Managing Land transactions in Uganda
2.2 In my presentation and in the context of the audience before me, I look at all of us, as being potential investors in real estate development, sellers of land, buyers, professional advisers and property consultants, potential tax payers involved in land transactions, potential lenders to persons intending to secure borrowings with land as the collateral and of course potential victims of land fraud or breaches arising from land transactions that have gone bad. The presentation seeks to highlight management of land transactions focused on the various stakeholders and interests in a land transaction. I trust we shall all benefit from the discussion pertaining to managing of land transactions.
2.3 The question that arises for consideration and which we should ponder on, is; in driving sustainability and trust in the context of land transactions, how best can we structure a land transaction to ensure that we, as buyers and sellers or investors and those we assist or advise in structuring such transactions are safe and that the transactions are free from impeachment?
2.4 It’s not my intention to assure you that I have a specific criteria that can safeguard any dealing in land from being a subject of legal and practical challenges. What we strive to do is to mitigate potential losses by attempting to cause a sufficient due diligence to perfect the transaction and talking all necessary steps to ensure that there is compliance with the applicable laws. The ultimate aim is that, if the transaction is sought to be impeached, there are good grounds upon which we can defend the transaction.
3.2 Indeed, the need for a high level due diligence in structuring, managing and perfecting a land transaction in Uganda can no longer be over emphasised. It is possibly better explained by the words of Okello J A, in Sir John Bageire vs. Ausi Matovu CACA No.07 of 1996, at page 26, who, while, emphasising the value of land property and the need for thorough investigations before purchase noted that;
“Lands are not vegetables that are bought from unknown sellers. Lands are valuable properties and buyers are expected to make thorough investigations; not only of the land but of the sellers before purchase.”
3.3 You can imagine that is a decision of 1996. If the warning was sounded in 1996, when the levels of honest, good faith and trust amongst stake holders are said to have been high at the time, in 2024, with the ever changing socio economic realities highlighted herein above, the focus can no longer be on reasonable due diligence but a sufficient and more thorough due diligence, if the transaction is to be successfully and properly structured. This is especially so, where most of the transactions in this country are linked to land, for example mortgages, creation of land estates, property development and now the condominium structures, amidst the involvement of so many stakeholders. This is not restricted to only registered land but extends to unregistered land as well. (See: Margaret and Joel kato versus Nalwoga).
3.4 Hitherto, due diligence focused on the land and the register maintained by the land registry. The law and practice at the time was that the register was everything. A search at the land office was then deemed to be sufficient. (See: Souza Figuiredo & Co. V. Moorings Hotel Limited (1960) EA926). At the time, there was no need to investigate the root of the title, the process leading to the registration of the proprietor, inquiry into the previous owners, inquiries with LCs, inquiries as to the marital status of the vendor, etc. As long as the land office confirmed the vendor as the registered proprietor, that transaction would be concluded. The purchaser would be relatively safe, unless there were apparent incumbrances or adverse claims on the title or on the land.
3.5 Lately, the trend has significantly changed. The socio-economic realities of the time, the increasing levels of fraud and the willingness of the Judges to create more safeguards and requirements beyond what was envisaged under registered land have rendered a land transaction more strenuous than ever before. A recent example is the decision of the Kenyan Supreme to the effect that, the party seeking to claim that they bonafidely acquired the title to the land must prove that the title in the first place was rooted in the law, was lawfully issued, meaning that the process that was followed prior to the issuance of title and leading to its creation must have been within the confines of the law. (See: Dina Management Limited versus Country Government of Mombasa & 5 Others).
3.6 Even the land office, which used to be considered to be very safe has heightened the need for thorough due diligence than ever before. Courts have equally extended searches at the land office to verification of authenticity of instruments and instrument numbers by potential purchasers and advisers. (See: Konde Mathias Similar V. Byarugaba Moses HCCS No. 66/2007). That means that it is now possible to have illegal or improper instruments and instrument numbers maintained by the land office.
