Structure Of Land Register
The link between law and economics is often undermined in Pakistan. In doing so, we ignore the impact that our institution of private property has on the national economy. Countries respectful of the right to private property provide easy access to information, a simple process of conveyance and security of title to land.
Unfortunately, our system of private property is shambolic on all three fronts. Consider the hypothetical case of a foreign investor planning to setup a major industrial unit in the country. The proposed investment is expected to open up thousands of job opportunities, provide millions in taxes to the government, promote competition and drive down prices for the end consumer.
The accrual of such economic benefits is, however, contingent upon the investor’s ability to purchase land and the subsequent protection afforded to his title. Under our law 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, a prospective purchaser will (in case of land located in rural areas) first approach the local patwari to identify the land he intends to buy and obtain its corresponding land-identification number. By searching against the land-identification number in a vast, manual and paper-based record maintained by the patwari (which is often disorganized and inaccurate), the prospective purchaser will gather further information with respect to the land and its current owner.
Since the record maintained by the patwari only carries presumptive value, the investor must investigate the ‘chain of title’ by carrying out necessary due diligence in order 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 fifteen years.
Two conclusions can be drawn from this example. Firstly, there is no central land register that conclusively records all rights pertaining to land from where a prospective buyer can investigate title to land and check it for any encumbrances.
Secondly, in Pakistan the state is not the guarantor of 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.
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. Under the said Act, each local patwari was under a duty 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 became to be recognized 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 truth.
The second is the framework under the Registration Act 1908, where any sale purporting to transfer 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. Following Australia, the United Kingdom passed the Land Registration Act 2002 (LRA 2002) and thereby abandoned the traditional deeds-based registration 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 register online, search for ownership details, investigate title and inspect land for any encumbrances.
Two salient characteristics of the Torrens system have been adopted by the UK. Firstly, title is conferred by registration and not by executing the sale deed. This ensures that the register remains an accurate reflection of information related to land ownership at all times.
Secondly, the state has become the guarantor of title. The government 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.
In this context, Pakistan should also consider embracing the Torrens Registration System, characterized by a central land register, conferment of title by registration and state guarantee of title. This would have the accompanying advantage of reducing litigation. The recent provincial computerization of land records maintained under the Land Revenue Act 1967 is a welcome step but it only addresses the issue of access to information. Moving towards a more investment-friendly Pakistan would, however, require revamping our institution of private property by streamlining the existing process of conveyance and providing greater security of title.
An earlier version of this article was previously published in DAWN and it is being republished here with permission.
The views expressed in this article are those of the author and do not necessarily represent the views of CourtingTheLaw.com or any organization with which he might be associated.