Showing papers on "Leasehold estate published in 1990"

Reforming property rights in land and tenancy

Abstract: This article examines the nature and distribution of property rights in land and how they are changing under economic and demographic pressures. It also analyzes the practical chances of success of several alternative forms of policy intervention to redistribute property rights and regulate tenancy. This analysis begins with the political economy of land reform in the twentieth century. It draws a distinction between reforms precipitated by social upheaval (defeat in war, social revolution, or national liberation) and those that occur in 'normal' times, when the social and political order is more secure. It is argued that the former have been much more important and, drawing on examples, that the latter face formidable obstacles. In this connection, it is proposed that a tax reform which does away with the highly selective subsidies and exemptions that benefit the rich and inflate the price of land should be undertaken first. Then, when land prices have fallen, compulsory purchase of land for redistribution, at close to fair market value to ensure its political acceptability, will not entail an intolerable fiscal burden. Where tenancy is concerned, it is argued that this institution is commonly a socially useful market response, which provides opportunities for the fuller employment of family resources and, over the long run, for individual mobility. Thus interventions designed to inhibit tenancy directly or to transfer ownership-like rights to existing tenants may result in heavy costs, especially or future cohorts of will-be tenants

On the dominance of land tenancy over permanent labor contract in agrarian economies

Abstract: Labor employment and land tenancy contracts are alternative institutions by which labor and land are combined for agricultural production. Yet these contracts are not treated as alternatives in the theoretical literature on agrarian institutions. By constructing a general model, which permits the choice of land and labor contracts, we show that the long-term wage (permanent) labor contract will never be adopted in the world of imperfect information with respect to the effort of workers, unless tenancy contracts are prohibited. The theoretical results are consistent with the unique pattern of agrarian change in the history of Japan, as compared with those of developing economies in South Asia today.

The Housing Act 1988: A New Regime For The Private Rented Sector: 2

Abstract: The Housing Act 1988 confers security of tenure on “normal” assured tenants,1 by way of a scheme which has certain similarities (particularly as regards some of the prescribed grounds for possession) with that governing “regulated” tenants in the Rent Act 1977 (s.98 and Sched. 15). However, there are some significant differences between the new scheme in the 1988 Act and the old scheme in the 1977 Act: in particular, the 1988 Act avoids the Rent Act's somewhat unhappy distinction between the contractual (“protected”) tenancy and the statutory tenancy which follows its termination (compare the 1977 Act, ss.1-2), and it introduces some draconian new grounds for possession which have no precise counterparts in the Rent Act.

