International Experience in Registering Property Reform Gavin Adlington August 24, 2016
Contents 1. Property Rights and the Economy 2. Property Rights Registration Issues in South Africa 3. The Doing Business Indicators 4. Good Practice Examples Internationally 5. The Example of Russia 6. Some Questions or Challenges
Property rights and the Economy Nearly two-thirds of a nation’s capital wealth is derived from its property assets. Recording, managing and using property assets effectively are crucial. Land and property markets, including construction, may contribute as much as 15% to GDP in a developed economy, and, returns to property are often greater than returns to stock and bonds.(The Economist, May 2003). As an example, investment financing (or loans) secured by charges upon the properties (mortgages) form the principal financing mechanism available to the private investor. In countries such as the USA, the value of mortgages were equivalent to 86% of the GDP in 2007, and 69% in 2012. For the EU27 countries, these ratios were 49% in 2007, and 52% in 2012. In South Africa the figure is currently about 20% and in the UK it is 69%.
Property markets in South Africa are limited • The populations of the UK and South Africa are similar – In the UK, the buying and selling of property averages about 5% per year. i.e. about 1.3 million sales per year. – In Europe as a whole the figures vary between 3% and 5%. • In South Africa the figure is about 1% to 1.5%, i.e. about 300,000 sales per year.
Contents 1. Property Rights and the Economy 2. Property Rights Registration Issues in South Africa 3. The Doing Business Indicators 4. Good Practice Examples Internationally 5. The Example of Russia 6. Some Questions or Challenges
High professional standards in South Africa – for registering property rights • Education, capacity and standards of the professional community is high by any international standard • Existing systems work well for those that can afford them, although they have not kept pace with changes in OECD countries over the last 30 years and are somewhat slow and bureaucratic, and the costs are quite high.
Constraints in South Africa include: • Small percentage of people actually register either their property rights or transactions with those rights – Maybe less than 25% – Unaffordable to most – can not afford conveyancers, surveyors or taxes – Inaccessible to many – no local access, especially if parties are working all day – Too many constraints in the process – clearances, certificates needed, etc. – Takes too long – most people can not take so much time off work – Lack of awareness – many people just do not know official requirements
Conveyancers overprotected Getting clearances certificates for property tax payments, utilities payments, electricity compliance and entomology is highly unusual and not seen in best practice countries. Principle of caveat emptor (buyer beware) applies in South Africa and in most countries it is the duty of the Conveyancer to check these things. Deeds registry triple checks deeds that are produced by professional licensed conveyancers and then requires them to come to the office and sign in front of the registrar! Little incentive for conveyancers to provide services to low income people and for low value properties.
Contents 1. Property Rights and the Economy 2. Property Rights Registration Issues in South Africa 3. The Doing Business Indicators 4. Good Practice Examples Internationally 5. The Example of Russia 6. Some Questions or Challenges
Doing Business Indicators • From 2005 to 2015 1/3 Procedures 1/3 Time 1/3 Cost • Ranking Introduced in 2009 • Distance to Frontier (DTF) Introduced in 2015 • Quality Index Introduced in 2016 1/4 Procedures 1/4 Time 1/4 Cost 1/4 Quality
Contents 1. Property Rights and the Economy 2. Property Rights Registration Issues in South Africa 3. The Doing Business Indicators 4. Good Practice Examples Internationally 5. The Example of Russia 6. Some Questions or Challenges
Some Examples of Good Practice See attached handout with comparisons: • South Africa • CF Botswana, Nigeria, Mauritius and Rwanda • Denmark, Lithuania, Netherlands and UK • New Zealand • Russia
Contents 1. Property Rights and the Economy 2. Property Rights Registration Issues in South Africa 3. The Doing Business Indicators 4. Good Practice Examples Internationally 5. The Example of Russia 6. Some Questions or Challenges
The Example of Russia (1) • Break up of Soviet Union about the same time as break up of Apartheid System. • Completely different focus than before for both – politically and in economic objectives. • Need to be inclusive, issue new titles and reform property registration systems. • Major legal, institutional, educational and practice changes needed.
The Example of Russia (2) • Putin ‘required’ all land plots to be registered and a land tax to be implemented between 2000 and 2005 – for 43 million owners. • Multi-functional centres established so that the public could get all services provided in one place – property tax payments, planning applications, registration, social security applications, banking and payment offices, etc. • Service to citizens became a central pillar of government.
The Example of Russia (3) • However, even in the “one-stop-shop”, the ‘customer’ was effectively a messenger, collecting certificates from one agency and handing it to another. To prevent this the government required that any certificate held by one agency must be automatically transferred internally to the other requiring it. The customer therefore only made an application in one place, and everything else was done internally. • In 2009 institutions for registration, land mapping and surveying, building measurement and control and valuation were merged into one organization.
The Example of Russia (4) Russia now No. 8 in DB, and has the largest and busiest registration system in the World. • Focus on automation – across all of Russia. • Focus on decentralized services – one front office in 3,500 districts, but processing done centrally. • Focus on improving DB rankings! • And above all, focus on the customer.
The Result in Russia • 156 million parcels and buildings registered • 253 million titles issued by end of 2013 (includes apartments) • Dealt with 28 million applications in 2015 • Annually deals with 27 million e-documents • Dealt with 8 million inter-departmental requests in 2015 through electronic means https://rosreestr.ru/site/en/about/
Contents 1. Property Rights and the Economy 2. Property Rights Registration Issues in South Africa 3. The Doing Business Indicators 4. Good Practice Examples Internationally 5. The Example of Russia 6. Some Questions or Challenges
Good Practice - Think of this from the Customer’s Viewpoint One stop shop. No unnecessary steps. Simple forms. S imple One visit to an office or to a professional person. WEB services. Automate/ interlink the approvals and certificates so that they are done automatically. Keep taxes and fees low – especially for low value C heap properties. No unnecessary steps. Use of para-legal and para-surveyor? Good Publicity! Services provided locally – either A ccessible private or by local authority. Services provided out of normal working hours. Mobile services. WEB services. Transparent services - Fees and service standards R eliable displayed. Accurate and reliable information – process and records. Track progress. Guarantee and indemnity provision. Complete coverage - all land. Aim for one day service. Automation is key. F ast
Questions for the Cities 1. How can you make the process of registration more inclusive? So that all citizens can benefit from services provided? 2. What actions can be taken to make the systems in use more ‘customer friendly’? 3. What data and automated systems should be put in place? 4. How can cities improve public awareness, and coordinate better with civil society and the private sector.
Some areas for consideration 1. Already proposed: a) Electronic issuance of rates clearance certificate or on-line payment confirmation. b) Improvements to the deeds registry – automation/ electronic registration. c) Service standards, including time limits and possibly fast track procedures. 2. Other possibilities: a) One stop shop linked with greater automation. b) More local access to services. c) City land information system. d) Reduce no. of certificates required. e) Reduce fees and taxes – especially for low value properties. f) The role of conveyancers.
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