REAL ESTATE : Transfer of property land rights in Tanzania

According to modern academic theory, owning property is less a matter of owning a physical resource, than it gives access to a bundle of rights attached to the resource.

Ownership, hence, represents the rights to use a resource in a specified and limited way. (Alchian & Demsetz, 1973:17) These rights would have no value at all, if not being recognised by the surrounding society.

Property transfer involves land which is already registered - also known as conveyancing (legal transfer of property from one person to another). In this case there is a person who is holding the title to the land. The transfer involves the process of changing ownership of land from one party to another.

Property transfer results from a disposition of land where there is sale or property is given to another person as gift or through love and affection. Once there is a need to change ownership of title to land that is when transfer of property takes place.

The initial basic procedures involved before finalizing the said transaction include the following;

a) To get hold of a lawyer who is conversant to prepare the transfer documents which will later be signed by the Vendor (property owner) and the Purchaser respectively thereafter to be attested by a Notary Public and Commissioner for Oaths.

b) Along with the transfer document the necessary forms under the land act shall be filled by the applicant (transferor) who is applying for the transfer from his/her name to the other person’s name.

c) The sale agreement or any agreement effecting the change of ownership will be taken to the Tanzania Revenue Authority offices where a stamp duty fee shall be paid before transmission of the documents to the Registrar of documents for due registration of the new owner and effecting the necessary changes in the land register. All pending rates have to be paid before the documents are submitted to the Registrar.

d) Thereafter, after thorough examination of the documents by the Registrar, the Registrar shall effect the changes in the register and the title deed to show the name of the new owner in the title deed.

During this process, one would be advised to seek a lawyer to ensure the smooth transition and legal framework is in order.

In line with the above stated procedures let us look into the payments that have been addressed with reference to paragraph “c” which in this case, also involves taxes to be cleared prior to legalizing the transfer of ownership. All property owners are subject to pay property taxes with the exception of a few, who would be exempted for various factors.

• Stamp duty fees which is levied at 1% of the gross selling price, either the purchase price or the value shown in the valuation report.

• Capital gains tax which is 10% of the value of the property to be transferred. Once the payments are cleared you will obtain the capital gains tax certificate.

• If a person disposed of any of the assets possessed and realizes gain on disposal, the gain is subject to tax unless exempted under the tax laws.

• Registration fee, at which the rate is obtained from the amount paid as stamp duty divide by four (4)

• Land rent land charges are collected through a system of annual land rents administered through the Ministry of Lands, thereafter a rent clearance certificate will be issued.

• Property tax (does not apply to undeveloped land)- Property tax clearance certificate will then be granted.

Historically, property taxation was introduced by the colonial governments in Tanzania during the twentieth century. Property taxes are generally levied on all types of properties – residential, commercial and industrial, as well as on farm properties.

In Tanzania, the level of land rents is set by the central government, with the land rent sharing rate in 1999 giving 80 percent to the central government and 20 percent to the local government.

Under the property tax rural property is essentially not taxed. In fact, non-surveyed rural land is not even required to pay land rent. This means that a large portion of rural wealth is left untapped by the government. Rural districts continue to rely on the agriculture as a means of taxing its agricultural base.

The rating law only applies to urban areas, and there are only a few district governments that are applying a flat rating approach as allowed under the Local Government Finance Act of 1982.

Disaggregated national level information on local government revenues is not systematically maintained or published. Under the ongoing Local Government Reform Programme, it is expected that these data—along with local government expenditure data—will in time be collected and disseminated by local authority and by type of expenditure and revenue. This is according to a survey conducted by the World Bank.

In all essence, when it comes to the transfer of property rights, it is crucial for one to ensure that all the relevant procedures are conducted thoroughly.

We must take up the initiative and perform our due diligence in acquiring as much information as possible; through reading or seeking guidance from an expert on land matters and who is well aware on all the laws governing land transfers to the last stage of attaining the certificate of registration/title.

The author is a practice manager with ABC Attorneys. Please, send your questions to: [email protected], [email protected] More information: www.abcattorneys.co.tz