steps to verify title

STEPS TO VERIFY THE TITLE 54 Written laws are like spiders’ webs and, like them, only entangle and hold the poor and weak, while the rich and powerful easily break through. Anacharsis(fl. 600 B.C), Quoted in Plutarch, Lives:Solon Synopsis 1. Introduction 2. Verification with local bodies 3. Flow of title 4. Caption of a document is irrelevant 5. Original documents to be verified 6. Litigations 7. Mortgage and title to property 8. Power of attorney 9. Contract of sale 10. Encumbrance certificate 11. Tax dues 12. Properties of minors, trust and wakf 13. Physical inspection of the property 14. Properties of the deceased 15. Registration of a document and Notice 16. Housing plots 17. Apartments 18. Leasehold lands 19. Legal opinions 20. Caveat Emptor 21. Suggested questions Summary While verifying title in respect of any property, the basic principles of law governing the parties to that document and also nature of the document should be kept in mind. Any single document may invite the application of many legal principles and many laws. So, before proceeding to verify the document one should be thorough with the basic principles governing the property transactions. 1. Introduction The title of any person acquiring property would depend upon the antecedent title of the person from whom the property is acquired. Standard Chartered Bank v. Andhra Bank Financial Services Ltd & Ors. AIR 2006 SC 3626 Verification of the title of anyone in respect of any immovable property has to be done in a systematic manner. The first step is to assemble the title deeds chronologically. All the title deeds collected in respect of any property have to be arranged on the basis of the date of its execution. After arranging the same, the description of the properties covered by those documents are to be carefully verified and it has be confirmed that all the documents relate to the very same property and the extent of the property for which we want to scrutinize the title are covered in all those documents. 2. Verification with local bodies Further, we have to verify the records of the local bodies and the revenue records to ascertain as to the maximum extent of land area available to the seller in that survey number. In many cases, documents come into existence by including the extent of the porombokku land under the occupation of the seller with the extent of the patta land. So, in a survey number, the extent of the land available in the document would be more than the one available in the government records. We have to carefully go through all the contents of those documents. Every document contains the names of the parties, the title of the predecessors in interest, the manner and the purpose for which the said document was executed, consideration if any agreed and the payment details and the description of the property covered by that document. The maps and plans maintained by the local bodies would also throw light on the extent of the property owned by the seller. Sec.83 of the Indian Evidence Act provides that the Court shall presume that the maps or plans purporting to be made by the authority of the Central Government or any State Government were so made and are accurate, but maps and plans made for any other cause must be proved to be accurate. Harendra Rai & Ors. v. Chandrawatti Devi & Ors. AIR 2007 Pat 120 3. Flow of title After confirming that the documents given to us relate to the property given to us, we have to see the flow of title. For this we have to commence from the parent document. The earliest document placed in our hand has to be a sale deed. This sale deed should contain the details as to the title of the executor of that sale deed to sell that property. After perusing that sale deed, we have to read subsequent documents. 4. Caption of a document is irrelevant We should not be misled by the caption of the documents. Only the contents of the documents determine the flow of title and not the caption given by the document writer. A document titled as settlement deed may sometimes be a will actually. A settlement deed settling the property in the name of a person may in fact settle only a limited interest in favour of that person. The sale deed may not convey the property absolutely. Condition regarding the further sale, resale, holding or usage may have been imposed in that sale deed. The seller might have imposed a condition that the buyer should not sell the property for a particular period. He might have imposed a condition that the buyer, if intend to sell should give an option to a particular person or group of persons. There could be a condition regarding the usage of the property or the easementary of the neighbours. So, all the contents of the documents produced should be carefully perused. After perusing the documents, the continuous flow of title from the earliest document till the latest document has to be seen. There should not be any break in the flow of title. While perusing the same, it has to be ascertained whether, the author of those documents had the authority to execute that document. The property belongs to a Hindu may be a joint family property or Coparcenary property. The executants of the document may be the legal heir(s) of the owner and inherited the property on the demise of the owner. The property might have been belonging to the partnership firm. In all these cases, it has to be ascertained whether all the persons having interest had signed in those documents as executants and whether they had alienated all their interest in that property by that document. 