Insecure land title
IN Pakistan, purchasing land is not just laboriously complex but also insecure as the law provides little or no protection to the investor’s title.
Under the current legal framework for rural areas, a prospective purchaser approaches the local patwari of the area to identify the land he intends to buy and obtain its corresponding land-identification number. By searching against this identification number in a vast, manual and paper-based record maintained by the patwari, the prospective purchaser obtains further information with respect to the land and its current owner.
Since the patwari’s record carries presumptive value only, the purchaser must investigate the ‘chain of title’ by carrying out necessary due diligence to ensure that the present owner has a good root of title. For this, he must separately approach the local registrar of the area and verify if the sale deed through which the present owner derives his title was validly executed. This needs to be repeated for all transactions executed in the last 15 years.
There is no centralised land register that records all rights.
Two conclusions can be drawn from this enterprise. Firstly, there is no centralised land register that conclusively records all rights pertaining to land from where a prospective buyer can investigate title and probe for any encumbrances.
Secondly, in Pakistan the state does not guarantee title. A buyer must carry out due diligence by investigating the seller’s title and bear responsibility for the eventuality where the title is proved to be defective. In other words, the state does not even guarantee the accuracy of the land record it maintains. Thus, where a buyer has acted in reliance upon governmental records to purchase a piece of land and it is subsequently found that the seller’s title was defective, the state will not compensate the buyer. Instead, the matter would be settled by litigation.
This not only generates undue litigation but also deters foreign investors from investing in Pakistan. Two overlapping and parallel systems have had a profound impact on the current state of our law. The first is the Land Revenue Act 1967 which applies to rural land only. Under the said Act, each local patwari is duty-bound to maintain a ‘record-of-rights’ for land and separately record mutations for changes in ownership. The underlying rationale was to help the state in administering, levying and collecting tax.
With time, due to lack of alternative record keeping, the record originally maintained by the revenue officials for fiscal purposes assumed greater significance and gradually came to be recognised as evidence of title. The concentration of power with the patwari along with the corruption and lack of transparency associated with the process meant that the courts were never willing to acknowledge revenue record as carrying anything more than a presumption of the truth.
The second is the framework under the Registration Act 1908, where any sale purporting to transfer urban or rural land must be registered with the registrar of the locality in which the land is situated. The underlying rationale for registering the sale deed under the said Act was to give notice to the world that the sale had been validly executed and the land had changed ownership.
However, the courts have consistently held that the Act applies to registration of documents and not to registration of transactions. Such an interpretation defeats the purpose of the Act and paves open the way for oral sales of land. Thus, a change in ownership of land might have already taken place without being reflected in the state’s record.
Our law is still based on the traditional deeds registration system inherited from the British where a sale deed serves as the document of title. In 2002, the United Kingdom passed the Land Registration Act and thereby abandoned the earlier system in favour of the Australian-Torrens registration system. A land register is now maintained by the state which conclusively records all titles to land. A prospective buyer can access the online register, search for ownership details and investigate title.
Under the Torrens system adopted by the UK, title is conferred by registration and not by executing the sale deed. This ensures that the register accurately reflects information related to land ownership at all times. Additionally, the state is now the guarantor of title: it guarantees that the information contained in the land register is correct and any loss incurred by placing reliance on its contents is indemnified by the state.
By contrast, our institution of private property needs a desperate overhaul. While recent provincial computerisation of land records addresses the issue of access to information, the laborious process of conveyancing and the state’s inability to guarantee title continue to discourage foreign investors. In order to enable a more investment-friendly Pakistan, we should now move a step further and embrace the Torrens registration system characterised by a central land register, conferment of title by registration and state guarantee of title.
The writer is a lawyer.
Twitter: @bbsoofi
Published in Dawn, April 5th, 2015
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