Is It Required To Get A Legal/Title Opinion For Purchase Of Property

Buying a property is a dream of every working class in India. Now a days everyone is interested in buying a property instead of gold because of  gold price is gearing  up and are expected to go even higher so, everyone is looking for an alternative way to invest their money. But most of us do not aware of the legal consequences of buying an immovable property ,there is always a pros & cons one should know before buying an immovable property the first step is title search a, title is a legal documents, which contains the information of ownership right about the property. Title is a mere evidence of ownership which authorised the owner to sell, gift, mortgage, lease etc of the property.

 Why is legal opinion important when purchasing a property?

 The legal opinion is meant to secures the buyers interest. The legal opinion is necessary to decide whether a property is worthy to buy it or not, in oder to avoid any litigations with respect to the property which you are buying. If we look into the role of a lawyer when a buying a property it starts with title opinion which is the first stage of purchasing a property and continues until you get a occupancy certified for the property.

The lawyer plays an ,important role in verifying,drafting the property documents such as the title search, ATS, Sale Deed, parent Deed, clearance certificate, NOC, Encumbrance Certificate, Conversion documents, Khata Certificates, occupancy certificate etc,the relevant approvals including sanctioned building plan, Tax paid receipts etc, are flawless and are complied with recent changes by the appropriate government. It is always advisable to take a legal opinion before buying a property, an accomplished lawyer always  do his best to render a perfect paper work. The process and documentation involved in the buying the property are quite complicated, one can’t find a solution without the assistance of a legal adviser. The lawyer will cross check all the documents of the property and also verify whether the seller failed to disclose any material defects about the property. It is advisable to go with the opinion of the lawyer, however the legal opinion comes at a cost, it protects the interest of the buyer.

Legal opinion on acquisition of property is a life saver :

A lay man is not well versed in law related to property, only a lawyer with technical skill to draft the documents and well aware about law pertaining to property could save the interest of the purchaser as well as his clients pocket.

There is a English proverb ” Look before you Leap”  Which is appropriate when buying an immovable property. Although there are several laws to protect the interest of the buyer, but still  one should do due diligence before buying a property. Property documents are considered as an important source of any property investment. It is a proof of ownership will be considered as evidence in the court of law if contrary arose. There are important  certain  documents everyone should know before buying a property. There are a list of important property documents, mandatory to buy an immovable property( land, apartment or independent house) in each and every stage legal opinion plays a vital role and leads the purchaser to take a clear decision before it’s being too late which are discussed in detail below,

1.    Title of property / title opinion

Investigation about title of property is the important duty of the lawyer before giving opinion about the property to his client, there are certain steps to ensure the originality of the title by means of investigation such as ;

• Reading the documents of the title carefully if not it leads to a defective title
• Inspection of original title deed and inspect the place where the property is located
• It is important to inspect the Surroundings in person and to verify if there any easementary rights involved.
• It is necessary to investigate whether the property was leased, mortgaged or on lien and to know still it servers any interest of the third parties.
• Taking search of land record and record of sub-registrar.
• Issuing a public notice in a local newspaper calling for claims in respect of the property

Title report is a legal documents which contains the information of ownership and also includes information on the recent tax information, zoning laws and market property value etc.It helps to know about the present status regarding the encumbrance of the property.

How to get a land title search report

• It is prepared by the advocate after a proper investigation on the documents , issue a tittle certificate.
• A search should be done by the advocate or any other authorised person to conduct the survey of title of the property
• It is mandatory to the buyer to annex this report in “agreement to sell” ( ATS) with a intend purchaser stating that if there any existing mortgage, litigation or conditions on the property.
• Get an counseling from an advocate to know more about the issues in the property

A  title search report gives the buyer confidence that the property is free from any issues and the genuines of the seller.

2. Agreement to sell (ATS)

Agreement to sell is an memorandum of agreement between the transferor and the transferee which will be drafted by an advocate. The seller(transferor) agrees to transfer the property and the buyer (transferee) agrees to buy the property. It is considered as a contract for sale , legally binding and enforceable.

Why “agreement to sale” is important? 

