Environmental and Human Factors of Real Estate Transactions Costs and Control Measures in Iran Registration Law

دانشنامه حقوق اقتصادی

Article 2, Volume 23, Issue 10, February 2017, Pages 1-20   

Document Type: Scientific research

DOI: 10.22067/le.v23i9.51625

Author

Nasrin Tabatabai Hesari^*

tehran university

Abstract

Real estate is the most important economic asset of any society whose entry into the economic cycle has a considerable impact on the development of the country. Stability of real estate rights has effect on the owner's ability on the entry of its real state to economic cycles. This stability will motivate investment in real estate section. The stability of real state rights as well as identifying of the objective rights in the real state have effects on the ability to achieve the financial markets, supply and exchange of property on the market, and affect the real estate transaction costs which have a vital role in the development of real estate transactions. Hence, markets, where real estate is exchanged, want to design a system to detect and determine real state rights; a system which allows the exchange of real state with lower transaction costs because the increase in the volume of property transaction has the inverse relationship with the "transaction cost". "Transaction costs" in the field of real estate is a matter of debate and a lot of effort has been made to explore different aspects of it in the legal systems of other countries. However, despite its importance and its impact on the development of the property market, enough attention has not been paid to this concept in the Iranian legal system. Thus, attention must be paid to the following two factors: 1. the concept of transaction cost, on the one hand 2. The inverse relationship between the volume of real estate transactions and transaction costs, on the other hand. Given these two factors, it is necessary to review the environmental and human factors of transaction costs in the field of real estate transactions in two stages, i.e., before and after the conclusion of the transaction. Additionally, it raises the need for legal solutions to remove or reduce environmental and human factors.
This paper analyzes the concept of transaction costs, particularly in the real estate market. This article examines the causes of transaction costs on the basis of economic theory in two stages, i.e., before and after the conclusion of the contract. The paper examines environmental and human factors that create these costs in both periods. In this study, the specific characteristics and differences of real estate with other assets are considered and after determining these attributes in real estate, it was concluded that the land registry system convert assets into capital. With this system, real estate transactions are impersonal. Land Registry System performs this function through the following two functions: (1) Identifying and defining property rights and guaranteeing the stability of property rights (2) The legal protection of those rights. As a result, property registration reduces transaction costs and has impact on the environment and human factors of costs. The property enters the economic cycle through this system. This research reviews both personal and objective systems of registration of the Land Registry that are used worldwide. In this study the legal functions of the registration system are emphasized and their effects on transaction costs are analyzed. This study shows that, despite some shortcomings, the use of objective registration system in combination with the cadaster in Iran provides access to the goal. In Iran, Land Registry's system is a legal entity with functions that can affect the performance of the property market and reduce "transaction costs". In addition, this system increases the volume of these transactions and their "economic efficiency". Registration system determines property rights and protects those rights against trade risks.
Land Registration System collects the information and data about real estate and their rights and makes it possible to achieve this information and data for concluding the deal on the market. This system intercepts asymmetries and distortions of information and thereby eliminates the "uncertainty" and "complexity" of transaction. It eliminates "opportunistic behavior" and cheating "parties" that increase transaction costs. In addition, Land Registry System provides legal protection of registered property rights and it cannot be violated. As a result, it controls "bounded rationality" of the parties that is another factor in increasing transaction costs through reduced claims and risk. Of course, creating a land registry system imposes the costs to the government (the cost of creating and maintaining land registration system) as well as parties (inquiry fee, tax costs, registration fees such as notary fees and costs of registration of property rights in registration system, etc.). These costs themselves are the transaction costs. However, it is desirable as long as these costs are less than the costs caused by the lack of the existence of such a system.

Keywords

Registration Law; Transaction Costs; Real State; land registration system in Iran

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