Tuesday 7 February 2012

Good legal article on verification of Title of Immovable Property

Rapid industrial development and unbridled urbanisation have seen the demand for land for development of residential, commercial and industrial complexes, and even for farmhouses rise tremendously, resulting in sky-high prices. Alienation of real estate is specially taking place in villages situated within a radius of 1-20 km of urban industrial and commercial centres. Land parcels are generally purchased through socially advanced, often unscrupulous persons, or rich agriculturists possessing sufficient muscle power and skills to persuade, deceive and exploit the poor farmer. As a result, widespread deceit and exploitation is seen in almost all land alienations. It is, therefore, essential to have a fair idea of the guidelines of investigation of title.

Title is a legal term; it means the ownership right to property. When search is conducted unto the property of the person who owns it, it is called the Investigation of Title.

Investigation of title commences with the advocate commissioning searches in the offices of the concerned sub-registrar, to find out all documents that are registered relating to the property for the last 30 years. If the relevant documents are not available from the above office, the owner’s advocate is asked to provide copies of the same. Enquiries should also be made from the Municipal Corporation to ascertain whether there are any arrears of property taxes or water charges in respect of property.

In addition, the advocate issues a notice in local newspapers inviting claims in the nature of mortgage, charge, easement, etc., against the property to be submitted within a specific time with supporting documents. The notice states that if no claim is received, it would be deemed that no such claim exists or it shall be deemed to have been waived. Such a clause is not binding on the real claimants because the notice may not come to the attention of such person, however in case of dispute such notice will support buyer’s contention that he is a bona fide purchaser for value without notice of claim. Site inspection through a surveyor for ascertaining the possession and boundaries of the land should be conducted.

The investigation is carried out broadly to ensure that the property is indeed in the name of the person selling, is free from liens, mortgages and encumbrances, that the property tax has been fully paid up to date and that the property is not engaged in any legal conflicts. The owner of the property/land has to prove this satisfactorily or else there is no chance at all that any buyer/creditor would take the risk & invest his funds.

In the legal term, land has a vast meaning, however, for the time being we are considering limited meaning of land. The land means surface of the ground and everything on or over or under it. Land can be classified as per its use or as per its geographical nature

The word “Title” generally used in the context of property means a right in the property. It connotes bundle of rights subject to prohibitory or regulatory statute. Such rights are capable of being transferred.

In the case law reported in Supreme Court Cases ,

Can bank Financial Services Vs custodian 2004(8) SCC 266, it was held by Supreme Court that:-

“The Title in an immoveable property is the means whereby a person’s rights to property in presenti is established and does not include a bare expectancy to get such right in due course of time.”

i.e. Title means a present right or interest in an immovable property capable of being transferred.

The expression Title conveys different forms of a right to a property, which can include a right to possess such property.

Title in immovable property can be conveyed only if the transferor posses such title.

A person cannot convey any title, which he himself does not possess .This was decided by the Supreme court in case of “Syndicate Bank V Estate officer, AIR 2007 SC 3169”

Title in a property cannot exist in two different persons having rival claim.

Marketable title to property :-

The term ’marketable title’ title means a title free from reasonable doubt.

Where there is reasonable decent probability of litigation, it would be considered as the title is doubtful.

Further a public notice in local newspapers should be given about the intention of sale as also calling for any objection before the sale is finalised.

Material defect in property is different from material defect in title.

A right of way / easement may not be a defect in title of the property but would become the material defect in the property. Disclosure of material defect in property is the duty of the seller:-The seller is duty bound to disclose to the buyer. Material defect in the seller’s title makes the sale deed voidable.

Material defect in property if not disclosed amounts to fraudulent transfer. –Under Section 55 of the Transfer of property Act, omission on the part of the seller to make disclosure as are mentioned under section 55(1)(a) of the Act, is fraudulent. But before there is such breach it must be shown that the buyer could not with ordinary diligence, discover such defect.

It is well settled that where the buyer has the means of discovering the defect of the title, there can be no breach of section55 (1) of the Act.

The reported case laws are  Dr.Gwashalal Vs Kartar Singh A.I.R 1961 ,J.K. 66and  Jhamaklal v Mishrilal AIR ,1957 MB 23.

Existence of mortgage makes the title incomplete. – The existence of the mortgage over the property makes the title thereto incomplete.

It is well settled that encumbrance on the property is material defect in the property.

Possessory title in the property – A possessory title under a registered agreement to sale along with “No Objection Certicate” of the seller, could be very well to the extent of furnishing the security but cannot confer full fledged title in the property.

In terms of section 12 B of the Income Tax Act, title must pass by any modes mentioned therein, namely sale exchange or transfer.

In the case of Alapati Venkataramaih Vs commissioner AIR 1966 SC 115 Supreme court held that the contention that a possessory title in terms of section53A of the Transfer of Property Act would not sub serve the requirements of an effective conveyance of the capital assets, as delivery of possession of immoveable property cannot by itself be treated as equivalent to conveyance of immovable property.

By taking proper care as above, the purchaser can get good and marketable title to any immoveable property.

While buying flats in co-operative societies, certain precautions should be taken such as:

1. Verifying the name of the member on the share certificate, electricity, telephone and maintenance bills and receipts;

2. Inspection of the records of the society for ascertaining whether:

a. The building has an occupation certificate;

b. Any lien/charge/claim has been registered with the society;

c. All dues in respect of the flat have been paid to the society;

d. The land has been conveyed to the society;

e.There are any disputes/litigation in relation to the flat;

The society has no objection in transferring the flat. (Although the new co-operative society bye-laws do not require obtaining a no-objection certificate, societies have not adopted the same, hence the requirement of obtaining the no objection continues to exist).

3. Ensure that the transferor is in possession of the flat and has the original agreement/s for sale and share certificate;

4. Verify that proper stamp duty is paid on the original agreement/s for sale and the agreements are registered; The following should also be considered:

a. Whether the shares are transferor’s self acquired property or acquired/held by the transferor in as a Karta of a Hindu Undivided Family;

b. If the transferor is a nominee of the deceased, whether consent of all the legal heirs of the deceased has been obtained;

If the transferor is a partnership firm, verify the partnership deed to ascertain if the partner/s disposing off the shares are authorized;

c. If the transferor is a limited company, verify that proper resolutions are passed approving and authorizing execution of the transaction and whether any winding up petitions are pending against the Company.

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