Transfer of immovable property by sale, gift, exchange, inheritance, Will, etc is a very natural phenomenon. Out of these various modes, sale involves payment of consideration (purchase price) and every purchaser hopes to get perfect absolute title.
But the seller cannot pass on a better title than what he has; any defects in his title will also pass on to the purchaser, but purchaser having paid considerable amount wants a perfect unencumbered marketable title.
But many purchasers do not get the title of the seller verified by advocates who is having specialised knowledge and experience on property matters, often rely on real estate agents, middlemen and assurance of seller and sellers advocates legal opinion. Though they spend lakhs of rupees on purchase of property, they hesitate to spend a few thousand rupees on verification of title and later on land in trouble. Most of the times power of attorney is the only document which is handed over to the purchaser. Some of the reputed builders refuse to give title papers to the purchaser, dictate the terms and insist that property be purchased on their own. Advocates certifiy the title in just four lines without referring to the devolution of the property. They also force the purchaser to avail the loan from a particular new generation bank.
Title of property:
The title may be freehold or leasehold. In case of freehold title, the owner has absolute title without any encumbrance with power to alienate the property.
But in case of leasehold the owner will be different who had leased the property to the Lessee for certain period and the rights are not absolute and the lessee will be only in possession of the property for agreed period. After the lapse of the agreed period, the lessee has to hand over the vacant possession to the owner. Such person may transfer only leasehold rights to the purchaser, if the lease document provides for alienation and the purchaser is bound by terms of lease deed.
There are different forms of legal ownership of the property;
1. Government lands either Central or State.
2. Individual ownership.
3. Hindu undivided or joint family ownership of property.
4. Property owned by a Private Company or Public Company duly constituted under Indian Companies Act.
5. Property ownership of a Government Company.
6. Property ownership of a Co-operative society registered under Co-operative Societies Act of respective stores.
7. Property ownership of partnership firms formed and registered under Indian Partnership Act.
8. Wakf properties
9. Trust properties including properties of temples and religious endowments.
10. Property ownership of public societies and clubs registered under societies Act.
11. Property ownership of Autonomous Institutions (Statutory Bodies) like universities, electricity boards etc.
12. Property ownership of Nationalised undertakings and Etc.
Most common mode of ownership is individual ownership where a single individual owns the property.
Tracing of title
Tracing of the title means tracing the history of property through documents, Government records, how the present owner got property. This is a very complicated exercise and only professionals specialised in property laws of Central, State and latest court decisions could help to trace the title. Though the seller is bound under section 55(1) (a) of the Transfer of Property Act to disclose any material defects in the property in his title, it is prudent to scrutinise the title to the satisfaction. A good marketable title is one which is free from all encumbrances, doubts, and gives the holder full ownership rights to the exclusion of the rest of the world.
The property might have been acquired by various modes, like sale, gift, settlement, will, succession, partition, release, adverse possession, allotment, grant etc.
The tracing of the title has to start by verification of the earliest document available, which is called parent deed or mother deed. If the earliest document is not available, the certified copy must be obtained at the Jurisdictional sub-registrar office. This earliest document details as to how the first owner got the property. Generally in earlier times, all the landed property was owned by Kings, Jodidars, Inamdars and they gifted or granted the land to the people. Such acquisition document generally will be by an Order of the Court, Government, Statutory Authority, ruler. Thereafter, the property might have passed through different hands who are referred as intermediary parties. Such documents have to be examined in chronological order tracing the devolution of property to each of the intermediary parties. The sequence should be continuous without any break till the immediate transferor. In case of any missing link, the records at the sub registrars office revenue department have to be verified to the satisfaction, but should not be ignored.
But documents like gift deed, partition deed, release deed, settlement deed are not mother documents and the title of the executants of such deeds has to be examined.
After tracing the title of the property from the first owner to the immediate transferor, the latest document which describes how the present owner got the property has to be verified. Apart from legal documents like transfer deeds, the revenue records like tax paid receipts, Khatha, approved plans, encumbrance certificates, mutations, genealogical trees and other records extracts have to be verified.
The most important function of tracing the title is investigation, where it is ascertained that records, documents produced actually exist are recorded in books, records of respective departments. But advocates certify the title with a narration based on documents produced which does not refer to the investigation or genuineness of the documents. Often the advocates accept the latest documents without supporting documents and certify the title which is a dangerous practice.
Limitations of tracing the title
Though the title is traced to perfection by referring to the documents, revenue records and also investigation, there are certain limitations. Instances like pending cases, government notifications, prior unregistered agreements are not easy to trace. These are called hidden areas of the properties. There may be cases disputing the title, which are not reflected in the documents. A proper search in jurisdictional courts would help in tracing such pending cases but multitude and hierarchy of courts makes it a difficult task. A search also in Government bodies, Statutory authorities, who have authority to acquire the land is necessary to rule out any notification of acquisition. Further, No-objection Certificates from urban development agencies would help. But the possibility of earlier sale agreements which are not registered is very difficult to find out. Proper enquiries with the vendor, neighbours and discussions would help. A paper notification to call for objections and claim on the property to be purchased would be helpful.
The encumbrance certificates disclose only transactions which are registered. They do not reflect, oral tenancy, litigation in courts, tax liabilities, equitable mortgages which is not registered, oral partition, oral gift under Mohammedan law, unregistered will, liability of maintenance, General Power of Attorney, etc. Small change in the description of the schedule of the property will lead the registering authorities to issue nil encumbrance certificates. ECs are one of the document to trace the title but entirely depending on encumbrance certificate is dangerous.
Period of Verification of title
Most of the advocates trace the title for period of 13 years only. Even many nationalised banks advise their advocates on panel to trace the title for 13 years and their pro-formas are also designed accordingly which is not correct.
It is safe and advisable to trace title for a minimum period of 42 years or more to weed out any chances of dispute in title. If a private individual lays conflicting claim on any document other than mortgage the maximum limitation period is 12 years. The period of limitation against government is 30 years and execution period is 12 years. Further, as per section 90 of the Indian Evidence Act, a document executed 30 years or before is presumed to be validly executed. The Articles 61 (a) & (b) of Limitation Act provides a limitation period of 30 years for redemption. Article 61(b) provides a limitation of 12 years for instituting a suit for recovery of possession against a transferee who has taken the property from mortgagee for valuable consideration, and the limitation is to begin to run when the transfer becomes known to the Mortgagor. We shall examine this with reference to an example. Limitation period for redemption of mortgage is 30 years. Suppose a mortgagee sells the mortgaged property after 29 years from the date of execution of mortgage deed without the knowledge of the Mortgagor and before the Mortgagor institutes a suit for redemption. The Mortgagor has a right to institute a suit for redemption. The Mortgagor has right to institute a suit for recovery of possession of the mortgaged property from the purchaser within a period of 12 years after coming to know of the transfer. Thus, a Mortgagor can lay hands on the property within 30+12 years of the execution of mortgage deed. The question of adverse possession is also relevant in this regard. A person who remains in actual, peaceful, open and exclusive possession of immovable property for a period of twelve years or more, expressly or impliedly in total denial of the title to the true owner is deemed to have acquired ownership and title to the immovable property by adverse possession. Thus, it is safe and clear to trace the title for a minimum period of 42 years at least. Original title deeds Generally, only photocopies of the documents are scrutinised. The advocates should insist on production of all the original title deeds for verification, before finalising the legal opinion to rule out the possibilities of mortgage by deposit of title deeds which is not registered. In case of tracing the title of the properties allotted / granted by statutory authorities and government it is sufficient if the title is traced from the date of allotment to the immediate seller and there is no need to trace the title for a period of 42 years.