What’s in a title?

Picture the following situation: In 1990, a prime piece of beach real estate was given with a title deed by a country’s then-president to one of his officials. In 2003, an investor obtained the same piece of property and had it entered in a local land registry. The investor then sold the plot to a developer in 2004 with the transfer also noted in the local registry. The developer proceeded with making improvements to the plot until… the town council ordered to demolish the erected structure on the grounds that the plot was really public land, citing city development plans dating back to 1980. The developer sued the town council in response. The official, who asserted that he had never sold the land and in fact used it as collateral for a loan, also protested the decision and demanded that the second title issued to the investor and then transferred to the developer be nullified.

What is the setting and who are the actors in this complicated story? The location: Kilifi, a resort town north of Mombasa, Kenya; the official: Kenya’s Education Minister Samson Ongeri; the investor: Kazrad Agencies; the developer: Greenbays Holdings. The case was finally decided by the local High Court which recently ruled the plot as public land after all, nullifying all the competing private titles. This high profile case poignantly illustrates the problem that Kenyans – from ministers to street vendors – continue to struggle with: property rights.

CIPE has been working with the Institute of Economic Affairs (IEA) in Kenya to find out what barriers small businesses face in urban property markets. IEA has conducted focus groups and interviews with small entrepreneurs and real estate professionals in Nairobi and Mombasa. On May 12, property market experts gathered at a joint CIPE-IEA roundtable in Nairobi to discuss preliminary findings. The discussion pointed to many existing challenges and CIPE and IEA are using a property markets scorecard to illustrate not just the problem areas but also institutional linkages between them.

For instance, the disarray and unreliability of the land registry – illustrated by the story of the disputed plot in Kilifi – translates into many other problems for ordinary businesses. If a business doesn’t have a registered property title to the land it is using, or the title it has is considered insecure, that business cannot obtain a bank loan to operate and grow. And if several competing titles exist for the same piece of property, businesses depend on courts (which in Kenya are inaccessible and unaffordable for many entrepreneurs) to rule on which title is the legitimate one.

As one of the participants in the roundtable discussion said, “the status of the land registry is a hindrance to property ownership because conducting searches is costly and unreliable.” Somebody else put it in even stronger terms, “the sanctity of a property title has been lost.” Kenya’s National Land Policy and Chapter 5 of the new Constitution passed last year are supposed to tackle this and many other land-related issues. But as reforms are being designed to overcome the decades of what is often euphemistically called “irregular public land allocations,” the decision-makers must keep in mind that resolving complex property problems requires more than passing new laws or digitizing land records. It is above all an institutional reform challenge that touches on many aspects of how the state institutions function – or fail to function.