3.7 Further, a search at the land office is not sufficient nor can it be said to be full proof of ownership and status of incumbrances on the register. Search statements (especially system searches) may not reflect the correct status quo on the register. A search statement may sometimes show that the land has no incumbrance contrary to what is on the white page (either on account of error in typing or indiligence). (See: Stanbic Bank Limited V. Sunbelt Holdings Limited Misc. Appn. No. 1731 of 2022). Search statements showing the land belongs to A but there is an earlier title for the same piece of land registered in the names of B, all under the custody of the office of titles. (See: Henley Property Developers Limited V. AG & Commissioner Land Registration, Zion Construction Limited V. Abahaire & Others HCCS No.241/2015).
3.8 Now, other than the foregoing problems, some of which are attributed to the land office, the focus has now further extended from a thorough search at the land office, to a thorough investigation at the land, to inquiries with Local Council Authorities, all neighbours and even looking for previous owners of the land. (See: Jennifer Nsubuga V. Michael Mukundane CACA No. 208/2018). The assumption is that LCs and neighbours are co- operative, honest and trustworthy.
3.9 Interestingly, a search and due diligence on the person of the vendor and the purchaser is now equally required. You have to confirm their identity. The land office does not confirm identity. Burden is on the purchaser and their advisors to ensure that they deal with the actual correct owner. (See recent decision of the Supreme Court in Kushaba Ronald versus CLR) We have reached the extent that we doubt the identity of the owner and that requires proof too. (See: Audrey Musimenta V. Emily Migisha & Others HCCS No. 78/2011 and Kanyike versus Mukasa).
4.10 What is so shocking is that you can still be defrauded, despite inquiries at all levels, simply because dishonesty cannot be ruled out at any of the stages of the inquiry. Nevertheless, the more sophisticated land transactions have become, the greater the need for diligence by all so us involved in the transactions.
4.11 For professional advisors, it is even worse now with courts more willing to find professional advocates, valuers and advisors liable in negligence for their failure to properly guide their clients in perfecting a land transaction leading to clients losing money in transactions that turn out to be fraudulent.
5.0 The Pertinent Areas For consideration in Structuring and Managing a Land Transaction
5.1 What entails a land transaction?
This is a question of fact. Transactions in land vary. Some relate to sell or purchase of land, others relate to loans or mortgages where land is the collateral, others relate to investment in property development, like joint ventures, where one investor contributes land and another monetary capital, and transactions by way of leases on Mailo or freehold land, both in respect of private land or public land, transactions in form of swap of land for land or land for moveable assets like cars etc.
So, each transaction will attract special consideration in terms of how it is perfected or managed. It also matters, whose interests we are instructed to protect or safeguard. There are however areas of due diligence that are common to most of the transactions, which will be highlighted hereinafter.
5.2 What entails land?
In managing a land transaction, consideration should be heard to what constitutes the land in question. Land should include all that is permanently affixed to the land (See: Mulyanti versus Batalingaya). Land and developments thereon need to be described clearly. Not uncommon for title to be registered in the names of A and building was constructed by B. How do we deal with both or who do we deal with? What of those who want to sell their land but remove some of their developments? This informs the terms of the contract.
5.3 Relevancy of Knowledge of the Land Tenure System
5.3.1 The law in Uganda recognises 4 land tenure systems. Mailo (titled land, both private and official Mailo of the Kabaka of Buganda), Freehold (Titled land), Leasehold (titled land) and customary interests (unregistered land). (See: Bamuhiga versus Mugara).
5.3.2 There are also interests of lawful or bonafide occupant created by the Land Act (Bibanja owners). Their ownership is normally by occupation save that it may be evidenced by certificates of occupancy. Dealings in land may call for varying considerations depending on the nature of the interest in the land. Due diligence will be guided by the nature of interest.
5.4 Transactions in land, where Government has an interest
Transactions in land where the Government has an interest require approval or consent of the Attorney General, otherwise they may be rendered illegal. (See: Legal Brains Trust versus Basajjabalaba). Structuring such transactions may require such approvals.
