Land Markets and Land Consolidation in Central Europe IV

THE IMPORTANCE OF LAND ADMINISTRATION IN THE DEVELOPMENT OF

LAND MARKETS - A GLOBAL PERSPECTIVE

Peter Dale

Department of Geomatic Engineering, University College London

England

ABSTRACT
This paper looks at the growing pressures on land administration systems and examines
the effectiveness or otherwise of current responses. It cites examples from around the
world, including less developed countries, drawing attention to the need for sustainable
development and the role that land administration plays in support of such a goal. It
comments on the development of land markets in east and central Europe, indicating
how their performance may be quantified. It then charts possible ways ahead for those
involved in land information management systems, stressing in particular the need to
take a holistic approach to land and all its attributes.

INTRODUCTION

In recent times there has been a revival of interest in the role and operation of land
administration systems, in part because of the land reform programmes in east and central
Europe and in part because of the opportunities created by information technology to re-
engineer cadastral systems. Under the previous command economies, the cadastre was
principally focused on land use but it is now tending to embrace both valuation data and land
title information. This mirrors the cadastral systems (or their equivalents) that operate in
western economies, which are becoming more diversified and provide linkages between the
old cadastral records and the land book systems.

New forms of land information system, which some call land information services, are being
created that address the needs both of individual landowners and land professionals as well as
of government. The delivery of government services is becoming more 'joined-up', an
expression used in the United Kingdom to describe, amongst other things, the increased level
of co-operation between ministries and departments and the treatment of data as a corporate
resource. It also describes attempts to improve the relationship between government agencies
and the general public that they serve.

In many countries, and especially amongst the less developed nations, these moves towards
joined-up government have scarcely begun. Decision-making is based on a vertical rather
than horizontal flow of information and the levels of sharing of data between government
departments are often minimal. Yet the problems that are faced, both in rural and in urban
development, are becoming so complex that only a multi-disciplinary approach will be able to

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Land Markets and Land Consolidation in Central Europe IV

solve them. Populations expand putting greater pressure on the land and its resources - the
world's population has now reached six billion people and within the next thirty years, two
thirds of these will be living within towns or cities. Already the poor are increasingly
concentrated within urban slums and squatter settlements and access to basic resources is
restricted. Women in particular suffer. Although constituting more than 50% of the world's
population they own less than 1% of its wealth. In less developed countries literacy amongst
women may be as low as 20% of that amongst men, especially in rural areas.

As stated in the Bathurst Declaration:

"The challenge is not only to meet the world population's needs for food, shelter and quality
of life, but also to ensure that future generations can have their needs met". (FIG, 1999)
Any response to this must focus on long-term as well as short-term issues. Sustainability is no
longer an option, it should be an essential. The world needs to develop more intense and
sustainable use of the land. Wasting space by abusing the land should be seen as a crime.

Availability of space is however only one factor. Present statistics suggest that by the year
2025, two thirds of the world's population will be living in areas of water stress. Access to
fresh water is as essential as access to space. Within the European Union the value of
agricultural land is increasingly being determined more by the additional rights associated
with it, such as milk or slurry quotas, than by traditional factors such as land rights. Rights of
access to water will increasingly influence the value of any real property.

This is part of a process in which, as societies become more complex, so do land markets.
Secondary rights become tradable commodities with landowners selling development rights;
likewise mortgage rights are being converted into bonds that are bought or sold in secondary
mortgage markets. In parts of North America, for example, developers can sell their air space
above a certain floor level so that other sites can be developed to a higher level. Even in less
developed countries, market forces are becoming more important for, as Jude Wallace
observed:
"Giving land a value (monetarisation) may occur even without a trading system of a land
market. Ascribing a value is an essential mechanism for making rational decisions about
liabilities, risks and state intervention in land uses. In developed economies, land is both
monetarised and commodified. Hence in all economic systems which deliberately allocate
land use, some form of land administration system is essential." (Wallace, 1999).