 ATS should contain clauses that protect both the interest of buyer and seller in the contract . It should contains all the details of the parties, description of the property, market value , method of delivery of possession etc. There is no prescribed format for drafting the ATS, but it is important for an advocate to draft a clear ATS and, to include indemnity clause, time limit to executes the sale deed, right to terminate AST and whatever clause is necessary based on the facts and circumstances of the property.

Right to terminate the agreement to sale

It is necessary to include right to terminate clause, in ATS . If the buyer finds any defects in title or encumbrance in the property, he can repudiate the contract.

 Time limit to executes the sale deed

In oder to secure the interest of the seller , it is important to include this clause , which entitle the seller to forfeit the advance amount paid by the buyer in case the prescribed time limit exceeds. It is the duty of the buyer to perform the contract in a prescribed time limit. ^[1]Prem Narain vs Mahabir Jain, the Allahabad HC, held that the  limitation for instituting the suit for the cancellation of transfer deed will be commence  from the date of knowledge of the registration of the document and not from the date of execution of the deed.

Indemnity clause

It protects the interest of the buyer, the aim of including indemnity clause in ATS is to get compensation from the seller if any losses or expenses incurred by the buyer in the future for non compliance prior to sale.

 Doctrine of part performance

As per section 53-A of the Transfer of property Act 1882, If the transferee performed his part or willing to perform his part on the contract and the transferor is not willing to sell the property to the transferee who performed his part , in order to secure secure the rights of the buyer it is necessary to mention the damages clause in ATS

Key ingredients of specific performance u/s 53-A

• The contract should be in written and signed by the parties.
• The transferee should take possession in furtherance of the contract.
• If the transferor was in possession even prior to the contract, he should continue in possession, and also do some other act in furtherance of the contract.

Example : A (buyer) gave advance money for buying a house from B (seller) after that, B refused to sell the house to A. In this issue here A’s  right is protect u/s 53 A of Transfer of property act, enables the transferee to sue for specific performance only if he can prove that he has performed or willing to perform his part of the contract.  ^[2]Prabodh kumar Das V. Dandamor tea company ltd,  it was held that, part performance u/s 53A was not an active one, in India. It doesn’t give any right of action to the transferee who is in possession of the property under an unregistered contract of sale. ^[3]Ramesh Chandra V. Chuni Lal, it was held that , the intention and conduct of the property will be taken into consideration,the mere willingness would not attract the section 53-A of Transfer of property Act,1882.

3. Sale deed

Sale deed is one of evidence of proof of ownership. Sale deed or conveyance deed are legal documents drafted at the time of sale by an advocate. The sale deed is drafted on a non-judicial stamp paper of value as set by the state government. It contains all the required information about the buyer, it will be executed if both the seller and buyers are satisfied the “agreement to sell” and all the necessary terms and conditions as mentioned in the contract by signing. Sale deed has a prescribed format rather than ATS. The draft contains the details about  both the parties, transfer of title, agreement,registration deed, proof of registration.

Note:

• As per section 17 of the Registration Act,1908  made mandatory registration of all the documents related to immovable property both the ATS and sale deed are required to registration, where it’s value is more than Rs.100
• It is the duty of the buyer to pay stamp duty and registration charges
• Before the execution of sale, the liabilities of seller is to clear all the payments related to the property such as property tax, cess, water and electricity.
• The buyer is bound to obtain the registered, original documents of the property within a 4 months from the date of registration.

AS IS WHERE IS CLAUSE

The “As is where is ” Clause is an agreement in a contract which implies that the thing so contracted is transferred, by one person to another in its existing condition and the transferee has accepted it with all its faults and defects, whether or not immediately apparent. This clause will be drafted on the favour of seller this,is based on the doctrine “caveat emptor” ( let the buyer be aware) qui ignorare debuit quod jus alienum emit” means “let the purchaser beware who ought not to be ignorant that he is purchasing the rights of another.” The duty of the buyer is to know the defects in the property before entering into the contract. If the purchaser failed to conduct necessary inspection and later found a defects in the property after performance of the contract cannot claim damages or revoke the contracts, it will be presumed that purchaser is aware of the property hence cannot claim damages from the seller. However it’s the duty of the seller to disclose all the material defects and encumbrance in the property. That’s the reason why one should go for legal opinion many of us are not aware of existence of such laws. Think of an indigent person trying to buy a property without consulting a lawyer, there is a possibilities of falling into the trap of caveat emptor. It is always necessary to read all the documents carefully before signing.