5.5 Identification of the land
5.5.1 It is pertinent to identify the land, its location and its actual existence. Do not transact from office merely by relying on titles and searches from the land office. Titles must relate to the land on ground (see: Father Narsencio Begumisa V. Eric Tibebaga SCCA No. 17/2002). Land may have a title but on ground, it may be in a wet land (See: Amooti Godfrey Nyakaana versus NEMA & Others), swamp, may be a forest reserve, a road reserve, may not have any access road, may not be fit for the intended purpose, or may not attract development permission, given the Physical planning area.
5.5.2 It may be a protected area or green belt or land where government has a vested interest (See Legal Brains Trust Limited versus Hassan Basajjabalaba & Others) not even worth spending money any further due diligence.
5.6 Proof of Ownership
5.6.1 Preliminary proof of ownership varies depending on the nature of land being purchased. In case of Mailo, freehold or leasehold, normally the proof is by certificate of title. Certificate is deemed to be conclusive proof that a person mentioned therein is the proprietor of the land. (See: Father Narsencio Begumisa V. Eric Tibebaga SCCA No. 17/2002).
5.6.2 In case of unregistered interest like Kibanja, proof may be by occupation and developments, certificate of occupancy or customary ownership, recognition by the land lord, for example Buganda Land Board cards for registered bibanja owners and names appearing in the register of bibanja owners. Note the need for consent of the landlord (See: Registered Trustees of Kampala Arch Diocese vs. Muyanja).
5.6.3 Take keen interest in the preliminary proof offered. For certificate of title, is it a duplicate or special certificate of title, and if special certificate of title, what happened to the duplicate. (See: Patel V. Commissioner Land Registration HCCS No 87/2009; Konde Mathias Similar V. Byarugaba Moses HCCS No. 66/2007.) Is the vendor in possession of the title, or it’s with third parties and if so why? There could be third party claims. Are there evident encumbrances on the duplicate, like leases or mortgages? Check the names in the title or agreement or other form of proof (See: Kushaba Ronald versus CLR). Are they of the person purporting to be the vendor, if not why? (See Audrey Musimenta V. Emily Migisha). These may dictate whether you should even proceed with the transaction or not.
5.7 A search at the Land office
5.7.1 Try as much as possible to do both the official system and physical search of the register or the white page. The official search is paid for. You get a search statement duly signed by the registrar of titles. Don’t over rely on the vendor and land brokers or strangers to cause the search. It may be done at “Nasser Road”. Official search is your fall-back position in case it turns out that land office misled you. (See: Henley Property Developers Limited V. AG & Commissioner Land Registration).
5.7.2 Sometimes, search may have challenges. Entries on the register and white page should be confirmed. System search may provide insufficient information or even incorrect information. Search statements have disclaimers. (See Standard Chartered Bank Limited V. Sunbelt Holdings Limited & Anor).
5.7.3 Where possible and information is accessible check other information, Passport Photos, National ID, signatures on earlier transfers and the names thereon. The Uganda National Land information centre may equally be useful.
5.7.4 Are there encumbrances and if so, what are the claims of the persons lodging such encumbrances like mortgages, caveats, court orders etc. (See: Wadhia Construction Ltd versus CLR), (Kaliisa versus Nyangire). How do we deal with the encumbrances? That should be part of the transaction discussions/negotiations.
5.7.5 In case of leases, search should extend to Buganda Land Board, District Land Boards and the Uganda Land Commission; did they actually grant those leases to the person claiming to be vendors or dealers in the leases. (See: Lukyamuzi Investments Limited V. AG & ULC, KCCA & KDLB). Has the lessee complied with the lease terms, are they amenable to granting consent to sell and transfer? (See: Meera investments Limited versus dfcu Bank Ltd and Mogode Ikuya versus Londa Mbarak).
5.7.6 Need to check the information in the search statement and that on the duplicate or special title. Is there consistence of information? Are the names consistent? (See: Musimenta versus Dr. Kaggwa and Mukasa versus Kanyike) on inconsistence in names. Agreement and transfer executed by a person other than the registered proprietor (or attorney) is a nullity. (See: Kushaba Ronald versus CLR).
