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Modelling Property Transactions
by Miran Ferlan, Hans Mattsson and Radoš Šumrada

Real Property Transfers and Property Formation
If economic development is to prevail in a society, efficient technical and social processes are needed for underpinning continuous social change. It is a reasonable proposition that, the faster the pace of economic development, the more flexible the processes of change should be. The technical processes comprise such factors as production technology and logistics, while the social ones include factors as leadership, negotiations, the writing of contracts and bureaucratic routines. Few would deny that the general need for efficient processes also include various parts of the real property sector.

In countries with private land ownership, methods have to exist for transferring ownership from one person to another. Changes of ownership ought reasonably to be smooth and rapid to a greater or less extent, but in a changeable society this is not enough. There also has to be a possibility of changing property structure. It must be possible to create, redistribute and amalgamate properties, thus changing the territories in which ownership is exercised. These activities also contribute to methods for producing new properties, which sooner or later, will be put on the market. The utopian ideal is for each area of land somehow to be in the hands of the party best able to use it. It is the task of the property market to achieve this. At the same time, land use has external consequences. This being so, changes cannot always be wholly entrusted to individual players. Public control may be needed to safeguard common interests. This control can vary in extent but should not be unwieldy.

Thus we have two processes which ought reasonably to function in market economies based on private ownership of real property, namely processes for changes of ownership and for property formation. If these two processes do not run smoothly, existing structures of ownership, property divisions and land use are liable to impede development instead of supporting it.

The purpose of this article is to expound models for international comparisons of property transfer and property formation. These two phenomena will be jointly referred to as transaction processes. A third process, hinted at above and concerning changes of land use through legally binding plans, permit decisions etc., will not be dealt with except insofar as it affects the two transaction processes under consideration.

Comparisons of property transfer and property formation are a scientific end in them. Comparative work can also play an important part in a country’s construction of more efficient legislation for the processes. But if the work is to be used for achieving more efficient transaction processes, it has to be viewed in a wider national context, to avoid the risk of introducing legal rules, which look good in one jurisdiction but can have devastating effects in another. [1] Thus understanding of a country’s code of rules can be obtained through in-depth studies, but at the same time one risks getting bogged down in details without arriving at any useful comparisons. One way round this is to decide at an early stage of things what one proposes to compare, i.e. what is judged to be important. The intention, after all, is, by using reasonably simplified methods, to identify manageable and comparable conditions in different countries so that the person making the comparison will not need to master the whole body of each country’s property law. Comparisons have to be standardised, despite the risks that this entails.

System Concepts Used and Relations Between Them
This study is based on a system approach where events are highlighted and therefore some concepts and their use have to be clarified. A system is seen here as an organised complex of related components whose purpose is to reach a final result. [2] The components are seen as subsystem with specific sub results.

The components (subsystems) consist of elements, which are the smallest parts to be observed. In our case the smallest element is an activity within a process, so in this essay the word “activity” is used instead of “element”, since we will be using activity diagrams for process descriptions. The activities can end up with a judgement for further investigation, a product (e.g. a map), a decision (e.g. contract signing), etc. They can be informal, helping the parties to come to formal decisions, and formal, so that the results of the process will be legally valid.

Activities, then, are the smallest elements of our process analyses. When activities are being analysed, in principle they can be broken down infinitesimally, and so the breakdown has to be halted at a reasonable level, in keeping with the purpose defined for the study. This has its problems, because the question is where the breakdown is to be terminated, e.g. which things are to be included and which excluded. Ultimately it is the outcome that decides whether the processes have been successful, even if uncertainties remain and new questions are begged.

If, in the end, systems in several countries can be described in a similar graph, we have got a model. As it is the goal of this study to create two transaction models (one for sale and one for subdivision), our use of model must also be explained. Our model is an applied abstract supplement, which is formed of a graphical and descriptive specification of selected parts (domains) of reality. It represents simplified mapping of activity environments into conceived and interpreted notions. The aim of the models is to help us to understand and shape both the problem and its solution domain. If our modelling approach is successful, it makes the process transparent and comparable between countries.

Actors and objects are also included in the modelling as they influence or guide the process. It is both actors servicing and serviced by the processes. The processes are constructed by and for people with different interest and they have rights or interests to guard.

Instance 1. Purchase of a detached house with land. It is assumed that an estate agent is involved and that the purchase is to be financed with a bank loan.

Instance 2. Subdivision of unbuilt land for building purposes. It is assumed that the owner retains both the subdivided property unit and the original property.

Instance 3. Combined purchase and subdivision. It is assumed that a purchase of unbuilt land for building purpose will be co-ordinated with the subdivision of the land.

The first two instances have been chosen to illustrate common situations in the property market. The third is presumably less common, but illustrates the possibility of combining the first two instances in one process.

The three instances will be described as they occur in two countries, Slovenia and Sweden. To this end, basic, standardised activities, together with actors, will be defined to indicate the general system. The activities are plotted in chronological order with the aid of activity charts, at the same time, as their purpose is made clear. Knowledge of the constituent activities and of how they are usually combined can be derived from legislation, literature, and interviews with professional practitioners and one’s own practical experience.

The country descriptions will be followed by comparisons between the countries, to see whether a common model can be set up which includes basic components (subsystems). Differences of principle appearing between the two countries will then be commented on, as this is a kind of test of the relevance of the model. Is it possible to compare and draw conclusions from the models?

Structure of the Work
We shall begin by describing the components to be used in the analysis that follows. The actual comparisons begin with a description of normal activities in connection with purchase and subdivision in
Slovenia and then in Sweden. After the country descriptions have been completed, the comparison will be made and models constructed. Lastly the models (including weaknesses) will be investigated and commented on. [3]

Basic Components of Purchase
Basically, a normal purchase of an existing property can be described as follows. Vendor and buyer try to find each other with the aid of an estate agent. At the same time the buyer has to investigate the property including legal and other cadastral data and the possibilities of financing the purchase with a bank loan. In certain locations, sale may be subject to public restrictions. If the purchase can be completed, a contract is signed and the purchase price paid over. Legal expertise may be involved. Lastly the purchase is formally registered.

The activities leading to the signing of the contract of sale can be summed up as market-oriented, contract drafting and, where applicable, public control. The drawing up of a contact is a form of decision, which changes the legal situation (i.e. ownership is transferred) and registration is a completion measure to make the purchase public. Five basic components of purchase can therefore be more systematically analysed.

Land Policy Control
There are at least two forms of policy, which can affect property acquisition. One of them is concerned with securing a particular land use, the other with who shall be entitled to own a property. The first form can be instanced with a municipality having been given a right of pre-emption because land is in future to be applied to a certain local government purpose. The second form is social, i.e. land policy favours certain groups of the population at the expense of others. For example, a local resident may have first refusal of a property, which is coming up for sale. The result of the control is to force the players in the market into a certain kind of behaviour, so that transactions help to underpin the achievement of society’s general objectives.

Marketing Activities
Marketing activities comprise the activities that take place when seller and buyer are trying to find one another in a market. As a result, both vendor and buyer - but also creditor - come into contact with more players in the market, and are thus given the opportunity of maximising the fruits of their endeavour. Activities proceed both in the property market and in the credit market. Ultimately the parties can negotiate on conditions of sale and also judge the possibility of financing the transaction.

For various reasons, a preliminary contract of sale is often used as a means of binding the parties as work continues for a final agreement. This clarifies the terms of contract, including the conditions for a loan. In addition, this presents an opportunity of avoiding the situation where one party incurs expenses because the other party has withdrawn the proceedings before they are over.

The contract of sale is the final purchase document. The parties are agreed on all conditions and they enter into a binding commitment which includes the conditions of sale and if needed financing. The signing of the transaction results in the transition being finally confirmed, so long as the agreement is legally valid. In this connection the purchase money is paid over. Mortgage activities can be seen as a part of this component but it had also been possible to treat it as an own component. The reason could be to analyse the complexity of combining purchase and loan contracts in the same process. The same can be said about rights and encumbrances, like easements.

Purchase registration comprises the activities associated with the entry of the change of ownership into a public register. As a result, the transaction becomes transparent and in a lot of countries also protected against third party.