LAND ADMINISTRATION, AN OVERVIEW

'Land Administration' is the term adopted by the UN Economic Commission for Europe to
describe the processes of recording and disseminating information about the ownership, value
and use of land and its associated resources. Such processes include the determination
(sometimes known as the 'adjudication') of rights and other attributes of the land, the survey
and description of these, their detailed documentation and the provision of relevant
information about the land and any property attached to it.

Until recent times the primary aim of land administration was seen as the provision of secure
title to land. Insecure property rights inhibit investment and hence good land use. They also
hinder good governance and the creation of an involved and committed society. Without
effective access to secure property rights, national economies cannot progress and sustainable
development cannot be achieved.

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Land Markets and Land Consolidation in Central Europe IV

Today, the prime objective of a land administration system is seen as facilitating the
operations of the land market. In some communities land is not regarded as a tradable
commodity even though it has a perceived value since it is seen as part of the social, political
and cultural fabric of society. In others, land can be bought and sold by converting it to a cash
value. In practice, because land is an immovable object, the commodity that is traded is not
the land itself but, rather, a set of abstract rights that are associated with the land. These rights
determine the way in which certain characteristics of the land can be used. As Jude Wallace
also pointed out:
"Depending on the socio-political order and on the economic creativity of the system, the
legal order will begin to identify interests which are remarkably remote from the land but
which are immensely valuable. When the legal system identifies abstract interests in the land
and allows these to be traded in their own right, it has invented what might be called complex
property commodities. The significance of this development in property law is simply
astounding: property rights of almost any content can be created in relation to anything of
value. The rights create entitlements and interests that are enforceable amongst people. The
entitlements and interests can then become tradable commodities". (Wallace, 1999).

To support such a process there needs to be a land registration system, a valuation system and
appropriate financial institutions such as banks and mortgaging facilities. Historically, the
recording of rights in land emerged as an independent process that was more concerned with
providing security of tenure than with financial services. In many countries, documents of
transfer were registered with entries in land books (e.g. in the German "Grundbuch" system)
while physical and financial details of properties were recorded in the cadastre. More recently
the databases underpinning these two systems have been unified, for instance in Austria, but
in many countries and especially in much of the developing world, records for ownership are
still compiled and maintained quite separately from records for taxation or for land use
control.

Every country has its own system of land records with varying degrees of completion of
cover, content and availability of access to the public. No two systems are identical as each
reflects its own historical development. There are many similarities, for instance within
Europe where the influences of the old Austrian-Hungarian Empire or of the French Emperor
Napoleon have put a common stamp on many aspects of modern practice. Throughout sub-
Saharan Africa each country's land registration system is different depending on the influence
of the Belgians, British, French, German, Dutch or Portuguese. None are identical.

Many land registration and cadastral systems are undergoing re-engineering in part because of
the increased demands being placed upon them and in part because of the new information
technologies that have become available. A catalyst for a number of these reforms has been
the collapse of communism. This, combined with computerisation, has led to some attempt at
creating 'joined-up' government although often the outcome has been little more than the
computerisation of the mistakes of the past. In Third World countries that had not formally
adopted a communist system, there have been far fewer reforms.

Most countries are seeking to computerise their land records. Those countries in which a
critical mass of data has already been converted into digital form are now in a position to
analyse their data and monitor trends in the land market. The old manual systems of data
storage and retrieval did not allow this, and today in many of the less developed countries it is
still impossible to compile even very general statistics for management information. The
integration of data currently held in different ministries in different formats and often with

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Land Markets and Land Consolidation in Central Europe IV

different reference systems is not easy, either technologically or institutionally. It is

nevertheless beginning to happen. When sufficient data have been entered into the computer,
new opportunities arise to use the data in ways that add value and help to recover costs.

LAND ADMINISTRATION IN DEVELOPING COUNTRIES

Although exciting possibilities are opening up to exploit land-related data, it is important to

recognise that what is happening in western societies is moving far ahead of what is possible
for example in much of Africa, the Indian sub-continent or parts of South East Asia. In the
latter case there have been some significant developments for instance in Malaysia and
Thailand and every generalised statement has notable exceptions. In most cases, however, the
Third World has been unable to make a significant investment in the necessary hardware,
software and data capture or conversion, or institutional change, that is necessary to sustain a
modern land information system. Not only are such countries economically poor, they are
also data poor in an age when the rest of the world is becoming data rich.

