By David Owiro. This post originally appeared on IEA Kenya’s blog.
If you have ever taken a walk around the major towns in Kenya you will come across warning notices and signboards announcing to the world that “this plot/land is not for sale” or that “this property is not for sale.” Also, if you are a keen reader of the daily newspapers you will come across, in the back pages, notices announcing “caveat emptor or buyer beware” on some parcels of land. These are often put up by individuals seeking to enforce their property rights by deterring members of the public who are likely to be defrauded by unscrupulous groups or individuals.
And now, the National Land Commission, which is the body mandated by the constitution of Kenya to hold public land in trust, has also began placing adverts warning members of the public against buying land without carrying out background searches or relying on certificates of titles.
The reason all this is happening is that people have taken advantage of the previously weak property rights regime that allowed for exploitation and manipulation of official land and property records in order to defraud unsuspecting members of the public.
Now, we have reached this situation because of some specific reasons, the first being that the property rights regime was too weak for individuals and groups to feel that they needed to take action in order to enforce and protect their property rights, and some of them have gone to the extent of bearing crude arms and weapons in order to do this.
Secondly, the main agencies and government institutions were ill equipped, in terms of how they were institutionalized, to deal with the problem, partly because the executive arm of government had too much control in land administration and management.
This was further complicated by the perceptions that people had. It is a well known fact that Kenyans still view the property transfer process as being too complicated and expensive, and are therefore only too willing to pay a little extra to a “broker” in order to have a much simpler and faster process that assures them of a specific outcome. This has over the years led to the emergence of individuals and groups or cartels who take advantage of the disorganization of the land records to extort Kenyans out of their hard-earned money.
In a way the complexity and disharmony that existed in the previous property rights regime facilitated the creation of these back door services. We had too many laws that created a multitude of institutions, as well as poor coordination and centralization of critical functions that had to be dealt with at the Ministry of Lands headquarters, and a lands registry that was manual and poorly kept. Thus encouraging the evolution of a system that relied on who you knew at the lands office, and how good your network was, in order to access whatever service that was required as regards property rights enforcement, transfer, or administration.
The impact of this state of affairs has been quite adverse for Kenyans, many of whom hold land as the largest or most valuable asset they have. As you have seen, individuals have to spend additional funds in posting advertisements and notices, or been forced to get court orders to enforce and protect their property rights. Some have even resorted to use of force leading to loss and damage of property and even life.
Certainly small businesses have equally suffered, with many enterprises being unable to access credit because of lack of title deeds for collateral often imposed by lenders, or incurring greater expenses in checking validity of title deeds and ascertaining ownership of land. Also the fraudulent cases that are rampant in the sector involving fake and invalid title deeds, present a risk to the banking system as they have to undertake additional due diligence to determine whether a title deed is an original or a fake.
And so as we continue to applaud a class of entrepreneurs who view land as a speculative vehicle to make quick riches to the detriment of the economy yet these activities create little economic value, often leveraging their premiums on their access and proximity to key individuals in governments offices and ministries. While at the same time we bemoan the small and medium enterprises for the challenges they face not understanding that the biggest impediment for them is access to credit which is heavily dependent on land as collateral.
The constitution has created a very good opportunity as it has captured the key reforms as contained in the national land policy. The creation of the National Land Commission being a key reform priority because it is independent from the executive and it also has mechanisms for addressing this problem.
A key solution is in the full implementation of the digitization of land records. This will eliminate the information hoarding that allows “brokers” to operate as it will allow for quick access when carrying out searches and verifying ownership details of the owners.
The economic impact of this one reform alone would be tremendous both for individuals as well as businesses. Think about the millions of shillings lost in fraudulent land deals, and the numerous court cases involving land, the stalled cases of land succession and inheritance due to lack of cadastral information, and the relief such a system would give to both small businesses and individuals.
Therefore, while the National Land Commission continues to put up warning notices, the medium term to long term solution is in having digital land records.
David Owiro is Programme Officer for Regulation Competition Policy at the Institute of Economic Affairs in Kenya, a CIPE partner.