February 2017 | Back to all Real Estate Articles
A title search involves examining the chain of ownership and establishing whether or not it is free from legal and financial encumbrances. Here’s how you can get it right
A title search, is a due diligence investigation of various aspects of a property, to ascertain its legal health. “In the case of resale properties, the existing owner may have created encumbrances on the property, in the form of pending service or utility charges, by raising a mortgage or personal loan, or through other financial liabilities. It should not be taken for granted that every first owner will disclose such encumbrances,” cautions Anuj Puri, chairman and country head of JLL India.
One must also be well-versed with the latest judgments of the various authorities, tribunals, and courts, adds Anirudh Hariani, solicitor of Hariani and Company. “There are certain landmark judgments that give an in-depth interpretation of various statutes and the correct method to comply with the same. It is essential that these judgments and orders be considered, in order to draft your transactional documents correctly,” he advises. Other practical exercises and due diligence procedures, also have a bearing on the transaction as a whole, he explains.
Advocate KM John, points out that buyers should first verify the seller’s capacity to sell. For example, if the person selling the property is a nominee, or one of the legal heirs of a deceased owner, he cannot sell the property, without the consent of all legal heirs. If he has received the property through a will, it has to be examined whether probate is necessary. If the property is government-owned, it is necessary to obtain prior permission of the concerned authorities, he elaborates.
The entire legal process of sale or purchase, leave and licensing and redevelopment of properties is multi-faceted. Title search alone touches upon various aspects of law (which vary from state to state), most of which have no reference to one another and are in a constant state of flux. Provisions relating to the title of immovable properties, are scattered in different statutes, including the Transfer of Property Act, Registration Act, Stamp Acts, FEMA, Guardians and Wards Act, Succession laws, Income Tax Act, Companies Act, Partnership Act and Public Trust Act, besides state government regulations, John points out.
Adherence to various government notifications and rules is also required, most of which are not mentioned in textbooks or commentaries. The applicability of such laws and notifications varies, and depends upon the nature of the property, type of rights, nature of transaction and legal status of the parties.
“The basis for rights in property and the mode in which they are crystallised, is through various transactional documents. These documents form ‘the title’ to the property. The documents embody the parties’ rights and interest in the property and include ancillary documentation and hence, are of great importance,” explains Hariani. “There is no fixed format for such transactional documents. Each document varies from another and tailoring of the same may be required, in order to meet the parties’ needs, to mitigate future legal liability, and to protect the rights of the parties,” he adds.
There is a growing trend to rely on estate agents, to complete the transactions, John points out. “The agents have formats of previous agreements, in which they replace the name, address and the property’s description, to prepare fresh agreements for their clients. I have seen several people landing in serious problems, on account of this practice,” he warns.
It is especially important to conduct a thorough title search, in the case of land and older high-value properties. While there is no fixed checklist for the same, a relatively safe option, would be to hire the services of a lawyer to the same.