Basic Functions for Property Formation
Property formation is described with the aid of subdivision procedures. A new property has to be defined somehow. A society’s land policy can affect the possibility of doing so. Moreover, it has to be decided that, with effect from a certain point in time, an area of land is to be separated from the original property and constitute a legal entity in its own right. This new property has to be made public by registration. Congruently with the above component description, we have four basic components of property formation. The component marketing activities can be excluded, because the chosen subdivision case is subject to the property owner retaining both the original property and the subdivided one. Later, of course, he can sell one or both of them, but then we will have a process of sale. When the diagrams for subdivision are developed, the activity diagrams are expanded by introducing actors and roles.

Land policy control

Property formation can be entirely free, but it can also be controlled, directly or indirectly, so that newly formed properties will comply with society’s land policy. Land policy can be aimed at the formation of properties and at the use to be made of them. The policy may, for example, be to counteract the formation of properties, which are unduly large or small. As a consequence of control, the new property structure will agree with society’s land policy.

Preparation of case

Property formation involves the definition of new boundaries. These have to be surveyed. In addition, perhaps new rights need to be formed - a right of way, for example - and perhaps others have to be removed. Mortgage loans are another type of encumbrance, which can be affected. In connection with property formation, therefore, legal and territorial consequences have to be investigated and taken into account before a decision is made. Rights management, however, need not be a part of the subdivision process but can be dealt with separately, though this latter eventuality does not eliminate the necessity of taking rights into account, one way or another, during the actual subdivision procedure.

Cadastral decision

The formation of an independent legal unit, i.e. the formation of a new property, is an act that needs to gain force of law. Some form of decision thus has to be made whereby a new division into property applies from a certain point in time. As a result, a new, unambiguous and well-defined property is obtained which is separate from the original one. The new property must be capable of carrying rights of its own.


Properties in the western world are usually registered, with the result that the extent and legal content of the new property and the original one are known to the market and public authorities, which facilitates both the buying and selling of them and the borrowing/lending of money on the security of them.


The components chosen are to be used to describe subdivision as well as purchase processes in such a way that the activities and decisions included in the processes will be comparable between countries. Thus the components are used to illuminate similarities and differences. Responsible individuals and organisations are also included in the process descriptions, so as to add a further dimension to the inquiry, namely that of how a transaction “jumps” between different people and instances. Leaps of this kind affect the efficiency of a process.

There are, however, possible additional but excluded components in the models. Processes for appealing public decisions will not be dealt with, because they are national in the sense of tying in with a national structure indicating how appeal proceedings are to be conducted in courts and other bodies, rather than being uniquely designed on the basis of purchase and property formation procedures. Payment flows and taxes are given summary treatment in the text and figure descriptions prepared, but are not allotted a component of their own. This is because they often form part of one or several of the components described.

It should also be noted that the basic components dealt with in this article are biased, since they emerged as work proceeded and are based on the countries investigated. But they have been included by way of introduction, so as to make the subsequent descriptions easier to understand. Certain components may presumably be altogether absent in a third country, while there may be additional components that have not been observed in this study. If, however, a model for comparisons is being developed, it has to start with a concept and then be supplemented by means of continued tests and analyses. It should be added that the figures and descriptions presented have been simplified and standardised as far as possible, in an attempt to highlight the basic principles. Much has been omitted, especially unusual activities not shedding light on the principles of a country’s legislation.

The Slovene Case
Background Information

Slovenia belongs to the countries with the German legal provenance where it is important that all real rights can be acquired (two conditions) with a promissory legal deal and by public announcement through the registration in the Land register. Generally, the ownership rights gained through the registered transfer process are well protected and safe. Today in Slovenia the legislation regarding property transactions is regulated by several laws that guard relationships between involved parties and pertain to the purpose and usage of land. The Slovenian system of cadastre is a dual one consisting of:

-Land registry and

-Land cadastre and Building cadastre.

Both are established by different organizations and in different historical periods and nowadays are maintained also by two separate ministries. The Land register is a part of the local courts under jurisdiction of Ministry of Justice. The Land and Building cadastre is under the Ministry of the Environment and Spatial Planning. The Land cadastre was established at the beginning of the 19th century. Slovenia was at that time part of the Austrian Empire and cadastre is derived from that origin. With the new legislation (after 2000) the new Building cadastre was established. Data recorded in the Building register includes data on buildings and parts of buildings.

The Slovenian Land register as well as the Land and Building cadastre are kept in two different digital databases. Both are declared and established as public registers. The role of the modern Land register together with the Land and Building cadastre is to secure property rights and to relate these rights to their holders and to support different levels of state and municipal administration.

Slovenia has a long history of land registry system (since 1871), which guarantees the security of real rights (ownership, mortgage, land charge, easement and right of superficies or building right). The rights in the Land register can be acquired, transferred and extinguished upon a proposal (owner) or on official duty (court’s decision, cadastral offices or state body final decisions). The relevant documents must be enclosed to the inscription proposal at the local court. Unregistered rights are not protected against a third party. Even if the modern Land register is changed to the digital form all data are still not up-to-date. A lot of backlogs still wait for entry and update and the quality of data is only gradually improving.

Encumbrance is a right on the basis of which the owner of an encumbered property is bound to future charges or services. An encumbrance may be established on real property for the benefit of a specific person or of the owner of a specific property. Easement is a right held by one person to make use of the land of another for a limited purpose. The Slovenian legislation distinguishes between real and personal easements. Real easements are created mainly to regulate neighbourhood relations. The purpose of real easements is to enable better use or exploitation of land. The main real easements are established for a right to way. A real easement is created:

-By law (electrical power line easements, water easement etc.),

-On the basis of a legal transaction; it’s mainly used for public utility infrastructure. In these cases, easements seldom enter into the Land register.

-By decision of a state body (e.g. court or administrative body).

Personal easements are established for the benefit of an appointed person until the holder's death (time duration for a legal person may not be longer than thirty years). Personal easements are strictly personal and un-transferable; they are meant for enjoyment (usufruct) and use of the object of a real right or for the right of habitation. Personal easements are usually registered in the Land registry.

Mortgage is the most common method of financing real estate transactions as a lien on a real estate. The acquisition of a mortgage on the basis of a legal transaction requires entry in the Land register. A mortgage is established to secure a claim until its final repayment. If a claim is partly repaid, the mortgage is not reduced. If a property, encumbered with a mortgage, is subdivided, each part of the property is encumbered with the mortgage in full. A mortgage also encompasses the accessories owned by the pledger, even if e.g. a new house was built after the mortgage had been established. If a real property is mortgaged to two or more mortgagees the order in which they are repaid in full is determined by the time when the mortgage was created. The Slovenian legislation distinguishes different type of mortgages, such us joint mortgage, maximum mortgage and super mortgage.

With the Law of Property the land debt was introduced. The Slovenian land debt has a lot in common with the German Grundschuld. Land debt is an independent claim or charge. That means that a property owner defines a desired sum of money and the amount is not bound to any conditions. Thus, the land debt is independent of the existence of claim. The existence of land debt does not occur if entry into the Land registry has occurred previously, but by issuing a land debt letter through the notary to the owner of property, who can make further dispositions.

The building right is also a new right in the Slovenian legislation; it gives a juridical or physical person the right to build a structure above or beneath the real property (parcel). It is generally established for not more than ninety-nine years.

Leasehold (obligation rights) is entered into the Land register only if the lease period is longer than one year. For the specific use of agricultural land for vineyards, orchards, hop gardens etc. the minimum period of leasehold is prescribed by law and it amounts to 25 years for vineyards, and 20 years for orchards and hop gardens.

The pre-emption right is the right by which a beneficiary has an advantage but not an obligation to buy a specific property at a certain price. The pre-emption right is a privilege of being prior to others in claiming property that is subject to pre-emption. Such right can be defined by law or imposed by a contract. Important for the property transactions in urban area are the pre-emption rights on cultural heritage, either by the state or by the municipality, and the municipal pre-emption rights for the future development of urban areas.

