Despite the rapid growth of the real estate sector, getting a piece of land with a clean and trouble-free title deed remains a major challenge.
Indeed, tales of people who have invested huge sums in the sector, only for their property to be brought down by bulldozers, abound.
The reasons for this merciless act are almost always that the land was meant for public use, or the buyer was conned. Unfortunately, there is no solution in sight to this problem.
It is this state of affairs that prompted Mr Ronald Omwoma, a land management expert, to suggest that title deeds be insured.
He says this will free the real estate sector from issues such as defective or invalid title deeds.
Title insurance, he explains, is a form of cover found predominantly in the US. It insures against financial loss from defects in title deeds for real property and from the invalidity or unenforceability of mortgage liens.
“Basically, it is meant to protect an owner’s or a lender’s financial interest against loss due to defective titles, liens or other matters such as unpaid taxes for the land,” Mr Omwoma explains.
“Unlike other forms of insurance, which focus on possible future hazards and charge premiums annually, title insurance is a safeguard against hazards and defects that might have affected the title in the past,” he offers.
In essence, then, title insurance doesn’t pool together risks or losses arising from unforeseen future occurrences, but seeks to make the title risk free by eliminating risks from past events, thereby preventing any possible losses to the owner.
To achieve this, Mr Omwoma says, the company providing the insurance cover investigates the history of the title deed right from the beginning to its current status, and any other matters that might affect the holder.
“Such an indemnity could cover issues like incorrect signatures on documents, forgery, fraud, defective recording, restrictive covenants, unpaid taxes, tax judgements, outstanding child support liens, pending bankruptcy and encumbrances or divorce proceedings or probate issues against the property owner,” he explains.
The cover can also protect against unrecorded liens and easements, access rights, defects and other unrecorded documents, as well as encroachment and forgeries.
With deficiencies in land title registries and inefficiencies in land administration still prevalent, Mr Omwoma says, it is time Kenyans started insuring their title deeds, as this will not only give prospective property investors an assurance that the title they acquire is genuine and clean, but also guarantee that they will be compensated if that is not the case
Mr Omwoma explains that title insurance can also protect other interest in real property, such as leases and life estate.
“Absent landowners have sometimes returned to find their land invaded by squatters or sold without their knowledge and title insurance will address this,” he says, adding that it will be particularly helpful for property owners living abroad.
“The company providing the cover will conduct regular searches and physical inspections of the land, land or deploy guards where necessary,” he adds, noting that it essentially takes over the responsibility of protecting the land.
To determine premiums for a title insurance cover, Mr Omwoma says, the US model can be used. “In the US, one per cent of the value of the property being purchased, charged or mortgaged, is charged once for the period of ownership or mortgage.”
Annual premiums may be charged for insurance covers that protect ownership by absent landlords and premiums go towards financing searches, guards and physical inspection of the property.
“To ensure that the property is insurable, land management experts will determine the land ownerships rights, together with the process of acquiring such rights”, he says, adding that the professionals will do this by examining public land records to find and isolate the risks.
In certain transactions, such as plot sales, he says, real property characteristics — zoning, location, surveys and improvement type — will be evaluated in order to establish the genuineness of the title deed beyond reasonable doubt.
“If title insurance is embraced in Kenya and encouraged by the relevant authorities, demolitions and loss of land/money to con artists will be a thing past,” he avers.