Friday, May 16, 2008

Title Insurance in Jamaica can liberate 'Dead Capital'

KINGSTON, Jamaica - The introduction of Title Insurance in the Jamaican market opens up the possibility of developing hundreds of thousands of parcels of land which are now effectively ‘dead capital’, says Earl Jarrett, general manager of Jamaica National Building Society (JNBS).

Just over half of the more than 700,000 parcels of land in Jamaica have government registered titles, he said at the Title Insurance launch last month. The rest, with common law titles, have no such government guarantees.

“These plots of land are outside of the formal land registration system, and cannot be leveraged to access financial resources,” he stated. They lack the government guarantees provided under the Registration of Titles law that would enable their use in the financial sector.

With a common law title, “you get the value of saying a property is yours, but you cannot borrow on it,” said Garfield Knight, chief executive officer, Caribbean Title Limited in an interview.

Someone could invest $10 million building a home on an unregistered property and then be unable to borrow $1 million on it, he continued.

“Many families pass down land from one generation to the next, and in the process, subdivide sections for family members, without obtaining properly registered titles for the properties. Beautiful houses built on large acres of land, are literally worth nothing because ownership to the land is not properly documented,” Mr. Jarrett opined.



Earl Jarrett, JNBS General Manager, says research has shown that Title Insurance can provide the private enterprise model that will inject viability into the Jamaican property market’s stock of ‘dead capital’.


This has impacted heavily on the development prospects of the island. He said Highway 2000, the North Coast Highway, and the roads between Montego Bay and Negril have opened up large areas the country.

“Lands adjoining these road networks are appreciating significantly,” Mr. Jarrett pointed out. “Unfortunately many landowners are unable to benefit directly from the enormous investment opportunities in real estate that they can provide.”

The difficulty is that the roads run through previously underdeveloped areas where many property owners have common law titles.

“In the mortgage business, very often we meet persons who want to upgrade their properties or take out a mortgage, but cannot do so because many do not have registered titles; and, the process of getting those titles can be difficult,” Mr. Jarrett said.

“Compliance with the Registration of Titles Act may be challenging, even though they are legitimate owners,” Mr. Knight said.

The Jamaica Information Service (JIS) stated in a 2006 release that along with a common law title, several other documents are needed to obtain a registered land title for a property.

The property registration process also requires a legal statement setting out details of how the land was obtained, two declarations from persons familiar with the property for at least 30 years, as well as an up-to-date tax certificate indicating that payment of property taxes is current, the JIS report said.

The government has been trying to address the unregistered land issue for some time, Mr. Knight said. The efforts have been very costly and have shown little success.

Mr. Jarrett said that research has shown that the use of Title Insurance can provide the private enterprise model that will inject viability into the Jamaican property market’s stock of ‘dead capital’.

“With verified land titles acquired with Title Insurance, policy holders would have the financial leverage they need for other investment opportunities,” Mr. Jarrett said. Unlocking Jamaica’s real estate potential will benefit all the stakeholders in the real estate industry, whether they are developers, agents, brokers, attorneys, financiers, one-time buyers, or sellers.

NEM Insurance, a subsidiary of Jamaica National, introduced the new insurance product to the Jamaican market in April 15. The new product is being provided through collaboration with NEM, First American Title Insurance Company, which reinsures the policies and Caribbean Title Limited (CT), which provides risk assessment services.

“We all have a real opportunity to collaborate to grow the industry and our economy by capitalising on these efforts,” Mr. Jarrett said. source