5. Original documents to be verified Further, it has to verified whether, the documents produced before us are the original documents. Now a day, because of the advancement of science, forged documents of title can be prepared and many innocent persons are being cheated every day. So, it is better for us to get one another certified copy of those documents from the Registrar office and compare the same with the documents produced before us. To further satisfy ourself as to the title of the parties, we have to see that property tax receipts and E.B. receipts and confirm whether the property is assessed and E.B. connection is available in the name of the person who intends to sell the property to us. 6. Litigations The documents produced before us may reveal some legal proceedings. We have to collect the certified copies of the judgements and also see the suit register in the court and confirm as the finality of the litigation. Some times the legal proceedings might have been over only recently. In such case, we should have a discussion with the advocate for the opposite parties and ascertain the further steps taken by them after such judgement. 7. Mortgage and title to property The title to a property is the embodiment of a bundle of various rights to that property. So, when the owner mortgages such property, by virtue of such mortgage, he does not lose his right completely in respect of such property. He remains as owner whatever be the terms contained in such mortgage. He is having a right of redemption of such mortgage. In India there is no equity or right in property created in favour of the purchaser by the contract between the mortgagee and the proposed purchaser. In India, there is no distinction between legal and equitable estates. The law of India knows nothing of that distinction between legal and equitable property in the sense in which it was understood when equity was administered by the Court of Chancery in England. Under the Indian law, there can be but one owner that is, the legal owner. Rani Chhatra Kumari v. Mohan Bikram (1931) 58 Ind App 279 : AIR 1931 PC 196 The right of redemption which is embodied in Section 60 of the Transfer of Property Act is available to the Mortgagor unless it has been extinguished by the act of parties. The combined effect of Section 54 of the Transfer of Property Act and Section 17 of the Indian Registration Act is that a contract for sale in respect of immoveable property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. In India it is only on execution of the conveyance and registration of transfer of the mortgagor’s interest by registered instrument that the mortgagor’s right of redemption will be extinguished. The conferment of power to sell without intervention of the Court in a Mortgage Deed by itself will not deprive the mortgagor of his right to redemption. The extinction of the right of redemption has to be subsequent to the deed conferring such power. The right of redemption is not extinguished at the expiry of the period. The equity of redemption is not extinguished by mere contract for sale. The mortgagor’s right to redeem will survive until there has been completion of sale of by the mortgagee by a registered deed. The mortgagor exercises his right under a different claim. The mortgagee’s right is different from the mortgagor’s. The mortgagee exercises his right under a totally superior claim which is not under the mortgagor, but against him. In other words, the sale is against the mortgagor’s wishes. Rights and interests of the mortgagor and the mortgagee in regard to sale are conflicting. In view of the fact that only on execution of conveyance, ownership passes from one party to another it cannot be held that the mortgagor lost the right of redemption just because the property was put to auction. The mortgagor has a right to redeem unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act. Narandas Karsondas, Appellant v. S. A. Kamtam and another, AIR 1977 SC 774 If a mortgage is evidenced in writing, it may be redeemed only by the delivery of mortgage deed. If any endorsement of such redemption is available in the mortgage deed, there shoud be the signature of the mortgagee to authenticate such endorsement. Harendra Rai & Ors. v. Chandrawatti Devi & Ors. AIR 2007 Pat 120 8. Power of attorney If the person who intends to sell the property is a power agent, it is better for the buyer to get a written confirmation as to the genuineness and the validity of the power document. We should also get a certified copy of the power copy from the registration office and confirm as to the validity of the power on date. Some times the power might have been given for a limited period or limited purpose. In such case, it has to be ascertained as to the entitlement of the power holder regarding the intended transaction. 9. Contract of sale A contract of sale does not of itself create any interest in, or charge on, the property. This is expressly declared in Section 54 of the Transfer of Property Act. Rambaran Prosad v. Ram Mohit Hazra, (1967) 1 SCR 293 : AIR 1967 SC 744 The fiduciary character of the personal obligation created by a contract for sale is recognised in Section 3 of the Specific Relief Act 1963, and in Section 91 of the Trusts Act. The personal obligation created by a contract of sale is described in Section 40 of the Transfer of Property Act as an obligation arising out of contract and annexed to the ownership of property, but not amounting to an interest or easement therein. 10. Encumbrance certificate Further the Registration department is also maintaining the index of the documents registered in Book 1. We should peruse that certificate and satisfy as to the absence of any other document other than the one given to us for verification of title. If any other entry is available in that certificate, we should get a copy of those documents and analyse the same. Further, the Encumbrance certificate should contain the entries regarding the title deeds given to us by the seller. Failure of any particular document in the E.C. should be taken seriously and necessary enquiry has to be made to ascertain the reason for such failure. 