In spite of the growing affluence in the West, the levels of poverty in the Third World are not
improving. The increasing gap between rich and poor has been well documented by UN
agencies such as UNDP. 20% of the world's population do not have access to clean water,
while twice as many (2.6 billion people) do not have access to basic sanitation. 1.3 billion
people live on less than US$1 per day. The problems are often most acute in urban areas
where there is an urgent need to improve access not only to better shelter and basic services,
but also to formal and informal employment opportunities.

In an attempt to overcome some of these problems, the United Nations Centre for Human
Settlement (UNCHS, better known as Habitat) has mounted a Global Campaign for Secure
Tenure in which:
"Habitat and its partners will be using the Campaign to make clear that it is not urbanisation,
in and of itself, that causes these problems, but rather a failure to make better use of the
enormous opportunity and potential offered by the urbanisation process. It is poorly-managed
urbanisation that leads to the marginalisation of the urban poor, which increases their
current cost of living and defers enormous future environmental and social costs for the next
generation." (UNCHS, 2000)

Habitat went on to point out that insecure tenure:

• Inhibits investment in housing
• Hinders good governance
• Undermines long term planning
• Distorts prices of land and services
• Reinforces poverty and social exclusion
• Impacts most negatively on women and children
These consequences arise just as much in rural as in urban communities.

In the former communist countries of east and central Europe, the creation of an effective land
market has been seen as part of the way to improve living standards. For the poor in the Third
World, access to land and services cannot be based on formal market processes because they
have no money with which to compete and no access to the formal market mechanisms.
Poverty tends to be associated with poor infrastructure and in urban areas with informal
squatter settlements. Cost effective mechanisms need to be developed in order to formalise
the land tenure arrangements and ensure that resources are allocated efficiently for the

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upgrade of the infrastructure. International funding agencies such as the World Bank have
successfully implemented a variety of appropriate schemes but such actions all too often only
address the problems of the present. A more fundamental review of land and development
policies is often needed to ensure that land is used in a sustainable way. As Habitat points out,
"Informal settlements exist and expand because of the inadequate provision of land,
speculative investment patterns, a tendency towards over-regulation, and a regulatory
framework of standards, regulations and administrative procedures that is, at best, indifferent
and - more likely - hostile to the needs of the urban poor. All of these issues will have to be
directly tackled in order to create the conditions for rapid progress, economic investment and
growth". (UNCHS, 2000).

Part of this process must be improvement to the local land administration system and the
development of an appropriate land information system. This is necessary but not sufficient
to ensure a more equitable distribution of land and hence of wealth. Secure tenure will not, on
its own, reduce poverty and ensure sustainable development but it is an essential component
in the way forward. It is also something to which many Governments became committed
when they signed up to the Habitat II Agenda after the meeting in Istanbul in 1996. Under
paragraph 40(b) they committed themselves to
"providing legal security of tenure and equal access to land to all people, including women
and those living in poverty; and undertaking legislative and administrative reforms to give
women full and equal access to economic resources, including the right to inheritance and to
ownership of land and other property, credit, natural resources and appropriate
technologies". (UN, 1996).

In many countries there is still a tendency to separate land ownership rights from land use
rights and to have no effective institutional mechanism for linking planning and land use
controls with land values and the operations of the land market. The problems are often
compounded by poor administrative and management procedures that fail to deliver the
services that are needed. Investment in new technology will only go a small way towards
solving a much deeper problem, which is the failure to treat land and its resources as a
coherent whole.

