Publication by Gartrell Group Principal Bryce Gartrell, 1996

Weighing the Benefits: When Does Formal Titling of Land Justify Its Costs?

A Short Essay by Bryce Gartrell, 1996

With the dawning of the Age of Information and an expanding consciousness of global population growth and of human impact on the natural environment has come an unprecedented interest in land data as a valuable commodity, a means to power, and a vitally important element in the use, study, management, control, and protection not only of natural resources, but also of the social, economic, and political arrangements which they sustain. Formal land titling has been identified as a method for vastly increasing land data funds and, accordingly, has been declared as a means to realizing a wide variety of benefits related to increases in land-related information. Especially in recent years, formal land titling has been hailed in many corners of the commercial, academic, and governmental domains as the fundamental rung in the developing world's ladder toward social equity and economic progress, and as an important means by which land markets throughout the world might be made more efficient and more accommodating of higher volumes of trade.

Particularly in light of recent political developments such as the crumbling of the former Soviet empire and the growth of democracy across Latin America, interests in the privatization of land and in attracting foreign investment into transitional land markets have been stimulated (Jeffress, 1996, p.1). Although many customary systems of tenure are able to provide `symmetry of information' between individuals from a single community, expanded land markets involving transactions between unrelated individuals generate more questions as to the entitlement of an owner to transfer land rights, and pressures for the establishment of more secure means of determining and recording tenure rights mount (Feder, Nishio, 1996, p.7). Beyond providing assurances of land rights to foreign investors, formal land titling, and the development of some form of a legal cadastre which it typically involves, has also shown to be beneficial to small landholders in many developing economies by increasing their tenure security. In a number of cases, the ability to prove ownership of land has helped small landholders gain access to greater amounts and better rates of credit and allowed them to increase their level of investment in their property, thus increasing its productivity. This has the effect of raising land values and enabling a better distribution of skills so that a better economic use of the land is achieved: with titling comes the ability to buy, lease, or rent with a greater assurance of rights, so that people with the greatest economic interest in land have an improved chance of gaining and maintaining access to it. (Feder, Nishio, 1996, pp 4-10). While this can help stimulate local and national economies, it also may provide incentives for landowners to engage in environmentally and agriculturally sound practices. As `sweat equity' and financial investments in property become more secure through the bestowal of exclusive rights to land, landowners will often exhibit a greater concern for the stewardship and long-term use of their lands (Hendrix, 1996, p.195). Further benefits attributed to formal land titling are that it increases the overall amount of property within a national land market, and that it allows for the appraisal and economic mobilization of what may be dormant capitol stock and resources.

Historical evidence from a number of formal land titling projects suggests that all of these benefits may be attributed, in part, to the practice of modernizing and formalizing systems of titling and registration. However, the mere act of implementing formal title by no means assures that they will be realized. The overall effectiveness of formal land title is highly contingent upon a number of other complex social, economic, and environmental factors which must be carefully reviewed if titling efforts are to be successful. While the publicity given to land titling successes may give it the allure of a magic solution to complicated problems, it is crucial that titling be recognized for what it is. It is one element in a broader development strategy that must take into account many other aspects of a national infrastructure such as financial, educational, communication, transportation, and health care systems (Jeffress, 1996, p.7) as well as other local factors such as custom, geography, law, resources, and history (Hendrix, 1996, p.183).

Certainly, in national economies where the lack of title is among the single biggest remaining constraints to credit access, and where other `factor markets' related, for instance, to land, labor, and capitol, are functioning relatively well, formal land titling efforts are likely to result in increases in credit and investment (Hendrix, 1996, pp197-198) and to provide a mechanism by which real estate markets can function freely (Dansby and Jeffress, 1996, p.7). Likewise, in cases where formal title is the sole or primary impediment to the security of tenure and to prompt land transfer, a new registration system will have a positive effect on the rate of investment in property and on the creation of wealth and its related social benefits and should be pursued vigorously (Centre H.S., 1990, s. 4.5). However, such cases are rare. More realistically, the adoption of formal titling will be one among many challenges confronting a country.