The vendor and the buyer initiate the sale case of the selected parcel. They may need legal expert assistance for the purchase process. If the vendor and the buyer want to have support from an expert (surveyor, technical expert, lawyer, notary, real estate agent etc.), they hire such assistance. The vendor must be owner shown by the registration in the Land registry or (if the land registry is not up-to-date) by former purchase contracts (sometimes a whole chain of purchase contracts), which should already be in the process of formal registration. There can be a number of persons owning a parcel jointly. Therefore, the vendor as well as the buyer can be a group of people (physical persons) and/or juridical persons. Before the final contract a pre-contract can be signed. The pre-contract activities may include one of the following: offer or demand, public auction, tendering, negotiation and letter of intent.

The transfer of ownership of a whole parcel basically means registration of the change of title and is carried out among the vendor, the buyer, the notary and the Land registry. If the vendor wants to avoid possible conflicts with the neighbours, a surveying service for the settlement of boundaries is an additional option. That means explicit collateral establishments of definitive boundaries in the field.

Sales concerning agricultural, forest or water land (pre-emption rights) are different from sales of a parcel for building purposes. The legislation regarding agricultural, forest or water land (Act of agricultural land, Act of agriculture, Act of forest land, Water Act) allows using such land as to their nature. The administrative authority for agriculture defines the pre-emptive buyer and gives him the permission to acquire agricultural, forest or water land. When the buyer of agricultural land is confirmed the purchasing process is the same as presented above.

The mediation of real estates is foreseen by the special Act on Real Estate Agencies. With the new possibilities (internet and web) the role of real estate agencies has also become more evident. The most important step for a real estate agency is to establish contact between the person placing an order (the vendor) and any third person (possible buyer). The real estate agency also makes further contacts and mediation between the seller and the possible buyers. The persons employed by real estate agencies and holding the license of the Ministry of Environment and Space can only perform activities concerning real estates. Representatives of such an agency should also participate in all negotiations and prepare the legal contract (sale, purchase, lease, rent etc.). A limited payment is also provided for any real estate mediators, and amounts to up to 4% of the contracted purchase value (without VAT).

The Slovene case of ordinary purchase of a detached house with land, without pre-emption, is shown in figure 1 as a UML activity diagram. In case of a mortgage on the parcel in question appropriate agreements must be made in advance among the vendor, the buyer and the mortgagee. In practice, however, such parcels are rarely included in the transfer of land. When selling a parcel for the building purpose plan information for such purchase is required. According to the planning restrictions in force, the municipal authority informs the buyer if any pre-emption rights exist. The beneficiary of such rights, and thus the potential first buyer, is the municipality or (rarely) the state. If the municipality renounces its legal pre-emption claim, this must be made official in written form as a provision that - together with the plan information - becomes a constituent part of the purchase contract. The pre-emption rights are excluded in case of a purchase or a gift to close relatives (parent/child). A problem arises if the municipality has interests in land (building sites). If this is the case the owner must first send his purchase offer to the municipality.

The seller and the buyer must meet and initiate the purchase process. It is not necessary that they know all the details about the transfer of property; a notary has the duty to check all the property data and explain the purchase contract to all the parties involved. The buyer should examine the parcel for any possible deviations from the normal conditions. The buyer should also check the land register data on the parcel. The buyer and the vendor may write a pre-contract, which they both sign. It is also possible to agree (with the pre-contract) on some partial prepayment or security deposit. Such a deposit is an instrument to secure the rights of both vendor and buyer if they resign from the pre-contract. A security deposit is paid to the vendor and can’t be exceed the purchase price for over 10%. In case of a mortgage on the parcel appropriate agreements must be pre-arranged among the vendor, the buyer and the mortgagee.

A purchase requires a written document (contract). The buyer and the vendor prepare the contract, preferably with the assistance of a legal expert (notary, lawyer etc.). The notary must check its contents (identifications of all parties and properties concerned, signatures etc.). He is also bound to explain all parties their rights and obligations. The final contract must specify at least the following items:

-Clear statement of sale (declaration of transfer),

-Identification, names and addresses of contractors,

-Identification and description of real property (data from Land Registry and Cadastre),

-Purchase price and terms of payment,

-Time and manner of real property transfer in possession,

-Registration permission for Land registry (intabulacia),

-Responsibility for mistakes and disputes,

-Covering of expenses (taxes),

-Moment of validity of the contract,

-Place and date of signing the contract,


The buyer and the vendor sign the contract (the purchase deed). The vendor must pay the property transfer tax (unless it is defined otherwise in the contract) to the tax authority concerned, which also checks the contract sum against the assessed market value of the property. At this moment the tax authority can decide that a sworn appraiser will assess and define the market value. This can cause a delay of 15 days. The tax authority also registers the purchase price in its database (Property tax register). The notary finally authenticates the contract. After the authentication of the contract, the transfer of the purchase sum to the vendor is carried out according to the terms of payment. The date of the final contract is the date of the transfer of possession. The transfer of ownership is finally fulfilled at the date of registration.

The payment details for the property acquired are determined in the final contract. Usually the buyer pays the whole amount to the vendor on the day when the notary authenticates the contract, unless the explicit contract terms of transaction are defined otherwise. Such a delay in payment enables the vendor to see to any required mortgage loans with his bank, what is possible only if the final contract is complete and authenticated. In connection with the pre-contract and the later contract, the buyer and the vendor negotiate with the mortgagee. The buyer can take over the loan (hypothec), or the vendor has to pay off the loan together with the purchase sum.

The buyer can (it’s not mandatory) submit a registration request (form, final contract etc.) to the Land registry for the registration of his ownership (within six months from the contract date at the most). Upon the registration the Land registry issues an invoice for the registration of the title and the buyer (the new owner) pays it before the registration starts. The Land registry changes the ownership and updates the data in the Land registry database. After the registration of the title the new owner is protected against any third parties. The Land registry informs the buyer (the new owner) and the vendor about the entry of the new ownership by means of a decree. The appeal period totals eight days beginning on the day when the decree is received. When the appeal period ends the Cadastral authority is informed about the new ownership and it updates the cadastral databases.

With the request for the entry in the Land registry the existing easements on the parcel (serviant and dominant) are transferred together with the ownership. Any possible arrangements of new easements or expiries of old easements are settled either by the purchase, by a special contract or by the court decision; they are normally registered in Land registry. The buyer must pay the real property profit tax if the new purchase contract for the very same parcel is concluded earlier then three years from the previous sale.

The owner may decide to subdivide a part of a parcel to form a new parcel. The ownership must be registered in the Land registry or proved by former purchase contracts that are already in the process of formal registration. The newly formed parcel will be entered into the cadastral database, mapped in the cadastral map and registered in the Land registry. The planning authority may impose limitations to subdivisions on building sites or even prevent them. Such decisions are made according to the planning or other regulations of the sector. Figure 2 shows a general Slovene subdivision case of a not yet built up parcel for building purposes, in form of an activity diagram.

The owner submits a request for a subdivision to the selected surveying company, which selects a responsible surveyor working for the company who is legally responsible and technically carries out the subdivision. The responsible surveyor collects data about the parcel (Land registry, Cadastral databases and analog cadastral maps) and investigates the subdivision case from the legal point of view. If needed the responsible surveyor consults the owner. The responsible surveyor examines data and prepares a specific strategy for each case accordingly to the conditions and circumstances.

If permission is needed for the subdivision, the responsible authority issues the required permission. If this authority is of the opinion that the planned subdivision impedes appropriate use of the area it denies permission. The authority’s denial is final, the subdivision case thus concluded. Also the owner can stop the subdivision procedure at any time during the process until the cadastral authority’s final decision comes into effect, but he is also responsible for all arising expenses. If a surveying company ascertains that the subdivision case is not possible, it forwards the case to the Cadastral authority, which investigates and takes further measures in order to resolve the case.

If the old boundaries now forming the newly subdivided parcel are undefined or unclear, the responsible surveyor begins a special procedure for the definition or reestablishment of the old boundaries (partially or completely). The neighbours will be summoned to participate in the field procedure; later on they can also make an appeal against the surveyor’s and the Cadastral authority decisions (oral hearing or written provision) and forward it to a law court. In case of illegally defined boundaries of the subdivided the parcel, a simultaneous procedure of setting up the definitive boundary points for the parcel must be carried out; its is parallel to the procedure of subdivision.