11. Tax dues While purchasing any immovable property the intending buyer has to carefully scrutinize as to the various tax due on the property sought to be purchased by him. In case of buildings the local bodies impose property tax and the water and sewage board impose water and sewage tax. Further, in case of vacant urban land the government also imposes vacant land tax. Now, the State of A.P. imposes such tax and the Central Government also proposes to bring in suitable legislation for the levy of such tax Economic Times, Chennai Edition dated 19th Mar, 2007.. Local laws create charge on the properties for such tax dues. The tax due on the above stated heads goes along with the property and the buyer cannot latter on contend that he is a bona fide buyer without any notice of such dues. Further, there is also a tax called urban land tax Act. In case of holding of lands in urban areas beyond certain limit, the persons holding such land has to pay the Government tax on such excess holdings. So, before buying any land or immovable property the buyer should, not only enquire about the free flow of title to the seller in respect of such property but also about the tax dues by the seller in respect of such property. 12. Properties of minors, trust and wakf In case of minors and the trust, only the State is the ultimate guardian and the permission from the court should be obtained for such transaction. So, if in any document the interest of the minor or trust is traced, we should insist for an order from the court for such transaction. In the case of properties owned by the wakf or Hindu religious endowment, the prior permission of the concerned board should be obtained and the conditions that have been given in such permission has to be complied with in its letter and spirit. 13. Physical inspection of the property We should also make physical inspection of the property and ascertain the person in actual possession of the property. If any other person is in possession, we have to ascertain the interest of those persons in the property. We should also make a local enquiry to ascertain the claim of the third parties, litigations and even the character of the seller and the charge available on the property. Further, the in all the documents the extent of the land, survey number, door number and the four boundaries should tally with each other. If there are any differences, the same has to be enquired and satisfactory explanation has to be obtained. The above stated points are not exhaustive. They are only indicative of the some of the precautions that are to be observed by the person who scrutinize the documents. 14. Properties of the deceased In the case of properties left by the deceased, his religion at the time of his death has to be ascertained. Though change of religion is not to be readily presumed, some persons are converting their faith. So, only the religion at the time of his death determines the legal heirs and their share in the properties. Further, the availability of will should also be enquired. If will was left by him, it is to be ascertained as to whether it was his last will. In case of will relating to any property situated in Metropolitan area or executed by a Christian, probate of such will has to be insisted upon. Though, the legal heir certificate issued by the revenue authorities would be a helpful tool to determine the legal heirs of the deceased, it cannot be the final one. The mistake committed by the revenue authorities in issuing legal heir certificate would not deprive anyone of his interest in the property if he is also the legal heir. 15. Registration of a document and Notice A person who wishes to search the registers for any prior sale, mortgage or charge would necessarily inspect Index II, which under Sec. 55(3) of the Registration Act is required to contain such particulars mentioned in Sec. 21 relating to every such document and memorandum as the Inspector General from time to time directs in that behalf. Under Sec. 21 description of property and maps or plans have to be mentioned in all non-testamentary documents relating to immoveable property before they are accepted for registration, with further particulars as specified in Secs. (2) and (4) thereof. Under Sec. 55(1) there are to be four Indices I to IV. Secs. (2) provides that Index I shall contain the names and addresses of all persons executing and of all persons claiming under every document entered or memorandum filed in Book No. 1 and Index II shall contain such particulars mentioned in Sec. 21 relating to every such document and memorandum as the Inspector General may from time to time direct in that behalf. Under Sec. 51(2) in Book 1 shall be entered or filed all documents or memoranda registered under Sec. 17, 18 and 89 which relate to immoveable property, and are not Wills. If the property which a person wants to purchase or which is being offered to him as a mortgage or security for payment of any money is shown in Index II, then he would have notice of such charge or mortgage and may wish to further probe by inspecting Index I and Book 1. Merely inspecting Book 1 or Index I will not benefit him because all he can know is that there is a decree that has been registered which may not be helpful Dattatreya Shanker Mote v. Anand Chintaman Datar 1974-SCC-2-799. 