What is property settlement?

According to the legal definition, settlement refers to an agreement between two parties to settle the matters or any dispute between them. In real estate, property disputes are quite common. Such disputes are resolved either through a court procedure or an out-of-court settlement. A settlement also refers to a term used for closing a real estate transaction between a buyer and a seller or their agents.

 

What is a settlement in real estate?

Settlement is the last step in a real estate transaction and refers to the transfer of property by the owner. The settlement must be documented and should be registered.

The settlement of a property should be made by an individual only in the case of a self-acquired property. In the case of property acquired by the partition of family assets, also considered a self-acquired one, the settlement is governed by the Transfer of Property Act.

 

Property settlement in case of disputes

A property settlement refers to a legal agreement which includes the terms of resolution of a dispute between two parties.

For example, there are two parties claiming ownership over a piece of land. If one of them provides valid proof in terms of property records, the ownership can be established. However, without proper property records, the right owner of the property cannot be determined.

In this dispute, if one of the parties offers remuneration against complete ownership of the property and the other party agrees to the proposal, a settlement is reached.

 

Property settlement procedure

The property settlement procedure involves the following stages:

• Negotiation: In this stage, both parties discuss the possible resolution of the dispute or matter.
• Agreement: The resolution chosen is then documented by a legal professional.
• Settlement: A consent order is issued to legally validate the settlement deed.

After the settlement draft is prepared, the document must be carefully studied to ensure all the points regarding the settlement have been documented, and the settlement deed must be finalised with a signature of the parties.

See also: What is property settlement deed?

 

Difference between settlement, trust, and partition in real estate

While the three terms are connected to property ownership, there are specific differences as explained below:

Partition

In case of a partition suit, the property is equally divided between two or more parties, with or without the support of a will. This is common in cases of intestate inheritance.

Settlement

In case of settlement, the parties claiming sole title of the property discuss and finalise a resolution. The resolution, thus, reached is documented as a settlement deed.

Trust

In case of a trust, the original owner of the property vests the property to an individual. The legal document is known as a trust deed. In a settlement deed, the executant (settlor), transfers the property directly to the claimant, who will be the absolute owners of the property, subject to conditions, if any.

 

Registration of Settlement Deed

• Sale agreement: It is a legally binding contract between the buyer and the seller, mentioning the terms and conditions of the property sale.
• Title deed: It is a document that proves the ownership of a property, mentioning details such as property history, encumbrances, legal disputes, etc.
• Encumbrance certificate: This document is proof to establish that there are no pending mortgages, loans or any legal disputes connected to the property.
• Property tax receipts: These documents help prove that the owner has cleared all property tax dues.
• Proof of identity and address: Both parties must provide their identity and address proofs.
• No objection certificate: If the property falls under any specific regulation or zone, an NOC from the relevant authorities must be obtained.
• Passport size photographs: The buyer and the seller must provide this proof.

 

FAQs

What does property settlement mean?

A property settlement is an agreement between two parties stating the terms of dispute resolution.

What is a settlement deed?

A settlement deed or a property settlement agreement refers to a legal document stating the division of assets and liabilities between the parties involved in a property dispute or separation.

What is the difference between a settlement deed and a sale deed?

A settlement deed is applicable when a property is being transferred without any monetary consideration, while a sale deed is used in case of a sale.

What is the difference between a settlement deed and a gift deed?

A gift deed is used when a property is being transferred as a gift to another party without any monetary consideration. Unlike a settlement deed, it cannot be revoked once it is executed.

What is the validity of a settlement agreement?

The validity of a settlement is mentioned in the deed depending on the mutual agreement between the two parties.

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