Transfer of Property Act, 1882 (hereinafter referred as “TPA, 1882″) included the ”Doctrine of Constructive Notice’ under section 3 of the Act .

Explanation II: Any person acquiring any immovable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof.

The willful abstinence from inspection or enquiry about the immovable property of the purchaser is considered to be an gross negligence and can’t make the seller liable for it a,purchaser is said to have the notice of fact about the property. Although the Transfer of property Act 1882 impose certain duties on seller to disclose the all the material defects in the property which he aware of and the buyer could not find it with ordinary care discover. There is a question that incase if the seller not aware of the material defects later found by the buyer , here the seller is not liable. This is, however, subject to the presence of contract to contrary between the parties.^[4] Pawittar Singh Walia vs Union Territory, the court held that, the petitioner is violating the principle of caveat emptor, by his mere negligence and failed to verify the genuineness of the property he bought, the burden of proof is always on the hands of purchaser, to prove that he doesn’t aware of the material defects in the property at the time of buying. Since the petitioner remained totally negligent in this regard, he cannot  complain on this issue, against the defended authorities.

4. Parent document / mother deed

It’s an important document which traces the history of ownership of the property. An immovable property is considered as a perpetual thing, which can be transfer from the hands of one to another. That transfer can be by mean of any modes such as gift, lease, mortgage, partition or inheritance. It is necessary for the buyer to know about such transfer. A lawyer will arrange,all the documents in a chronological order, and to find whether those documents are continuous and unbroken. A missing record could be traced at registering offices, revenue records and recitals in other documents, and if possible, by ascertaining from the parties concerned.

5. Sanctioned building plan / clearance certificate

According to the Real Estate (Regulation and Development) Act, 2016, a sanctioned plan covers approval to structural designs,site plan, building plan, service plan, parking and circulation plan, landscape plan, layout plan, zoning plan and such other plan and may also include environment clearances by a competent authority. To build or renovate, a land owner or developer must approach a civic authority to get an approval for the building plan he proposed and the competent authority visit that place and conduct a Preliminary enquiry  on the proposed project and check whether the place is suitable for construction, then after such procedure, the concerned authority may give the clearance certificate. After the approval the building plan becomes the sanctioned plan. The land owner is not allowed to construct any other additional structure which is not mentioned in the approved sanctioned plan. The unauthorised construction is illegal and to be penalized. For instance ; some of the land owners trying to occupy the space around their house, which belongs to government, by mean of constructing veranda, or by gardening, most of them were not aware that it’s illegal and liable for penalty. ^[5]Dipak Kumar Mukherjee vs Kolkata Mun.Corp.& Ors, the honorable supreme Court held that,unauthorized construction of buildings not only destroys the concept of planned development which is beneficial to the public but also places unbearable burden on the basic amenities and facilities provided by the public authorities.  At times, construction of such buildings becomes hazardous for the public and creates traffic congestion. Therefore, it is imperative for the concerned public authorities not only to demolish such construction but also impose adequate penalty on the wrongdoer.

A aggrieved person can approach a lawyer that the sanctioned building plan is again law and if there as been a violation of Environmental Impact Assessment.

6. No objection certificate

It is a legal document, which is required during sale and purchase of an immovable property. It is nothing but issued to certify that the building doesn’t violates the terms and conditions of an organisation, society, agency or institute.For a different property transactions, various No Objection Certificates are required from different authorities. It is mandatory for constructing a building, the failure to obtain NOC leads to eviction by the concerned authority As per ; Section 15 under the Real Estate (Regulation and Development) Act [RERA], if a developer is transferring his rights and liabilities to a third party, they require a No Objection Certificate from at least 2/3rd allottees involved in the project. Once the allottees grant the certificate, a similar certificate is issued by the RERA authority. Most of us are not aware that, NOC from various authority are required based on proposed projects, in this unclear situation, a lawyer will assist you where and from whom to get NOC, the failure to obtain NOC will leads to legal consequences and may attract eviction notice.

