How to avoid land fraud in Uganda
Allan Henry Aheebwa
Corporate law | Non-profit practice | Estate Planning | Arbitration
1. Investigate!! Investigate!! Investigate!!
Before buying any plot of land whether from a relative or friend, never miss this crucial step of conducting an investigation on the property. This is what we call due diligence in legal parlance.
The investigation must typically include the following steps:
i) If it is titled land ask for a copy of the certificate of title from the seller.
ii) Apply for a search at the Ministry of Lands office Zonal office near you (MZO). The search will give you details such as the location of the land, the size, who the registered owner is, and whether there are any incumbrances on the land such as mortgages or caveats. You will obtain an official search report after conducting the land search. However, the official search report is never comprehensive and it is advisable that you visit your local MZO office and obtain the full registration history of the land in question.
iii) If the land has no certificate of title (unregistered land), ensure to make complete inquiries from the owners of all the neighboring plots of land and the area LCs. Generally, what you want to avoid when buying untitled land is purchasing communal land (usually in form of playing fields, common grazing fields, land with water wells and boreholes etc.). It also helps to confirm with the local physical planning office to ensure that the land is not in a road reserve, wetland or part of a gazetted forest.
Of course, if you are purchasing land in areas like Buganda you should expect it to have a mailo title unless you are buying a kibanja but even then, you must fully understand what it means to be a kibanja owner before committing yourself to paying money for it.
iv)?????? Pay a visit to the land.
Land is not like vegetables that are bought from unknown sellers. It is valuable property and you must see what you are buying. Ensure that the particulars on the certificate of title reflect what is on the land and the search report.
If the land has elements like a grave yard or deposits of construction materials like bricks, sand and gravel then you must be extra inquisitive and careful before paying money for that land. Those bricks didn’t just deposit themselves on the land!! The real owner probably did and he/she probably intends to develop it.
Always make arrangements to visit the land during day hours. A seller who asks you to visit the land during evening and night hours is probably hiding something.
v)??????? Beware of third-party interests in the land. The term “interests in land” is interpreted widely by the law and a person does not have to own the land to actually have an interest in it. The Courts of law do not look kindly at someone who buys land and obtains a certificate of title with the aim of depriving third parties of their interests in that land. These third-party interests may include bibanja holders, beneficiaries of a deceased’s estate, any person who occupied the land unchallenged for 12 years or more before the year of 1995 (Bonafide occupants), a person with a lease on the land, a person with a mortgage on the land etc.
Remember due diligence/investigation is not just a crucial step in purchasing land. It is mandatory because Courts of law will usually consider a land transaction as having been fraudulent if due diligence was never done.
2. Land survey and boundary opening
This is done to confirm if particulars of the land on ground correspond with the particulars on the certificate of title. A surveyor must be employed to open the boundaries of the land.
You must also check with the Physical Planning office of your district/city to make sure that the land is not in a road reserve and ascertain the area’s development plan.
3. Obtain spousal consent if necessary
If the land you are purchasing is where the seller resides with his family, ensure to obtain spousal consent from the spouse of the seller. Spousal consent is obtained by the spouse of the seller signing a Spousal consent form.
The same applies where the land you are interested in buying has features such as a banana plantation and gardens because this most likely means that the family of the seller depends on this land for a living.
Failure to obtain spousal consent for dealings in family land will lead to the whole transaction being void and illegal.
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4. Have a sale agreement
Avoid standard form agreements you borrow from friends. You should hire a lawyer to draft for you a proper land sale agreement.
Whereas LC officials usually draft land sale agreements for buyers and sellers, this is also not advisable because in most cases such agreements miss out on essential features that make an agreement binding and enforceable. Some of the agreements drafted by LC officials rarely mention essential things like correct particulars of the certificate of title, measurements of the land and even its location.
Agreements drawn in local languages (usually by LC officials) whereas easy to interpret, also have unintended loopholes for example they may use words like “the seller shall deliver the title upon full payment of the purchase price” unlike an agreement drafted in English which will state that “the seller shall transfer the title to the buyer upon full payment of the purchase price.” The words “deliver” and “transfer” in this case have very different meanings legally and can create legal obligations that are extremely varying in nature.
A well drafted sale agreement will not only capture all the terms agreed upon by the parties, but also cater for any future problems that may arise. Remember buying land is a complex transaction that usually involves a lot of money so you need a professional to draw a sound agreement for you.
For purposes of evidence and to prevent forgery, you may even have the Sale Agreement registered as a document with the Uganda Registration Services Bureau (URSB).
5. Executing a transfer instrument
This must be signed in latin characters or else it may be challenged in Court thus invalidating the whole transaction. To put it simply, the transfer form must have the names of the seller, vendor and witnesses clearly written in alphabetical letters. Mere scribbled signatures are not enough.
The transfer instrument must also be witnessed by an Advocate of the High Court.
6. Valuation and Payment of stamp duty
Pay stamp duty at the rate of 1.5% of the land sale value.
7. Submit all the documents for filing at the relevant ministry of lands zonal office (MZO) where the land is located.
The necessary documents you need to submit include;
Note: Uganda recognizes four types of land tenure i.e., Freehold, Leasehold, Mailo and Customary tenure. If you are non-Ugandan citizen, you can only own land through Leasehold. Therefore if you are not a Ugandan Citizen you should not pay money for land expecting a Freehold title or Mailo title unless you are buying a lease on the land.
The same applies to a company whose majority shares are not owned by Ugandan citizens. Thus a company where at least 51% of its issued share capital is owned by non-Ugandans cannot own freehold or mailo land. It can only obtain a leasehold title.
Furthermore, the Articles of Association of the Company must contain a clause restricting transfer of majority ownership to a non-citizen. The Court of Appeal of Uganda recently held that even if the company is wholly owned by Ugandan citizens but does not contain the above clause in its Articles of Association, then it is still a foreigner for purposes of acquiring a freehold or mailo title. These restrictions should not be taken lightly as they can result in unforeseen consequences in future as seen in a number of recent court decisions. The company's Articles can always be amended to include the share transfer restriction clause.
In conclusion, the process of buying land can be very technical. It is advisable to use a lawyer to guide you through the entire process successfully to avoid losses and lengthy litigation.
References:
Sir John Bageire vs. Ausi Matovu CACA No.07 of 1996
Uganda Posts and Telecommunications V Lutaaya SCCA No.36 of 2006