People are often willing to deal informally when the other person is a parent, sibling, relative, close friend or someone they have known for many years.
That is why, in land disputes, I often hear statements such as:
“My father told me this portion was mine.”
“We signed a simple agreement on plain paper.”
“I have lived there and built a house for years. Nobody objected.”
“I paid the advance, but before the deed was signed he sold the land to somebody else.”
The difficulty is that land is not treated in the same way as an ordinary informal transaction.
With some oral agreements, the main problem may be proving what the parties agreed.
With land, even if you can prove that a discussion or promise took place, the law may require the transaction itself to comply with particular formalities.
Land transactions require special formalities
The Prevention of Frauds Ordinance imposes formal requirements on important transactions involving immovable property.
Transactions such as the sale, purchase, transfer, assignment or mortgage of immovable property, agreements intended to effect certain such transactions, and agreements for future sale or purchase generally have to comply with the statutory requirements for writing and notarial execution.
This creates an important practical difference.
A person may be able to prove:
“He promised to sell me the land.”
But that does not necessarily mean that an informal oral promise can be enforced as though a properly executed land agreement or deed existed.
“My father orally gave me this portion”
This is extremely common within families.
A parent may tell one child:
“This side of the land is yours. Build your house there.”
For the next ten or fifteen years, everybody in the family may behave as though that is the arrangement.
But an oral statement by itself does not ordinarily amount to a formal transfer of ownership of land.
If the property remains legally in the parent's name, serious problems can arise later if:
- the parent changes his or her mind;
- the parent decides to transfer the property to another child;
- the parent dies without completing the expected transfer;
- siblings dispute what was originally promised; or
- the entire property is later sold or mortgaged.
A family understanding and a legally completed transfer are not necessarily the same thing.
“We signed an agreement on plain paper”
People sometimes believe that the problem with an oral agreement can be solved simply by writing the arrangement on a piece of paper and signing it.
That may still be insufficient where the law requires notarial execution.
Sri Lankan courts have treated non-notarial arrangements relating to land with considerable caution. A document that does not satisfy the statutory formalities cannot simply be treated as though it were a properly executed conveyance or enforceable land agreement.
So the question should not merely be:
“Do I have something in writing?”
It should be:
“Does this particular land transaction comply with the legal formalities required for it?”
“I have lived there and built a house for years”
Occupation can sometimes create a strong feeling of ownership.
A person may say:
“I have lived there for twelve years.”
“I built the entire house.”
“The electricity account is in my name.”
“I obtained the water connection at my own expense.”
Those facts may be important evidence when considering the history of a dispute.
But they do not automatically mean that legal ownership of the land was transferred.
A water bill, electricity account, building expenditure or long period of occupation should not simply be treated as a substitute for a deed.
Depending on the circumstances, possession and expenditure may give rise to other legal questions, but that is different from saying that an oral gift of the land has automatically become a valid transfer.
“My parents said I would inherit this property, so I built the house”
This can become particularly painful within families.
A child may spend substantial money constructing a house or improving the family property because both parents repeatedly say:
“This property will eventually be yours.”
Years later, the parents may decide to give it to another sibling.
The child then says:
“I would never have spent all this money if they had not promised me the land.”
That situation should not automatically be reduced to one simple question of ownership.
The expenditure, the representations made by the parents, the intention of the parties and the surrounding circumstances may raise separate legal issues.
But the safest course is not to depend for years on the assumption that a future inheritance has already become present ownership.
An expectation of inheritance is not the same thing as a completed legal transfer.
“I paid Rs. 500,000 as the advance”
Consider another situation.
You agree to buy a land for Rs. 5 million.
You transfer Rs. 500,000 to the seller's bank account as an advance.
There is no properly executed agreement relating to the proposed sale.
A few months later you discover that the seller has sold the land to somebody else.
You may have excellent evidence that Rs. 500,000 was paid.
But a bank transaction establishes primarily that money moved from you to the seller. It does not by itself transfer ownership of the land.
There may then be several different legal questions:
Can the money be recovered?
What exactly was agreed when the payment was made?
Was there a legally enforceable agreement concerning the land?
Has the property already been transferred to a third party?
Did that third party know anything about the earlier transaction?
Certain circumstances may also raise questions involving constructive trusts, but that deserves a separate article rather than being compressed into this one.
“I sent the money from abroad, but the deed is in my relative's name”
This is another situation that arises frequently.
Someone working overseas sends money to Sri Lanka to purchase a property.
For convenience, trust or family reasons, the deed is executed in the name of a parent, sibling or another relative.
The understanding may have been:
“Keep it in your name for now. When I return to Sri Lanka, transfer it to me.”
Years later, the person whose name appears on the deed says:
“This property belongs to me.”
The person who sent the money then responds:
“But I paid for the entire property.”
The source of the purchase money can be extremely important evidence.
But again, the fact that one person supplied the money while the deed stands in another person's name does not mean that the dispute can be resolved simply by looking at the bank transfers.
Sri Lankan trust law recognises circumstances in which property transferred to one person with consideration provided by another may give rise to a trust, depending particularly on the intention behind the payment and the surrounding facts.
Separate guide planned: I Paid for the Land, But the Deed Is in Someone Else's Name – What Can I Do Now?
A deed should also be registered
Executing the proper deed is not the end of the practical process.
Documents affecting land should also be properly registered in the relevant Land Registry.
Registration becomes particularly important where there are competing transactions affecting the same property.
For example, difficulties may arise where one transaction occurred earlier but was not registered, while another instrument affecting the same land was subsequently executed and duly registered.
The Registration of Documents Ordinance contains rules governing the priority of such instruments.
But there is another important point:
Registration does not magically make a bad deed good.
A registered document does not necessarily prove that the person who transferred the property actually had valid title, nor does registration cure defects that otherwise make the transaction ineffective.
So two different questions should always be kept in mind:
Was the transaction legally and properly executed?
and
Was the resulting instrument properly registered?
Before spending substantial money on land
The safest time to resolve these issues is before the dispute begins.
Before paying a substantial advance, constructing a house or spending your savings on another person's land, make sure you understand:
- who legally owns the property;
- what the title documents show;
- exactly what transaction is proposed;
- whether the required notarial documentation has been prepared;
- what you are actually receiving in return for any money paid; and
- whether the relevant deed or instrument will be properly registered.
Trust between family members is valuable.
But when considerable money and immovable property are involved, proper documentation protects the relationship as much as it protects the property.
The important distinction
If you lend someone money without a written agreement, the main dispute may sometimes be:
“Can I prove that this was a loan?”
Land can be different.
Even if everyone agrees that an oral promise was made, the law may still ask:
“Was the transaction completed in the manner required by law?”
That is why statements such as:
“Everyone knew the land was mine.”
“My father promised it to me.”
“I paid for it.”
or
“I have lived there for years.”
should never automatically be treated as equivalent to a properly executed and registered title document.
General information only. Rights relating to immovable property may depend on deeds, title, possession, statutory formalities, registration, trusts, succession and the particular circumstances of the transaction. Individual disputes should therefore be considered on their own facts. Reading this guide does not by itself create an Attorney-at-Law/client relationship.