Sector Update – Conveyance Land Purchase – Legal Due Diligence

Sector Update – Conveyance Land Purchase – Legal Due Diligence This short updater covers the key items to look out for from a legal perspective when purchasing land. 1. Seller/owner It is critical to establish who the owner of the property is prior to entering into the purchase agreement. Ownership can be ascertained via undertaking search at the respective land registry, looking at the identification documents, meeting the local government officials where the land is located and speaking to the neighbors. Through this process, avoid being accompanied by the purported seller because you may fail to get accurate or honest information from the respective subjects. 2. Location This is critical for unregistered land i.e. no certificate of title is issued. The Ministry of Lands makes plans for how particular land should be used.

Hence, if the area which is being purchased is out of town and least developed, it is important to visit the land registry and obtain the plan of the area. Otherwise, when you purchase that piece of land and realize that it is set aside for public use or uses which do not accommodate your intended purpose, you are unlikely to get the respective title documents unless you commence the process of change of land use. 3. Disputes Establish if there is any dispute with respect to the property. Whilst Tanzania does not have a centralized registry for all court cases, a lot of information can be obtained from the neighbors and the local government authority where the property is located. As stated above, do not take the purported owner with you when you go to make these inquiries.

Some disputes may not be in courts, but are merely between neighbors meaning you will get information which will allow you to either proceed with the purchase or just back out. Also, as a caution, depending on how much time you have, send someone to the property for several days consecutively to just be checking, looking out and see if it will spark any interest from the neighbors or if there will be any restrictions on accessing the land. This can be a huge tell-tell sign that there is a potential issue with the property. 4. Spouses & family properties From a general perspective, spouses have a say on the sale of land. In order to avoid any potential issues, try to establish if the seller is married, widowed, divorced or otherwise.

Whilst it might not be a material risk, it remains to be a risk and there will be no harm to insist (as a purchaser) that the seller signs the appropriate affidavit confirming about absence or presence of marriage etc. Alternatively the spouse should be one of the witnesses in the purchase agreement. Family properties can have their own challenges especially if there are no title documents. When family properties are purchased, it is important to establish who are the family members with the rights to the respective property and make them either witnesses or sellers. This is to avoid one or more of the family members to file a case in court to challenge the sale. Note that courts are usually sympathetic towards family members especially if the one objecting is the female spouse or children of the seller especially those who are under-age. 5.

Valuation Valuation over the property is important for the properties with certificates of title. It will not be possible to do a transfer of property and have the certificate of title registered in your name (as the purchaser) unless there is a valuation done on the property. 6. Taxes

These are divided into two i.e. payment of capital gains tax and stamp duty to the Tanzania Revenue Authority and the payments to the local government authority where the property is located. Most local government authorities demand payment based on percentage of the purchase price. It is critical for the parties to state clearly within the purchase agreement who will be responsible for payment of these taxes. If the seller is to pay any part of these costs – particularly capital gains tax, it is best to withhold it from the sale price otherwise it may become challenging to get the seller to pay it once all the money has been paid to him/her 7. Local government authority Aside from the ordinary sale and purchase agreement executed between the parties, it is advisable to visit the local government authority which will prepare a separate transfer agreement in their own format.

Once the parties sign, the local government will also sign and issue you with the receipt after payment of the respective percentage. This document will be important at the later stage especially if there is no certificate of title at the time of the purchase of land. 8. Outstanding land rent For registered properties with certificate of title or plot numbers, it is important to establish if there are any outstanding land rent. If there are outstanding payments, the land office will not register the transfer of title until the outstanding land rent is paid. Ordinarily, these have to be paid by the seller prior to being paid the purchase price or the purchaser can withhold the outstanding land rent from the purchase price. 9. Contracts This cannot be over emphasized.

It is very important to have written agreements for purchase of property and pictures of the sellers to be attached to those agreements. Also, it is important for the seller to provide their national identification cards, voters’ card or any other identification document which is not an employment ID or something which someone can easily create. These documents will be very important and useful especially if there is a problem later with respect to the sale. 10.Payments Avoid making payments in cash to the sellers. Payments through bank accounts which are in the name of the seller is the most secure way of making payment. It can be challenging if the land being purchased is village land or sold by persons who do not have bank accounts. In such an instance, the most secure way of making such payments is via mobile money because a trace can be left and always make sure that the names match.

All in all it is important to undertake extensive legal due diligence on the land and on the seller to avoid fraudsters and double sales. Disclaimer The views expressed in this paper are those of the author only and should not be considered as an official interpretation, defamatory or interference of any legislation, laws or policies of any country including Tanzania. The contents of this paper should not under any circumstances be reproduced or used without our express written consent. It should not be considered as a legal advice to any of its recipient(s) and should not be relied upon without obtaining further legal advice. We accept no liability for any loss occasioned or suffered due to the contents of this paper.