Given the challenge of political indecision, formal title will probably be ineffective in bringing tenure security and its benefits, as was demonstrated in the political struggles which plagued Nicaragua in the early 1990's (Hendrix, 1996, p.190). Property is a concept which depends on consensus and is defined by government through legislation. When confusion over ruling powers exists, legal instruments, maps, and surveys depicting the assignment of property interests will not have the support of an enforceable legal system, and will be ineffectual in securing those interests (McLaughlin, de Soto, 1996, p.4). Neither will land titling be likely to succeed in bringing its vaunted improvements if it is undertaken, independent of other measures, in an over-regulated economy, or in a place where the general business climate does not encourage strong ownership rights and increased transaction levels (Feder, Nishio, 1996, pp19-21). Although a lack of formal title can indeed cause certain inefficiencies and rigidities in land markets, it is not uncommon that alternative systems will have developed in response to such shortcomings. While these systems may not provide optimal conditions for a thriving land market, they may become so deeply enmeshed in the social and economic fabric of a country that successful formal titling efforts would necessitate a massive overhaul of entire systems of governance and economics. And in many of these cases, the very barriers to secure property ownership which titling is intended to remove serve as a shelter to small landholders. If these barriers are removed before economic and legislative playing fields have been leveled -- for example, many large landholders in Latin America receive government credits and subsidies to make them more competitive internationally, while small landholders do not -- then programs which improve titling and reduce registration costs may actually cause the land market to push the poor off their land instead of protecting their rights to it (Hendrix, 1996, p.219).

Formal titling has also shown converse results in places where the security of existing systems of tenure for the likely economic activity of a region was not duly considered before the implementation of replacement systems. Many people now believe that customary tenure in much of rural Africa is secure enough to induce investment after having observed that formal titling did not increase levels of investment and productivity in lands (in many parts of eastern and southern Africa, the productivity of titled lands is actually less than that of untitled lands -- this was also partly due to the interference of formal titling with customary labor relations) (Hendrix, 1996, p.193). In Niger, it has been found that the advantages of asset-based lending may be had with certificates of occupation, and that titles yield no greater access to credit for most landholders (Hendrix, 1996, p.197). Experiences in rural Africa have also lead people to believe that benefits of formal titling are not likely to outweigh its costs in cases where distances to markets for produce from land are too great, where land is largely infertile, where distribution systems for agricultural inputs do not function well, or where there are shortages of labor (Feder, Nishio, 1996, p.20).

When the introduction of titling does require significant institutional changes, it will commonly be met with resistance by those whose vested interests in the status quo appear to be in jeopardy. As these parties are generally large stakeholders with considerable political clout, they are likely to find ways for their interests to prevail, either through the disruption or prevention of titling processes, or, as is often the case, through `land-grabbing' practices in which they unfairly take advantage of titling opportunities by amassing lands, through force or finance, before small landholders have seen any benefit from titling (Holstein, 1996, p.24). If the means to prevent `land-grabbing' are not established in advance of titling operations, then neither economic advances among small landholders nor increased social equity are likely to be witnessed.

A good deal of the success of titling efforts relies on careful, thorough analysis and planning before operations actually begin. Among the important bits of preparatory work is the selection of priority areas for titling and registration. In general, titling should be focused foremost on those areas where land values are highest, or where conflict over land rights are the most prevalent. In every country, there are areas of low land value, low development potential, and low levels of property disputation where there is little or no justification for introducing registration of title (Centre H.S., 1996, s.3.1) Even though countries like the United States -- where (some) land values are at a world-wide premium and where land markets are relatively efficient -- have considerable expanses of land which do not appear on any form of legal cadastre because of their low market value, many international development efforts take a shotgun approach to titling land parcels, assuming that the entire country must be registered (Centre H.S., 1996, s.4.21) As budgetary constraints are a universal concern in titling efforts, such an approach represents a lack of thrift that steals resources from subsequent operations.