5.8 Due diligence on the Land
5.8.1 Physical inspection of the property; this time not to find out if the land exists but ascertain, if the land has developments, do they belong to the vendor, is he in possession and if not who is in possession and why? (See: Ojwang versus Bagonzya). Is he known as the owner in the neighbourhood, or to the LCs, or tenants in the premises?; (See: Nsubuga versus Mukundane); is it a matrimonial home, in respect of which transactions would require spousal consent; (See: Diamond Trust Bank Limited vs. Amuge Hilder Okwir Gunya). are there squatters or lawful or bonafide occupants on the land? (See: John Kaggwa versus Joseph Kizito Batume & Others) any other physical encumbrances that may need to be sorted out first. That may be dictate the terms of the agreement.
5.8.2 Very safe to cause the inspection in the presence of the vendor so that he is easily identified on ground. Does he know the boundaries of the land for example?
5.8.3 Equally advised to cause a formal or informal boundary opening exercise during the inspection using a professional certified and registered surveyor. Helpful in identifying any overlaps, encroachment, consistence of acreage of the land on ground and on title and other features on ground. (See: Constance Butamanya V. Rwamatsibuza & Others HCCS No. 103/1992), (Edward Rurangaranga V. Mbarara Municipal Council).
5.9 Confirmation of the identity of the vendor/ Purchaser/ borrower etc
5.9.1 The Land office does not confirm identity of the registered proprietor. (Musimenta versus Kaggwa). Need for a due diligence on the vendor. Are they Ugandan Citizens, do they hold dual citizenship and can therefore legally hold Mailo or freehold or customary land? (See: Kaggwa versus Olal and Formular Feeds Uganda Limited versus KCB).
5.9.2 Do their identification documents contain names consistent with the names on the title? (See: Israel Lwanga versus Lenard Mubiru). If there are any variations in names, how is that explainable? Where a title has a NIN number, cross check for consistence. Are they known by search names at the land or neighbourhood? (See: Musimenta versus Kaggwa). Photo in ID, cross check with copy of ID and photo at land office.
5.9.3 If the Vendor is a company or a corporation, who is authorised to transact on its behalf? Any need for a resolution or power of attorney or other form of mandate, any consents required, any seal required? Is it a transaction in respect of land where government has an interest and requires approval of the Attorney General? (See: Uganda Broadcasting Corporation V. Haba Group of Companies & Deo & Sons Ltd, (Legal Brains Trust Limited V. Hassan Basajjabalaba & Others Constitutional Petition No. 4/2012).
5.9.4 Is the vendor an administrator or a set of administrators? Do they have a valid grant, were they registered on the title, or the title is still in the names of the deceased. Are there beneficiaries on the land, and how do we deal with the land subject to beneficial claims (See: Israel Lwanga vs Mubiru, Ddumba versus Bagambe). What of situations where one of the administrators /executors is dead, can we deal with the survivor? (See: Silver Byaruhanga versus Ruvugwaho).
6.0 Managing the Negotiations and Execution of a formal agreement
6.1 Very important to negotiate and agree terms and of late, to execute an agreement of sale. Agreement may be formal or electronic. Hitherto, transfer form and handing over of title and possession would suffice (See: M. Buwule versus Asuma Mugenyi). Of late, people deny agreements they signed or feign ignorance of the transactions they executed, claiming it was a loan not a sale, or otherwise, what would happen where there is no agreement at all?
6.2 To prove purchase, an agreement or atleast a formal acknowledgement is now of serious evidential value, especially where transaction exceeds 10 currency points. (See: Ochaya Samuel Owen (Administrator of the estate of the late Ochan H.K) Versus Akena Kristy Rose HCCA No. 30/2015 2. HJK Trading Co Limited V. Zziwa HCCS No. 415/2018).
6.3 Be very keen on the terms in the agreement. Terms depend on which side you are or whose interests you are protecting. Terms as to payment especially in instalments, (See: Felix Nsibirwa versus Dr. Baguma), when to take possession, when to pay the balance and what happens if the balance is not paid. (See: Boutique Shazim Ltd V. Norrattan Bhatia & Anor SCCA No.04/2020). Agreement determines breach and consequences. (See: Golden Eagle Complex Limited versus Mubiru Adrian).
