Institutional economics and property strata title – a survey and case study

Hong Kong uses a common law ownership system for property held in multiple ownership. Many problems have arisen with the process of managing high rise multiple ownership property resulting in dilapidated, unsafe buildings. The Government is considering changing the ownership method to a statutory system, such as a strata or condominium title system as a way of resolving some of the management difficulties. Using an institutional economic framework this paper considers whether changing the ownership system will alter people's behaviour and reduce management problems. The framework draws on theory developed from the problems of collective choice action and the management of common pool resources. The paper concludes that the existing common law system fails to take account of the innate difficulty of rational self-interested individuals acting for their collective good, without some central authority to provide management. This would be provided in a statutory system such as a condominium or strata title system.