- Introducing time limits that are complied with
- Setting low fixed fees
- Streamlining procedures
- Using electronic services (information and communication technology)
Property registries around the world confer different legal effect on the information they record. Not all offer conclusive information on property ownership. Some simply keep a record of property transactions—that is, they record the transfer of deeds. The Registry of Deeds and Documents in the Bahamas is an example of this kind of property registry. Others, for example the land registry in Spain, record the changes in the holders of property rights that occur as a result of the deeds presented to the registry—that is, they record the changes in holders of rights or title. And some property registries, such as that in Ghana, include both a deed and a title system.(1)
Title systems usually provide conclusive evidence about who holds the rights in a given property. The rights registered are opposable to third parties and, in some cases, cannot be voided or annulled. To find out who rightfully owns a property and whether anyone else has rights over it, the buyer can simply consult the property information at the land registry.(2)
Deed systems, by contrast, do not provide conclusive proof of property ownership. Deed systems record property transfers, but the registration of a transfer does not necessarily make it a valid transfer. Because the last registered owner could be holding a title that is not valid, a buyer will usually hire a lawyer to determine the “good root” of the title being purchased. In the Bahamas, lawyers conduct searches on the property title at the Registry of Deeds and Documents, the courts and the company registry to establish the legality of the previous owners’ rights as well as whether the property was lawfully transferred. These searches add $300 Bahamian dollars ($300) and 45 days to the purchaser’s due diligence.
To increase the security of property transactions—and to save purchasers “the trouble and expense of going behind the Register to investigate the history of the vendor’s title and to satisfy themselves of its validity”(3) —Sri Lanka transitioned from a deed system to a title system. Since making such a change can be a complex process, economies often opt to keep a deed system in place while expanding the records held by the registry. Doing so increases the security of property transactions. Argentina, which has always had a deed system, qualifies it with a 20-year statute of limitations (lawyers must go back only 20 years in checking the good root of a title). In other economies with a deed system, including the United States, buyers can purchase title insurance to increase the security of property transactions. If an acquired title has defects, title insurance compensates for any financial loss incurred by the buyer.
All of these systems have the same goal: to maintain an up-to-date database of rights in property. Deed and title systems can be equally efficient.(4) A comparison of property registration systems—based solely on the procedures, time and cost to transfer and register property as measured by Doing Business—suggests a number of common good practices.
INTRODUCING TIME LIMITS AND COMPLIANCE
Time limits give citizens a reference for how much time a procedure will take. If the procedure is not completed within that time limit, they know they need to follow up.
Twenty-two economies introduced time limits over the past decade. However, time limits work only when the agency has the capacity to comply with them. In most economies, therefore, time limits have served to support broader changes. Ten economies—including the Russian Federation, Bosnia and Herzegovina, Burundi, Cyprus, the Czech Republic, Israel, Italy, Mauritius, Ukraine, and Poland—introduced time limits while at the same time streamlining procedures through computerization and reorganization. In Russia the creation of a unified electronic land and property database eliminated the need for applicants to visit the Bureau of Technical Inventory offices and obtain a cadastral passport, reducing the time to transfer property by up to 22 days.
SETTING LOW FIXED FEES
Property transfer taxes are an important source of revenue for many governments. When transfer fees and taxes are too burdensome, however, even registered property might quickly become informal if subsequent transactions are not registered. A lack of property registration not only weaken the protection of property rights but also reduces potential revenue from property taxes.
Over the past 10 years, 62 economies lowered property transfer taxes and other government fees. Twenty-eight of these economies are in Sub-Saharan Africa, where costs have been the highest. Togo, for example, cut the property transfer tax rate in half (to 3% of the property value), while Senegal lowered transfer taxes from 15% to 5% and Chad from 10% to 5%. Côte d’Ivoire lowered its property transfer tax from 10% to 4% and Niger from 5% to 3%. Malawi reduced the stamp duty from 3% to 1.5%. Elsewhere, the Bahamas reduced the stamp duty from 12% to 2.5% of the property value. The United Arab Emirates reduced the property transfer fee from 2% of the purchase value to 10 U.A.E. dirhams ($2.75) for each square meter of land, with a minimum fee of 10,000 U.A.E. dirhams ($2,723).
