Author: Yamini Arora, School of Law, RNB Global University, Rajasthan
Introduction
Land and properties are deeply intertwined, land serves as the foundation for wealth, while property represents legally owned assets that contribute to financial security. The desire to own property is universal, as it provides stability and a sense of accomplishment.However, with property ownership comes a need for legal regulation. Laws help maintain
transparency, prevent disputes, and ensure fair transactions in real estate. Without legal safeguards, the real estate market could be plagued by fraud, illegal land acquisitions, and unfair practices. This is why property laws—ranging from land acquisition to zoning regulations—are essential for protecting the rights of buyers, sellers, and investors.
Abstract
Key topics include title due diligence, the importance of registering property, and comprehension of various legal documents relevant in transactions, such as sale deeds, encumbrance certificates, and occupancy certificates. There’s discussion on the risks of non-verification of title, highlighting the necessity of ensuring clear ownership to prevent legal complications or financial losses.
Legal perspective
the types of property in India most of the properties are distinguished between two types of property first being a freehold property in which there’s an absolute ownership of the property and there’s no time limit on the ownership of the property ,so in freehold property a property where the owner has absolute and unrestricted ownership for an indefinite period of time there are no limitations on transfer inheritance or sale for example if you purchase a standalone house in Mumbai and grant a complete ownership right basically When you purchase land and the structure on top of it, it will be a freehold purchase made by you or a leasehold property, wherein the ownership of the property is usually for a specific period of time as agreed upon in a lease contract. This could be for 99 years, 50 years, and so on. The lease is valid for that number of years, and after that period, you need to renew your lease or the lease reverts to the original owner
For leasehold properties, you must take permission from government authorities before initiating a transaction. If you want to sell a particular property, you must follow their procedure, obtain their permission, and get a No Objection Certificate (NOC) before transferring ownership.
Case Study: Delhi Development Authority v. Anant Raj Agencies (2016)
This case involved the leasehold nature of properties under the Delhi Development Authority (DDA). The Supreme Court ruled that the original lessor (DDA) retained ownership rights, and leaseholders had to seek proper renewal or conversion to freehold for complete ownership rights.
There are two other modes of property acquisition. The first is an ancestral property. An ancestral property refers to property owned by a great-grandfather, which is passed down across four generations. If a plot, flat, or building is owned by your great-grandfather, then four generations will be entitled to a share in that property.
The second is self-acquired property. This refers to property purchased or acquired independently by an individual using personal resources. The owner has full authority to sell, transfer, or bequeath the property as per their wishes. For example, a flat purchased solely by an individual using their own funds is considered self-acquired property. If your father or mother owns a property, you do not have any rights to it unless they pass away and have not executed a will, gift deed, or any other transaction establishing your right. If a property is intestate (i.e., no will is executed), it will devolve upon the legal heirs as per succession laws, including Class 1 and Class 2 legal heirs.
Regarding property transactions, when a particular amount is paid partly, it is called an agreement for sale. There are conditions within a set period of days, and if the sale is completed within that timeframe, it will be considered a sale. A sale deed, on the other hand, involves a one-time payment in full, which is then considered a completed sale. If you are partly paying or taking a loan, conditions will be set, such as completing the transaction within 30 or 45 working days, as decided between the buyer and seller. If the transaction is completed within the agreed period, the agreement for sale will be treated as a sale deed. If the transaction is not completed within the timeframe, the agreement becomes null and void, requiring the execution of a cancellation deed.
Another mode of transaction is via gift deed or mortgage. A gift deed transfers property without monetary exchange, typically out of love and affection. For example, if a father gifts property to his child, stamp duty will be payable, though at a nominal rate, and no
consideration will be involved. In contrast, a sale deed involves monetary consideration, even if a father sells property to his child.
The difference between a mortgage and a lease is that a mortgage uses property as loan collateral. The borrower does not retain full ownership unless the repayment is completed. A lease grants temporary usage rights for a specific period. If land is owned by a government authority or a private entity and leased for a certain period, it is considered leasehold. To sell or transfer a leasehold property, permission from the land-owning authority is required. If the land is on a collector’s land, then collector’s permission is needed. After the lease expires, it must be renewed, or the land reverts to the owner.
Many flats in Mumbai or Delhi are leasehold properties, where the land belongs to the government, and the flat owners hold a long-term lease. If a builder sells a flat, will it be freehold or leasehold? This depends on the ownership structure. A conveyance deed must be executed between the society and the builder. If this deed is not executed, the land and building still belong to the builder, and the society does not have ownership rights. When a builder develops property, they either own the land or have leasehold rights. They construct flats and sell them to buyers, but land ownership is not automatically transferred to housing societies.
If there is no conveyance deed between the society and builder, the society does not have ownership rights to the land. If the society wants to redevelop the property, it cannot do so without ownership rights. A conveyance deed legally transfers ownership between the builder and the housing society. Once executed and registered, the society becomes the legal owner of the land and building.
If the builder does not cooperate or is no longer in business, a process called deemed conveyance can be followed. Many builders refuse to execute a conveyance deed, leaving societies without legal land ownership. Deemed conveyance allows societies to get land ownership transferred without the builder’s cooperation. The society must approach the District Deputy Registrar of Societies to initiate the process. If approved, the society gains legal ownership of the land, and the conveyance deed can be executed unilaterally.