16. Housing Plots For the purpose of orderly development of the urban areas and to provide various common facilities to the people and also to protect environment, the legislatures have enacted various laws and the executives have also framed various regulations. One such measure is the town planning laws. The town planning laws provide that the agricultural land cannot be used for housing or industrial purposes. Further, only in the approved plots houses can be constructed. While granting such approval, the authorities provide for the creation of common facilities such as roads, parks, places of worship, market, play grounds etc. Such common areas and facilities are to be entrusted to the local bodies and only then the plot approval would be valid. So, while buying a housing plot, the buyer has to verify not only about the approval granted by the authorities for such plot but also about the factum of surrender of the common areas and facilities to the local bodies as per the condition imposed while granting the plot approval. 17. Apartments Urban areas have been facing an acute shortage of land for housing purposes, resulting in the enormous increase in land prices beyond the reach of the lower and middle income groups. Therefore, the need to construct the multi-storied houses for persons of these groups has become a necessity and such need has also been increasingly felt by the government. It is a collective building with undivided share in a single piece of land. All the State legislatures have enacted various laws to regulate the relationship arising out of the concept of apartments. In Tamil Nadu, the ‘Tamil Nadu Apartment Ownership Act, 1994’ regulates the matters relating to the apartments. Each apartment owner shall be entitled to the exclusive ownership and possession of his apartment in accordance with the deed of apartment. Each apartment owner shall be entitled to an undivided interest in the common areas and facilities in the percentage specified in the deed of apartment. The common areas and the facilities shall remain undivided and no apartment owner shall bring any action for partition or division of any part thereof. Each apartment owner may use the common areas and facilities and the limited common areas and facilities in accordance with the purpose for which they are intended without hindering or encroaching upon the lawful rights of the other apartment owners. There shall also be a society registered to take over and manage the common facilities of the apartment owners. The common expenses shall be the charge on the property. Each apartment shall be separately assessed for local taxes. In case of apartments, for the land all the principles that apply for the scrutiny of title equally apply. Though an individual apartment owner has only an undivided share in the land, the title for the land has to be verified for the whole extent of the land. Further, the apartment owner has to pay regular payment to the association that maintains common facilities and the buyer has to ascertain about any arrears in this regard. This arrear is a charge on such apartment. Further, deviation from the sanctioned plan and the unauthorized floors are the regular features in case of apartments. It would result in an action by the local bodies to take action for the demolition of the building. So, the buyer has to verify about such deviations and constructions and guard himself. 18. Leasehold lands Lease is also a form of limited transfer of title in favour of the lease holder. Whereas, an agreement for lease do not transfer any right in favour of such agreement holder. To understand this concept the meaning of these two terms and their impact on the right of the parties are to be analysed. A lease is a transaction which as of itself creates a tenancy in favour of the tenant. An agreement for a lease is a transaction whereby the parties bind themselves, one to grant and the other to accept, a lease. Hill and Redman I Law of Landlord and Tenant, 17th Edn., Vol.1, at p.100. The usual words by which a lease is made are ‘demise’ and ‘let’; but any words which amount to a grant are sufficient to make a lease. Whatever words are sufficient to explain the intent of the parties, that the one shall divest himself of the possession and the other come into it, for any determinate time, whether they run in the form of a licence, covenant or agreement, are sufficient, and will in construction of law amount to a lease for years as effectually as if the most proper and pertinent words had been used for that purpose; for if the words used are sufficient to prove a lease of land, in whatsoever form they are introduced, the law calls in the intent of the parties, and moulds and governs the words accordingly. Woodfall in Law of Landlord and Tenant, Vol.1, 28th Edn., 1978 at page 184. An agreement to lease may effect an actual demise in which case it is a lease. On the other hand, the agreement to lease may be a merely executory instrument binding the parties, the one, to grant, and the other, to accept a lease in the future. As to such an executory agreement the law in England differs from that in India. An agreement to lease not creating a present demise is not a lease and requires neither writing nor registration. Mulla in The Transfer of Property Act (7th Edn) at p. 647. A tenant who has been let into possession cannot deny his landlord’s title, however, defective it may be, so long as he has not openly restored possession by surrender to his landlord. Bilas Kunwar v. Desraj Ranjit Singh, ILR 37 All 557 : AIR 1915 PC 96 During the continuance of the tenancy, the tenant cannot acquire by prescription a permanent right of occupancy in derogation of the landlord’s title by mere assertion of such a right to the knowledge of the landlord. Mohammad Mumtaz Ali Khan v. Mohan Singh, 50 Ind App 202 : AIR 1923 PC 118, Madhavrao Waman Saundalgekar v. Raghunath Venkatesh Deshpande, 50 Ind App 255 : AIR 1923 PC 205, 51 Ind App 83: AIR 1924 PC 65. 