 For example : if an agency or organisation is refused to give  NOC , then the builder cannot start or continue the development work, it will be considered, that the place is unsuitable for the proposed construction.

Note:

• If a building violates any of the construction bylaws, a No Objection Certificate will not be granted from any urban developmental authority or other concerned authorities. The authorities are expected to issue NOC after strict, transparent and fair inspections.
• The builder has to get NOC from state pollution control board for the proposed project if it concerned with environmental issues.
• NOC from municipality or respective authority for digging bore well is mandatory.

7. Commencement certificate

According to Section 2(m) of the RERA Act, 2016, “commencement certificate” means the commencement certificate or the construction permit, issued by the competent authority to allow the promoter to begin the development works on immovable property, as per the sanctioned building plan. The commencement certificate will be given by an local municipal authority permitting the landowner to construct the building. After the development works started, the concerned authority should inspect sanctioned building plans if the authority found, that the landowner violated the approved plan, then he can take necessary actions against the landowner. A lawyer always helps you with his knowledge, before or after obtaining a commencement certificate, there is an obligation on the buyer not to go beyond the rules  prescribed by the appropriate government.

Note :

• It is mandatory to produce NOC from different authorities before the construction of approved building plan.
• The failure to obtain commencement certificate for construction is considered as illegal and the wrong doer is liable to penalties and even attract eviction notice.

^[6]K. L. Gupta & Ors vs The Bombay Municipal Corporation, it was held that, that the local authority should make an inquiry before granting or refusing a commencement certificate. The Authority must therefore look into all material available to it including the tentative plans and the final development plan and then make up its mind as to whether a commencement certificate should be granted or not.

8. Encumbrance certificate

A Encumbrance certificate is a assurance that the property is free from legal or monetary liabilities such as mortgage or uncleared loans. It also enables the holder to be eligible to borrow loans from banks and financial institutions.

How to get Encumbrance certificate

• A person applying for an EC should fill in the Form 22,specified in the annexures to the rules of the Registrations Acts of the respective states, affix a non-judicial stamp and submit it to the jurisdictional sub-registrar’s office.
• It is mandatory to submit a copy of sale deed to obtain EC.
• Application made with a proof of residential address, details about the property along with fee for EC.
• The officer will inspect the true nature of the submitted details about the property
• If no transaction is taken place then the authority issues (NEC) Nil Encumbrance Certificate in Form No. 16 of the respective state rules.
• The certificate will be issued within 15-30 days from the date of application

EC is mandatory for applying home loans, a skilled property lawyer will makes you understand the liabilities,terms and conditions of home loans and further, future consequences.

9. Development charges receipt / Betterment fees

If a property seen price appreciation by mean of infrastructural development including commercial set up, malls, metro station, schools, IT park etc, then the betterment charges or development charges will be impose by a civic authority.

The Ministry of Urban Development has  given its approval to “betterment fees” that will be levied in addition to other charges, including stamp duty, if the property is expected to meet price appreciation in future owing to infrastructural development. Everyone who purchase or sell such property is liable to pay the development charges. It is necessary to consult a lawyer, before making payment on developmental charges, because the development charges may differ from place to place, the development charges may be depreciated due to natural calamities,

10. Khata certificate

The term ‘khata’ means account, This will be know as different names in different states. Khata is therefore an account of a person who has property in the city which will be kept,in the records of the Corporation/Municipality.It is nothing but a proof, that the property has an entry in local municipal records. It makes the person liable to pay property tax, it contains all the details of the property. Most of the lawyers advised that before applying for khata certificate it is necessary to done, khata bifurcation, to know the liabilities of the property owner.

