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Revisiting the documents needed for property buy
Source : The Hindu Property Plus Published On : 2009-01-24 City : Chennai

R.L. NARAYANAN

There are various documents and information is relevant

Recession may be good for purchase of properties. Many investors are looking at an ideal time for making investment in properties. Prices have taken a down turn. It is also a good time for acquisition of properties for personal use. Hence, we can revisit certain basic requirements relating to purchase of properties.

When you propose to purchase a property, you are confronted with various types of documents and title deeds. A title deed or document can be one or more of many types. This could be a Sale Deed, Settlement or Gift, Deed of Partition, Exchange or various other deeds like release, etc. Every information in the document is relevant. Hence, the document concerned has to be looked into for date, particulars of parties, nature of transaction, aspect of consideration, particulars of property transacted and other details, which may relate to registration or non-registration.

It will be good to have an idea of the nature of various types of transactions that one may normally come across. For instance, a “sale” is a transfer of property in consideration of a price paid. A “settlement” is like a gift within certain degrees of relationship. It enjoys, in Tamil Nadu, a lower stamp duty and registration charges than a gift. A “partition” is a division of properties between co-owners. An “exchange” is the transfer of property in consideration of the transfer of ownership of the property of another. A “gift” is a transfer, which is made voluntarily and without consideration.

The property, which is the subject matter of the deed or document, may be subject to certain issues. There could be various types of mortgages or charges. A “mortgage” is basically, a transfer of interest in the property for securing repayment of loan.     A ‘Simple Mortgage’ is in the nature of an undertaking that if there is a default of payment of mortgage money, then the mortgagee will have the right to sell the property concerned. In this type of mortgage, possession of property is not transferred.

A ‘Mortgage by deposit of title deeds’ is well known. All the original title deeds relating to the property are deposited with the mortgagee with intent to create a security on the property concerned. There is no transfer of ownership or possession.

Proper documentation

These are only two of the most prevalent forms by which property is given as security and which may have an impact on the purchase decision. While dealing with property, mortgages and charges have to be taken note of and cleared prior to or at the time of purchase. The discharge of a mortgage has to be properly documented. The availability or otherwise of the original title deeds, is a matter of concern.

Reverting to the title documents, it is to be noted that there could be some documents which are executed by persons, who are not competent to execute such documents. Generally, a document has to be executed by or on behalf of the person who is entitled to transfer the property. The person concerned should be competent to transfer the property. For this purpose, a Company, a Partnership Firm or other entities like Trust, etc, are deemed to be persons.

Vital importance

The history of how the person who has acquired the property has to be looked into. All the prior transferors should also meet the requirements for making a valid transfer. It has to be further checked as to whether possession of the property is also duly transferred.

Doubts on title have to be eliminated. One has to see whether any other person can claim any share in the property. It has to be seen as to whether the methodology of transfer has resulted in operation of the transfer as intended. Further, aspects like permission from Court or other Authority have to be scrutinized in relevant cases. Any restriction or condition has to be properly understood. Tendency of litigation or other proceedings will be a matter of vital importance.

The Authority concerned should have duly authorized constructions, sub-divisions, layouts and development. Approvals must be in place and wherever required, current. The building or development should be in accordance with such approvals. An Authority or Court may cancel an approval granted, under certain circumstances. Development proposals should also meet general guidelines with regard to permitted nature of development, zone classifications, etc.

One has to check the revenue and tax records. The property and other taxes have to be paid by the owner. Chitra, which is a rough assessment of payment of tax and Adangal Extract, which is the village account, have to be issued in the name of the owner. Patta also should be in the name of the owner.

Encumbrances

Then, one has to ascertain whether the property is free of encumbrances. For this purpose, Encumbrance Certificates, documents like Power of Attorney, Agreements, unregistered documents, Wills, Codicils, Trust Deeds, Partnership Deeds and Memorandum and Articles of Association, etc, Search Reports, information on land acquisitions, schemes, future acquisitions, etc have to be considered. There could be licenses, easements and other factors that may affect the ownership.

In addition, one has to see whether the documents are properly stamped and registered. Availability or other otherwise of original documents will have an impact otherwise. There could be a variety of other situations which can impact the title and all aspects have to be carefully considered for evaluation of title. There could be fraud or other situations, which may affect the dealings. There could be leases and oral arrangements. Religion of the owner may have an impact on the property. All these factors have to be properly assessed for evaluating title. These are only broad and general guidelines and title has to be culled out in each case on merits. A decision not to go ahead with the purchase is as critical as a decision to make the purchase. As such, do not rush through this process, as often, you will find yourself in circumstances that may require you to provide yes or no immediately. Do not take decisions blindly. If you are forced to take urgent decisions, then play it safe.

The author is partner, RANK Associates, Advocates, Chennai.

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