19. Legal opinions Advocates are considered as experts in their field. So, the opinion given by any advocate in respect of the title to the intending property carries much weight. But, the buyer should not place sole reliance on such opinion. The statistics published by various international bodies reveal that in India corruption is widely prevalent. Further, the regulatory mechanism governing the ethical standards of the advocates are slow and it takes many years to achieve result. Now a day, the property laws are becoming complex and chances of committing mistakes are also more. If mistake is committed in scrutiny of title, it would be a costly mistake that may lead to endless litigations. So, the buyer should not give over importance to the legal opinion produced by the vendor. The buyer has to take that opinion to his own advocate and get an independent opinion on the title. In case, his advocate differs on the title from the one produced by the seller, the buyer has to become over cautious and thoroughly check the title before proceeding forward on the transaction. 20. Caveat Emptor The basic rule in a contract for the sale of any immovable property is caveat emptor (let the buyer beware). It is therefore important that before buying any immovable property, the buyer has to make search, enquiry and inspection to find out more about the property to be transferred. The seller is, of course, under a duty to disclose any latent defects in his title. Latent defects are encumbrances and any other adverse interests which a prospective buyer cannot discover for himself by a reasonable inspection of the property and cover estate contracts, restrictive covenants, certain easements such as underground pipelines, leases where the tenant is not in possession etc. But otherwise the seller does not have to volunteer any information. Thus the buyer has to make standard enquires such as any existing disputes over the property, the ownership of boundary walls, hedges and fences, rights of way, ownership and maintenance of drive away, planning matters etc. This exercise represents the biggest hazard for prospective buyers who have to incur considerable time and efforts to gather information which may have already been possessed by the seller. S.H.Goo, Source book on land law, p.114. In the absence of a contract to the contrary, the seller is bound to disclose to the buyer any material defect in the property or in the seller’s title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover and to answer to the best of his information all relevant questions put to him by the buyer in respect of the property or the title thereto. Sec.55 of the Transfer of Property Act, 1882. The purchaser at auction sale takes the property subject to all the defects of title and the doctrine caveat emptor (let the purchaser beware) applies to such purchaser. The Ahmedabad Municipal Corporation of the City of Ahmedabad v, Haji Abdul Gafur Haji Hussenbhai AIR 1971 SC 1201;1971-SCC-1-757 21. Suggested questions The above stated points may be put in a question form. It is to be remembered that these questions are only illustrative and not exhaustive. They are as follows: (1) Whether the description of the properties mentioned in the documents tally with each other? (2) If not, whether the difference is the result of consolidation or sub-division? (3) Whether all the documents relate to the very same property? (4) Whether the survey number, boundaries as mentioned in all those documents are same and in case of difference whether the differences are properly explained? (5) Whether the documents are inter-related to one another and if there are any gap in the relationship the reason for such gap? (6) If there are any gaps, is it the result of death of the party or the act of the statutory authorities of Court? (7) Whether the documents contain restrictive covenants? If so, what is the impact of such covenants on the title of the proposed purchaser? (8) Whether the flow of title from the earliest owner to the present owner is smooth and complete? (9) Whether all the parties having interest in the property had signed in the documents? (10) Whether the revenue records, Municipal tax assessment and the E.B. receipt stands in the name of the proposed seller? If not, whether he is able to offer satisfactory explanation? (11) If any one of the document had been executed by the power agent, whether the power deed contained necessary power to execute such document and that power was in force till the date of execution of such document? (12) If the enquiry reveals the litigation, whether those litigations attained finality and the effect of those litigations on the title of the seller and the previous land owners. (13) Whether, in the pleadings of those cases the seller and his predecessor in title had admitted any adverse right or interest of any other party over the present property? If so what is the impact of such admission on the title of the seller? (14) If there are any erasures, alternations and interlineations on material aspects in the documents, whether the same has been properly explained and authenticated? (15) Whether the Encumbarance certificate reveals the documents produced to us ? If not the reason for such omission. (16) Whether the Encumbarance certificate reveals any other unconnected document ? If so, the reason. (17) Whether the permission of the Court has been obtained in respect of the property belonging to the minor and trust and the conditions available thereon have been complied with? (18) Whether the permission of the Wakf / Hindu religious endowment board has been obtained in respect of the wakf property/Hindu endowment property and if so, the conditions have been satisfies? (19) Whether physical inspection of the property was made and whether local enquiries were made? If so, whether it revealed any adverse factors?