Defect in property is different from defect in title

Advocates, business lawyers, senior advocates, property lawyers in Bangalore, property advocates in Bangalore

In recent times, dealings in real estate in Bangalore have been at the peak. Predominant reason for this is the growth of IT sector and the eagerness of the people to invest their money in real estates in and around Bangalore. As the real estates require huge investments, the purchaser has to take necessary precautions before investing his money to save himself from future complications. If the property transferred suffers from any defect in the title of the vendor, the purchaser does not get good and marketable title. Therefore, the purchaser has to make doubly sure before finalizing the deal, that the vendor has got a valid and marketable title. 

Marketable Title:

The term “Marketable title” means a title which is clear and free from reasonable doubts and is a title good against everybody. Thus, it is the title which establishes full ownership of the vendor to the property intended to be conveyed, without reasonable doubt. A buyer is not bound to complete the sale if there are defects in the title to the property which are material and latent. The defect to be material, it is to be of such a nature that if the purchaser were aware of it he would not have entered into the contract of sale at all.

Doubtful or defective title:

A title is said to be doubtful when the vendor does not have any conclusive evidence to prove the ownership.The defects in title are generally latent defects which can be found only on investigation of title by perusal of documents, by an eminent advocate, carrying out searches of Government Departments and Municipal records and by making reasonable enquiries. The vendor is bound to disclose such latent defects known to him.

A title becomes doubtful:

• Where the doubt arises by reason of some uncertainty in law itself;
• Where the doubt pertains to the application of some settled principle or rule of law.
• Where a matter of fact upon which a title depends is either not in its nature capable of satisfactory proof or is capable of such proof but yet not satisfactorily proved. 

The ownership of the vendor to the property intended to be sold, must be the property traceable from the previous title deeds commencing from the Deed which can be considered as a good root of title and for this purpose at least 30 years previous title would need to be verified. The property should have already been properly transferred from all predecessors-in-title and no third person other than the Vendor should have any right or claim thereto.

Thus, for example, if ‘A’ has sold the property to B and if it is found that the property under sale belonged to a Hindu Joint Family property and ‘A’ has sold it neither for  legal necessity nor after obtaining the consent from Co-Parceners, then the property sold to ‘B’ is said to be defective.

The following are a few instances where the title cannot be termed as defective:

• An omission to disclose a prior agreement for sale by the Vendor is not a defect in title.
• Title by adverse possession is marketable and not a defective title, if proper title by such possession can be successfully made out. A title may be good although there are no Deeds but there must have been such a long uninterrupted possession, enjoyment and dealing with the property as to form a reasonable presumption that the title  is absolute .
• Loss of title deed is not a defect, if the loss can be explained satisfactorily.

Defect in property:

Defect in property is different from the defect in title. A defect in the property only prejudices the purchaser in the physical enjoyment of the property but the defect in title exposes the purchaser to adverse claims. This difference has been enunciated in Section 55 (1) (a) of the Transfer of Property Act, which provides that the vendor is bound to disclose to the purchaser any material defect in the property or in the vendor’s title. The defects in property are generally patent defects which can be seen on an inspection of the property and the Vendor need not disclose the same so long as the same does not lead to defect in title.

Root of title:

In investigating title and in considering whether the title is marketable and free from reasonable doubts, it is necessary to find out the root of the title. Documents are considered as root of the title. A good root of title is a document purporting to deal with the entire property conveyed, which does not depend upon the validity of any previous instrument and without inviting any suspicion on the title of the Vendor.  It may also be described as a document of transfer of property showing nothing tocast any doubt on the title. An instrument, the effect of which depends on some earlier document is considered as an instrument with insufficient root of title. In India, there is no law which stipulates statutory period for examination of root or commencement of title. However, it is advisable to investigate the title for a minimum period of 30 years unless the circumstances warrant production of documents beyond 30 years. 

Though our law makes it obligatory on the part of the vendors to disclose the defects in title  before the  sale of a property, purchasers have also  to exercise due diligence and investigate the title of the property before purchasing the same, to avoid future complications.

REGISTRATION OF SALE DEED ALONE WOULD NOT GET OWNERSHIP

Advocates, business lawyers, property lawyers in Bangalore, property advocates in Bangalore

The general perception amongst the people at large is that registration of the sale deed in the concerned Sub-Registrar’s office would conclude the formalities for transfer of ownership of the property from the vendor to the Purchaser or his nominee, but it is not so. The formalities in purchase of immovable property could be broadly classified into pre-registration formalities and post-registration formalities, compliance of both is a must for getting the ownership rights over the property transferred in totality in favour of  the purchaser or his nominee.

