Analysis

Mandatory Title Insurance: the Remaining Puzzle in Sierra Leone’s Land Reform Policy

3 August 2008 at 21:02 | 1460 views

By Kortor Kamara, USA.

The launching of a Title Insurance Policy Coverage (TIP), specifically designed for the Sierra Leone real estate market in December 2006, by Medical & General Insurance Company and Saddleback Re (USA) ushered in a significant milestone and seismic shift, as private enterprises in Sierra Leone were at long last beginning to proactively participate in bringing about market-based solutions to some of our country’s developmental challenges.

During his opening remarks at the launching ceremony held at the Sierra Leone Insurance Commission (SLICOM) headquarters in Freetown, the author representing the interests of Saddleback Re (USA), while encouraging the proactive participation of business sector leaders opined that “the partnership of Saddleback Re and Medical & General Insurance Company (MAGIC) in designing and introducing the first policy of title insurance was intended to address the acute problems currently endemic in the real estate market in Sierra Leone through the utilization of market-based risk management tools”.

CONSTRUCTION BOOM

The end of the civil war in Sierra Leone ushered a potential boom in the purchase, transfer of land and the construction of private homes and commercial buildings in major population centers of the country. This move is being fueled primarily by the thousands of Sierra Leoneans, some who fled overseas during the civil war and are returning to rebuild homes, businesses and other infrastructure as peace and tranquility now prevails throughout the country.

The full potential of this economic boom in land acquisition and construction will inevitably become stymied and impeded, if the country:

Fails to embark upon meaningful reforms in her land tenure system.

Fails to create reforms in her public land records system.

Fails to reform its real estate laws and procedures, and
fails to provide requisite legal protection to land and real estate buyers, lenders and sellers.

MINISTRY OF LANDS
While the government, through the Ministry of Lands, is charged with creating and facilitating an orderly business and legal system, together with procedures and methodology for the sale and transfer of real estate, the tools utilized by successive governments and ministry officials so far have not coped with the rampant corruption, forgery, fraud and defects in title prevalent in the system. As a result scam artists and some corrupt government officials are prone to solicit potential land purchasers with fraudulent title deeds, sometimes selling the same piece of land to more than one purchaser.

This situation is even more acute in the cities of Freetown, Bo, Kenema, Koidu, Port-Loko and Makeni where the availability of land and houses for sale, coupled with the absence of a transparent system documenting title transfers and insurance has resulted in several unscrupulous real estate transactions, mostly disastrous to the financial interests of prospective land or home buyers.

JUDICIARY OVERWHELMED
A prominent attorney in Freetown recently reported that over fifty percent of all cases pending in the courts are land/real estate title matters which can on average take between 5 to 10 years to litigate. The courts are inundated with cases where land and property has been sold to multiple buyers without proper title searches or insurance that could provide the requisite guarantee against loss from defective titles, liens and encumbrances.

The above status quo has been allowed to fester largely as a result of apathy and inertia on the part of both policymakers in the executive, the judiciary and officials in the ministry of lands, whose inability to innovate and meet the challenges by modernizing the antiquated and deplorable land records management system stands as a singular monumental impediment to development currently confronting the country.

NEW APPROACH?
The efforts of the current administration and especially the Minister of Lands, Mr. Benjamin Davis in seeking to revert this trend, by introducing progressive land management policies and innovations especially in the field of GIS mapping and computerization must be lauded.

However, merely introducing technological innovations in the lands management and records systems of the ministry of lands without a concomitant policy and regulatory shift requiring evidence of title insurance for all approvals of deeds and land transfers, essentially leaves out a large and important tool in addressing the risks inherent in the sale of property. The cog in any land reform modernization policy thus must entail as a central requirement the purchase of title insurance designed to protect and safeguard land purchasers and lenders ownership rights and investments.

WHY TITLE INSURANCE?
Title insurance differs significantly from other forms of insurance in that whilst most other forms of insurance function as risk assumption entities through the pooling of risks, the primary function of title insurance is the elimination of risks and prevention of losses caused by defects in title.

Title insurance is today’s answer to bringing the transfer of real estate-land and mortgages in Sierra Leone, into the 21st century with greater security and orderliness. As a buyer, lending institution, seller and community at large, the purchase of title insurance guarantees against possible defects such as:

Errors or omissions in deeds

Liens & encumbrances

Mistakes in examining records

Forgery

Undisclosed heirs.

A core tenet of the title insurance policy is the duty to defend against legal actions. Title insurance defends the insured’s title against any litigation and in the event of problems will compensate the insured up to the policy limit.

The following polices of title insurance are currently available through Medical & General Insurance Company in Freetown and by contacting admin@Saddlebackre.com.

The Standard Land Title Policy

Owners Title Policy

Lenders Title Policy

Sellers Title Policy

CONCLUSION
It is envisaged that with commercial private enterprise participation by insurance companies, offering title policies in the real estate market, we can be assured of the elimination of most of the problems inherent in the government only managed system.

For Diasporas interested in participating in the real estate market in Sierra Leone, title insurance will provide the added security of insurance to not only protect their interests and investments but of greater importance seek to eliminate all foreseeable risks and prevent losses due to defects in title, fraud, forgery and unmarketability of title.

It is hoped that the current land reforms being undertaken by government include as a central cog the need for title insurance coverage by all parties to a real estate transaction before title can be legally transferred in Sierra Leone.

About the Author:
The author, Mr. Kortor Kamara has over 25 years experience in the insurance industry both in Sierra Leone and the United States. He is a Chartered Property & Casualty Insurer and holds the Workers Compensation Claims Professional (WCCP) designation. He is a Member of the Chartered Insurance Institute ( London); Certified Self-Insurance Claims Administrator-State of California; Registered World Bank Consultant and has served as a Consultant on various Insurance initiatives in Sierra Leone, including design of the country’s first Title Insurance Policy.

In addition, Mr. Kamara is a graduate of Fourah Bay College, University of Sierra Leone, 1978-1981; studied Law at both the Univerisity of West Los Angeles School of Law and the California Southern School of Law in Riverside. He is currently a Doctoral Candidate in Insurance and Risk Management.

Through association with Saddleback Re, were he serves as the Regional Manager, Africa Division, Mr. Kamara is intimately involved in the provision of reinsurance coverage, policy design, loss control, training and risk management services to the African Insurance marketplace.
www.saddlebackre.com.

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