In real estate, unclear property boundaries and encroachment are the most common reasons for legal disputes. These issues can hamper the prospects of a property sale and affect the owner in many ways, including financial losses. Due to unclear ownership and the legal risks involved, properties with encroachment can ultimately see decreased resale value. Even if a seller gets a deal, the buyer may try to negotiate a price below market rate, which can be unprofitable. In this guide, we will delve into how property encroachment can impact your home-selling prospects.
What is property encroachment?
Property or land encroachment is the unauthorised occupation or use of another owner’s property or land. This normally occurs when the owner of a land or property, knowingly or unknowingly, violates property boundaries and constructs or extends a structure onto the neighbouring property owned by someone else. Encroachments are commonly seen on public land, such as unauthorised developments along river banks, lakes, or forest land. However, rampant encroachments are also seen on smaller scales among privately owned properties and shared spaces or common areas.
Encroachment can be either structural or physical. That is, structural encroachment is when someone builds permanent structures on another’s property, whereas physical encroachment may mean illegal use of land by building temporary structures and squatting or trespassing on the property.
The Indian Easements Act talks about the right of way or light. This pertains to a property owner being entitled to limited access to another’s property for specific purposes. This is referred to as an easement. However, an easement can become an encroachment if the individual exceeds their limited rights. Encroachments are illegal, and encroachers face significant legal risks, including penalties and imprisonment.
Impact of property encroachment on sale prospects
Title issues
Homebuyers perform legal due diligence before their purchase. This includes verification of property’s title and ownership history. Properties with encroached areas have unclear boundaries and this may result in title issues. If not resolved, it will be reflected in official property records, such as an encumbrance certificate. This can deter prospective buyers from purchasing the property.
Gaps in property measurements
Encroachments can result in inaccurate property measurements. If there are unclear boundaries for the property, sellers may find it difficult to discuss features such as spacious outdoor areas, parking, or additional space for development. This can result in the misrepresentation of the property’s actual size, deterring buyers from purchasing it.
Rejection of home loans
Most banks conduct due diligence on their end before sanctioning home loans. In cases of encroachments, the risk of home loan rejection is higher. This is most likely if the encumbrances or land disputes are unresolved. Hence, such properties will not attract buyers, directly affecting the home seller.
Reduced property value
Encroachments can lower a property’s value. This is mainly due to its title issues and reduced marketability. Over a period, the resale value can be significantly reduced and impact the owner in the long term. This means that even if a property is sold in the future, the price may be much lower than the average market price. It is mainly because owners are compelled to lower the asking price.
Legal implications
Encroachments may have major legal implications, with owners facing the risk of extended legal battles. Under Section 447 of the Indian Penal Code (IPC), encroachments on someone’s property can attract a fine of Rs 500 and/ or imprisonment for up to three months, depending on the severity of the offence. Encroachments can result in court cases or be resolved through mediation or negotiations.
Risk of demolition
Encroachments may result in eviction or demolition of the property. This is generally seen in cases of encroachments on public land or property, where people construct structures without valid permits. Construction activities must comply with local regulations, including town planning acts and building codes. In case of violations, local authorities can take action, including initiating demolition of the structure. Other implications could include eviction or rehabilitation of the occupants. So, the property sale can be impacted due to such events.
Tips for property sellers dealing with encroachment issues
Get property boundary and title checks
Initiate the exercise to obtain property records, including cadastral maps (Bhu Naksha). Compare the site plans and key documents like sale deed and if there are mismatches, these must be documented. You can approach a land surveyor or a lawyer for clarity.
Obtain key documents
Before planning to sell the property, sellers must obtain updated versions of property documents, such as an Encumbrance Certificate (EC), khata/revenue records, property tax receipts, and an approved building plan. These documents help prove rightful ownership over a property. They can approach a lawyer to seek legal advice. Banks and lending institutions may require NOCs from relevant authorities before approving home loans. So, sellers must apply for NOCs if applicable.
Disclose complete information with buyers
Sellers ensure they share critical information with buyers to avoid issues such as deal cancellation, disputes, or litigation. One such information pertaining to easement rights. If a neighbour is entitled to use a shared pathway or facility, such third-party rights or restrictions must be shared with the buyers. Similarly, any information regarding past or ongoing litigation or disputes relating to property ownership, land acquisition, encroachment, partition, etc. should be shared with buyers. This helps build trust and gives scope for smooth negotiations.
Seek legal remedies
If you have an encroached property, start by getting the land officially surveyed to examine the extent of the encroachment. Then, with the help of a lawyer, send a notice to the encroacher asking for the removal of the encroachment within a specified timeframe. In case of government land, illegally occupied land can be regularised. However, this involves complex legal processes. Owners can approach the local authorities to understand the procedures. It is also important to stay updated on government notices, regularisation policies and demolition drives. This way, sellers can maintain transparent communication with prospective buyers, increasing the chances of sale.
Housing.com POV
Properties affected by encroachments can be difficult to sell. However, there are ways property sellers can speed up the sale process while avoiding legal issues. Before listing their property, sellers must resolve the encroachment issues. Well-defined boundaries, a clear title, and updated legal documents are crucial to attract genuine buyers, set a reasonable price, and close property deals faster. Approaching an experienced lawyer can help sellers understand and navigate the complex processes involving land surveys and paperwork.
FAQs
How to check if your property has an encroachment?
Obtain land records and an updated Encumbrance Certificate, and compare them with the site plan. Property owners can approach the local municipal authority or an experienced lawyer.
Can encroachment be regularised?
Encroachments can be regularised through regularisation or rehabilitation schemes, which may depend on the specific state and the nature of the land.