The responsible surveyor sets up the new and the old boundaries in field and measures the parcel. In the office he calculates the data and updates the cadastral map for the new parcel. The surveying company elaborates a detailed report on the subdivision and prepares the subdivision invoice. The owner pays the subdivision costs to the surveying company. The surveying company delivers a detailed report to the owner and, if needed, the surveyor interprets it to the owner. The owners can authorize a surveying company to take all further necessary registration steps.

In due period the owner or the surveying company (as the owner’s representative) sends to the Cadastral authority a formal request for the entry of the new parcels; it encloses a detailed report. Such a request must be submitted within six months from the last field measurements. The cadastral authority issues an invoice for the subdivision registration and the owner pays the expenses for the formal entry. If the owner does not submit an entry request to the cadastral authority within six months, the responsible surveyor must carry out a rollback process (removal of new boundary marks) at the expense of the owner.

The cadastral authority performs formal audition (revision) of the case regarding the fulfilment of various conditions and the technical quality of the detailed report. In case of disputed old boundaries the cadastral authority invites the owners and the neighbours to the cadastral office for oral hearings (administrative procedure). Together they try to find the best solution for the disputed boundaries. In case of disagreement the case is decided by the court with the help of a special court expert for cadastre (appointed surveyor). The subdivision is carried out in the field even if the old boundaries are disputed.

The cadastral authority issues a written provision (cadastral authority decision), which is sent to the owner and the neighbours. When the owner receives it the fifteen days’ period for public appeals for the subdivision begins. The owners and the neighbours are summoned to examine the boundaries solution and can also dispute the decision of the cadastral authority. Laws permit appeals against any administrative procedure.

The subdivision is formally concluded at the end of the appealing period. The cadastral authority concludes the subdivision case and updates the cadastral databases. A detailed report is stored in the official archive. The cadastral authority sends the owner a notice and the data (copies of relevant documents) regarding the parcels concerned. The cadastral authority also sends the case provision and the relevant data regarding the subdivision to the Land registry that updates the Land register database. If the original parcel is burdened by mortgages and easements the Land registry must transfer these rights from the original parcel to their new parts in whole. Unfortunately, in Slovenia the surveyor is not directly involved in the consideration of mortgages and easements for any cadastral procedure, such as subdivision. Figure 3 shows the Slovene registration principle for subdivision (the situation beforehand on the left and afterwards on the right hand side).

Purchase and Subdivision Combined
The vendor (owner) of the parcel sells a part of the parcel; it shall be subdivided and registered as a new parcel and the buyer registered as the new owner of the subdivided parcel. The purchase of a part of an existing parcel first initiates the subdivision, followed by the cadastral registration of the new parcel. After the purchase of the newly formed parcel the registration of its new ownership in the Land registry must follow.

If someone wishes to buy a part of a property, the procedure will therefore be a combination of the two processes described above. The Slovene combined purchase and subdivision of unbuilt land for building purpose is shown in figure 4. We assume that such a transaction involves an urban site for construction development (Instance 3 in chapter System approach). Normally the seller and the buyer deal in direct contact with each other, without an estate agent being involved, but with possible assistance of a legal expert (notary). Creditors are also unlikely to be involved until later on when the building development is about to begin; this is normally after the entire process of the subdivision and the sale of the parcel had been completed. The parties sign a pre-contract of sale on the basis of which the vendor applies for the subdivision procedure. The subdivision application must be made within six months otherwise the purchase will be void or the subdivision must be repeated. If the subdivided property is an urban site, the municipality can intervene to exercise its right of pre-emption. Pre-emption here means that the municipality takes over the purchase on the same terms as the original sale. This, however, is rare.

The selected surveyor carries out the complete subdivision procedure described above. When the procedure is complete the buyer signs the act of sale with the vendor and pays the purchase price, unless this has already been done before or during the cadastral procedure. After the procedure of the subdivision registration at the Cadastral office has been completed, the duties and taxes paid, the purchase contract signed and the signatures authenticated by the notary, the new owner applies for the registration of the title to the Land registry. Then the new owner is registered and the vendor invoiced for administrative charges.

Swedish Case

By way of introduction, here is a description of the Swedish property register (fastighetsregisteret). The register comprises an entry section (inskrivningsdelen) and a general section (allmänna delen). The entry section mostly contains particulars of owners, charges and rights which have been created by agreement and without any involvement of the authorities, but which the parties have nonetheless wanted to register. The general section contains particulars of property formation (fastighetsindelning) and rights formed in connection therewith. These two parts of the register are co-ordinated, and the property, with its register designation, is the basic unit of all registration. So there can be no registration until a property has been formed and allotted a register designation, except that a preliminary entry can be made in both sections of the register, to signal that something is in the making. Registration in the entry section is managed by the land registration authority (inskrivningsmyndigheten), while registration in the general section is managed by surveyors of the National Land Survey (lantmäterimyndigheten) at the time of property formation.

Transfer processes have been designed to support the aim of the property register always being kept up to date on rights of ownership and division into property units. In addition, the content of the register must be accessible to the general public, so that they can at any time check charges and appurtenances, e.g. before the property is bought/sold or mortgaged. One of the register’s important functions, then, is that of facilitating transactions in the property and credit markets. Registration also facilitates official control in the property sector. It should be added that register maintenance is not burdened with taxation matters. True, property values are entered in the register, but only the total assessed value of each property, and this is taken from a separate property tax assessment register.

Leaseholds (arrende) and rental (hyra) tenures are seldom entered in the property register, because here the law guarantees tenants’ rights against third parties without any need of registration. Easements (servitut), on the other hand, are entered as a rule, because unregistered easements are not protected against a third party in cases of bona fide purchase and attachment. Because easements are important for the rest of this description, we should begin with a few words about their creation, alteration and cancellation.

An easement entitles the owner of a property (the dominant tenement) to dispose of another property (the servient tenement) in some respect. There are two forms of easement, namely contractual (avtalsservitut) and official (officialservitut). Contractual easements result from the owners of two properties agreeing in a contract that one property is to be charged (encumbered) with an easement in favour of the other. This can apply to the whole property or a certain part of it. The agreement can be entered in the land register to secure it against third parties. The order of priority of contractual easements in relation to other charges depends on the date of entry in the land register. A contractual easement can also be cancelled by agreement between the parties themselves. Official easements too are usually based on an agreement made between property owners, but they are created by order of an authority or a court of law. An official easement refers to a particular area of land. Usually it is created in a cadastral procedure (fastighetsbildningsförrätting) by a cadastral authority, e.g. in connection with land subdivision, and acquires superior title in the property, so that in practice it cannot be eliminated by bona fide purchase or attachment. If it is to be altered or cancelled, a new official decision has to be made. In a survey procedure, contractual easements can also be amended or cancelled. The creation of official easements, like the amendment and cancellation of both contractual and official easements, can also take place against the wishes of property owners, in the course of a cadastral procedure by a survey authority.

There are also rights that are similar to Roman rights of superficies like utility easements (ledningsrätt). Such a right is created in a cadastral procedure.

The aim is for the property register to reliably indicate the current ownership of land. This in turn has resulted, for example, in the following standpoint. A promise of sale is not binding. The parties are not bound until a written contract of sale has been signed by both of them. Written options to purchase property at a future date are not permitted (there must be no “suspended” sales). Conditions of rescission are permitted for a period of up to two years. Ownership registration must be applied for not more than three months after completion of a purchase. Only after registration is a purchase protected vis-à-vis third parties. Purchase of part of a property (an area of land) must be followed by subdivision or some other change in the property division. Application to this end must be filed with a cadastral authority within a certain length of time, otherwise the purchase will be void. Property formation is effected by surveyors employed by a public authority.

