Colombian Real Estate: the Danger of a tainted Chain of Title in Property Purchases

Over the last year, we have helped numerous expat clients purchase their dream home or investment property in Colombia. For the most part, the purchases have gone smoothly, with both parties leaving the transaction extremely happy - the expat buyers happy to find a better bargain than in their home countries and the Colombian sellers happy to be dealing with a serious purchaser who can pay in cash.

Unfortunately though, on a small number of occasions, we have encountered an issue during a real estate transaction and have had to advise our clients against purchasing a property they had their hearts set on. The problem in these cases were that after running a Title Search on the property, we found that the properties each had a Chain of Title that was tainted by illegal activity.

What is the Chain of Title of a Property?

The Chain of Title is the history of ownership of a property. When read, it tells the story from when the land was first developed (or as far back as the records go) up until who the current owners are. It states when each previous owner acquired and transferred the property, and through which means they did so (such as a sale or inheritance), and tells if there are certain liens or easements on the property, usually held by the government or utility company.

What is a tainted Chain of Title?

A tainted Chain of Title is when there is a problem in the history of the transfers and ownership of a property. This can include unrecorded deeds or fraudulent sales but, in the Colombian context, it generally refers to property that was acquired with illicit funds or used for money laundering purposes. The most common example in Colombia are properties which were purchased with money earned through drug trafficking.

Why is a having a tainted Chain of Title so dangerous in Colombia?

Due to the country’s decades long history of violent conflict, Colombia has enacted some of the strictest criminal asset forfeiture laws in the world in order to attack the financial bases of the criminal enterprises that have funded the conflict. This means that the government has wide-sweeping powers to confiscate a property that is even tangentially related to criminal activity or remotely tied to funds arising from criminal activity.

The danger this poses to the average homebuyer in Colombia is that these asset forfeiture laws are so powerful that the government can even confiscate a property that is currently owned by an innocent, law-abiding person if that property was once tainted with criminal funds in the past, even if this criminal tie was years ago and several owners removed from the current owner in the Chain of Title.

The justification for this seemingly unfair outcome is that the Colombian government needs the forfeiture laws to be this strict in order for them to have any effect. If not, drug traffickers and terrorists would just transfer all their property into the names of family members, associates, or even innocent civilians they compelled under force, in order to keep the ill-gotten properties out of reach of the authorities.

How do I protect my property from being seized under these Criminal Asset Forfeiture Laws?

The best defense is prevention. Before buying a property it is imperative to do a thorough Title Search and background check on all the previous owners of the property.

Doesn’t the Seller of the Property have an obligation to tell me if the Chain of Title includes a known criminal?

No. Morally they should of course, but by law the onus is on the buyer to do their due diligence in researching the property history before going through with the purchase.

Publicly acknowledging a tainted Chain of Title will only serve to drive down the price of sale or make the property unsellable, so you cannot rely on the owner or their agent to disclose anything.

Wouldn’t my Real Estate Agent let me know if a property is tied to any criminal history?

No. In Colombia real estate agents do not research property history or contract a third-party to conduct any sort of Title Search. You cannot rely on your own Real Estate agent for protection against buying a property with a tainted Title history.

As a side note: There are many good real estate agents out there but, unfortunately, we have also encountered several who have actively worked against the best interest of their own clients in order to receive their commission from the sale. This includes a recent case of ours where a real estate kept badgering their client to procede with a property purchase on land we had found had once been owned by a high level narco who had had several other of his other properties confiscated by Colombian Government. This real estate agent continued to harass her client even after he clearly communicated to her several times that he wanted to look for other properties and only stopped after he fired her and eventually blocked her on all platforms. Real Estate agents in Colombia are not licensed so there is no governing board or agency to complain about unethical behavior.

Can I still buy a property if it has a tainted Chain of Title?

Yes. You can choose to purchase a property even if there is a known criminal in the Chain of Title. The government will have the power to bring an asset forfeiture case against the property but it may never do so. There are many properties in Colombia which live in this limbo.

The chances of the government bringing a case depends on many factors including notoriety of the criminal or criminal organization, the political mood, how much time has elapsed, and if it receives complaints or evidence from affected parties. All told, the risk is probably low that the government will move against your tainted property after purchase but every case must be judged on an individual basis and some properties are at much higher risks than other.

But the ever-present risk of suddenly losing a multi-hundred thousand dollar investment and being driven out of your home, and then spending years in court, always makes purchasing a tainted property something you should really think twice about.

Conclusion

Draconian Colombian criminal asset forfeiture laws and the negative consequences of owning a property with a tainted Chain of Title make it imperative to properly research the title history and previous owners of any real estate you are hoping to purchase. You cannot rely on either the seller or your real estate agent to alert you to any criminal ties in a property’s history so you must do the due diligence yourself as ignorance is not a defense in these cases.

If you have any further questions about the process of purchasing property in Colombia, feel free to contact Restrepo Legal. We are here to help.