Property buyers need better education about risks and rights
Since the dawn of humanity land has been a priced asset for many to own. Land ownership has made kings and nobility and been the cause of numerous battles in the past. This asset maintains its prestige of ownership, as no new stock is made and what exists is already owned and is increasing in value every day.
But with land ownership and assets comes the problem of fraud. Land frauds have been going on in Sri Lanka even before land records were introduced, but their introduction has done little to quell the scams. Land frauds can range from simply moving a fence a few feet into a neighbour’s territory to replacing titles with fake ones at the registry and laying claim to that land.
At times, owners – especially those who are living abroad for long periods of time, upon their return home – find to their utter dismay properties held by them for decades fraudulently sold to third parties!
Types of fraud
The most common fraud is the ‘fake deed’ racket. There have been numerous cases where criminals have been running illegal printing presses and producing fake Deeds, Title Abstracts (paththiru), letter of permits and selling these for between Rs. 20,000 and a few lakhs. Then there is also the fraud of using a deceased Notary’s name to submit fake Deeds.
A more sophisticated racket is cunningly changing the owner’s name on the Title Abstract itself. This is done by adding a letter to the end of the name or defacing the name while checking the documents at the Land Registry. This is followed by changing the Deed number in a similar way. Then the fraudster gets a legal copy of the deed which includes the name, address and NIC of the actual owner.
The next part of the scam is to create a fake NIC matching the details of the actual owner, but with the forged name created earlier. For this, the fraudster will find a person matching the age of the actual owner and use his image on the fake NIC. With the fake NIC created that now matches the Deed and/or Title Abstract, the fraudster then creates an ad and passes the details on to brokers to find buyers. Unsuspecting buyers and Notaries will then get caught to this scam as the owner’s details (NIC) match the details on the Title Abstract.
Some unscrupulous sellers also take advantage in the delay to register a Deed at the Land Registry. After selling the land, they then proceed to sell the land to another buyer before the 1st transaction’s documents can be registered.
Ways to prevent most of these frauds
One might ask, how are these possible? It is possible through the involvement of unscrupulous elements with access to land records, either at the Land Registry or at local government offices. Unless there is a secure registration and document preservation system in place, where only authorized persons have access to official records and any changes are verified and approved; land fraud is bound to take place.
How can this be prevented? Regular checks on documents at the Land Registry is one possible course of action. Another is to add a Caveat. A Caveat is a notice registered at the relevant Land Registry, which holds a record of the land. If the Caveat is in place, the Land Registrar is duty bound to inform those who register the Caveat when any document or alteration to the registration of the said land is received. Also, anyone verifying the documents should ensure that the names match between the Deed and Title Abstract and any other relevant documents. Had these precautions been taken, some of the land frauds could have been prevented.
Documents that need to be verified
When purchasing a land, make sure that you have checked at least the following documents to safe guard you against any fraudulent transactions:
- The original Deed
- The Title Report (for at least 30 years)
- Copy of survey plan recently approved by local authority
- Plan from the local authority to identify any land to be acquired by the government for development projects
- A certified copy of the duplicate deed (the copy of the Deed with the stamp duty affixed which must be mandatorily lodged at the Land Registry by the Notary)
- Abstracts of the Title (paththiru)
- Ownership non-vesting certificate
- Street / building line certificate
The Title report and Deed will help in identifying the ownership of the land and to make sure that the person selling it is the true owner. You will also need to make sure that the land is not in a shared/joint ownership (co-owners) and if so all the owners will need to have signed the Deed. Also make sure that if it’s a gift certificate, then there are no options to cancel/revoke this and if it’s not under any life interest. If there is a possessor for the land, then you should ask the seller to remove them before you buy it
Also ensure that the land hasn’t been handed through a grant to the owner and has been sold freehold. For any lands where the owner cannot be identified, anyone can submit a Deed of Declaration which gives them authority to use the land for 10. If no owner comes forward within this period, then the land will belong to the person who lodged the claim.
Apartment buyers also need to verify all necessary documents before they make a purchase. In addition to above, Certificate of Conformity (COC), approved plan by UDA and clearance letter by the Condominium Management Authority are some of the documents that must be verified. Without all the necessary documents a deed cannot be issued, and there have been multiple cases where developers have deviated from approved building plans, and thus the COC has not been granted by the local authority, which in turn prevents owners from receiving their Deeds. Buyers also need to be vary about the ownership of the land which it is being built upon. If it’s mortgaged to a bank, then the bank must agree to release each parcel (i.e. apartment unit) when payment is made for that parcel, rather than wait until the full loan is cleared.
Is there a long-term solution to prevent these frauds?
There are many loopholes and inefficiencies with the current way in which documents are registered and handled at the Land Registry and with Bim Saviya program. Innovations such as Blockchain that keep ownership records in a de-centralised digital ledger and records any validated changes to that record, might serve as a solution to prevent land fraud and even provide valuations online instantly. The Blockchain platform, built as the backbone for Cryptocurrencies like Bitcoins, are now being used for other purposes such as managing land titles, medical records and financial transactions. It stores all historical data in a ‘chain of blocks’ so all historical ownership records can be viewed for a given plot of land. Since the platform doesn’t allow any historical data to be modified but adds a new ‘block’ to the chain when a change is made, any fraudulent modifications can be blocked. The way that it would safeguard against tampering is by de-centralising the data, which means that data isn’t stored in one place, file or computer, but across multiple computers across multiple locations. Plus, complex algorithms and verifications are put in place so that any change to a record is fully scrutinized before it’s accepted, ensuring the trust in the data.
Recently Dubai announced that it will completely digitize all its property transactions and put its Land Registry on a platform so all deeds, tenancy agreements and registries will be held in the system with buyers and sellers being able to digitally sign the documents from anywhere in the world. In addition to that, the system will link up with banks, so mortgages can be approved instantly and the floor plans for the properties will be available to property facilities providers for conducting interior work or maintenance.
A platform such as this would also reduce the hassle for people having to visit multiple government institutions to submit their documents and to pay the stamp duties and taxes. However, this is many years away for us as most of the Deeds and Title Reports are held in paper form at the land Registry. Until such time, buyers and sellers are advised to seek advice from professionals on verifying and safeguarding their documents. LankaPropertyWeb’s Buyer and Seller Assistance Program was also initiated in order to provide advise & legal assistance to buyers and sellers on preparing documents and the safeguards that they can take to prevent fraud, plus help with identifying the true ownership of property and getting the property valued by recognised valuers. Once the Blockchain technology has been successfully implemented in other countries I hope that Sri Lanka would soon adapt this to not only prevent fraud but also to make transactions fast and hassle free.