Property purchase in its basic form is clearly standardized and easily transacted. Only a few particulars need to be stated in a deed of sale, namely the property concerned, a declaration of transfer, the vendor’s and buyer’s particulars and signatures, witnessing of the vendor’s signature and approval of the sale by the vendor’s spouse, if any. The purchase price also has to be shown. These, then, are the minimum statutory requirements, but further conditions may be included in the sale. As has already been made clear, the endurance of the purchase (the possibility of repurchase) cannot be left open for more than two years. The buyer sends the deed of sale to the land registration authority, for registration of himself as the new owner. The buyer is then secured against a third party and is entitled to grant rights charged to the property and to mortgage the property. The parties can retain a lawyer or some other person to assist with the formalities, but this is not necessary.

An agricultural lessee with a leasehold residence, like the tenant-owner association in an apartment building, has a right of pre-emption (hembud) in certain cases if the property is put up for sale. In addition, a municipality can have a right of pre-emption (förköp) over land in certain special circumstances.Purchases of agricultural land and forestland may be subject to the grant of a permit in certain regions. Companies are not entitled to purchase such land without selling off the corresponding acreage at the same time. In a number of municipalities, purchases of rental housing are subject to the grant of a permit. In practice, both pre-emption and permit procedures are uncommon.

As security for a loan, the property owner applies to the land registration authority for registration of a mortgage and is issued with a mortgage deed (pantbrev) showing the amount of security. The priority of the mortgage in the event of attachment is decided according to the registration date. If the owner later wishes to borrow money on the security of the property, a special contract is drawn up with the creditor and the mortgage deed surrendered to the creditor as security for the loan up to the amount which the deed indicates. Thus the loan document itself is merely an agreement between borrower and creditor and is not registered. Instead the mortgage deed surrendered to the creditor constitutes security for the loan. When the loan has been repaid the mortgage deed reverts to the property owner, who can re-use it for a new mortgage. Several mortgage deeds can be obtained on the same property, and security is determined according to the order of priority for payment.

Nowadays the mortgage deed held by a bank is usually in electronic form (datapantbrev), instead of being printed on paper. This kind of mortgage deed is entered in the mortgage deeds register (pantbrevsregistret) in the form of an imaginary “cyber-deed” and is transferred between creditors by means of entries in the register.

After this general description of the conditions of purchase and mortgage, let us turn to consider a typical instance of the normal purchase of a permanent home (see Instance 1 in paragraph System approach). We will assume the involvement of estate agents, a property inspector and credit banks. Our description is partly illustrated in figure 5. If the property is less than 3,000 sq. m. in area, there can be no question of pre-emption and no permits are necessary.

The vendor contacts an estate agent and they sign a contract setting forth the conditions of the assignment. Normally, then, the vendor contacts the estate agent, but he has responsibilities towards both vendor and buyer, and he must help with drawing up the contract of sale if necessary.The estate agent advertises the property, e.g. in the daily papers and on the Internet.

Through the estate agent the vendor and potential buyers come into contact with each other. If the potential buyer is interested in the vendor’s property, he inspects it, often with the assistance of an inspector specialising in house inspections. The buyer, as being in his own interest, usually pays for the inspection. Not having enough money of his own to pay the full price of the property cash down, the buyer gets in touch with a bank to enquire about the possibilities of borrowing money to finance the purchase. If he is judged creditworthy, he will be promised a loan and will thus be enabled to go ahead with the purchase.

If the vendor and buyer, with the estate agent as intermediary, finally agree on the conditions of sale, they often sign a pre-contract of sale (köpekontrakt), i.e. a preliminary document of sale setting forth the terms of the transaction. Two people, if any, witness the vendor’s signature and that of the vendor’s spouse. The transaction is binding on the parties and the buyer is protected against the vendor’s creditors. Often a deposit is paid, usually 10 per cent of the final purchase price. The possession date (the date when expenses and income relating to the property pass to the buyer) can be fixed in the contract, otherwise it is the date of signing the final deed of sale.

Before signing a final deed of sale (köpebrev), the parties normally meet at the bank to which the property will be mortgaged. They have also phone contact with the vendor’s bank. The purchase price is paid over, in a purely formal sense, by the bank to the buyer, who in turn remits it to the vendor and to his creditor. In reality, most of the money is transformed between the banks after oral agreement between them. Any mortgage document is transmitted in the opposite direction. Since banks usually hold electronic mortgage deeds, application to the land registration authority will be simply for a note to be made of the mortgage having been transferred from one bank to another. The buyer can also negotiate to take over existing loans, on the same terms as applied to the vendor. A deed of sale is signed, confirming that the purchase price has been paid and the purchase completed. The deed of sale is also witnessed and the creditor bank is instructed to apply for title registration, to request an entry in the register if possession of a mortgage deed is transferred from one bank to another, and if necessary to obtain further mortgage deeds. These instructions to the bank provide it with an assurance that ownership registration will be requested for the purchase and that any new mortgages will be duly affected.

The land registration authority registers the change of ownership, whereupon the new owner becomes entitled to request a mortgage. The authority enters any new mortgages in the real property register and either issues a mortgage deed as proof of the mortgage or makes an electronic entry in the land register. The land registration authority informs the buyer (but not the vendor) that his ownership has been registered and bills him for the administrative handling charge and for stamp duty. The transfer tax on the purchase is 1.5 per cent of the purchase price for a natural person and 3 per cent for a legal person. The stamp duty on mortgage deeds is 2 per cent of the mortgage amount.

Registration of new ownership and entry of mortgage deeds usually take place on the same day that the request is received by the authority. Charges and taxes are paid subsequently and thus have no effect on the registration procedure. In this way the land register can always be kept up to date, so long as the documents sent to the land registration authority are legally correct and are sent for registration without delay. This is in the interests of both buyer and bank, to prevent double sale and to prevent the former owner mortgaging the property he has already sold.

The property is bought and sold with all appurtenant and encumbering rights and public restrictions, except for unregistered easements of which the buyer had no knowledge and could not reasonably have been expected to know about.

If the vendor makes a profit on the sale, the profit is taxable. The vendor declares the profit to the tax authority after the purchase has been completed. The authority works out the capital gains tax payable and this is paid by the vendor. Thus the tax aspect has no effect on the purchasing procedure but is a subsequent matter between the vendor and the State. In other words, all charges and taxes are paid subsequently and cannot delay the transfer of ownership.

If pre-emption rights should be applicable, then the municipality has to decide within three months if it wants to take over the purchase. That shall be decided during the registration procedure.

Subdivision (avstyckning) is a process whereby an area is detached from an original property (Instance 2). The area thus detached is termed a “lot” (lott) until registered as a property in its own right. During the subdivision process the original property is called a “residual property unit” (stamfastighet). After the lot has been registered, the residual property unit retains its register designation and all other characteristics not transferred to the lot as a result of the subdivision decision (figure 6).

A cadastral authority can only handle subdivision. This is a national authority except in about 40 municipalities with cadastral authorities of their own. The cadastral authority surveyors are completely independent in their decision-making. When making a subdivision order, the surveyor can also make decisions concerning easements, mortgage conditions, uncertain boundaries etc. The surveyor must consult the landowners and authorities concerned. The new property is entered by the surveyor in the real property register, together with new or modified rights. The changes included in the surveyor’s decision but affecting conditions in the land register are recorded, however, subsequently by the land registration authority.

Let us now take a closer look at the subdivision process (figure 7). An application for subdivision must always come from the person wishing to have the measure taken. He has to describe the area he wants parcelled off, preferably with the aid of a map or sketch map. The purpose of the subdivision, i.e. future land use, also has to be specified. The application is filed with the cadastral authority within whose jurisdiction the land is situated. The authority appoints a surveyor to take charge of the procedure. In principle the surveyor then has to carry out the subdivision as requested by the applicant, or else reject the request if it is impossible to realise. It is not uncommon, however, for the surveyor to advise on alternative solutions to make an otherwise impossible transaction possible. The surveyor himself organises the subdivision process as convenient, i.e. is not bound by a statutory procedure for the transaction.

