Posted by: Martin | June 13, 2011

Secure Title

Titre Foncier
I got the question below from a friend about “Titre Foncier” which is the final title deed for land ownership in the Ivory Coast.
How do you know that the Titre Foncier is genuine, when there has been so much corruption and fraud up to the highest level, and you have a judiciairy which is just as corrupt and corruptible?
Investor Stephen Jennings from the A Bull on Africa post said that “In urban real estate we are looking for very large conurbations in fast growing countries with reliable property title and reasonably sound rule of law.”   So this question is about the two latter issues which are very fundamental to real estate investing in Africa. Here’s my reply:
Well, the short answer is that  that’s why there is a risk premium for investing in Africa.  Returns on paper are much better than in the developed world.
As for Titre Foncier, I have yet to hear of a case where someone holding a titre foncier has lost a property outright,  but heard many cases of problems with “lettre d’attribution” and “terrain villageois”. Corruption is not uniform, the risk reward from the point of a corrupt official looks much better when rules and paperwork are less clear.  And with a Titre Foncier that’s as clear as it gets.
One has to put much more effort into due diligence when doing real estate deals in the Ivory Coast compared to the developed world. The more due diligence is done the more expensive it gets for somebody to bribe officials. For a small plot of land it could be worth it for an official at a local municipality, but less so at the Ministry of Construction.
I think for most of the cases the main risk is a dishonest counterparty (possibly cooperating with a dishonest/fake notary and agent) trying to sell something he doesnt own, or selling the same plot multiple times or something like that, without having any links to the adminstration.  A bit of natural skepticism and checks at the local municipality or at the Ministry of Construction should avoid these types of frauds.
Close call
Another thing to watch out for is if the land is disputed. It can look fine at the Ministry of Construction, the seller’s identity matches the owner’s and everything, but then there is someone else claiming ownership through a legal process that can last several years. And such a legal process is definetly not something one wants to be involved in. Heritage Foundation writes:
The judiciary [in the Ivory Coast] is constitutionally independent but slow, inefficient, and subject to executive branch, military, and other influences. Judges serve at the discretion of the executive, and some are open to bribery.
This is exactly what happened with the first Cocody plot I looked at. A  friend who is a lawyer fortunately checked at the “Cour de Cassation”  [the Ivorian High Court] and found that there was a legal claim from somebody other than the seller –  so I backed out of that one and bought another pretty equivalent plot nearby instead. That was a close call, and these due diligence checks can really be the difference between success and failure.

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