Property registration fees or transfer taxes represent only part of the total cost of property transfers in many economies. Additional fees and duties can apply throughout the process. Even where these additional fees add little to overall revenue, they may present obstacles to entrepreneurs if the process for paying them is unnecessarily cumbersome. Armenia and Burkina Faso simplified the process by making it possible to pay several fees at a single location. Others eliminated these additional fees altogether. Madagascar, Mauritius, Rwanda and the Slovak Republic have all eliminated additional fees since 2006, reducing the transfer cost by an average of 4.5% of the property value.
Making the cost of the property transfer neutral to the value of the property helps to increase the transparency of the real estate market. Ten economies worldwide set up fixed fees for property transfers. These fees typically include those for notary services, the registration of a property transfer or access to the public databases on encumbrances. Georgia, the Slovak Republic, Palau and Rwanda have implemented a fixed fee schedule for every step of the property transfer process.
Fifty economies streamlined procedures and linked or improved agencies’ systems to simplify property registration in the past 10 years. These measures reduced interactions between entrepreneurs and agencies—saving between one and two procedures on average—while maintaining security and controls. For example, Kosovo and Montenegro introduced new notary systems and combined procedures for drafting and legalizing sale and purchase agreements, while Rwanda cut two procedures by eliminating the property valuation requirement for tax purposes.
Doing Business captured 28 reforms in 2010-18 that streamlined procedures in property registration in the economies of Europe and Central Asia. In 2012/13 Ukraine introduced a new system of registration of property rights and encumbrances over real property. The system requires that sellers re-register titles before transferring them to buyers.
One-stop shops are an efficient way to minimize interactions between agencies and entrepreneurs. Burundi and Ghana implemented one-stop shops to simplify the property registration process. However, not all economies can afford to bring all agencies involved in property transfer under one roof. Even so, many have been able to coordinate the functions or records of at least two institutions involved in the property transfer process. In most cases, this coordination links the land registry with the tax agency or valuation agency. This link can be established either by having a representative of one of the institutions physically present at the other—as in Ethiopia—or by linking the agencies electronically—as in Denmark, Latvia, Lithuania, Peru and Portugal. In Latvia, the land registry has electronic access to municipal tax information on real estate, eliminating the need for entrepreneurs to provide this information in paper format.
Some economies streamline procedures by eliminating the requirement to obtain the municipality’s approval for property transfers. Lesotho eliminated a requirement for ministerial approval for property transfers and recruited new staff at the registry. Similar reforms in Belarus, Sweden and Uruguay have also been captured by Doing Business in recent years. Rather than requiring a certificate for every transaction, the municipality instead checks a list of the properties subject to preemption rights and contacts only the parties concerned.(5) In economies that require waivers of preemption rights, the number of buildings affected is usually small compared with the total number of transfers. Only four economies worldwide—France, Germany, Latvia and Senegal—still require waivers of preemption rights for every transaction.
USING ELECTRONIC SERVICES (INFORMATION AND COMMUNICATION TECHNOLOGY)
Doing Business data indicate that property registries use electronic files in 61% of economies.(6) Digital records have advantages over paper records—they take less space, and backup copies ensure that property records will not be compromised in the event of natural or other disasters. Electronic systems also make errors and overlapping titles easier to identify. However, paper registries can be efficient also. Before transitioning to an electronic system, Thailand had a very efficient manual system. Furthermore, having a digital records system is no guarantee that an economy will manage this information well.
Nonetheless, transferring property takes about half as much time in economies with computerized registries as in those without them. All 32 OECD high-income economies have electronic registries. Eleven, including Denmark, the Netherlands and New Zealand, offer electronic registration. In South Asia and Sub-Saharan Africa, by contrast, 71.4% of economies still have paper-based systems. Unsurprisingly, OECD high-income economies have the fastest property registration, taking 22 days on average.