After first checking the applicant’s authority to apply for a cadastral procedure, the surveyor makes initial investigations. This can be done by phoning the person concerned, visiting the site, making a legal search of records and checking any plans already adopted for the area concerned. The surveyor also considers whether he needs to consult other public authorities and hear their opinion on the subject, e.g. the county administrative board (länsstyrelsen) on the subject of environment protection and heritage management, and the road authority on matters of exit. The most important thing, however, is to consult the municipality in order to assess the purpose and design of the lot to be parcelled off. In principle, the same assessment has to be made concerning the residual property, to ensure that it will also be suitable after the lot has been detached from it.

The surveyor is responsible for the appropriate parties being consulted. If the subdivision is technically feasible but affects existing or new settlement, the municipality may ask for the matter to be referred to it for a written statement. Refusal of municipal consent precludes the subdivision. Consultations with public authorities are a land policy safeguard for which the surveyor is ultimately responsible.

In addition to this land policy check, an assessment has to be made of the legal and technical qualities of the subdivision lot. The legal assessment may concern the need for new easements for the detached lot and for the residual property unit, e.g. road, well and sewerage easements. If the residual property unit has an easement, a share in a joint facility (i.e. a facility owned by several properties; gemensamhetsanläggning) or a share in a joint property unit (samfällighet), it has to be decided whether any of the rights are to be transferred to the subdivision lot or shared between the properties in a certain proportion. Otherwise they remain with the original property. It is also possible for a new joint property unit to be formed in favour of the properties together, in which case participatory shares have to be determined. If the original property is charged with an easement or right of user, the surveyor can certify that these are to be removed from the lot or the residual property unit if in future the rights will only be located on one of them. Otherwise the rights will be charged to both properties. Mortgages in the original property can also be certified away in the subdivision lot, subject to certain conditions, e.g. their removal from the lot being manifestly of no importance to the mortgagee, or the mortgagee having consented to the removal of the charge by certification.

One interesting fact is that the mortgagees are not interested parties in the Swedish process and, consequently, cannot be summoned to meetings. Any contacts between the mortgagee and the surveyor are instead conducted in writing.

The subdivision lot has to be measured and mapped. If a boundary is uncertain, the surveyor can summon the owners of the neighbouring properties with uncertain boundaries to decide where the boundary is to be located. If the matter is of a complicated nature or includes boundary definition, the surveyor usually calls a meeting of affected property owners and other right holders so that any points of uncertainty can be resolved in the presence of all concerned.

The transaction is formally concluded by the surveyor’s decision. This can be taken at a meeting of the landowner(s) but also without any such meeting taking place. The surveyor decides boundaries and future charges, as well as the appurtenant rights. As we have already seen, he can also eliminate by certification rights and charges entered in the land register. The land registration authority then deletes them from the register on the strength of the surveyor’s decision. Localised public restrictions remain in their original location, i.e. the property whose land comes within the restricted area. After making his decision, the surveyor makes a preliminary entry for the lot in the real property register. The computer system contains controls so faults shall not be easily entered in the register.

After the decision the landowner, in common with any neighbours who have become embroiled in the process, is entitled to appeal the matter within four weeks. Failing this, the transaction acquires force of law, whereupon the surveyor finally enters changes in the residual property and the lot in the real property register as a new property unit and the subdivision is complete. The landowner receives a copy of the documents and the surveyor enters the new boundaries on the digital register map.

The land registration authority is notified electronically of the new property and changes to the original one. The land registration authority staff log the owner of the new property (who in this particular case is the same as the original owner), delete any previously entered contractual easements and other rights which are not to be charged to either of the two properties (the residual property or the subdivision lot) and delete any charges on the new property which the surveyor has deleted by certification.

Maps, a description of rights, minutes of proceedings etc. are sent to be scanned and entered in a digital archive, while the original documents are stored in a safe repository. The tax authority is informed of the transaction and eventually carries out a tax assessment of the new property and of the original one as now modified.

Lastly it should be mentioned that the landowner pays the transactional costs after the event (when the decision has been finalised). Thus the process is not delayed by financial dealings between landowner and authorities. If the property owner does not pay what is due from him, other processes will take over, but these, of course, do not affect the property formation.

Purchase and Subdivision Combined
If someone wishes to buy part of a property, the process will be a combination of the two processes described above. We assume that the transaction involves an unbuilt site for development (Instance 3). Normally vendor and buyer deal with each other directly, without an estate agent being involved (figure 8). Creditors are also unlikely to be involved until later on, when building development is about to begin, which is normally after the entire process of sale and subdivision has been completed. The parties sign a contract of sale, on the basis of which the buyer or vendor applies for a subdivision procedure. The application must be made within six months, otherwise the purchase will be void. The surveyor carries out a complete subdivision procedure and the only additional point compared with the process described above is that the surveyor also assesses the validity of the contract of sale. When the procedure is complete the buyer pays the purchase price and finally signs the deed of sale with the vendor, unless this had already been done before the cadastral procedure, at the same time applying to the land registration authority for registration of title.

This being unbuilt site, the municipality can intervene to exercise its right of pre-emption after registration of title has been applied for. First, though, there are certain conditions, which have to be met, such as the land being needed for urban expansion. Pre-emption here means the municipality entering into the buyer’s stead and taking over the purchase on the same terms as the original sale. This, however, is very uncommon, and pre-emption occurs, at most, in ten sales per year.

The new owner is then registered and invoiced for transfer tax and administrative charges. The profit on the sale is declared by the vendor and tax paid on it as already described. The cadastral authority also informs the tax authority that the original property has been altered and a new property formed. The tax authority values the two units and puts a tax assessment value on them. So, as in the previous examples, in this combination of purchase and subdivision all matters of charges and taxes payable are sorted out afterwards and have no effect on the change of ownership or on property formation.

The components initially devised for modelling transactions are summed up in fig. 9. The usefulness of the components for comparisons is to be finally tested. This is done by inserting the activity diagrams from
Slovenia and Sweden parallel and in compressed form in a general component model, the purpose being to see whether differences in the main principles of the national transaction systems are clearly and plainly apparent.

The processes compared, over and above a simple sale, are the sale of a detached housing property, the subdivision of an undeveloped plot and the sale of an undeveloped part of a property (Instances 1-3, above). These processes will also be commented on from a market perspective, given the claim, in the introduction to the article, that the property and credit markets benefit from swift processes. Actors in these markets, however, may be interested in other aspects than swiftness, such as security, i.e. no party incurring an unforeseen loss in the process.

The number of comparative figures may seem rather high, but this is prompted by an endeavour to evaluate the usefulness of the models. It should be mentioned before going any further that the comparisons have been based on partly different methodologies. The first, for simple sale, is based on text comparisons, the second, for ordinary sale, is based on a comparison of figures supplemented by comparison of texts, the third, for subdivision, adds actors, and the fourth deals with heavily compressed activities. In this way we can see what the different model constructions lead to.

Simple Purchase
Two comparisons will be made concerning sale. The first shows a sale in its simplest and purest form, in order to highlight principles. This information is extracted from earlier text, but this is not easily done. The country descriptions, therefore, could be rewritten to show this simplest instance and a figure added. We have deliberately refrained from doing this, so as to show how hard it can be for the curious to check figure 10 in relation to the preceding text.

A simple sale includes preparations for the purchase (pre-contracting), purchase (contracting) and registration (fig. 10). Pre-contracting is much the same in both countries. During the contact phase, on the other hand, a number of vital differences emerge. In Slovenia, transfer tax is payable just after the final signature, while in Sweden tax is paid afterwards. Then again, in Slovenia a special profession - the notary - has to be involved and must confirm the sale by verification, whereas in Sweden two witnesses verifying the sale are sufficient to confirm that the vendor has title. Practically anyone can be a witness to the signatures of the parties on a contract. The tax question and the notaries make the sale a slower process in Slovenia than in Sweden. The Slovenian process probably comes more expensive to the parties, because a notary has to be engaged, even in cases where he is not really needed.

There is yet another difference. In Slovenia the purchase money is often paid after the contract of sale has been signed, with the result that completion of the sale can be delayed pending payment (which is most often due within 28 days). However, the Slovenian parties are in control of the process and can hasten it by instant payment. Remittance, on the other hand, is a prerequisite of the deed of purchase in Sweden, with the result that, in practice, the purchase money is paid simultaneously with the signing of the contract and the purchaser can immediately apply for registration of title.

