Balancing Land Access for Investors
with Local Land Rights:
A Reform Model from Mozambique
Is land leasing an appropriate tool to increase
investment and economic development?
World Bank Land and Poverty Conference
Washington, DC. March 24, 2015
Presented by: Ian M. Rose, DAI, Land Tenure and Property Rights Specialist
Context Within Existing Legal Framework
• Constitution: All land in Mozambique is owned by the state in
trust for the people. Land cannot be sold or mortgaged
• Citizens, foreigners, communities and corporate entities may
hold or acquire land use rights (DUATs) for varying periods
(prazos)
• Transfer of DUATs: automatic for urban parcels (prédios
urbanos), but requires prior government authorization for rural
parcels (prédios rusticos)
• Requirement of a development plan (plano de exploração) for
each parcel (very few exceptions)
• Estimated that less than 5% to 10% of parcels formally registered
• Customary rights to land recognized under Land Law
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Why is there a need for legal reform?
• Government discretion in the approval
process to transfer DUATs (of rural land,
vacant urban land) arguably impedes
investment
• Transferor must be in compliance of plano
de exploração, unless there is justifiable
excuse (opportunity for subjectivity
regarding both aspects)
• If transfer not approved, DUAT holder may
lose investment
• It is restricted transferability combined with
plano de exploração requirement that
impedes investment
•
Regime of prior approvals with government discretion: introduces risk not
just because of opportunities for rent-seeking but also, more neutrally,
because of under-resourced government offices
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Transferability: In Context of Different Economic Models
Classic (Market) Economic Model:
• Unrestricted transferability will eventually place land under control of bestpositioned user to develop land for the most productive allowed use.
• “Invisible hand of the market” more efficient than state-imposed
regulation
State-Oriented Model:
• Places trust in government to allocate land. This is – partially – the
underlying origin of features of Mozambique land law such as: restricted
transferability; plano de exploração.
Unrestricted transferability – and not “ownership” – is what matters!
“Owner” of land in U.S. must pay property taxes and always faces
expropriation for public purpose. Not significantly different from a secure,
long-term, transferable, renewable leasehold right.
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Is limited transferability the reason we see large tracts
of undeveloped land?
Without much more detailed studies and analysis, we can only say maybe.
We should not overstate the obstacle because:
(a) Savvy or sophisticated investors can hold land via a corporate entity and
effectively transfer rights to a third party through the sale of shares in
the company;
(b) Savvy investors can craft the plano de exploração with less detail rather
than more detail, allowing flexibility later on
(c) Factors completely independent of transferability may explain
underdeveloped tracts of land, such as: lack of infrastructure to move
goods to market; suitability of land (quality and location) for productive
use in relation to competition; lack of confidence in court system to
resolve disputes.
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What is a “cessão de exploração”? A temporary
transfer of a DUAT. A temporary assignment of land
use rights.
Goal of well-drafted “cessão de exploração”
regulation from economic perspective:
•
Lower transaction costs of transferring land use rights (even
if only a temporary transfer/assignment of rights), thus
improving the enabling environment for investments
•
Effectively create a land rental market, which is increasingly
seen as accomplishing many of the same gains as land
ownership market
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Primary Categories of Parcels Addressed by the
Regulation:
1. Prédios Rusticos held by Private DUAT title holders
2. Community land in rural areas
3. Individual DUAT holders via good faith or customary
right (rural)
4. Prédios Urbanos (originally. now excluded)
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Are the number of approvals (and
corresponding discretion) reduced in the
cessão de exploração regulation, as compared
with an original DUAT application or with a
DUAT transfer application?
• In the original early 2014 draft released by DNTF for
comments: not significantly.
• In the current draft being circulated: yes.
