5 is assigned if the fee schedule is accessible online or on a public board free of charge; 0 if it is not made available to the public or if it can be obtained only in person.
  • Whether the agency in charge of immovable property registration commits to a specific time frame for delivering a legally binding document that proves property ownership. A score of 0.5 is assigned if the service standard is accessible online or on a public board; 0 if it is not made available to the public or if it can be obtained only in person.
  • Whether there is a specific and independent mechanism for filing complaints about a problem that occurred at the agency in charge of immovable property registration. A score of 1 is assigned if there is a specific and independent mecha­nism for filing a complaint; 0 if there is only a general mechanism or no mechanism.
  • Whether there are publicly available official statistics tracking the number of transactions at the immovable property registration agency. A score of 0.5 is assigned if statistics are published about property transfers in the largest business city in the past calendar year at the latest on May 1st of the following year; 0 if no such statistics are made publicly available.
  • Whether maps of land plots are made publicly available. A score of 0.5 is assigned if maps are accessible by anyone; 0 if access is restricted.
  • Whether the fee schedule for accessing maps is made publicly available. A score of 0.5 is assigned if the fee schedule is accessible online or on a public board free of charge; 0 if it is not made available to the public or if it can be obtained only in person.
  • Whether the mapping agency commits to a specific time frame for delivering an updated map. A score of 0.5 is assigned if the service standard is accessible online or on a public board; 0 if it is not made available to the public or if it can be obtained only in person.
  • Whether there is a specific and independent mechanism for filing complaints about a problem that occurred at the mapping agency. A score of 0.5 is assigned if there is a specific and independent mecha­nism for filing a complaint; 0 if there is only a general mechanism or no mechanism.

The index ranges from 0 to 6, with higher values indicating greater transparency in the land administration system. In the Netherlands, for example, anyone who pays a fee can consult the land owner­ship database (a score of 1). Information can be obtained at the office, by mail or online using the Kadaster website (http:// www.kadaster.nl). Anyone can also get information online about the list of documents to submit for property regis­tration (a score of 0.5), the fee schedule for registration (a score of 0.5) and the service standards (a score of 0.5). And anyone facing a problem at the land registry can file a complaint or report an error by filling out a specific form online (a score of 1). In addition, the Kadaster makes statistics about land transactions available to the public, reporting a total of 39,849 property transfers in Amsterdam in 2017 (a score of 0.5). Moreover, anyone who pays a fee can consult online cadastral maps (a score of 0.5). It is also possible to get public access to the fee schedule for map consultation (a score of 0.5), the service standards for delivery of an updated plan (a score of 0.5) and a specific mechanism for filing a complaint about a map (a score of 0.5). Adding these numbers gives the Netherlands a score of 6 on the transparency of infor­mation index. 

Geographic coverage index

The geographic coverage index has four components:

  • How complete the coverage of the land registry is at the level of the largest business city. A score of 2 is assigned if all privately held land plots in the city are formally registered at the land registry; 0 if not.
  • How complete the coverage of the land registry is at the level of the economy. A score of 2 is assigned if all privately held land plots in the economy are formally registered at the land registry; 0 if not.
  • How complete the coverage of the mapping agency is at the level of the largest business city. A score of 2 is assigned if all privately held land plots in the city are mapped; 0 if not.
  • How complete the coverage of the mapping agency is at the level of the economy. A score of 2 is assigned if all privately held land plots in the economy are mapped; 0 if not.

The index ranges from 0 to 8, with higher values indicating greater geographic coverage in land ownership registration and cadastral mapping. In Japan, for example, all privately held land plots are formally registered at the land registry in Tokyo and Osaka (a score of 2) and the economy as a whole (a score of 2). Also, all privately held land plots are mapped in both cities (a score of 2) and the economy as a whole (a score of 2). Adding these numbers gives Japan a score of 8 on the geographic coverage index.

Land dispute resolution index

The land dispute resolution index assesses the legal framework for immovable property registration and the accessibility of dispute resolu­tion mechanisms. The index has eight components:

  • Whether the law requires that all property sale transactions be regis­tered at the immovable property registry to make them opposable to third parties. A score of 1.5 is assigned if yes; 0 if no.
  • Whether the formal system of immovable property registration is subject to a guarantee. A score of 0.5 is assigned if either a state or private guarantee over immovable property registration is required by law; 0 if no such guarantee is required.
  • Whether there is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who engaged in good faith in a prop­erty transaction based on erroneous information certified by the immov­able property registry. A score of 0.5 is assigned if yes; 0 if no.
  • Whether the legal system requires verification of the legal validity of the documents (such as the sales, transfer or conveyance deed) necessary for a property transaction. A score of 0.5 is assigned if there is a review of legal validity, either by the registrar or by a professional (such as a notary or a lawyer); 0 if there is no review.
  • Whether the legal system requires verification of the identity of the parties to a property transaction. A score of 0.5 is assigned if there is verification of identity, either by the registrar or by a professional (such as a notary or a lawyer); 0 if there is no verification.
  • Whether there is a national database to verify the accuracy of identity documents. A score of 1 is assigned if such a national database is available; 0 if not.
  • How much time it takes to obtain a decision from a court of first instance (without an appeal) in a standard land dispute between two local busi­nesses over tenure rights worth 50 times income per capita and located in the largest business city. A score of 3 is assigned if it takes less than one year; 2 if it takes between one and two years; 1 if it takes between two and three years; 0 if it takes more than three years.
  • Whether there are publicly avail­able statistics on the number of land disputes in the first instance. A score of 0.5 is assigned if statistics are published about land disputes in the economy in the past calendar year; 0 if no such statistics are made publicly available.