In reality, many of the less developed countries need to re-engineer their cadastral and land
registration systems to take into account the need for 'joined-up' government and the
requirements of a modern land market. Many, for example, need to find faster and less
expensive ways of recording land parcels and the formal and informal legal interests that are
attached to them. Radical solutions are needed that do not necessarily build on the precedents
of the past, many of which have evolved from colonial experience and alien cultures. There
are signs that this process has begun in some countries, for instance in South Africa, but in
most developing nations there is not yet the will for root and branch reform.

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Land Markets and Land Consolidation in Central Europe IV

Elements that characterise an efficient and effective land market

y and Regulatory Framework

Legal entities and all physical persons may own properties with equal rights.
Institutional structures are secure with well-regulated activities.
Clear policies create strong and clearly understood regulating authorities, a favourable environment
for investment and strong motivation for individuals.
Agricultural and urban land management policies are clear.
Planning, environment, health and local administration policies clear.
Planning and zoning controls are clearly understood and enforced.
Professional services exist, with basic assent and understanding from the public.
There are clear policies about information management, intellectual property rights and the protection
of investments in data.

et (Participants, Goods and Services, and Financial Instruments)

Landowners and tenants exist and represent a range of different stakeholders.

There is a strong private sector (with individuals, companies & family units).
Large corporate players exist (including investment funds, pension funds).
All government held land is basically held for public purpose or social housing.
The construction sector is established and healthy.
There is a variety of assets available, apartments, residences (of various sizes), offices, commercial
buildings and agricultural land holdings.
Information on real assets available for sale is widely known and reliable.
Mechanisms exist to create new assets where needed, (i.e. the market is able to respond to rising
demand by building more houses, etc.).

Pillar 1 - Land Registration and Cadastre

1. There is a sound legal basis for ownership and trading of property rights.
2. All necessary legal structures are in place, especially inheritance.
3. Recording and registering systems are soundly implemented
4. There is no risk of unjustified expropriation.
5. Land and buildings can be traded and leased easily.
6. The quality of data held by regulators is good.

Pillar 2 - Valuation

1. Valuation is clear and well understood, based on market prices.

2. Valuations are accepted and used as basis for calculation of asset values.
3. The mechanism for offering real property for sale is clear.
4. Mortgage advice is available for residential property.
5. The quality of data held by regulators is good.

Pillar 3 - Financial Services

1. Cash sales are clear and supported.

2. Land and buildings can be used as security.
3. Special mortgages / credit facilities are available for agricultural land.
4. Bankruptcy and first charges on mortgages are supported.
5. Mortgages are available for residential property (up to a certain % of the value).
6. Financial products are tied to assets (e.g. pension funds can be used as security).
7. Taxation regimes are not subject to sudden change.
8. Tax implications for investments are clear.
9. Financing for investments exists and venture capital is available.
10. Foreign Direct Investment is encouraged and there is a low assessment of risk.
11. There is an understanding of how land and property taxes can affect land use.
12. The quality of data held by regulators is good.

Table 1: Land Market Requirements (from Dale & Baldwin, 2000).

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Land Markets and Land Consolidation in Central Europe IV

LAND MARKETS IN EAST AND CENTRAL EUROPE

The most radical reforms of recent times have taken place in east and central Europe As part
of the European Action for Co-operation in the Field of Economics (ACE) programme,
(Baldwin et al, 1999) examined the emerging land markets in six countries in economic
transition. These were the Czech Republic, Hungary, Latvia, Poland, the Slovak Republic and
Slovenia. The research concluded that if there is to be a stable and efficient land market that
encourages sustainable development then there must be:

• the clear definition and sound administration of property rights;

• a minimum set of restrictions on property use consistent with the common good;
• a simple and inexpensive way to transfer property rights;
• transparency in all matters relating to the land; and
• the availability of capital and credit.

The elements listed in Table 1 form part of a model (Figure 1) that illustrates the way in
which the market and those who operate within it need to be supported by certain pillars that
in turn must stand on the firm foundations of national land policy.

PARTICIPANTS
(people & legal entities)

LAND MARKET
GOODS & SERVICES FINANCIAL INSTRUMENTS.
(land & property) (mortgages & finance)

Pillar One Pillar Three

Land Registration Financial
and Cadastre Services
(title & rights) (capital & credit)

Pillar Two
Land Valuation
(market based)
POLICY FRAMEWORK / LEGAL BASIS

Figure 1: The Land Market Model.