Titling is also more successful when planning efforts have determined how a broad systematic approach my be applied to land registration. That is, how large numbers of land parcels may be titled en masse as opposed to one by one. Although a systematic approach requires a large-scale deployment of personnel, technologies, and resources, it helps reduce the unit cost of titling and registration per land parcel and thus enables the achievement of an economy of scale. A systematic approach also allows for greater consistency in methods and operations which is a crucial concern, especially when titling is being done for purposes of revenue collection and must garner the faith of those who will be taxed (Centre H.S., 1996, s.2.45). Costs may also be saved by planning for graduated scales of accuracy based on the requirements of different regions covered by a titling project (Centre H.S., 1996, s.4.21).

Planning phases are also great opportunities to help ensure the success of a land titling project in that they provide an occasion for the overall examination of current registration procedures, aims, objectives, and costs. By measuring the efficiency of existing internal procedures and their effect on the surrounding socio-economic environment, project planners can gain much insight into the advantages and shortcomings of practiced systems of land registration and clarify their notions of the requirements of replacement systems. They can also help release capital through the reduction of waste, and pinpoint and correct existing registration system inefficiencies (Centre H.S., 1996 s.4.5).

One of the single most important issues in land titling efforts, and one upon which the lasting success of an entire project may hinge, has to do with the effective integration of system-user needs, public and private institutions, information technologies and related personnel, surveying activities, legal processes of recording and enforcing land ownership, and the management of land in both economic and environmental terms (Centre H.S., 1996, s.4.41). While planning can provide a chance to identify and resolve many existing and potential institutional problems, it also allows an opportunity to weigh the projected expenses of land titling against the projected increases in the level of security that titles might provide over existing documents or practices evidencing ownership rights and interests (Hendrix, 1996, p.191). This kind of analysis is of premium value in determining whether formal titling is even worthwhile, and might have saved considerable pain and resources had it been performed in situations where the expected benefits of titling were not realized.

Those involved in title implementation efforts also have a tendency to be romanced by technology and standardized titling practices, though the latest innovations or standard methods are not always necessary, practical, or adequate to the situation at hand. Information technologies can bring many benefits to titling efforts. The computerization of records can help uncover inconsistencies and increase efficiency by reducing duplication of documents and efforts, facilitating the compilation of information and reports that might otherwise be cumbersome or impossible to produce, and by catering to expected increases in land titles and related records (Centre H.S., 1996, s.3.33). Information technologies can greatly expand the potential for data access and sharing at all levels of a land records system because it imposes a greater rigor on data and data processing techniques and a review of the kinds of information, and information flows that exist within a land records system (Centre H.S., 1996, s.4.2.2). However, many countries simply do not have the technical, financial, or human resources to adopt and sustain the use of information technologies. In such cases, the best short term solution to land titling efforts is to do without these technologies. Any other decision may practically doom a project to failure, as it will mean a waste of already limited resources and will necessitate a dependence on resources which simply do not exist or are unavailable to the situation at hand.

Much has been made of the "method-oriented" nature of contemporary surveying practices and education. In many developing countries, this devotion to method, and sometimes to local legislation, has resulted in undue survey expenditures, long delays in survey deliveries, and in the imposition of inordinate levels of survey accuracy in areas where much lower grades of accuracy would have accomplished the desired ends (in cases of initial title, often a rough location and depiction of a parcel would suffice). By slowing down the land market and imposing rigid boundaries, especially where they have not previously existed or where they conflict with cultural perceptions of land rights and community (MacLeod, Latham, 1996, p.5), surveyors and others may well be encouraging landowners to create or return to informal systems of tenure to conduct their land-related business. Informal systems provide a refuge from legal, financial, and bureaucratic restrictions, and from titling systems that do not satisfactorily represent local people's understanding of their land rights. If a formal titling system is implemented on the backs of a citizenry and does not take their needs and customs into account, it will eventually have to compete with a parallel, informal system and will almost surely lose out. Among the subtleties which have divided successful titling projects from failed ones are the ability to effectively represent communal lands and of proportional and multiple ownership of land(Centre H.S., 1996, s.2.41).