11. Conversation certificate ( from agricultural land to non agricultural land)

The doesn’t permit anyone to build a house, factories or industries etc. The land is a subject of state so, there is a different laws for different states on land. For converting agricultural land into non agricultural land you have to approach the local municipal authority or the revenue department of the concerned state . A mandatory permission is required for change of use on land. It is important to attach all the necessary documents including title of the property, location of the property and a proper details of the owner for conversation of the land. It is advisable to get a legal opinion to know about the procedures and legal consequences about the conversation on such land includes mortgage loan, type of crops, debts, title of past and present owners, etc. It is mandatory to pay the fee for conversation based on the type of land and environment.

12. Power of Attorney (if any)

It is a legal document which enables an principal to designate another person to act for himself, the authority to take action on behalf of someone else, called the principal. It is drafted by an advocate based on facts and circumstances. The most commonly used POA are conventional , it convey only a limited power on the attorney (agent). Durable, it lasts for lifetime unless the principal revokes it.Both the principal and agent is of sound mind , when the document is drawn up. Spring durable power of attorney is practising in some States , when a specified event occurs and the principal become incapacitated, then the power of attorney will be automatically assigned to the nominated person by the principal before being incapable. A limited POA has a limited specific time period. Illustration;  ‘A’ working in UK designated his brother ‘B’ as attorney for his property, A will return to India within a 2 yrs, after A’s arrival, B ‘s position of attorney will terminate.

^[7]Tmt. Kasthuri Radhakrishnan & ors. v. M. Chinniyan & anr, it was held that any documents executed or things done by the agent on the power of attorney,in the name of principal will be considered as effective as done by the principal himself.

13. Tax paid receipt

There are several taxes that a purchaser has to pay, however the registration and stamp are one time charges. The property tax is imposed by a local municipal authority and a land ower is liable to pay every year. The tax may vary based on numerous factories such as location of the property, size of the property, annual income of the land owner etc. Property tax is calculated, according to the recent property valuation conducted by the municipal body. Only the owner of the property is liable to pay tax not the tenant.The receipt is considered as an evidence that the property tax is paid.

14. Completion certificate

Before obtaining completion certificate from the concerned authority, the lawyer will verify all the legal documents of the building, makes sure that the building was constructed based on the government guidelines and approved sanctioned plan. Then make the builder to apply for completion certificate to the appropriate authority.

The authority may conduct an preliminary inspection of the documents and make sure that the building was built with regards to the standards set by the local development authority or municipal corporation.

Note ;

This certificate is needed to be obtained by the builder as well as the owner of property for the essential supply of water, electricity and drainages etc.

15. Occupancy certified

It is necessary to consult a legal adviser before obtaining a occupancy certificate, the lawyer will once again check all the documents to be produced for occupancy certificate, and make sure all the documents are clear and not contrary. Occupancy certificate is nothing but a certificate issued by the local municipal authority, stating that the building was constructed based on the approved plan and in compliance with local law. The occupancy certificate ensures that the building is fit for living. You have to obtain OC before taking possession on the apartment, if the developer denied or failed to give you OC, then you can file a suit in consumer Redressal forum.

These are the important documents,everyone should be aware of before buying an immovable property. As we discussed above in detailed,about the importance of legal opinion in each and every stages of documents concerning, the purchase of property. Legal opinion plays a major role it, starts with title opinion continues throughout the other documentation process. Even though legal opinion comes at a cost, it protects the interest of the buyer. When a person buys a property, he generally invests all his savings, into the property so, it’s more important to know all the material defects in the property.One should obtain a clear knowledge about the property before buying it and also to get a legal advise for further, future legal consequences in the property.

^[1]7 May, 2018 ( Allahabad , HC)

^[2] 10 October, 1939;Equivalent citations: (1940) 42 BOMLR 199

^[3] 1971 SC 1238.

^[4] 21 November, 2012;Civil Writ Petition No. 22898 of 2012(O&M)                              1

^[5] CIVIL APPEAL No. 7356 of 2012 (Arising out of SLP(C) No. 23780/2011)

^[6] 21 August, 1967;Equivalent citations: 1968 AIR 303, 1968 SCR (1) 674

^[7] Civil Appeal No. 5158 of 2009; Decided On, 28 January 2016