We conclude that sale in the two countries involves basically the same components and activities, but that the way in which they are structured and combined through public regulation facilitates more easily administered transfer processes in Sweden, enabling the actors in the property market to operate faster and at lower cost. Swiftness can be said to be achieved at the cost of security, in that the parties may inadvertently frame contracts which do not correspond to their wishes or, due to ignorance, are not formally correct, and that the state risks having difficulty in collecting the transfer tax.

Ordinary Purchase
The next analysis concerns an ordinary purchase of a single-family housing property (fig. 11). This information is taken from previous figures (figs. 1 and 5) and their accompanying texts. The figure will be simplified in cases where there are striking similarities between the two countries. This is done by capturing bundles of activities in an overarching activity when the bundle is essentially the same in both countries. Marketing activities are the same in the descriptions for both countries and can therefore be summarised in the overarching activity of marketing. The growing complexity of the sale when estate agents and banks are included in the process does not therefore emerge from the comparative figure, concealed as it is by the summarising activities. This can be acceptable, however, since the comparisons are meant to indicate similarities and differences, and for a more detailed view of events one need only consult one of the country descriptions. On the other hand a different type of complexity is highlighted, namely the possibility of a normal sale involving questions of land policy.

First of all we may note that the Slovenian process begins with the vendor having to ascertain whether any private person or other party has a right of pre-emption, in which case that person or party must be given first refusal. He will then be dependent on existing rights of pre-emption, as the property cannot be put on the market before the right holders have confirmed in writing that they are not interested in buying. In Sweden the vendor can put the property on the market straight away.

The marketing activities which follow in order for vendor and purchaser, and also credit-provider, to find each other are, as we earlier remarked, strikingly similar and are therefore summarised in the figure as marketing, without further comment.

Once vendor and purchaser have found each other they often sign a pre-contract so as to somehow bind them to each other and thus give each other the confidence to move on. In both countries a deposit is often paid in this connection, as a measure of security for the vendor. This is a risk premium that accrues to the vendor if the purchaser backs out. There is a palpable difference here. In Sweden the pre-contract is viewed as a contract of sale, even if the sale has not been finalised and there must in principle be reversion clauses in order for cancellation of the contract to be possible. In Slovenia, by contrast, the pre-contract is not formally binding.

Pre-contract, as we have here termed it, is followed, and completion of the sale proceeded, by a succession of activities, depending on how much was settled prior to pre-contracting. This can mean inspection of the house, sale of the old home, purchase of a new one, arranging bank transactions etc. This period can vary in length, depending on what issues remain to be sorted out. Once everything is settled, the sale must be completed. In Slovenia, though, there are a number of separate stages to go through, whereas in Sweden everyone concerned (purchaser, vendor, estate agent and bank representatives) usually attends a single meeting. The purchase money is paid over, the contract of sale and credit agreement are signed by the parties and two persons present witness the transaction. The whole process can be termed instantaneous, and application for registration of the purchase, as well as an application, if any, for new charges, can be filed immediately.

Registration is ostensibly a routine procedure in both countries, especially in Sweden, where it goes quickly. In both countries a check is made of the formal correctness of the sale. One Swedish aspect will be highlighted, however, even though it is not conspicuous in connection with normal house sales. A municipality wishing to exercise its right of pre-emption has three months in which to decide to this effect. During this time registration of the sale remains pending at the land registration authority. A developed house property less than 3.000 m2 in area, however, is excluded from pre-emption, and so the municipality is not normally consulted in connection with a house sale.

The model comprising land policy control, marketing activities, pre-contracting, contracting and registration highlights both similarities and dissimilarities between the two countries. It quite clearly indicates factors of delay in the process in one country compared to the other and makes clear, for example, that the handling of land policy issues is based on different principles, causing them to be addressed at different points in time. On the other hand figure 11 says nothing concerning what is a reasonable length of time for the sale process, nor does it have anything to say concerning security for the parties involved. It is, however, safe to say that slow processes aggravate the parties’ uncertainty, because a protracted period for transfer of ownership augments the likelihood of something happening which ought not to happen.

A number of pivotal questions can be asked as well. Why is a notary needed in the Slovenian process when the Swedish process apparently runs smoothly without one? Then again, why do payments have to be remitted before a service or product is delivered in Slovenia, instead of afterwards as in Sweden? Are these differences due to bad payers, lack of distraint opportunities or tradition?

The comparisons prompt still further reflections. The Slovenian process especially seems to be delayed by land policy control, insistence on the involvement of a notary and perhaps also transfer tax payment. If the right conclusions have been drawn from the comparisons made here, it should be possible to carry out efficiency studies in Slovenia with a view to amending the law and thereby speeding up the processes. This does not preclude the possibility of the same applying to Sweden, e.g. concerning the right of pre-emption, which in practice is hardly ever exercised. This being so, does the pre-emption cases actually occurring justify the red tape and uncertainty involved?

The essence of the next model, for subdivision, is a landowner wishing to detach an undeveloped area from his own land, making two properties out of one. In addition, the model is expanded from earlier comparisons by the inclusion of actors. In other words, the earlier comparative technique has been enhanced for highlighting responsibilities.

As will be seen from figure 12, all the components - land policy control, preparation, decision and registration - are present in both countries. Straight activity comparison shows the constituent activities to be very similar. Clear differences become apparent, however, if actors are included for a study of responsibilities.

The first component is land policy control. Slovenia expects the landowner to get in touch with the authorities, which are empowered, and duty bound to grant or refuse permission for a subdivision. If the landowner obtains permission for the subdivision from the authorities concerned, he turns to a licensed company. The surveyor who carries out the measurement must also be licensed.

In Sweden too, the landowner can contact the necessary authorities, but it can be hard for the individual to tell which are the relevant authorities to contact. Added to this, the process assumes a surveyor in the service of a public authority to be responsible for these contacts, since he has to strike a balance between private and public interests. In striking this balance, which can go against other authorities, he must, however, always comply with laws and regulations. In the matter of urban settlement, moreover, the municipality has the power to veto subdivision, i.e. the urban settlement case comes close to the permit procedure observed by Slovenian authorities. In Sweden the cadastral transaction moves on through the cadastral organisation after land policy control, with the original surveyor in charge.

Both the Slovenian and the Swedish surveyor examine the transaction and measure the new property. One difference, however, is that the Slovenian surveyor cannot examine charges on the property and, consequently, is unable to create new rights or cancel old ones - for example easements. The Swedish surveyor, by contrast, can create, alter and remove easements. This can be done on the property concerned but may also involve land on neighbouring properties with different owners. He can also examine other rights and charges, such as giving the new property a participatory share in joint facilities and joint property units. In certain situations the Swedish surveyor can also employ coercive methods in pursuit of desirable and necessary measures, such as the creation of an easement on a neighbouring property. In such situations he must also decide on compensation, i.e. if the parties are unable to agree on this point between themselves. If, moreover, there are mortgages on the original property, he can eliminate them in the newly formed property so that it will not be encumbered by existing mortgages. All changes, however, must be examined to ensure that no rights are lost by mortgagees or other right holders.

The Slovenian surveyor, lastly, draws up a report that is formally transmitted to the landowner but in reality is most often sent straight to the cadastral authority for decision and registration. The Swedish surveyor, by contrast, retains the matter for decision and, after the time limit for appeal has expired, enters the transaction in the real property register. He is not, however, empowered to enter ownership particulars in the land register. Instead particulars of the completed subdivision are automatically transmitted in electronic form to the land registration authority, which immediately registers the landowner for the subdivided lot.

One thing shall be added. In both countries, unclear boundaries can be dealt with during the cadastral process, with the difference that in Slovenia the surveyor proposes a boundary, which is then confirmed by the cadastral authority, whereas the Swedish surveyor determines the boundary.

