The Hindu Business Line : Buyer beware during property dealings

Document in ordinary parlance means a written statement. Documents are associated with dealings in properties, business contracts and in corporate circles.

However, as far as transfer of property is concerned, the term assumes more significance. No immovable property can be transferred without a document and registered unless the value of such property is Rs 100 and less.

The Transfer of Property Act, 1882, governs transfer of immovable properties and actionable claims. The act speaks of certain rights and obligations to be observed by the transferor and transferee (seller and buyer). Breach of any of the “covenants” (solemn agreement) by one party can be questioned only through a civil suit, which could be a waste of resources. Hence the principle of caveat emptor — buyer beware — is applicable in property dealings.

Scrutinise title
Verification of title can be done by a competent lawyer. The parent documents, in original and the ones in the name of the prospective seller, should be inspected.

There is a possibility of the original documents being pledged with banks or financial institutions as collateral security. Similarly, when a reverse mortgage is created with any bank by a senior citizen, he has to hand over the title deeds of his property to the bank.

In the aforesaid situation, the purchaser should inspect the original title deed at the place of the creditor or wherever the documents are in custody.

The vendor’s right to sell the property should be examined in the light of a number of enactments such as the succession laws, Land Ceiling Act, Land Acquisition Act and acts concerning environment. If the lawyer opines that the vendor has marketable title to the property that he proposes to sell, the buyer and seller should enter into a contract — an agreement to sell.

Further, the buyer should make proper enquiries regarding the identity of the purchaser and the property. It is always better that the buyer inspects the property.

Check for Encumbrance
The buyer should verify if the property is free from encumbrances. To encumber means to load with debts/to impede the motion of something.

If a loan is raised over the property and the loan is not discharged, it is an encumbrance. To find out whether a property is encumbered or not, apply to the Sub-Registrar for an encumbrance certificate.

If there is no transaction, a nil encumbrance certificate is issued.

Sale agreement
There is no prescribed format for entering into any sale agreement. The agreement should indicate, inter alia, the name of the seller and purchaser with full address, details of the property, price at which the property is sold.

Besides, mode of payment of sale price, advance received, time for performance of the contract, terms regarding possession of the property, vacant possession or by directing the tenant to pay rent to the prospective seller, penal clauses for any default and time for completing the contract are some of the points normally incorporated in sale agreements.

Power of Attorney
In certain cases, the seller may not be available to sell the property and might appoint an agent with the power to sell. In such cases, the power of attorney should be examined carefully to see if the principal who has executed the power is the property owner. If the power deed has been registered, check if the formalities of registration have been complied with and if the power is still in currency.

A registered power of attorney should contain the photo of the principal. Power deed executed in a foreign country by the owner of the property before a Notary Public or before the Indian Consul or Vice Consul should be authenticated by the Sub-Registrar of the area concerned.

Compulsory acquisition
If the deal involves purchase of any vacant site or agricultural land or farmland, it should not be subject matter of land acquisition proceedings. Hence the prospective buyer should verify in the office of the Tahsildar concerned to see if the land is under the process of acquisition. Once a notification is issued by the land acquisition authorities, the owners of the property lose their rights over the property and any agreement will not be binding upon the Government.

To be continued…
(The author is an advocate)

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