Revoked title deeds shakes business in real estate

By Harold Ayodo

Uncertainties over validity of title deeds are threatening the multi-billion shilling real estate sub-sector in Kenya.

Cases of the missing documents at Nairobi’s Ardhi House, the Ministry of Lands headquarters, are keeping away some prospective developers. The recent move by the Lands Minister James Orengo to repossess title deeds over irregularities has thrown the industry into further confusion.

Real estate agents say clients who bought large tracts of land to erect residential and commercial premises are hesitant because of doubts raised on the validity of land documents now in their possession.

About three weeks ago, leading to the Orengo’s stern action, the ministry raised a red flag over the presence of cartels at Ardhi House. Citing irregular allocation and lack of legitimate interest in the issuance, Orengo cancelled 137 title deeds. Most of the repossessed prime parcels of land were in Nairobi under the ownership of powerful individuals.

"We have repossessed government property worth billions of shillings from senior people including a Cabinet minister," Orengo said.

This move not only affects developers but also money-lending institutions. Legally, repossession of public property under executive orders means that the private claimants are not compensated. Furthermore, any business transactions conducted on the basis of cancelled titles are rendered null and void.

As the Lands minister cracked the whip on the big fish, cartels at Ardhi House continued to make transactions impossible. Willing investors held on to their fortunes after realising that necessary documents like title deeds in property transactions could not be traced at the central registry. It took an impromptu search last week led by Ministry of Lands Permanent Secretary Dorothy Angote to expose the rot.

Recovered files

Some workers were found with files dating back as far as 1995, which the PS says was beyond their mandate.

"What are these files doing here…can somebody tell me why these files cannot be in the registry?" asked a visibly dismayed Angote.

According to the PS, the hidden documents could be part of a cartel within the ministry involved in corruption.

"Kenyans are losing money to cartels in the Ministry…staffers found with unauthorised files will be summoned for explanations," said Angote.

The ministry is in the process of digitalising operations to restore sanity in the docket that collects the highest taxes after the Kenya Revenue Authority.

"We want to get rid of the lawlessness that has existed in the land sector for a long time," Angote said recently.

As the Ministry is yet to make public the punishment meted on the rogue staff, prospective investors in real estate are seeking greener pastures. Real estate agents say business has gone down since the minister and the PS’s recent interventions. For instance, Brilliant Ventures proprietor Kenyan Macharia says walk-in clients interested in purchasing and have reduced.

"Private developers who walked into our offices several times a day have disappeared over the past fortnight," Macharia says.

He says the clients are afraid to purchase property for fear of the acquired title deeds either turning out fake or being revoked over alleged illegal allocation.

"We rely on clients we have dealt with before for business as prospective investors say they cannot trust land transactions," Macharia says.

Property lawyers say investors must be careful in conveyancing (land transaction) following realities of cartels exposed by the Ministry of Lands.

Lawyer Leah Wanjiku says a title deed is a very important instrument in real estate.

"A holder of a genuine title deed has rights to its enjoyment during his life…rights are passed to his/her dependents upon death," Wanjiku says.

Legally, people who invest in real estate obtain a deed as a type of transaction paper to prove ownership of the title.

"It confirms that the person or persons acquiring the property have rights to the title in addition to the rights to the property," Wanjiku says.

Wanjiku says owners of legal title deeds can do whatever they please with the property as long as they do not breach property laws.

"A title deed can also be used as security for transactions like securing loans or to guarantee borrowing by another party," Wanjiku says.

The value of property in real estate appreciates with time and having the legal document as a registered owner guarantees benefits in time of sale.

Wanjiku says title deeds are what distinguish a landlord (owner) from a tenant or trespassers in cases of dispute.

Vital document

"The title acts as documentation that is matched in government records for instance Ardhi House or land registries in districts countrywide," she says.

Property lawyer Lucas Kang’oli says the Government can compensate investors in cases where it is to blame for an irregular title deed.

"Investors should, however, beware that they would be criminally liable if found in possession of an illegal title deed," says Kang’oli.

He says there are several ways people can acquire property before seeking for a title deeds.

"Property can be acquired by way of gift, inheritance, allotment or the common way of purchase before getting a title deed from the Government," says Kang’oli.

Wanjiku says first time property buyers must know all the steps to follow ahead of acquiring a legal title and eventually being registered as absolute owners.

"Prospective investors should first undertake an official search on the title they intend to buy at the Lands Registry where the property are registered," Wanjiku says.

Once the buyer establishes that the property is free from any encumbrances, the next step would be to enter into a sale agreement with the seller.

"A transfer of the property is then drawn up after stamp duty and other requisite fees are paid to the Ministry of Lands", she says.

Finally, the transfer is registered in favour of the purchaser and a new title issued in the name of the new owner.

If one co-owner dies in the case of joint ownership, the title remains in the surviving joint owner without required further action. Private companies have come up to help prospective investors verify the validity of title deeds and documents in land transaction.

verification

Rapid Verification Services Kenya (RVSK) in Nairobi, for instance, assists investors to conduct an official search at the lands office. RVSK partners Ochieng Omondi, Victor Okowa, Edwards Wycliff and Nick Githinji say the verification process is not easy.

"We ensure that the copy of the title deed presented to us bears the same details as the records at the lands registry," Omondi says.

Githinji says they also verify the status of the property (owner’s name, caveats or charges and status of rent due).

"We are on line and also go an extra mile to verify the status of the land rates owed at the City Council," Okowa says.

Omondi says the process takes an average of ten days including presentation of relevant documents to buyers, developers, banks, and leasers.

"Investors, banks and developers who want to conduct due diligence in property transactions are subscribing to our services," Omondi says. The company says it has come across dubious titles.

"We advice our clients accordingly in cases of ‘questionable’ title documents and records," Omondi says.

Githinji says titles may not necessarily be fake, however, the presentations may be fraudulent and misleading.

"There may be a caveat, joint ownership, a charge, road reserve property, litigation or no title at all which we inform our clients," Githinji says.