There are a number of things to be mentioned which are not apparent from figure 12 but are revealed only by supplementary text comparisons. In both countries the result is new properties with their own register designations. The original owner is registered for both properties. But there is a difference here. In Slovenia, both properties have rights and charges and no rights are created between them. In Sweden one of the properties retains the original designation, and rights and charges are primarily vested in that property unless the surveyor decides otherwise. In addition, the surveyor can create rights and charges between the properties. He enters not only the subdivision but also other rights in the real property register and enters the properties together with any easements and other localized rights on the register map.

In Slovenia above all, the rights process is not always concluded after the subdivision process, because further contacts with land registers may be needed for the creation of easements, clarification of charges etc. This, then, comes after registration in the land cadastre and describes essentially the same process as a simple sale. But there is an element of risk involved. Questions are liable to be left unsettled at the subdivision and then have to be cleared up afterwards. The danger is that they will remain unresolved.

In Sweden too, a certain amount of work may still remain to be done after the subdivision, especially with regard to mortgages, if the surveyor has been unable to remove them during the subdivision process because the mortgagee risked losing rights. If this kind of supplementation is needed, then in Sweden too the ensuing process resembles that of simple sale.

Having now reviewed similarities and differences, we can also observe that in Slovenia the process jumps about between different actors and in principle it is the landowner himself who drives the subdivision process towards a conclusion. Rights-related processes may have to be added subsequently. The landowner can of course make things easier for himself by entrusting the job to the surveyor or another agent. In Sweden a surveyor employed by a public authority is responsible for everything from the opening official contacts to the finished product, though the property owner may need in some cases to put in more work later on the subject of charges.

No figures considering the average duration of Slovenian and Swedish subdivision procedure from measurement to registration are available, but the Slovenian process ought reasonably to be quicker, since it contains fewer elements of a legal nature. These are instead left to the landowner to sort out before and after the property formation. If neighbours are to be involved, e.g. for creating an exit easement, he must negotiate with them separately, whereas in the Swedish process this can be handled by the surveyor. Taking the process as a whole from land policy control to registered property with appurtenant rights and charges, the Swedish model probably has advantages from an efficiency viewpoint, since everything is dealt with in one process. At least, this is a good hypothesis.

As we have seen, the Swedish surveyor has far more responsibility than his Slovenian counterpart for legal details connected with the creation of new properties. One can even say that the Swedish surveyor has been made responsible for the properties created, like the residual properties, being clearly defined from a legal viewpoint already after the subdivision process. No further steps are supposed to be necessary. Therefore, the property can normally be put on the market immediately after the subdivision process, and the sale of the new property can be handled very quickly indeed. In Slovenia further legal operations may be needed in order to create easements, eliminate mortgage charges etc.

Thus the task of the Swedish surveyor is to create effective, clearly defined units for the property and credit markets. In addition, rights like easements are localised, since they can be plotted on the cadastral map. In Slovenia it is the task of legally well-trained notaries to attend to this, at the same time as they may lack spatial knowledge concerning rational land use. The Slovenian surveyor’s function is merely to measure boundaries, even though he could decide on the spot which rights are needed in order to create properties, which are practical in every way. The differences of responsibility between the two countries doubtless have their historical explanations, but it is worth pondering what is best for the property and credit markets.

Purchase and subdivision
The next comparison concerns sale and subdivision combined, i.e. someone purchases an area which is to be detached from an existing property to form a new one. It is further assumed that the vendor has made contact with the purchaser without involving an estate agent or credit-provider. This restriction is made for the sake of simplicity, and in the normal run of things anyway there is unlikely to be any involvement of estate agent and bank if a private person is selling unsubdivided land.

Sale plus subdivision creates a combined process in both countries, since the sale follows one kind of procedure and the subdivision another. Different laws govern these processes. The model components, which have been devised, are therefore to be combined, one way or another (fig. 13).

At the initial stage, an agreement is concluded for the sale of the area concerned. The Slovenian landowner, however, has matters of pre-emption and permits to deal with first. The fact of the subsequent subdivision process being initiated by the vendor in Slovenia and the vendor or purchaser in Sweden shows that the first contract is not a form of transfer in Slovenia but is in Sweden where both have an interest in fulfilling the procedure.

The subdivision processes then follows, as described in figure 12. This work is based on the contract of sale. It is worth noting that in Sweden land policy control takes the form of a suitability assessment forming part of the subdivision process. Here a weakness becomes apparent. A sale is agreed on and the parties enter into a cadastral process without being certain that it is feasible. If it is not feasible, the purchase is invalidated, but finding this out can take time and cost money. In Slovenia the landowner has already finished with land policy control before entering into a situation of sale and subdivision.

After the subdivision has been effected, the parties meet to sign a final deed of purchase and to transfer that part of the purchase price, which has not been paid. The procedure described above for sale (fig. 11) follows here. Any easements which are to be created and other measures which can be attended to in the Swedish subdivision process have to be raised in Slovenia by the parties during the final phase and under the supervision of the notary or even court.

When the purchaser then wishes to register his title, the municipality in Sweden can exercise its right of pre-emption, the land in question being undeveloped. In other words, a further element of uncertainty is added at this point to the Swedish process. There are, however, a number of restrictions in this case too, and so a right of pre-emption does not necessarily exist.

In principle, then, the processes are similar in terms of results, and in this instance of combined purchase and redistribution, both Slovenian and Swedish properties are firmly defined when the combined process is over.

There is one remark to be added concerning Sweden. The two processes for sale and subdivision respectively are both continuous and apparently efficient, but combining them introduces various points of uncertainty. The process has a weakness in that land policy control does not come early and, moreover, can come in on two occasions. This is evident from figure 13, and especially by comparison with Slovenia. Purely theoretically speaking, even the municipality can approve the subdivision and subsequently exercise pre-emption. This means that in Sweden it may be wise for the landowner or purchaser to apply the Slovenian method and contact the municipality and the surveyor right from the start, to clarify the likelihood of sale and subdivision being feasible. It may be especially wise of the purchaser to consult the municipality at an early stage, to avoid the risk of devoting time and money to something that in the end may be denied him.

Four typical transactions (simple sale plus Instances 1-3) have been analysed in order to develop the models with components. Activity diagrams have been used to test them. But the choice of typical instances means that other transfers, such as the transfer of forestry land and agricultural land, may conform to other models and the land policy control component especially may need to be substantively developed. Instead the models are to be regarded as a starting point for further analyses of other transactional processes. A test of other countries, e.g. Finland, Denmark, the Netherlands and England, would presumably develop the models further.

It must also be pointed out that the models have been made general but are evaluated with reference to a certain aspect (the market). The components of the models may therefore need to be supplemented, or reconstructed, if other aspects are emphasised, e.g. if the emphasis is put on monetary flows, the rule of law, information flows or duplication of effort. The models must be constructed according to what is to be investigated.

The following conclusion can also be drawn from the practical work on this article. If nationals describe the rules of a certain process in text, it is rarely possible to compare different countries, or at least it is very hard to understand and still more to make comparisons. If the text is also illustrated with diagrams, e.g. ULM diagrams, differences and similarities become easier to detect. But if the information can be modelled in a structured way, even more powerful comparisons will be possible, e.g. with help of classes, relations and processes. To this end the present article has focused on procedures and actors by developing what are termed components and then compiling diagrams for countries investigated and core interactions side by side.

Rumbaugh, J., Booch G. and
Jacobson I. 2005. The Unified Modeling Language Reference Manual, 2rd edition. Addison-Wesley Object Technology Series.

Šumrada, R. 2005. UML in Use Case Modelling. GIM International. October 2005, vol.19, issue 10, p.12-15.

Zevenbergen, J. 2002. Systems of Land Registration - Aspects and Effects. Publication of geodesy 51. Netherlands Geodetic Commission. ISBN 90-6-32277-4.

Zweigert, K. and H. Kötz 1998. An Introduction to Comparative Law. 3rd edition. Oxford: Clarendon Press. ISBN 0-19-826859-9.

[1] Zweigert and Kötz 1998.

[2] A system study related to land registration and cadaster can be found in Zevenbergen 2002.

[3] ULM is used for modelling in this article. The possibility for this is shown in Šumrada 2005.

Rambough et al (2005) is the primary reference for UML.