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Land Markets and Land Consolidation in Central Europe IV

Unfortunately the foundations are often weak because they are made up of different policies
created by different ministries without awareness or concern for the wider consequences of
their implementation. Thus the Ministry of Finance may introduce land tax policies that bring
about changes in land use that may run counter to what the ministry responsible for physical
planning may have proposed. Similarly the Ministry of Justice may support fragmented
ownership rights (as in Slovakia where one field may be owned in pieces by more than a
thousand people) while the Ministry of Agriculture is struggling to maximise food production
and minimise the fragmentation of the land.

While the principles apply to almost every socio-political system, the conditions in eastern
and central Europe have a unique element. Not only are the countries in economic transition
to a market economy but they are also seeking to bring themselves into line with the
requirements of membership of the European Union and the acquis communautaire. The
'acquis' are the rules and regulations that govern the states of the European Community. These
in practice say little in detail about land markets per se but do require open access to the
market place for all members of the community. This creates some tension with regard to land
since it means that foreigners will be able to become local landowners. This is often seen as a
threat and an economic route to re-establish colonialism. Nevertheless in the longer term, full
harmonisation with the European Union norms will be a necessary condition of membership.

PERFORMANCE
INDICATOR
MARKET ECONOMY (EU)

100%
C

Driven by Harmonisation
80

60
B
40 Driven by Market

20 Driven by Reforms
A
0 1 2 3 4 5
COMMAND ECONOMY LAND MARKET INDICATOR

Figure 2: The Transition Curve to a European Market Economy.

The transition from a command to a market driven economy passes through several stages as
is illustrated in Figure 2. As part of the ACE study the progress of six countries was measured
both in terms of their land market performance and the extent to which the necessary land
administration infrastructure had been put in place. Quantification of the latter was made on
the basis of value judgements of the issues listed in Table 1, a variety of experts making

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Land Markets and Land Consolidation in Central Europe IV

independent assessments as to how far each of the criteria were met. The actual performance
of the market was more difficult to measure since in many cases, although the infrastructure
was in place to allow the land to be bought and sold, the value of the land was too low to
stimulate sales.

Urban land markets have been developing more rapidly but in rural areas, which were the
main focus of the study, there has been a reluctance to enter the market. Where former
productive land under a co-operative system has been restored to its original owners the
market price may in some cases be less than one US dollar per hectare. It would cost more to
enter into a deal than the price that would be realised.

There are, however, signs that land markets are beginning to pick up. It has taken longer than
some expected for the infrastructure to be put in place and the market to begin to operate
formally. The disbursement of support funds allocated by the European Community and the
World Bank in order to accelerate the land reform process has in many recipient countries run
behind schedule. While it is encouraging to note the care that is taken in spending money, the
cause is often in part due to reluctance in decision making.

While the focus of the land reform programmes has been directed primarily at land titling and
the restoration of absolute ownership rights in land, there has been a growth in trade in
leasehold rights and use rights. The latter often exist informally, for instance in local
agreements amongst farmers as to who works what land. In consequence, whatever appears
on the official land registers may not be what actually happens on the ground - which is why
in the land fragmentation in Slovakia referred to, the land is still being productively used.

There is plenty of anecdotal evidence that, during the communist era when great use of
statistics was made in centralised planning, the official data differed significantly from the
reality on the ground. There is an inherent danger that in the new land administration systems,
the official records, although representing the de jure position, will differ significantly from
the de facto. This however is not a unique problem since it also happens in countries still
operating customary land tenure systems.

