Verifying Title of a property

People invest millions to buy properties, but several of them do not check the title of the property correctly and land in financial mess and avoidable litigation  Checking the title of immovable property is a complex job because Indian Property Laws are not codified in a single law book, but they are scattered in different statutes. Even an accidental omission to take cognizance of any of these provisions will prove costly in the long run. Some of the important points to be checked before buying immovable property as under: 

Seller to be owner 

Only an owner can sell the property and so the buyer should deal with the owner. Inspection of documents such as property card, share certificates by co.operative societies, 7/12 extracts etc. will help the buyer to identify the owner. 

   If the seller cannot personally handle the sale transaction, he can appoint a constituted attorney. Under Section.33 of the Indian Registration Act, such a Power of Attorney should be attested before a Sub Registrar, if executed in India and if it is executed outside India, it should be attested by a Consular Officer or a Notary Public in that country. 

Capacity of seller 

If the seller has purchased the property with his money, he can sell it. If he is holding the property as a nominee he cannot sell without the consent of all legal heirs because the law is well settled that nominee is not the owner, but holds the property as a trustee. If seller claims ownership by virtue of a Will, it is advisable to insist on Probate. If the seller is a legal heir of a deceased owner, consent of all legal heirs is necessary. If the buyer has any doubt about the capacity of the seller, insist on Letters of Administration or such authority issued by a court. 

Company as seller 

If the seller is a company insist on a resolution of board of directors. The resolution should reflect the decision of the company to sell the property and authorize the signatory to sign the sale documents. The person thus authorized should sign the documents himself and not authorize another person to execute documents because a delegate cannot delegate. Under s.293 of the Companies Act, if the company sells whole or major part of the company's property, consent of the general body is necessary. 

   Many companies mortgage properties to avail of loan. Under s.124 of the Companies Act, all such charges should be registered with the Registrar of Companies within thirty days. A registered charge is a notice to the public. So, if the buyer buys company's property, he should check Register of Charges kept by Registrar of Companies. 

Partnership firm as seller 

When a partnership firm is the seller, all partners should sign the sale deed. In routine matters any one partner can bind the firm, but under s.19(2)(g) of Indian Partnership Act, the implied authority given to a partner does not empower him to sell immovable property of firm. 

Minor's rights 

When minor's rights are involved in a property, the buyer should insist on court's order permitting transfer. Courts will ensure that the money received by selling minor's property is used for the benefit of the minor. 

Lunatic's rights 

A mentally ill person or a lunatic is incapable of taking correct decisions. He cannot sign contracts. Therefore, if a lunatic person has share in a property, an application has to be filed in court to appoint a manager for the mentally ill person and the manager thus appointed by the court can sign documents on behalf of the lunatic. 

Trust, Wakf Property 

If the property is owned by a public trust, prior permission of Charity Commissioner is necessary. If the property is owned by Wakf, permission of Wakf Board is mandatory. In the absence of these permissions, the transaction may be declared as null and void. 

Foreign companies 

If the seller is a foreign company or corporate body, prior permission of Reserve Bank of India is necessary because under Foreign Exchange Management Act, foreign corporate bodies can buy or sell immovable property in India only with the permission of Reserve Bank. 

NRI as seller 

If an NRI or PIO (person of India origin) is the seller, please insist on NOC from Income Tax Dept. under s.195 of Income Tax Act. This will ensure that the purchaser does not receive any demands for capital gain tax from Income Tax Dept. 

Co.operative society as seller 

S.64 of Maharashtra Co.operative Societies Act prohibits a co.operative society from selling its assets and dividing the funds among its members. Therefore, avoid such deals. 

Premises in a co.operative society 

If the premises you propose to buy is situated in a co.operative society, there will be additional restrictions.For example,under s.29(2)(a) of the Maharashtra cooperative societies Act, a person can sell the property only after he holds the same for minimum one year. The transfer of shares will be subject to the byelaws of the co.operative society.The buyer's title becomes clear only after the co.operative society transfers the shares and admits the buyer as a member of the society. 

Premises in a constructed premises 

If the buyer is buying a constructed premises like flat, row house etc. in a constructed premises, please insist on occupation certificate before taking possession. If the building does not have occupation certificate, it may lead to several complications in future. 

Sale by insolvents 

In India there are two laws governing insolvency. They are Presidency Towns Insolvency Act (for Mumbai, Calcutta and Chennai) and Provincial Insolvency Act (for rest of India). Under the former law, when a person is declared as an insolvent by a court, his entire property vests in the Official Assignee and the owner does not have the right to sell his property. Further, the Official Assignee is empowered to examine the legality of all transfers made by the insolvent during the two years preceding the court's order. 

Involvement of govt. agencies :

Government agencies like Collector, MHADA,CIDCO etc .lease land for construction of buildings. If the buyer is buying premises in such buildings, he should find out the conditions stipulated by those agencies for transfer. Generally there may be conditions for payment of premium to those agencies. 

Use of premises: 

A residential flat is meant for residential purposes and a garage is meant for parking motor vehicles. Therefore, the buyer should be clear about the purpose for which he buys the premises. Illegal change of user of premises is an offence and may lead to future problems. 

Buying land :

In Maharashtra there are several restrictions on purchase of land. Agricultural land can be purchased only by an agriculturist. If the buyer gives false declarations at the time of purchase, the problems will be multiplied. Land owned by scheduled castes, tribes, nomadic tribes etc. can be bought only with prior permission of competent authorities. In a city like Mumbai land is reserved for specific purposes and the buyer must be aware of the use of land. 

Lis Pendens :

Under s.52 of the Transfer of Property Act when any legal proceeding involving title of a property is pending in a court, none can sell the property till the court decides the issues. In Mumbai pendency of such legal proceedings can be registered with the sub registrar under s.18 of the Indian Registration Act. This is called Lis Pendens. Before concluding the transaction the buyer should arrange to conduct a search of land records. 

Stamp duty :

After completing other formalities the parties should enter into a sale deed to buy the property. Stamp duty should be paid on the basis of the market value fixed by government or the agreement value, whichever is higher. 

Registration : 

Certain special laws exempt documents from compulsory registration, otherwise all documents for transfer of property should be registered with sub registrar. 

   The above list is not all inclusive. Additional requirements may vary from case to case. 

NOTE :

If he/she is holding the property as a nominee he cannot sell without the consent of all legal heirs 

All documents for transfer of property should be registered with sub registrar