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.
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I’m a big fan of this topic, Rick. Not only is a land tenure system protective of transferable rights important for attracting buyers/investment, it also allows low-income farmers to collateralize their property and gain access to much-needed credit. Given the incentives for a government to bring in large enterprises, it is all the more important that the system design safeguard customary landholders. I can definitely see that a simplified approach like the Torrens system facilitates the abuse of land rights. But your support of a more complex system seems to cut against the conventional wisdom that minimizing points of discretionary, bureaucratic decision-making helps to eliminate petty corruption. If corruption is such a problem that a Torrens system would fail, wouldn’t wealthy individuals (or the government itself) just pay more money to more officials to “fix” both the deed and the registry? Perhaps this concern wouldn’t be as relevant in a country where long-running deeds could be authenticated but in places where modern land tenure systems are emerging there are areas that haven’t even been surveyed yet.
I’m glad to see discussion of this topic, which I think is one of the most important within the international development field. Collateralized lending is often the only option at the base of the pyramid. I’m also glad to read that international organizations like the World Bank are paying increasing attention to these issues.
In designing land titling systems, it is certainly important to balance the flexibility and simplicity needed to serve individuals (in both rural and urban areas) who may not be used to operating within the formal legal system with the rigidity and complexity required to prevent easy co-opt by corrupt actors. I agree with the previous comment that complex systems can also fall to corruption, but your post brings attention to the fact that simplicity may not be the way to go either. I wonder if the answer is less about complexity and more about centralization. If so, blockchain-based approaches to land titling, already in use in Honduras, may hold promise. (More information available at https://www.devex.com/news/bitcoin-technology-for-land-administration-86362).
In addition to robbing people of land that they have been using for a long period of time, confusion of ownership can lead to a second problem: false sales. In Nicaragua, I saw dozens of homes with large painted black letters on the wall: “This home is not for sale.” It seemed strange until I learned that swindlers were pretending to be real estate agents and ‘selling’ homes that they never owned. I believe this is also a problem even in somewhat more developed countries like Poland, where a friend of mine had to go to court to fight after another group falsely believed they had bought his family home and tried to get in. A clearer system of land ownership can protect not just the current occupants, but also potential buyers.