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Deeds office scam raises fears about home title security

Is title deed insurance a solution?

Skulduggery in the Deeds Office that has seen more than 70 municipal and corporate properties fraudulently transferred to shady private companies since December last year raises the strong possibility of property owners now having to take out title deed insurance, as is the case in the US and other countries.

Top officials who held positions of great trust at the Deeds Office have been implicated in the irregular transfers and fraudulent alteration of the title deeds registry, and the Hawks have been drawn into the investigation so there is a strong suspicion that there is a criminal syndicate involved.

At the very least, this scandal has proved that the Deeds Office security procedures can be compromised – and that SA property owners may not in future be able to rely entirely on these for their security of tenure.

And that is a “very scary prospect”, which immediately raises the question about the need for title insurance to be introduced in South Africa.

This type of cover is a requirement in the US, for example, for almost anyone with a mortgage and the way it works is for the property owner or buyer to pay a once-off premium to a ‘title company’ that guarantees undisputed ownership of the property at the time of purchase, and will alert owners to any attempt to illegally transfer it to anyone else.

Owners with this type of insurance can usually also expect compensation if there turns out to be some ‘defect’ in the title that could inhibit the use or resale of the property, such as a servitude over the property, or some previously undisclosed lien in favour of a third party like the municipality.

And in most cases title insurance also gives the bank that provided the home loan to purchase the property peace of mind regarding the safety of the asset and title that secures the loan.

Title insurance is thus different from normal insurance in that it protects you against events that may have occurred before you took out the policy, not events that may occur in the future. “And given that, its cost is usually minimal when weighed against the protection it can provide.

*Berry Everitt is CEO of the Chas Everitt International property group

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