Wednesday, April 23, 2008

Real Estate in Jamaica - Title Insurance

There has been quite a bit of excitement in the real estate industry lately with talk about the introduction of title insurance by NEM insurance company. You will recall my earlier post about the complicated and bureaucratic experience inherent in transactions in the Jamaican real estate market.

Take a look again at my description of the structure of our land ownership system which comprises the Torrens title system and the common law title. In the case of the former, the land title is registered and this means among other things that it is guaranteed by the government of Jamaica. Demonstrating ownership to common law title/unregistered land is less certain however and depends on proof of an unbroken chain of title back to a good root of title.

The idea of title insurance is to combat the defects in the systems by providing protection against loss. Whereas registered title has lots of advantages the process of obtaining same can be very time consuming and even confusing whether it is applying to register splinter titles in a new subdivision or just transferring ownership in one title. With the introduction of title insurance financial institutions will be offered the security they need to make loans allowing land developers access to mortgage financing without the actual perfected title.

In the case of owners of common law title, if their titles are covered by title insurance, they will also have access to financing as, as they would now be able to get mortgage loans.

Indeed Jamaica National Building Society's general manager Earl Jarrett has said that they will accept NEM's title insurance policy. We look forward to the anticipated benefits that are to flow from this intiative.

3 comments:

The Trafalgar Council said...

I am still unclear on this issue.

(1) If the financial institution can lend on the strength of an incomplete title transaction what impetus is there for the developer to complete the transaction and wouldn't that be a serious drawback in the development of a vibrant land market in Jamaica?

(2) Also wouldn't the title insurance premiums be so substantial as to significantly alter the cost structure of the development and lead to even higher sale prices in a market that I would argue is overdue for correction?

(3) Given the cost of land in Jamaica and I presume the additional risk premium given the incomplete nature of the title transaction, is the insurance likely to be syndicated, thereby increasing the transactions cost?

I am no expert but in hearing about this matter and reading it on your informative blog I just thought I would seek some clarity.

The Trafalgar Council said...

By the way, congratulations on an impressive blog. On that basis we will be providing a link from our blog to yours. Please feel free to reciprocate if you are so minded.

Dee said...

Sure I will reciprocate and thanks for your comments.

As to the completion of the sale. Financial institutions do already lend prior to registration of documents, they usually do so on the advice of their lawyers who seek appropriate undertakings etc to ensure that that registration will take place failing which they usually insert some protective arrangement.

With respect to costs, yes I agree certainly prices are likely to spike. I guess they will argue however that with the insurance there is likely to be a reduction in delays and therfore a reduction in escalation.

I am waiting to see how it works. Meanwhile I notice that the company has a website at http://www.caribtitle.com/index.html