Mass scale fraud in Sri Lanka’s land and condo deals
Frauds pertaining to real estate property and condominium property have become somewhat common in Sri Lanka with the laws pertaining to them in this country being unreliable and often amended, repealed and replaced. There is no system in the country where the government certifies or guarantees the title of the property.
A seminar was recently held on ‘Condominium Law and Preventing Fraudulent Transaction in Real Estate’ by two legal experts on the subjects – Jagath Wickramanayake and Indika de Saram, attorneys-at-law – and organised by TW Corporate Training held at Cinnamon Lakeside Hotel, Colombo this week and the above were their views.
Mr. Wickramanayake said that in the title registration there are enormous number of issues arising from 90 odd sections of the Act. He revealed: “Except for the opening section – the first paragraph and the last one that is on interpretation that Sinhala text prevails if there is any inconsistency between the two, all the other sections have amendments”. He added: “This particular amendment was prepared by the Land Ministry itself and not by anyone else.”
He pointed out that these fraudulent transactions in real estate have become a common occurrence putting prospective innocent buyers into serious difficulties and said that the fraudsters appear to be experts and they appear to be getting solid assistance of the Land Registry workers and Municipal workers. He said: “One of my clients brought a huge file from the municipal custody and I chased him away. ”
About the law that has 93 section, 91 sections are to be repealed and the authorities have realised that this has lots of flaws and problems and are going to repeal and in place introduce 170 odd sections. This is the law, he said that the country has since 1998 in operation. So, he said: “For sure whatever the particular law says the government still cannot guarantee any land transaction in this country.”
On fraudulent transactions there are two options, he indicated. File a criminal action to punish the fraudster to recover the money, while masterminds behind this kind of transaction are not known. The fraudster gets someone else’s name, prepares false identity cards and ultimately the signing is done by ‘that someone’ and once the transaction is done the impersonator would get a small stipend like Rs. 500,000 or one million and say Rs.28 or 29 million is netted by the fraudster.
He said it would be a myth to think that this kind of real estate frauds take place only in countries like Sri Lanka and in developing countries. He indicated that in 2008 the Empire State Building in the US was fraudulently transacted and said it took only 90 minutes to execute the whole deal.
In that case the buyer was ‘Nelots Products’, the notary – infamous bank robber – Willie Sutton and the witness Fay Wray (King Kong star).
Mr. Wickramanayake explained the numerous situations how the fraudsters operate. They obtain all the details of the land and the owner, which they intend to fraudulently sell. Sensing that owners are not around, a building is put up on the bare land and the owner comes to know, when probably a neighbour alerts him.
The fraudster prepares all documents more perfect than originals. He said that when raids were carried out where these fraudsters operate, there were rubber stamps prepared in the old way, old stamps of any era, the names, signatures of the registrars in different eras and everything appears perfect.
He cautioned the legal officers and bank managers in charge of loans of land mortgage to act diligently in getting the certified copies of deeds and other documents from the Land Registry and warned them to go themselves to the Land Registry and not to depend on their clerks. What they could see the clerks would not see as there could be interpolation into the relevant folios as they have to be extremely careful as this kind of fraudulent transactions takes place every day in the country.
He said: “Now if you get caught to a real estate fraud you have to face very serious consequences.” Though the owner may have certain rights to possess and recover possession of the land, if the deed title is a fraudulent deed there is no entitlement for any of the rights. “If you get caught to a fraudulent transaction your money has just gone.”
Indika De Saram in his presentation on ‘Condominium Law’ indicated that those who are going to do projects, finance projects, or secure a developer or purchase, should have a good knowledge of the concept of the condominium law. He said that if a person puts up a storied building worth Rs. 100 million on a land worth Rs. 10,000, the building would be owned by the person who puts up the building.
When working on condominium projects one must clearly understand the basic laws that govern the apartment ownership in Sri Lanka – the Apartment law, the Condominium Authority Management law, the Land Restriction and Authority Act and the Municipal Ordinance.
He also enumerated various cases in condominium property and the extent of frauds involved in them.