A Marshallian model of share tenancy

Abstract: Despite persistent empirical support for the Marshallian model of share tenancy it remains out of favour at the theoretical level. There appear to be two reasons for this: Firstly, earlier attempts at theorizing an endogenous share rent under Marshallian assumptions implied that either the marginal product of land would have to be zero everywhere or that a competitive share rent equilibrium would fail to exist. The second objection to the Marshallian approach has been its failure to explain why inefficient Marshallian type contracts should survive under competitive conditions. The aim of this paper is to develop a simple Marshallian model in which the share rent is endogenous and which is free from these objections. It is argued that an explanation for the persistence of ‘inefficient’ sharecropping may be that it allows landlords to appropriate a portion of tenant surpluses even though landlords have no individual market power. Moreover, it is shown that (for a suitable set of parameters) the inefficient share rent equilibrium would survive competition from ‘efficient’ contracts. The work of Cheung (1968), (1969) has inspired a revival of interest in agricultural tenancy among economists from which two broad approaches to the theorisation of share tenancy have emerged. The first is the traditional or Marshallian one in which tenant choice with respect to both the quantity of land leased and to the application of labour and other non­ land inputs is unrestricted. This leads to the proposition that sharecropping is likely to be inefficient as compared with either owner production or fixed rent tenancy because the share rent has the effect of a tax which distorts the allocation of resources between land which is and is not sharecropped. The other view, pioneered by Cheung, may be termed the ‘contracts’ or ‘monitoring’ approach in which it is supposed that landlords can and will stipulate tenancy agreements with both land and non-land inputs set at efficient levels. Hence, in the absence of other offsetting advantages, competition among landlords and tenants would eliminate any inefficient Marshallian contracts and only efficient contracts would be observed. There is a persistent trickle of evidence pointing in the direction of the Marshallian position. For example, Bell (1977) concluded that ‘the predictions of the Marshallian view are generally in accord with the facts’ or more recently Shaban (1987), whose evidence indicates ‘a strong rejection of the monitoring approach’. Despite this, the Marshallian approach remains distinctly out of favour at the theoretical level. However, Bell (1977) also identified a reason for the unpopularity of the traditional approach in observing that ‘it cannot be said that the analytical foundations of the Marshallian position inspire much confidence’. The principal aim of this paper is to shift this perception by suggesting a way of theorizing a competitive share rent market which is free from the objections to the Marshallian approach alluded to by Bell. The theoretical difficulties associated with the Marshallian approach arise because, for the sharecropping tenant, the marginal cost of land appears to be zero — hence the tenant will wish to lease in land up to the point where its marginal product is also zero. This has led to the belief that either, in equilibrium, the overall marginal product of land must be zero, which is regarded as implausible in locations such as parts of India where sharecropping is widely observed or that the Marshallian model must result in a persistent excess demand for land and hence a competitive share rent equilibrium may not exist, see e.g. Newbery (1975). In fact, theorising an endogenously determined share rent under competitive market conditions, when agents satisfy Marshallian assumptions, i.e. tenants are free to choose the cultivation intensity and to lease from more than one landlord, has proved curiously intractable. The most notable attempt has been Bhardan and Srinivasan (1971) but their model is widely regarded as unsatisfactory precisely because it implies that under a share tenancy equilibrium the marginal product of land must be zero everywhere.1 A further objection to the standard Marshallian approach centres on its failure to identify an economic rationale for share tenancy. For a long time it was widely believed that the productive inefficiency of sharecropping could be offset by its superiority in terms of risk sharing but Stigliz (1974) and Newbery (1977) have shown that sharecropping has no risk Bell and Zusman (1976) provide a Marshallian model with an endogenous share rent but in the context of a market structure which is not strictly competitive. sharing advantages over a fixed rent and wage system. Few other offsetting advantages have been seriously proposed.2 Here it is suggested that a competitive share rent market can be theorised in a way which meets these objections to the Marshallian approach. In particular, it is shown that under the competitive share rent system developed below landlords may be able to appropriate a share of the ‘surplus’ which would accrue to tenants under a fixed rent system because tenants own non-marketed family resources. This provides a ‘rationale’ for the existence and persistence of ‘inefficient’ share tenancy. The idea that sharecropping is a means of appropriating surplus is, of course, not new; however, what is novel here is the demonstration that appropriation can occur even though individual landlords have no market power. Moreover, it is shown that while the familiar Marshallian property of a zero marginal product of land holds for leased out land this is consistent with an overall positive marginal product of land and a zero excess demand for tenancies. The paper is arranged as follows: Section 1 outlines the main assumptions of the model i.e. technology, existence of markets etc. Section 2 characterizes the fixed rent equilibrium while Section 3 suggests a way of characterizing a competitive share rent equilibrium. Section 4 provides a comparison of the two equilibria in which it is shown that share tenancy may in some circumstances provide landlords with sufficiently higher rental incomes to offset the efficiency disadvantages of sharecropping. Finally, Section 5 considers the question of the stability of the share rent equilibrium given that it is production inefficient and hence potentially vulnerable to erosion by efficient contracts. 1 THE MODEL There are two classes of household — landlords who own all the available land according to an exogenously given distribution and tenants who are landless.3 Both types of household own exogenously given quantities of non-land factors of production such as household labour, draught animals etc. However, it is supposed that the only organised market 2 Basu (1989) claims that limited tenant liability in the event of poor harvests may encourage excessively risky production plans. This distortion of a fixed rent system would be prevented by the adoption of share tenancy. The possibility that tenants may also be landowners is ignored here. yi = Gi (Hi Hi) i 1 ... M (Landlords) (1) yj = fj (hj) j = 1 ... N (Tenants) (2) where non-traded inputs have been suppressed, yj and yj are quantities of homogeneous output, Hj is the landlord’s endowment of land, Hj is the quantity of land leased out by the ith / landlord and hj is the quantity of land leased in by the jth tenant. It is assumed that f. > O, / ft / / G. > 0 , f . < 0 and G . < 0. Also, it is assumed that the extensive character of agricultural i i J production and the fixity of non-land inputs ensures that the marginal product of land on tenant farms becomes zero at finite (and possibly quite small) levels of land leased in ie. for all i and / for some finite hi, f. (hi) = 0. l Although landlord and tenant production functions are characterized as being different this is not necessary for any of the subsequent results but is convenient for expositional purposes. It is also convenient, but somewhat less innocuous, to assume that tenants are in fact identical i.e. fj (hj) = f(h) and similarly landlords i.e. Gj (Hi Hj) = G(H H). Finally, it is assumed that there is no uncertainty. This together with the fact that each household’s labour supply is fixed, means that all households will seek to maximize income subject to the market constraints they perceive. Thus, landlords will choose their leasing policy so as to maximize the sum of own output and rental income, while tenants will seek to maximize output less rent. 2 A COMPETITIVE FIXED RENT EQUILIBRIUM It is assumed that there are sufficiently large numbers of both landlords, M, and tenants, N, for the existence of a standard competitive market in land services. Landlord and tenant maximization then yields the conditions