6.4 Be mindful of persons claiming to be illiterates and therefore seek to set aside the transaction on ground that they did not understand the nature of the transaction. Consider the need for certificate of translation. (See: Stanbic Bank of Uganda Ltd V. Ssenyonjo Moses and Anor CACA of 2012), or persons, who, subsequent to the transaction, turn around and claim that they thought it was a loan transaction and not a sale or vice versa. (See: Ben Kavuuya versus Wakanyira and Alice Okirol versus Global Capital save 2004 Ltd). Also be mindful of persons who transact through attorneys, need to verify the authenticity of the power of attorney (See: Zaabwe vs. Orient Bank). Need for thorough due diligence on vendors abroad, acting through attorneys in Uganda.
6.5 On the other hand be mindful about the actual agreement you are executing, some lenders require borrowers to sign agreements of sale and transfers. (See: Musimenta versus Kaggwa), Image Finance versus Kamanyire). How do we ensure that we avoid being fleeced by lenders? The terms of the agreement matter.
6.6 The requirement to register the agreement of sale (URA policy of late), and implications in terms of taxes and evidential value in terms of admissibility of the agreement in evidence in future land dispute, (See: Rosemary Nalubega versus Jackson Kikayira), save that failure to register does not render the transaction illegal (See: Wasukira Fred V. M/s Harmony Group Ltd HCCS No 40/2009).
7.0 Managing the Tax component
7.1 There are tax obligations that arise from land transactions or dealings in land e.g. be mindful of the obligations related to Withholding Tax (See: Luwaluwa versus URA), who pays it, is there capital gains tax, and if so who pays, what about the stamp duty, who pays and how much. Be mindful of the practice of under declaration of consideration paid for the land and it being said to amount to fraud (See: Kanonya versus Kanonya; (see: Philip Dumba versus Bagambe). Seeking further guidance from tax experts is an added advantage.
8.0 Managing the Transfer process
8.1. Ensure that a transfer instrument is duly executed and witnessed by competent witnesses, recognised under the law (See: Nile Bank Limited versus Desmond Kaggwa). Also secure the consent to transfer form. For all other transactions, secure the relevant instrument like a mortgage instrument, lease instrument, spousal consent (See: Amuge Hilder versus DTB) etc.
8.2 Submit that the consent to transfer form or other instrument for valuation by the office of the Chief Government Valuer. Make material disclosure of the correct information including any developments on the land. Pay the assessed stamp duty and registration fees. (See: Ddumba versus Bagambe).
8.3 The need for prompt registration of the interest, the subject of the transaction is highly Advisable. (See: Simbamanyo Estates Ltd versus Meera Investments Ltd). Any delay in effecting a transfer may be faced with subsequent caveats and challenges. (See: Musimenta versus Dr. Kaggwa and Themi Nakibuuka versus Peter Sematimba). Note that a legal interest only passes upon registration of a proper instrument. The practice of keeping titles and blank signed transfer forms without effecting transfers is not safe.
8.4 Upon conclusion of a transfer, obtain a search statement confirming that indeed, the transferee is reflected on the register as the new proprietor.
9.0 Possession
Where possible, it is advisable that upon conclusion of the purchase, or lease, the purchaser or lessee should take immediate possession of the subject land. The practice of absent title owners is not safe, especially in case of vacant land. Squatters, beneficiaries and other claimants arise over time. Don’t leave the land unattended to, atleast show you are in control as the owner.
Conclusive remarks
It is quite evident that there is no set criteria whether under the law or in practice for managing a successful land transaction. The nature of due diligence and steps required to be taken will depend on the peculiar nature of the transaction. What I have highlighted herein above are simply some of the areas for consideration in managing and perfecting a land transaction.
I am hopeful that what I have been able to share with you has enriched your knowledge on how to manage and perfect a land transaction amidst all the socio economic and legal challenges we are facing as a country.