The index ranges from 0 to 8, with higher values indicating greater protec­tion against land disputes. In the United Kingdom, for example, according to the Land Registration Act 2002 property transactions must be registered at the land registry to make them opposable to third parties (a score of 1.5). The property transfer system is guaranteed by the state (a score of 0.5) and has a compensation mechanism to cover losses incurred by parties who engaged in good faith in a property transaction based on an error by the registry (a score of 0.5). In accordance with the Proceeds of Crime Act 2002 and the Money Laundering Regulations 2007, a lawyer verifies the legal validity of the documents in a property transac­tion (a score of 0.5) and the identity of the parties (a score of 0.5). The United Kingdom has a national database to verify the accuracy of identity docu­ments (a score of 1). In a land dispute between two British companies over the tenure rights of a property worth $2,026,500, the Land Registration divi­sion of the Property Chamber (First-tier Tribunal) gives a decision in less than one year (a score of 3). Finally, statistics about land disputes are collected and published; there were a total of 1,154 land disputes in the country in 2017 (a score of 0.5). Adding these numbers gives the United Kingdom a score of 8 on the land dispute resolution index.

Equal access to property rights index

The equal access to property rights index has two components:

  • Whether unmarried men and unmar­ried women have equal ownership rights to property. A score of -1 is assigned if there are unequal owner­ship rights to property; 0 if there is equality.
  • Whether married men and married women have equal ownership rights to property. A score of -1 is assigned if there are unequal ownership rights to property; 0 if there is equality.

Ownership rights cover the ability to manage, control, administer, access, encumber, receive, dispose of and transfer property. Each restriction is considered if there is a differential treat­ment for men and women in the law considering the default marital property regime. For customary land systems, equality is assumed unless there is a general legal provision stating a differential treatment.

The index ranges from -2 to 0, with higher values indicating greater inclu­siveness of property rights. In Mali, for example, unmarried men and unmarried women have equal ownership rights to property (a score of 0). The same applies to married men and women who can use their property in the same way (a score of 0). Adding these numbers gives Mali a score of 0 on the equal access to property rights index—which indicates equal prop­erty rights between men and women. By contrast, in Tonga unmarried men and unmarried women do not have equal ownership rights to property according to the Land Act [Cap 132], Sections 7, 45 and 82 (a score of -1). The same applies to married men and women who are not permitted to use their property in the same way according to the Land Act [Cap 132], Sections 7, 45 and 82 (a score of -1). Adding these numbers gives Tonga a score of -2 on the equal access to property rights index—which indicates unequal property rights between men and women.

Quality of land administration index

The quality of land administration index is the sum of the scores on the reliability of infrastructure, transparency of informa­tion, geographic coverage, land dispute resolution and equal access to property indices. The index ranges from 0 to 30 with higher values indicating better quality of the land administration system.

If private sector entities were unable to register property transfers in an economy between June 2017 and May 2018, the economy receives a “no practice” mark on the procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land administration index even if its legal framework includes provisions related to land administration.

Reforms

The registering property indicator set tracks changes related to the efficiency and quality of land administration systems every year. Depending on the impact on the data, certain changes are classified as reforms and listed in the summaries of Doing Business reforms in 2017/18 section of the report in order to acknowledge the implementation of significant changes. Reforms are divided into two types: those that make it easier to do business and those changes that make it more difficult to do business. The registering property indicator set uses two criteria to recognize a reform.

First, the aggregate gap on the overall score of the indicator set is used to assess the impact of data changes. Any data update that leads to a change of 2% or more in the score gap is classified as a reform, except when the change is the result of automatic official fee indexation to a price or wage index (for more details, see the chapter on the ease of doing business score and ease of doing business ranking). For example, if the implementation of a new electronic property registration system reduces time in a way that the overall gap decreases by 2% or more, such change is classified as a reform. Minor fee updates or other smaller changes in the indicators that have an aggregate impact of less than 2% on the gap are not classified as a reform, but their impact is still reflected in the most updated indicators for this indicator set.

Second, the overall score on the quality of land administration is also considered as a criterion. Any change of 1 point or more on the overall quality score is acknowl­edged as a reform. For instance, the completion of the geographic coverage of the land registry of the business city (2 points) is considered as a reform.