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Private DUAT title holders of prédios rusticos
Procedural Requirements for
Cessão de Exploraçao
March 2014 Pending
Draft
Recommend
Authorization of: Governor;
Ministro de Ag; or CM
(according to parcel size)
Yes
Yes
SPGC (Serviços
Províncias de
Geografia e
Cadastro)
Status of Title held by Lessor
Parcel Demarcated
Definitive
Yes
Provisional
Yes
Provisional
Yes
Re-file Plano de Exploração
Yes
Technical parecer
Many
Only if
changed
Fewer
Only if
changed
Minimal
New edital
Yes
No
No
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Private DUAT title holders of prédios rusticos
[continued]
Procedural Requirements for March
Cessão de Exploraçao
2014
Pending
Draft
Recommend
Prior Registration with Registo
Predial
Executed via escritura pública
Yes
No
No
Yes
Yes
Yes
10 year max prazo, renewable 3
times (30 years) or
1 year prazo renewable 10 times
(10 years)
Same
Same
Lengthen
No C de E in final 3 years of DUAT
Same
Same
Eliminate
Restriction
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Expected impact for land held by private (rather than
community) DUAT holders
• Modest, unless procedures streamlined as in pending revision.
• Biggest impact in cases where rights-holder does not wish to transfer
DUAT (even if it could), but rather needs partner/investor without
permanently giving up control. Partner/investor has security of its
interests being recorded in cadaster at SPGC and registo predial.
• Small holders may also benefit as they are more likely to have land
titled under their personal name, rather than via corporate entity.
• In revised draft, for informal DUAT holders: only need DUAT
formalized, not all the other paperwork. (No conversion to DUAT
“pedido” application process, as the original draft contained).
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Community Land
Special Considerations:
• Consent (FPIC – Free,
Prior, & Informed
Consent)
• Meaningful
participation of women
& vulnerable groups in
decision-making
processes of community
• Compliance (posttransaction) Monitoring
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Community Land
•
Land Law Regulation (LRT) is explicit that C de E “… depende de
consentimento dos seus membros”
•
Original: included reference to “consentimento da respectiva
comunidade,” but without any further guidance
•
Pending draft: No reference at all to community consent (not
advisable)
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DUAT rights of community members, in principle, are
very strong: co-title rights
Existing Guidance on Third-Party DUAT applications:
• Land Law Reg originally specified 3-9 members from the community, plus
occupants/title-holders of neighbors, would sign minutes of consultation
• 2010 Decreto and 2011 Diploma Ministerial: signing of consultation by
Conselho Consultivo; two phases (two consultations)
Anexo Tecnico to Land Law Reg on Community Land Delimitation:
Acta of consultation signed by 3-9 members of community “chosen in public
meetings”
Land Law Article 30: “mechanisms of representation” of local
communities would be established in future law
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Recommendations – Community Land
• Community Consultations – clarify process
• Community Members/Representatives (not just
members of Conselhos Consultivos) should sign
documentation
• Minimal Standards for Community Representation
• Delimitation of community sufficient, but area affected
by lease should be demarcated
• Strengthened regime of post-transaction monitoring
• Consider longer initial prazo (i.e. more than 15 years)
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Recommendations for Land Leases
(Cessão de Exploração) of Private Parcels
• Approval of Cessão de Exploração at regional technical office
• No need to refile and reapprove the Plano de Exploração (unless
substantially changed).
• Allowed in cases where lessor has a provisional or definitive
DUAT
• Longer initial prazo (i.e. longer than 10 years)
• No new edital (public posting)
• No prior registration required with registo predial (but required
afterwards)
• Focus on post-transaction monitoring rather than prior
approvals
• Include urban parcels
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General Recommendations for Reform of Related
Legal Framework
• Approval deemed granted in absence of explicit government
approval given within determine time frame
• Less reliance on pre-transaction approvals; more reliance on
post-transaction monitoring
• More reliance on zoning; less reliance on individual
development plans
• Merger or synchronization of the land/DUAT registry and the
property registry (multi-purpose cadaster)
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Obrigado! Thank you!