The low cost exchange of property is critical for economic growth, assuring that resources flow to those who can put them to their highest use. But where property rights are insecure, where buyers can’t be sure that they will get an uncontested claim to what they purchase, that easy exchange will not occur. Hence over the past two decades the World Bank, regional development banks, and many bilateral aid agencies have invested significant resources in helping developing nations strengthen the laws and institutions that secure property rights. The largest investments have been in titling and registering land. Land is the principle asset of most citizens in both developed and developing states, and although residents of wealthy countries take it for granted when buying a home that the property registry is accurate and the seller’s documents valid, this is a luxury most citizens in the developing world are denied.
But while building a land titling and registration system in a developing country is an important step in boosting growth and improving citizen well-being, it is time-consuming, costly and can go wrong in many ways. In a 2014 article in the Asian Journal of Law and Society (earlier version here), New York University’s Leah Trzcinski and Frank Upham show how the failure to consider the vulnerability of the system to corruption derailed a Cambodian project and how greater attention to local context, in particular the high degree of corruption present in many Cambodian institutions, could have made for a far more successful project.
Broadly speaking, land titling and registration systems are of two types. Older ones establish ownership through a pastiche of registration and documentation. The United State is an example where land law lawyers must conduct sometimes lengthy, and almost always costly, efforts to verify that the rights shown in the land registry are not trumped by some document that has not been properly recorded. By contrast, many other wealthy countries have scrapped deed and registry system in favor of a system that relies solely on what appears in the registry. Named after an Australian legislator who first proposed it, in a “Torrens systems” the land registry is maintained by the government which guarantees its accuracy and pledges to compensate those damaged by any error in the recording system.
Torrens systems have many advantages over deed and registry systems. It takes far fewer bureaucratic and legal steps to exchange rights with a Torrens system than with a deed and registry one — thus making the easy exchange of property so critical to development easier to realize. As Trzcinski and Upham explain, when at the urging of the World Bank and other development agencies Cambodia agreed to develop a system to secure land rights, it was persuaded to adopt a Torrens-style system. Under the 2001 Land Law, written by donor-financed experts, proof of registration is all that is required to establish ownership.
One challenge any land titling projects face is protecting the rights of those who have been living undisturbed on a plot of land for years and whose families may have lived and worked it for generations. While they will often have little if any legal documentation to back up their claim, their possessory rights will be recognized within the local community. A land titling program must find a way to protect these individuals’ rights, particularly if their land is an area where values are increasing and unscrupulous developers are looking for ways to grab their land by manipulating the titling system.
This is where the Cambodian project failed and where more thought in advance about the system’s vulnerability to corruption would have made a difference. The Torrens system makes land grabbing in Cambodia all too easy as all the grabber need do is waive around a registration document obtained by bribing land registry staff. By contrast, a deed and registry system offers greater protection against land grabbing, for in establishing ownership rights, those with possessory rights have a much greater opportunity to prove them. Another advantage with deed and registry systems is that if the land changes hands but the document showing the exchange is not registered, the rights of the one receiving the land are not lost whereas in a Torrens system the failure to register a transfer invalidates it. This is particularly important in places like rural Cambodia where citizens are not accustomed to registering exchanges.
As Trzcinski and Upham argue, the adoption of the Torrens system was inappropriate given the circumstances prevailing in much of Cambodia and invited corruption. “Local land officials routinely rely on documentation rather than actual land use, which means that wealthy individuals with falsified documents can dispossess farmers who have peacefully possessed the land or have even registered it under now invalid systems.”
This short summary of Trzcinski and Upham was written to bring out a critical lesson of the Cambodian experience for those concerned with combating corruption: Build concerns about corruption into the project design. In a country where bureaucrats can be easily bribed, putting all the weight on one certificate issued by a single bureaucracy invites abuse. Designing in more bureaucratic hoops to jump through, as is the case with a deed and registry system, may slow the process down but where there is a high risk of corruption, this is a price that must be paid.
Trzcinski and Upham have much more to say – about ways to reduce corruption when transplanting legal regimes to a developing state and indeed about the transplant process itself – which merit the attention of all those concerned with helping poor nations become rich ones. I commend it to readers.