Chapter 1
Property Rights and Property Value

1.1 Property rights

Real Property refers to the physical land (including minerals and other natural resources, soil, trees, plants and growing fruits) and improvements to land (including infrastructure, buildings and other facilities). Tenure refers to the relationship, either formal or informal, between members of a society and real property (UN FAO 2002). Tenure determines who can hold and use resources, for how long and under what conditions. These 'holding and using' arrangements are referred to as property rights, and the way in which they are formed, recognised and transferred between members of society depends on whether tenure systems are based on written policies and laws or unwritten customs and practices (UN FAO 2012).

For example, an individual may hold or 'own' a piece of land in perpetuity, providing the holder with an extensive set of property rights, free of disturbance. This freeholder may decide to lease or rent the land to another person for a period of time. The leaseholder would benefit from use rights (rather than ownership rights), which would end when the lease expires. There can be any number of arrangements, depending on the tenure systems in place. For example, shared equity refers to a combination of leasehold for a term of years but with the ability (usually subject to conditions) to acquire the freehold. This kind of arrangement has been used to enable occupiers of residential dwellings to rent initially but then buy their homes later.

The ways in which real property can be held have been the focus of a great deal of philosophical thought. A key debate is whether property rights should be held communally (or in common) or whether they can be legitimately held individually (or privately). Private property rights are advocated on libertarian and utilitarian grounds. From a libertarian perspective, there are those who advance a natural right to property. Aristotle argued that, although privately owned, individuals will learn to exercise generosity and moderation and share their property. In the thirteenth century, Thomas Aquinas argued that while property should be private, the use of things should remain common. 500?years later in the eighteenth century, Edmund Burke believed that private property provided the foundation for a just social order and a spur to personal industry and national prosperity. He argued in favour of widespread access to acquiring property, which he regarded as a check on encroachments by the state. Similarly, Georg Hegel and his followers probed relations between the existence of private property and things such as self-assertion, mutual recognition, stability of will, and the establishment of a sense of prudence and responsibility. They argued that not only is private property morally legitimate, but it also contributes to the ethical development of the individual.

Advancing a natural right to property, in the seventeenth century, John Locke maintained that an individual has a right to property on account of what he has done to it, so long as his appropriation does not violate the property rights of others. Thus, improving land in some way, perhaps by draining it or constructing buildings on it, imparts a degree of private control that others should refrain from interfering with. Utilitarian arguments for private property purport to show that the happiness or welfare of a society will be improved if resources (and, in particular, the means of production) are owned and controlled privately rather than by the state or a community. Developing a utilitarian theory of real property, Jeremy Bentham argued that the state should protect and promote private property ownership because landowners are more likely to invest in their land and to manage it better than public owners. Similarly, Demsetz (1967) argues that, by excluding others, private ownership internalises 'many of the external costs associated with communal ownership'. This concentration of benefits and costs on owners incentivises more effective use of resources.

Perhaps unsurprisingly, as Linklater (2015, p. 12) observed, living in a private property society encourages self-interest, in contrast to clan values, family values and communal structures found in other societies. Locke observed that with markets and prosperity come inequality and insecurity. To overcome these insecurities, people form governments to protect their private property, in return for which landowners should pay tax. Not every individual will or must establish such a relationship, so natural rights are not universal like a natural right to life and liberty (Waldron, 1990). This contrasts with the more contemporary view set out in Article 17 of the Universal Declaration on Human Rights, which states that 'everyone has the right to own property alone as well as in the association of others'. And of course, it contrasts with the case for communal property rights and the abolition of private property, advanced by Marx and Engels in the nineteenth century. To summarise, the way that property rights are held shapes the way society is organised.

1.1.1 Tenure

This 'holding' of property rights or tenure can be communal or individual. An example of communal tenure would be an apartment block that is jointly owned by all of the occupants, while each apartment is leased to individual occupants. Also, tenure can be customary, perhaps vested in a village community and administered by elders. Customs and traditions may allocate rights of private residence, communal grazing and so on.

Tenure is a social construct that regulates how property rights are allocated among members of society. Property rights are myriad, but the main ones are: use, take (fishing rights for example), extract (minerals or water for instance), enjoy (or usufruct), access (such as a right of way), transfer (buy, sell, lease, inherit, assign), impose charges (seize, foreclose, and so on, perhaps in cases of default), and options (such as a right to buy). There may also be rights granted to the state on behalf of the people, which can take precedence over other property rights. Examples of these overriding interests include land and property taxes; occupiers' rights such as adverse possession, easements and wayleaves; land recovery in cases of fraud and forgery; and acquisition by the state. Also, so that they can plan the physical environment of their jurisdictions, many states require landowners to ask permission before they develop or change the use of their land.

Property rights may be held by the state, by a community or privately. The definition of real property interests in the latest edition of the International Valuation Standards now includes communal, community and collective rights held in an informal, traditional, undocumented and unregistered manner (IVSC 2021). This includes informal tenure rights over tribal land and in informal settlements, which can take the form of possession, occupation and use rights. In the case of state and communal property, use rights are important, in terms of who is entitled to them and what they entitle holders to do. Many African countries have customary tenure systems based around communal ownership where the rights are held jointly in common. Decisions about allocation of rights among members of the community, how land might be used and so on are made by agreement. It is important to ensure that rights are allocated in a way that minimises external costs on neighbours and on future generations.

Under private ownership, it is argued that the economic use of land can be optimised and costs that are incurred by the owner (internal costs) will be minimised. But each owner has no direct incentive to minimise costs that affect other landowners (external costs). Each owner may negotiate with other landowners to minimise these external costs, and this is likely to be cheaper than negotiations between communal landowners since there are fewer stakeholders involved. To conduct these kinds of negotiations, societies often establish centralised bodies such as planning authorities to represent affected parties, which will include affected landowners as well as other members of society.

Barry (2015) notes that this economic perspective on property rights and their ownership ignores social, cultural, and political dimensions of land tenure, particularly in the case of private ownership. Land may form part of a person's identity, and communal property rights may foster connections between people and between people and their physical environment.

In westernised economies, private property rights prevail but the consequence of this approach to land tenure has come under scrutiny (see Picketty 2014 for example). It appears insensitive to the distribution of property rights and associated welfare or wealth in society. A situation can arise where net wealth is maximised but enjoyed by a few land-owning elites is superior to a situation in which there is slightly less wealth but enjoyed by everyone equally. As globalisation continues, market integration, technological advances, population growth and mass migration lead to rapid urbanisation and growing pressure on land and growing pressure on institutions1 to protect property rights. This pressure is acutely observed in developing countries where private property rights tend to lack legal formality and are under threat...