Conducting a title verification before purchasing a property is crucial, as it helps establish rightful ownership over the property and prevents potential legal issues later. The title deed is a crucial legal document that contains the chain of ownership records for the property. When purchasing a property, a buyer should verify the title deed to ensure it has a clear title and is marketable. Title defects can pose the risk of property-related disputes and claims over the property. In this guide, we will explore some important reasons for defective property titles and ways to address them.
Common reasons for defective property title
A defective property title can pose various challenges for a property buyer. The risks are higher in the case of an under-construction property compared to a new or resale property. Therefore, checking the title is a must before finalising a property. Some of the common reasons for a defective property title:
Lien on property
One is likely to come across the term ‘lien’ when obtaining a home loan to buy a property. A lien refers to a claim on the property by the lender, which gives the lender the right over the property in case the borrower defaults on repayment of the debt. A lien is placed over the property when obtaining a loan to protect the lender’s interest. Moreover, liens can also be private, where the loan agreement is registered in a sub-registrar’s office. A lien can also be established through a court order, preventing the owner from selling the property until the matter is resolved in court.
Pending civil suit or case in a family court
It is possible that a property may have a pending court case without a lien placed by the court. A civil suit could be filed against the owner regarding matters such as inheritance or property transfer. Another common reason for court cases may include property transactions made through a Power of Attorney (PoA), where a co-owner may claim that the PoA was executed under coercion.
Encumbrance
In real estate, an encumbrance refers to a claim or liability against the property, which restricts the use or transfer of the property by the owner. It is similar to a lien. However, in a lien, it is not necessary that a property is mortgaged. However, in encumbrance, the property is mortgaged as collateral. There could be a loan against the property. An encumbrance is when a lender or a third party, other than the seller, claims ownership over the property. The claimant gets the right to sell the property to cover any pending dues. Property buyers must check the encumbrance certificate from the sub-registrar’s office to check if the property has a clear title and is free from any legal or financial liabilities.
Multiple sale transactions
In the event of fraudulent transactions, a seller may sell a property to multiple buyers and collect payment from all parties to settle their pending loan dues. This could pose numerous challenges for buyers who have engaged in the transaction, involving multiple sale deeds. Thus, it is crucial for buyers to check for any defective property title due to such reasons.
Notified property
A notified property refers to a piece of land or any property that the government has marked for any infrastructure project or specific purpose. It is often announced through an official notification in the official gazette. Some owners may try to sell off such properties. However, the property title is legally a defective title. Thus, buyers should be cautious before finalising transactions.
Illegal land conversion
Given the limited availability of land in the city centre, developments are shifting towards the city outskirts. There have been many cases where agricultural land has been utilised for residential purposes. There are proper land conversion procedures that one needs to follow. In the absence of a land conversion certificate, it could result in a defective property title.
Rediscovered will
A will is a legal document in which the owner specifies how their assets will be distributed to beneficiaries after their death. In the absence of a will, the property will be distributed based on the succession laws or the state may take charge of the assets. A buyer gets the ownership of the property when the state sells the property to them. However, in case the Will of the previous owner is discovered years later, the current owner’s rights could be challenged based on the retrieved Will.
Forgery
There could be a case of fraud where a person impersonates as the property owner or forges documents such as the title in the sale deed. If the buyer discovers the fraud after the property has been transferred to them, there could be severe challenges regarding claiming ownership of the property or other legal complications.
Encroachment and survey disputes
There may be a case involving government land where access is not given to surrounding residential units. Construction should begin only after the required approvals from relevant authorities have been sought to prevent illegal construction or encroachment issues. Similarly, a property seller may show false surveys of the property, depicting boundaries that are not actually a part of the property. This could lead to disputes when any third party starts to claim ownership over this portion. Such cases could result in defective property title.
Conditional ownership
This involves ownership with some restrictions. For example, a development authority in a city has given a stretch of land as a leasehold property to a builder. Legally, this is not a defective property title if a buyer opts to buy a piece of this land. However, there will be restrictions on the property as it is not freehold and it will imply a conditional ownership. A conditional title certificate is provided to the buyer, limiting their rights to resell or transfer title, secure a loan, etc.
Break in chain of property titles
A defective property title during a property transfer can arise from errors in the paperwork. For example, a name could be misspelt or completely missed when drafting an agreement. If there are multiple inheritors of a property, the chain of title could be broken after the demise of the original owner, particularly in the absence of a clear Will.
How to prevent title issues?
A proper legal due diligence should be done before purchasing a property to avoid potential title-related issues. Here are a few tips property buyers must follow:
- Obtain the sale deed and title deed and review it. Make sure it is properly executed and registered.
- Check the title deed of the seller and ensure the property has a clear chain of ownership for at least 30 years.
- Apply for an encumbrance certificate (EC) at the sub-registrar’s office to check if the property is free from encumbrances.
- Ensure the property is registered with the Real Estate Regulatory Authority (RERA) and verify the details by visiting the official RERA website for the relevant state.
- View land records and cadastral maps to ensure the property’s details match with the government records.
- Check the property mutation records by visiting the official website of the relevant municipal authority or revenue department.
- Make sure the seller has obtained the necessary NOCs, wherever applicable.
Housing.com News Viewpoint
Buying a property is a major investment in one’s life. Neglecting legal due diligence can result in severe legal challenges for a buyer, including financial problems. Conducting a title verification has become a simplified process since the government has digitised its systems and processes for obtaining property-related documents. However, if you are a first-time home buyer and need assistance with verifying property title, you can approach an experienced legal professional.
FAQs
Can you obtain title insurance in India?
Yes, title insurance can be obtained in India. This helps protect a property owner against potential title defects.
Can a defective title be corrected after buying a property?
Yes. This can be done depending on the nature of the title defect. The role of rectification deed or court declarations may be crucial here.
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