Further technological and institutional concerns relate to the scope of land titling projects and to issues of centralization of land data. A number of different land titling projects have suffered from the over-ambitiousness of consultants and implementors who insisted on developing large-scale, multi-purpose Land Information Systems concurrently with the titling process. Typically such efforts have foundered in trying to serve the needs of multiple agencies and system end-users, all with different priorities, incentives, policies, and accuracy requirements. Especially in cases of initial titling, it generally seems to be more effective to concentrate on systematic titling and property registration, which in itself can provide the widely applicable base data for a Land Information System that may be developed at some later time (Holstein, 1996, pp21-22). Whether information technologies are to be used or not, the introduction of formal title usually requires decisions to be made as to the storage location of land records. Though conditions vary, highly centralized land data which require long distance travel for inhabitants of remote areas to record or obtain information will only provide incentive for the development of a more efficient, informal means of transacting land-related business (Centre H.S., 1996, s.3.33). The accessibility and transparency of land records are vital to the success of any titling system. If records are located at prohibitive distances from those who need to refer to them, they are neither accessible nor transparent; they are simply out of reach, and will quickly lose their relevancy to distant landholders.

An additional mark of distinction between land titling projects is the degree to which they acknowledge and respond to the immediate and long-term needs of the people who are to make use of the title registration system. It is not uncommon that governments will tend to focus on the increased tax base and land data cost recovery potential, as opposed to the free market, social and environmental benefits that title registration can provide (Jefress, 1996, p.1). And governments which do show an appreciation for market benefits will often focus largely on individual property rights, though communal rights may be highly relevant in a given culture, and the good use of land will be wholly abandoned to market forces and divorced from the management of an overall land tenure system (Centre H.S., 1996, s.2.1)

Of all the matters which determine whether the benefits of formal land titling outweigh its social and economic costs, education is probably the most important because its ramifications touch all levels of a land titling system. It is also the place where many of the possible improvements to land titling system designs and practices might be started. A good deal of the impediments to effective land titling systems previously identified reduce to matters of technical, legal, and organizational education. Lack of technical expertise and of understanding about the limitations of information technologies (the cost of data, the complexity of implementation, the importance of sharing, maintenance requirements, etc.) might both be solved by improvements in education and training (Centre H.S., 1996, s.2.5). Citizens' reluctance to adopt formalized titling can often be attributed to a lack of education and publicity as to the ways it could improve their situation. Many of the institutional problems which can overwhelm titling projects are rooted in matters of education, i.e. lack of management skills, lack of awareness of the value of land information as a resource and poor policies for providing, pricing, and marketing it. It is very commonly a sound education about the valuation, collection, and management of land data -- and the related technologies and human resource needs -- that is lacking from titling implementation efforts where expected gains are not met due to a lack of proper planning and needs analysis studies. Titling practitioners have also observed that education related to the social and economic struggles of the poor would benefit many legal professionals involved in titling projects because their training is typically geared toward the needs of middle and upper classes (Fourie, 1996, p.17). Likewise, many technical personnel who currently exhibit "little knowledge of how to behave in a transparent and accountable way towards communities" could become more effective through exposure to broader societal skills such as mediation, negotiation, needs assessment, and conflict resolution (Fourie, 1996, p.4).