Distress for Rent: An Archaic Remedy?

Abstract: The Housing Act 1988 clearly announced that reform of the institutional and legal structure of rented housing provision will be a major component of the Thatcher Government's ongoing reform of the welfare state. Within the public sector, the Act builds on central government efforts to reduce the role of council housing efforts which began with the Housing Act 1980 'right to buy' policy by enabling individual tenants, buildings, or estates to 'opt out' of local authority management and choose government-approved private landlords.1 The assault on local authority landlordism is further reinforced by the creation of government-appointed 'Housing Action Trusts' which will remove entire swathes of public sector housing from council control.2 In the private sector, the introduction of the 'assured' tenancy marks a clear restructuring of the rental contract in the landlord's favour, both by more closely aligning rents to market levels and by enhancing the landlord's capacity to repossess the premises.3 However, there is one aspect of the landlord and tenant relationship which the 1988 Act did not change the remedy of distress for rent. Distress is one of the few self-help remedies still extant within the legal system of England and Wales. Its mechanics are examined more fully below, but in essence it permits many landlords of commercial or residential property, whose tenants fall into arrears, immediately to seize and thereafter sell certain goods found on the demised property to satisfy the debt incurred. Unless the tenancy concerned is a protected tenancy under the Rent Act 1977, or an assured tenancy under the 1988 Act, the landlord need not seek a court order before levying distress.4 Landlords of other private sector tenants, of commercial premises, and in the public residential sector may act without any form of judicial approval. From a landlord's perspective, distress thus has several advantages when compared with the alternative remedies of a rent action or attempt to regain possession through the county court. Since no lawyers need be involved in the process, it can be both instantaneous in effect and extremely cheap.5

Duration and convexity in commercial property lease management

Abstract: Summary This paper examines the application of portfolio immunization strategies to leasehold real estate investments. It illustrates how measures such as duration and convexity can be used to improve the management of property portfolios and it also shows how the application of these statistical techniques can make more explicit the comparison of property assets with other investment media.

Multiple Leasing under Cropshare Tenancy­ A Note

Abstract: Taslim, M.A., 1990. Multiple leasing under cropshare tenancy- a note. Agric. Econ., 4: 91-98. This paper attempts to explain the perplexing tendency to multiple leasing by both landlords and tenants in some countries. It shows that if the negotiation of share contracts involves signif­ icant transaction costs and there is some uncertainty regarding the output on tenanted plots, a risk-averse landlord maximizing expected utility will find it in his advantage to subdivide his land among several tenants and also permit his tenant to lease land from other landlords.