Buying unregistered land is risky

I intend to buy land upcountry during this Christmas holidays. Upcountry land is still largely more pocket-friendly compared to the popular one-eighth plots in Nairobi and its environs. However, my reservation is that most parcels of land on sale upcountry are either not registered or are ancestral land. What complications may arise when someone buys such unregistered property?

Bernard, Nairobi.

Investing in property not registered with the Ministry of Lands is a risk an investor must avoid. Upcountry plots are mostly bigger and far much cheaper than those in Nairobi and its environs.

The bulk of land in rural areas are not registered because the owners mainly inherited them from their forefathers. Such land lack title deeds because they were never adjudicated and registered by the government.

Currently, slightly over 60 per cent of land in Kenya is unregistered, creating title insecurity and room for ownership conflict.

For sellers of such land, it is legally wrong to sell property that is not registered under your name, unless the registered owner gives you the power of attorney to transact on his or her behalf.

eSecurity of tenuren

It is, therefore, advisable to buy registered property with a valid title deed. For instance, owners of registered land have security of tenure and a right to indemnity from the government in case of compulsory acquisition.

Furthermore, commercial banks and other financial institutions prefer extending loans to clients with valid title deeds as security. Banks often perform official searches at the Ministry of Lands to ascertain the existence and ownership of the property offered as collateral.

On the other hand, investors can also easily secure capital from the lenders for development of their land. Moreover, dealing in registered property reduces court cases over ownership as the size and owner of the land or home are conclusively established and determined.

A purchaser of property from a registered seller enjoys a full commercial confidence in the transaction protected by law.

Even before passing of new land laws in 2012, property registered under the Registration of Titles Act and the Government Lands Act offered absolute proprietorship to registered owners.

Back to registration; it also prevents unreasonable and unnecessary sub-divisions or fragmentation of – especially – agricultural land.

Generally, fragmentation of land may lead to low production, thus hindering benefits of economies of scale for investors for agricultural reasons.

Therefore, prospective investors of such property require consent of the Land Control Board before any sale or sub-division.

Similarly, permission for planning, development and using land within urban areas is necessary, according to the Land Planning Act of 1968.

Furthermore, the law also protects sub-division of registered land - in urban areas – into partitions that would impact negatively on their proper use.

Transactions

For the government, registration makes it easy to identify property owners to levy tax on or rates as land transactions must be registered.

Some landowners also prefer not to register their property to avoid paying taxes — unregistered parcels of land are “invisible” to the taxman.

Unfortunately, registration of some trust lands countrywide is incomplete, making it difficult for counties to levy rates.

Professionally, unregistered land is difficult to value because of the uncertainty of title and an accepted and practical method for valuing.

— The writer is an advocate of the High Court.