Now that we know the types of property and the modes to acquire it, it’s very important to understand that while we are in the process of acquiring such a title, title verification is crucial. title verification ensures that the seller has a legal right to transfer the ownership of a property, whether it is land, a plot, or a flat
As homeowners, we invest our life savings in a particular property, only to later find out that the title was not clear in the first place. Title verification is crucial to avoid hidden liabilities or disputes in the future, such as fraud. Without proper verification, a buyer may face many legal complications, financial losses, or even lose the property altogether.
To avoid this, title verification is conducted.
Case Study: Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana (2011)
The Supreme Court ruled that property transfers via General Power of Attorney (GPA) were invalid unless accompanied by a registered sale deed. This landmark case prevented fraudulent transactions and unauthorized property sales.
So, what are the key documents that one must check while making title verification?
The first one is a sale deed, which is the most primary document. It is very crucial because it proves ownership. For example, if A goes to B to buy a property, does B have the legal entitlement to that property? Does B have the proper chain of documents? Who did B acquire the property from? Several questions need to be addressed, and hence, due diligence is very important.
Due diligence essentially means investigating or legal audit to confirm all the material facts relating to the history, title, and other aspects of the property. During this due diligence, you will obtain sufficient and reliable information about the real estate market and the land or flat you are interested in—whether it has a good, clear, or marketable title. Real estate due diligence is not just an inspection and investigation of the property, but it is also important for business entities before a buyer makes a final financial decision. Therefore, scrutiny in terms of legal status and user ownership is very important.
The first thing we do is check how the acquisition of the title for a particular flat or land is taking place. Is it via a lease of land? Is it through the partition of an HUF (Hindu Undivided Family) property? Is it a family settlement deed registered by the Sub-Registrar? For example, if there is a flat and a will has been executed, then in certain states, probate is compulsory. Has it been probated? Are there any court orders or litigations? These are just a few things that a lawyer must consider before issuing a title certificate.
You also must check inheritance and succession while conducting the title verification process. If there is a mortgage, is the mortgage closed? Have the dues been paid? If an
agreement was executed between the bank and the mortgage holder, you must also check the foreclosure agreement of the mortgage. Additionally, you should verify transactions involving gifts or relinquishment deeds, as these are just a few types of registered conveyances and relevant documents.
A relinquishment deed (also known as a release deed) is executed when there are multiple legal heirs of a property, and the title owner is deceased. In such a case, if a legal heir wants to give up their share in the property in favor of another legal heir, a release deed or relinquishment deed is executed. If someone acquires a flat via a release deed or relinquishment deed, it is important to verify whether all the legal heirs were considered in the process.
Along with the release deed, it is crucial to obtain a court order, known as a Letter of Administration. This order is filed in the High Court of the state where the property is located, requesting the court to grant the order in the applicant’s favor. Subsequently, a transfer deed or release deed must be registered.
To check the classification of a property, you will need to access government records by filing a PLA form. This requires visiting the Sub-Registrar’s office and submitting Form No. 22. This small form is a request to the Registrar to conduct due diligence and obtain information about the government records related to a particular flat or land. These records usually include copies of the site plan, survey number, layout, or sanctioned plan of the property.
If someone is selling a plot of land, you can cross-check its size and layout with the records in the government office to ensure that the information is accurate. This prevents fraudulent sales involving incorrect or manipulated layouts. It is also crucial to check the sanctioned plans of the property, as they help verify the property’s structure and any adjoining land use.
The documents should be certified by the land record officer to confirm the land’s designated use. The competent government authority or local body charges a fee for land conversion and issues the conversion certificate, which must be verified. Additionally, you need to ensure that the land is not subject to any legal proceedings. This can be done by checking records at the Tahsildar’s office and reviewing notifications issued by local authorities.
To ensure that the provisions contained in the title deed do not restrict the right of the owner, it is important to check that the title deed is executed properly, the requisite stamp
duty is paid, and it has been registered under the registrar of that area. In case a property is held by an HUF or if it’s an ancestral property, then you also must check the family tree and verify the death certificate of the original Karta and subsequent Karta.
You also must check the OC (Occupation Certificate) in case of a flat, and you must check the Commencement Certificate. When you’re buying a flat, you must check in which year the OC was received, and is it a part OC or a full OC? Because if your flat has not received an OC, then the builder has not completed his work, he has not paid all the dues, and he has not qualified to construct that floor. check the registered title deed—the channel of documents. Basically, in the recital part, the channel of documents is mentioned, but you need to cross-check it with the original chain of documents.
You also must check if there’s an Encumbrance Certificate (EC). The Encumbrance Certificate is mainly a certificate issued by a government authority, and in that certificate, they mention:
• Whether there is any mortgage or third-party interest created on the flat
• Who the owner is
Second is Index II, which is specifically for flats. Index II is a government record. Whenever a document is executed—say, even on the same day—you execute a Release Deed and a Gift Deed, both are updated in Index II.
If someone sells you a flat, then you can check their Index II even online. If you have property details, you can go to the state website, enter the property details, and check who the current registered owner of the flat is.
Conclusion
Real estate due diligence plays a vital role in safeguarding property transactions, preventing fraud, and ensuring compliance with legal standards. Landmark judgments reinforce the necessity of title verification, proper documentation, and regulatory checks. Buyers, sellers, and investors must conduct comprehensive due diligence before entering into real estate transactions to avoid legal complications and financial losses.
FAQS
1. How do courts handle disputed property transactions?
Courts rely on title verification, legal documentation, and precedents to resolve disputes and determine rightful ownership.
2. What are the risks of not conducting due diligence?
Failure to conduct due diligence may result in legal disputes, financial losses, or purchasing disputed or encumbered property.