The term “Post registration formalities” refers to those activities which are required to be performed subsequent to the registration of the Sale Deed.  They are:

Obtaining original title deeds:

Once registration of sale deed is completed, the Purchaser has to obtain all the original documents of title from the seller and compare them with the copies which his advocate had scrutinized for rendering his opinion to make sure that the documents scrutinized and documents referred to in the Sale Deed are  the same and have been correctly spelt.  If his advocate had called for production of certain other relevant original documents or certified copies, the purchaser has to ensure that such documents are also made available to him for his custody.

Generally, at the time of entering into agreement of sale only certain basic original documents are made available to the purchaser along with copies of few  other documents and therefore, at the time of sale agreement, the purchaser has only skeletal original  documents with him and the remaining original documents will be with the vendor himself.  Thus, the purchaser has to keep in mind to collect all the remaining original documents from  the vendor at the time of registration of theproperty.

Upon registration of the property, the purchaser has to collect the original registered sale deed. In addition to this, it is better if he applies and gets a few certified copies of the Sale Deed for his custody and use.

Encumbrance Certificate:

Normally, encumbrance certificate for the period prior to the date of transaction will be made available for scrutiny by the vendor. In order to have Encumbrance Certificate with the reflection of the latest sale transaction between the present vendor and the purchaser,  it is suggested that the purchaser  may apply for up-to-date encumbrance certificate on the date of registration of sale deed itself so that he can avoid making another  trip to the office at a later date for the purpose. 

Physical Possession of the property:

Taking physical possession of the property is a very important step in a property transaction. Therefore, it is necessary for the purchaser to inspect the property at least a day prior to the date of registration to make sure that the property is free from occupation of any stranger and there is no hurdle to get possession of the property upon purchase.

In some cases, the property could have been under occupation of persons other than the owner/vendor like tenant or leaseholder, trespasser, etc. Irrespective of such occupancy by strangers, the vendor should be insisted upon to deliver vacant physical possession of the property at the time of registration so that the purchaser could exercise his right over the property and  take possession of the same immediately upon purchase and put his lock for the building.

In case of vacant sites, it is always  safe to fence such  sites immediately upon purchase, though it is a little expensive. In the alternative, the purchaser may display a board on a prominent place of the site clearly indicating that “This property belongs to  XYZ. Trespassers will be prosecuted”.

Periodical visits to the site are necessary to detect and prevent encroachment.

Security Deposit and Tax receipts:

Once a property is purchased, the purchaser is duty bound to make all the statutory payments due on the property to Government and other agencies. Therefore, the purchaser is to get confirmed whether property tax and other levies payable to Municipal authorities, BWSSB, BESCOM, etc.,  are paid up-to-date and upon finding that any payment is outstanding, either he has to make such payment himself or insist upon the vendor to effect such payments. For this purpose, the purchaser has to collect and verify the latest property tax paid receipt and all the relevant statutory payment receipts from the seller and upon visiting the concerned tax/revenue offices.

Khatha transfer:

Once the registration of the sale deed is concluded, the purchaser has to ensure that the Khatha of the property standing in the name of the vendor in the records of the concerned local authority is transferred to his name. For such a transfer, both the seller and purchaser have to sign the application for transfer of Khatha and it is better that such an application is prepared and signed at  the time of executing  the sale deed itself to avoid complications at a later date. The application for Transfer of Khatha along with a copy of the sale deed, duly filled is to be submitted before concerned authority within whose jurisdiction the subject property falls.

The Local bodies transfer the Khatha in the name of the purchaser upon collecting transfer fee which is, generally 2%, of the stamp duty paid on the Sale Deed and issue written confirmation of transfer in the name of the purchaser. Usually, the Local bodies  reassess the property and issue assessment notice in the name of the purchaser. The tax paid receipt should be in the name of the owner.

Water and Power Meters:

Once Khatha is transferred, steps for getting the water and power connections registered in the name of the purchaser are to be initiated. For this purpose, careful verification of the receipts issued by the concerned authorities for the deposit and charges in favour of the vendor is necessary to make sure that such receipts stand in the name of the seller. A letter of No Objection addressed to the concerned authorities by the seller for such transfer of water and power connections and the deposits made there under in the name of the purchaser is also necessary. The purchaser, along with the letter of No Objection from the seller and the latest Khatha Certificate has to apply to the appropriate authorities for effecting such a  transfer in his name at the earliest. Upon consideration of such a request, the authorities will issue a written communication intimating the transfer of water and power connections and the deposits in the name of the purchaser.

Though the above mentioned actions are simple in nature, to have peaceful possession and enjoyment of the property purchased compliance with these is necessary.