THE WAY AHEAD

The origins of many of the land administration systems that are in operation today lie in the
19th Century or earlier. Only the technology to deliver them has significantly changed. If full
advantage is to be taken of the technology and a truly 'joined-up' service is to be delivered
then some radical reforms are called for. The first of these is to adopt a more holistic view of
land and to create a multi-disciplinary forum in which land issues can be seen in perspective.
The present fragmentation between different central and local government ministries and
departments and between different professional organisations must cease. Land as a whole is
greater than the sum of its parts. The treatment of land rights, land usage and land values as
entirely separate entities handled by entirely separate organisations leads to a misuse of
resources. To achieve sustainable development one must consider all aspects of the land and
how they inter-relate.

Land registers need to reflect the way that property is used in order that appropriate services
can be provided and citizens can be aware of their full rights. The Scandinavian model of
including buildings registers along with title data is a step in the right direction. Information
needs to be readily available with regard to the licensing of premises (for alcohol

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Land Markets and Land Consolidation in Central Europe IV

consumption or gaming) through health and safety controls and the existence of potentially
contaminated land to agricultural quotas. All these are matters that relate to land parcels. They
are therefore candidates for inclusion in land and property registers.

The second necessary reform is to ensure that all the institutional elements for an information-
based society are in place. Some of these elements require new laws or clarification of
existing laws relating to the ownership, copyright, privacy, liability and exploitation of land-
related data. In particular there may need to be new legislation to permit electronic
conveyancing and to facilitate the sharing of data between the public and private sectors.

For most Third World countries, some of these data are not yet required. Each country needs
to develop its own land information system but based on its vision of the way forward. Third
World countries in particular cannot afford to waste their resources, especially their land, and
for them an integrated approach to their land administration system is an essential investment
that will help to sustain their future. As pointed out by Dale and McLaughlin:
'Whatever is attempted must be designed as much for the future as for the present.
Maintenance is more important than initial system creation for without it, the system will
become an historical monument and a folly at that. Not only must external changes be
recorded within the system but also the system must itself be capable of change as the levels
of sophistication both of the hardware and software and of the people operating them grow. If
Third World countries are to make a quantum leap forward, if the growth of land information
systems has the impact on societies that it is hoped that they will, if in fact better land
information can lead to better decisions about the use of land and resources and better
management of that most fundamental resource, then there is a heavy responsibility on those
giving aid and assistance to get it right. The affluent can afford the occasional failure. The
Third World cannot'. (Dale and McLaughlin, 2000)

Overall, what is needed is a change of attitude towards land as a whole, a sharper focus on
information as a commodity, and binding commitment to keep that information up to date.
Land administration systems must evolve to provide a modern framework within which the
demands of sustainable development can be met. Given greater awareness of the issues, this
should not be too difficult to achieve.

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REFERENCES
Baldwin R., Bogaerts T, Csaki C., Dale P., and Zichy A. (1999): Land Markets in East and Central
Europe. Report on ACE study for European Union
Dale, P. F. & Baldwin, R. A. (2000): Emerging Land Markets in Central and Eastern Europe. In:
Structural Change in the Farming Sectors in Central and Eastern Europe. Lessons for EU
Accession - 2nd World Bank/FAO Workshop. Warsaw, Poland, June 27-29, 1999
Dale P. F. & McLaughlin J. D, (2000): Land Administration. Oxford University Press. 169 pages.
FIG (1999): Report of the Workshop on Land Tenure and Cadastral Infrastructures for Sustainable
Development. Bathurst, Australia. http://www.fig.net/
UN (1996): The Habitat Agenda. UN New York.
UNCHS (2000): "Global Campaign for Secure Tenure - implementing the habitat agenda: adequate
shelter for all". http:///www.unchs.org/
Wallace, J. (1999): "A Methodology to Review Torrens Systems and their Relevance to Changing
Societies from a Legal Perspective". Paper prepared for the Workshop on Land Tenure and
Cadastral Infrastructures for Sustainable Development. Bathurst, Australia

CO-ORDINATES
Prof. Peter Dale
Dept. of Geomatic Engineering
University College London
Gower Street, London
WC1E 6BT
England
Phone +44 (0)20 7679 2745
Fax +44 (0)20 7380 0453
E-mail [email protected]

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Land Markets and Land Consolidation in Central Europe IV

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