Understanding the MCC land project

The Cabinet approval for the MCC compact has drawn a hail of criticism, a lot which seems to be based on either misinterpretation or outright falsehoods. The most controversial area has been the land project so it’s worth trying to understand what this is about.

Registration of land in Sri Lanka is governed under the Registration of Deeds Ordinance of1927. There is an important distinction between a deed and a title. A title confers ownership of a property. Deeds are legal documents which show transfer of ownership from one individual or entity to another. In essence a deed is a formal contract to transfer property while a title reflects the actual ownership. This is somewhat akin to the difference between the registration book of a vehicle and a sales contract for the vehicle.

The deed reflects a transaction between two parties but does not immediately tell anyone if the title is valid. Even if the deed itself is sound, did the seller have proper ownership? This requires studying the previous deed by which the owner came into possession of the land. Even if the previous deed was valid what about the one that preceded it? To be certain one must trace back the transactions on the land for several generations.

The ordnance of 1927 makes provision for registration of deeds at a land registry which simplifies matters, provided all the preceding deeds were properly registered. The problem is that registration is voluntary, so all deeds may not be registered.

deeds registration system

Further, registration does not amount to ownership in Sri Lanka; registration of a deed is proof of the transaction but if legally defective does not make the sale effective. The accuracy of the contents of the document registered is not investigated by the land registry so no guarantee is given to the contents of the deed. A negligent notary who fails to check proper identification could register a false deed.

Therefore a deeds registration system does not guarantee indefeasible title. It provides an official archive where deeds concerning the transfer of rights to land can be registered but no more.

Thus buyers have no easy way to ensure that they will receive good title to land. Verification involves up to many days of historical search by lawyers of past deeds archived in primitive conditions before transfer documents can be drawn up.

With such obvious flaws it is not surprising that land fraud is a common occurrence. In a news article (2015) Lakshika Nadarajah lists some common methods of fraud:

1. Impersonation is fairly easy; it is simply a matter of creating a forged deed using a copy of the original deed and creating a fake identity card. Then buyers are found either through paper advertisements or brokers and once the lawyer of the buyer is satisfied with how genuine the deed is, subsequent to a search in the land registry where it has been correctly entered in the folio, the impostor sells the Land using the forged NIC.

2. It is also possible to sell the same piece of land twice or more times; Once a sale is made it takes some time in the Land Registry to alter the relevant folio, thus the seller can take advantage of this delay and sell the land to a second buyer, who will be satisfied that the seller still remains the owner after a search in the Land Registry. A longer delay enables the seller to deceive more buyers.

3. A slightly harder method than impersonation is to actually transfer the ownership of the land and then sell. This is done by collecting a copy of the deed either via a broker or someone attempting to sell, then creating a forged deed in the fraudster’s name using the name of a deceased lawyer and getting the forged deed registered in the Land registry, and then selling the land appearing as the original owner.

4. Another way is to execute a deed of declaration, without actually having 10 years of continuous possession, and registering the deed in a new folio as a ‘deed of declaration’. This in turn will cause the original owner to not be accepted as the original owner which enables the land to be sold to a buyer by a fraudster. This happens often where deeds are executed for government lands or temple properties on trust.

5. An unexpected method is by filing a partition action to obtain a court order through forgery. This can be done by first executing a deed of declaration by falsifying facts and pretending to be in possession for 10 years of an unused piece of land, and then introducing another person, to whom a portion of the land is transferred in the presence of a lawyer, this person thus becomes the co-owner. The partition action is filed, a decree is obtained from the court to divide the land, and this judgement is registered in the Land Registry, which enables sale to a third party. All this while the original absolute owner is unaware of these transactions, but when he goes to court, he will get ownership leaving the buyer without land or money.

This presents huge risks to individuals and businesses. For Foreign investors it can be a nightmare. According to a presentation done in 2017 by the Surveyor General, P.M.P. Udayakantha only 35-40 % lands have a title acceptable a bank.

In 2019 the World Bank Doing Business assessment Sri Lanka was ranked 138th of 190 economies on the scale of ease of Registering Property. Registering required 8 steps, took 39 days and cost 5.2% of the property value. In part the number of steps and days required to register property are the result of caution on the part of lawyers and their lack of faith in the system. The additional steps include the confirmation of information in the local authority assessment registers and local authority records on buildings and development approvals although these are not required by law.

These flaws were identified in the reports of the Land Commissions held in 1955 and 1985 which resulted in the Title Registration Act No. 21 of 1998.

The title registration programme commenced in 2001 under the name ‘Bim Saviya’ with the data being stored in the e-State Lands Information Management System. The Register will be conclusive evidence of ownership.

One of the other issues with land is the physical identification. A deed must describe the land and the boundaries are referenced to land marks. There is no requirement to include a supporting plan made by a qualified surveyor. Even where plans are submitted they carry no reference to a cadastre which is an overall national or regional plan, hence there is no easy way to resolve a conflict between the boundaries of registered plans.

It is to eliminate this problem that the MCC is to create a parcel fabric map-where territory is mapped and divided into parcels according to registered ownership. This is a very costly exercise and the MCC grant covers only 28% of the land in seven districts but will form the base of an inventory of State Land.

land valuation project

The MCC land valuation project will support the scanning and digitisation of information from valuation files for properties in the selected districts. It will include scanning of paper files and the data entry into a valuation system of key property information which will be linked to the registration system and the digital parcel map using a unique parcel identification number. Among other things this will enable the government to tax more efficiently.

The Bim Saviya project was initially funded by a World Bank grant and continued with public funding.

Progress was not very satisfactory. According to the bank “These implementation problems were due to a combination of the complexity of the vested interests involved and a lack of commitment of Government including the implementing agency to deal with these head on or on a priority basis. In particular, there were no champions in the high level political and policy making arenas to spearhead solving of the outstanding project issues.” (2007)

The MCC grant is an attempt to move this project further. The land project will benefit all citizens and businesses by reducing opportunities for fraud, theft and reduce the uncertainty and hassle associated with buying land. The vocal opposition of the Bar Association whose members should be familiar with the risks in land matters is quite puzzling.

(The writer is an independent consultant). 

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