The institution of formal land titling is no magic solution to the problems of developing countries. It is one component of a development strategy that must be an integrated, multidisciplinary effort if its benefits are to outweigh its social and economic costs to the citizens of a country (Dansby, 1996, pp 6-7). Although circumstances vary widely, there are several principal ways in which the shortcomings of many contemporary titling efforts might be avoided and the benefits of formalized registration realized:

Land titling could be made a more cooperative undertaking, defusing the considerable tension between top-down project direction and local interests. By sharing control and soliciting local level participation in titling operations, national governments and international consultants and donors can do much to ensure that titling activities will better meet the aspirations of communities in which titling is being undertaken (MacLeod, Latham, 1996, p.6).

Part of this relinquishment of centralized control could also include increased reliance on the private commercial sector to accomplish project objectives (Holstein(2), 1996, p.4). The duties of the public sector should be to provide what the private sector cannot: the provision of a legal framework of real property rights, an accepted framework of contract law and transfer system rights, and an efficient court system (Holstein, 1996, p.9). These duties may require, in some instances, that government offices be dispersed and local land records offices and local land administrators be appointed to assure transfer efficiency and property rights monitoring (Fourie, 1996, p.10) In many cases the private sector, either local or, if need be, international, can take over the responsibility of performing value-added land market services such as cadastral survey and legal services with land transfers, and, in some countries, many other services as well (Holstein, 1996, p.9). This could do much to reduce the burdens on the public sector and speed the titling process along.

In places where the private sector is not so advanced, the possibility of developing value-added services in a government agency, making the agency profitable, and then selling it might be considered. As regards legal services and scholarship, aid groups and consultants could work with governments during titling periods to help build awareness and consensus that is necessary for institutional and policy changes, thus enabling a foundation of broad-based support to counteroppose the concerns of powerful stakeholders. In surveying operations, continued attention should be given to methods and applications (such as those making use of hand-held GPS units for lower accuracy parcel and boundary location) which reduce the time and expense of providing the data necessary to the requirements of a project. In instances of significant time-lag in title delivery, temporary titling might be considered to prevent land markets from bogging down. Project costs might also be driven down by replacing professionals (surveyors, system administrators, etc.) with technicians when possible.

Titling efforts are more likely to succeed when they are focused on empowering communities so the communities themselves can effect change. In order for this to happen, inappropriate laws, standards, and financing mechanisms must be amended or done away with altogether, offices, agencies, and registration systems must reworked, and people at all levels of interaction with new titling systems must be educated and trained so that they will be able to make the best use of the resources available to them, and so these resources may be maintained and enhanced over time.

References:

1996. Economic Growth: The Poor and the Rich. The Economist May 25: pp23-25.

Dansby, B. and Jeffress, G. 1996. The Need for a Multi-Disciplinary Approach to Land Administration Projects. International Conference on Land Tenure Administration. Orlando, Fl.

Feder, G. and Nishio, A. 1996. The Benefits of Land Registration and Titling: Economic and Social Perspectives. International Conference on Land Tenure Administration. Orlando, Fl.

Fourie, C. 1996. The Role of Local Land Administrators and Land Managers in Decentralization, Land Delivery, Registration, and Information Management in Developing Countries. International Conference on Land Tenure Administration. Orlando, Fl.

Hendrix, S. 1996. The Myths of Property Rights. Arizona Journal of International and Comparative Law 12(1): 183-223.

Holstein, L. 1996. Towards Best Practice from World Bank Experience in Land Titling and Registration. International Conference on Land Tenure Administration. Orlando, Fl.

(2) Holstein, L. 1996. What Are the Roles of the Public and Private Sectors in Land Titling and Registration Systems. International Conference on Land Tenure Administration. Orlando, Fl.

MacLeod, F. and Latham, R. 1996. Crofting: An Example of Interacting Land Tenure and Rural Development Models. International Conference on Land Tenure and Administration, Orlando, Fl.

1996. United Nations Centre for Human Settlement. Guidelines for the Improvement of Land-Registration and Land-Information Systems in Developing Countries. Nairobi, Kenya.

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