Fifty-one economies—including Mauritius, Netherlands, Sierra Leone, Portugal, Samoa and Swaziland— computerized their registries in the past 10 years. In 2013 Liberia stopped writing deeds by hand and computerized its land registry, reducing the time to transfer property by six days. In Bosnia and Herzegovina, the registry has been able to register 33% more title transfers following computerization and in 2012, computerization allowed Bosnia and Herzegovina to cut property registration time by eight days. Angola, Portugal and West Bank and Gaza have also started to reap the benefits of years of computerization efforts at their registries.
Computerized systems at the cadaster or registry can make access to information easier and eventually allow information to become available online. Among the 201 with a cadaster or survey, 63 make their information available online. Singapore introduced an online fast-track registration process for single transfers in 2013, enabling property transfers to be completed in one day. In 2011, Costa Rica made cadastral and property certificates available online to all users on a single website. This reform merged previously independent procedures into one website.
Fully implementing computerization and electronic filing can take decades, and the cost can reach millions of dollars, depending on the amount of surveying and cadaster work involved. It is, therefore, unsurprising that many economies seek the financial and technical support of donor institutions. In addition to international organizations such as the World Bank and the Organization of American States, national aid agencies from Australia, Finland, Germany, the Netherlands, Spain and the United States have been engaged in land administration projects involving the digitization of records.(6)
Given the challenges (and the opportunities) of going electronic, many economies take a gradual approach to implementation—moving first from paper-based to electronic records and computerization, then introducing electronic registration. This was the approach taken by Denmark, New Zealand and Norway, which today have among the most efficient property registration systems in the world.
In 2009 the Danish government began modernizing its land registry by digitizing and automating property registration. Processes had to be streamlined and reorganized. The records of the centralized land registry were progressively digitized. Once this process was complete, the land registry introduced electronic lodgment of property transfers. By 2011 property transfer applications were only accepted online and the information technology system started screening applications in a fast and efficient way. As a result, over a period of five years, the time to transfer property was cut from 42 to four days.
New Zealand digitized its property records between 1997 and 2002 and then introduced electronic registration. However, by 2005 only about half of property transactions were being submitted electronically. In response, a law was passed in 2008 making electronic registration mandatory. Registration can now be completed in just two steps, at a cost of 0.06% of the property value.
In Norway in 1995 the registry’s paper records required 30 kilometers of shelving, and storage needs were growing by one kilometer a year. Following the merger of the land department and survey information, title certificates were digitized between 1997 and 2002. The next step was taken in 2002, when the 50-year-old Land Transfer Act was amended to allow online titling. Online registration has been required by law since 2008.
1. Property in Ghana falls under either the title or the deed system, depending on where it is located. This system is the result of the phased introduction of the Land Title Registration Law of 1986, which introduced the title system in Ghana. The capital city, Accra, falls under the title system.
2. The title systems offering the strongest conclusive evidence are those that do not allow any legal claim against the registered rights (that is, the registered rights are indefeasible). Other title systems are less absolute in the indefeasibility of the registered rights and allow claims in exceptional circumstances (for example, in the case of a registration that occurred based on a property sale-purchase agreement that is declared null and void after registration took place).
3. Lord Watson, in Gibbs v. Messer (1891), as quoted in “Immediate Indefeasibility for Mortgagees: a Moral Hazard?”, O’Connor, Pamela, 2009, page 201.
4. Whether an economy has a title or a deed system has no influence on its ranking on the ease of registering property. There is no statistically significant difference in how economies rank based solely on their choice of registration system.
5. Preemption rights in this case are the municipality’s rights to acquire the property, in preference to any other buyer, when the owner decides to sell it.
6. For a concise and thorough overview of World Bank support for land administration and management projects, see Bell (2009).