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LOANS Normally, any financial institution which lends money insists on security of immovable property. The original title deeds of an immovable property can be deposited for any borrowing and it is called mortgage by deposit of title deeds or equitable mortgage. A charge is created on the property covered by the document deposited. There should be utmost care & caution to be excised while taking immovable property as security on grant & disbursal of loans of higher value as the repayment is guaranteed only on the basis of high stakes of the property offered as security as the customer due to his immediate need only would have offered such property as security & would never meant to lose it for the same loan which would be lesser in value than that property offered. Mortgage of an immoveable property and Precautions to be taken prior to such mortgage: One of the most common dilemmas faced by NBFC¶s is as relating to mortgaging of an immoveable property and precautions to be taken prior to such mortgage. Therefore prior to advancing of any loan on the basis of creation of mortgage or charge over any immoveable property, it is advisable to approach a legal professional to ensure that proper title of the seller of the immoveable property is established and also to ensure subsequent documentation vests the immoveable property and the title to the immoveable property completely in favour of the purchaser. All consequent issues like S.M.E. loans, providing collateral etc. with reference to the property would be affected if perfect title does not pass on to the purchaser under a registered Sale Deed which would adversely affect the interest of the person who lend the money / Mortgagee based on such security offered through a mortgage Deed. Registration of a Sale Deed does not ratify or rectify an inherently defective title. Ownership:The origin of ownership is in possession: Actual possession implies a right to retain it until the contrary is proved and to that extent possessor is presumed to be the owner . The concept of ownership gave birth to ³title´ and the idea of title as the better right to obtain or retain possession evolved through dower and detenue.
property can be divided as registered or unregistered.Whether the property stands in the name of the present owner can be ascertained by obtaining Possession Certificate from Village Office. So much so land tax also will be accepted from such owners and receipts issued to them and the fact of possession can be ascertained by verifying Possession Certificate and Land Tax (Basic Tax) Receipt.A person. Possession Certificates will be issued only to owners of property and at least in the erstwhile Malabar Region of Kerala such possession Certificates are issued after mutation of names in the Revenue Records with out any delay. would be the owner. There is a dictum which says that so far as land is concerned. Possession :Possession is the prima facie evidence if title . They may be land or building. who would succeed in establishing a better right to have possession than the other. Every property always remains vested in a legal person or a living person and only the person in whom the property is vested can transfer it to another person. All titles to land are ultimately based on possession. Property here connotes immoveable property. there is no law of ownership but only a law of possession. Ownership never remains suspended or in abeyance but is µvested¶ in some person or other in some form of right or other. . We may note here that land may be:a) b) c) d) e) Private land Government land Government land on lease Land held by Corporate Bodies Land held by Trust In case of Buildings .buildings may be are a) b) c) d) e) Private building Government building Government building on lease Buildings held by Corporate Bodies Buildings held by Trust For the purpose of Scrutiny of the title . This is the position in English law as well as Indian law.
Title to Immoveable Property: An immoveable property can be residential. Title is a legal term for a bundle of the rights in the bundle may be separated and held by different parties. It may also refer to a formal document that serves as evidence of ownership. both possession and title may be transferred independently of each other Conveyance of the document may be required in order to transfer ownership in the property to another person. Observe if there are any defects. by wrongful possession. abatement. .e. Title is original or derivative i.. Registered property: unlike the un-registered property where the responsibility of the intending customer is intending customer is hancy. In many cases.i. Title is distinct from possession. Title is the evidence of the right of ownership or the ground of right of ownership. commercial or any other property including buildings thereon. Title means a right to property considered with reference either to the manner in which it has been acquired to its capacity of being effectually transferred. deeds of convergence and also the events coming in devolution of the ownership) at his expense. Title can be created by act of parties or by operation of law. The person who is the owner of the immoveable property derives his ownership for the property from various documents and deeds relating to the property establishing his ownership and title to the same.e. the mortgage has more care to be taken in case of registred property. Title Deeds: The title documents and deeds vary from property to property and also from State to State.Unregistered Property: As a general rule. is acquired by transfer or operation of law or by wrong or tort . or usurpation. intending customer should deliver an abstractt of title (such as will. a right that often rights in a piece of property in which a party may own either a legal interest or an equitable interest accompanies ownership but is not necessarily sufficient to prove it..
Types of Title Deeds: Titles as well as title deeds are created by acts of parties and also by operation of law. figures or mark for the purpose of recording that matter. These are however not treated as ³Title Deeds´. Assignment Deed and Patta issued under the Kerala Land Assignment Act and the various Rules and Schemes framed there under. 5) Property owned jointly by more than one person is partitioned among the joint owners by executing and registering Partition Deeds Title Deed issued under specific Statutes: Provisions are there in certain Statutes for conferring title to specified immovable property on certain specified category of persons. inscription. Title is created by acts of parties in the following manner: 1) Transfer by way of sale by executing and registering Sale Deeds. Title under Awards and Court Decrees: Title is often created or declared by decrees of Courts or by Awards by other legal Fora. Such title deeds subject to the restriction if any regarding alienation and mortgage etc are good title deeds. Under general law µdocument¶ means any matter expressed or described up on any substance by means of letters. The dictionary meaning of µdocument¶ is ³a deed.Most title documents are specific to State legislation although the overall ownership and title to the property is as covered under the provisions of the Transfer of the Property Act. Kudikidappukars and. 4) Transfer by way of Exchange by executing and registering Exchange Deeds. but are mere evidence of title based on which title deed can be made. µPatta¶ or Certificate of Purchase issued to cultivating tenants. For example. . 3) Transfer by way of Settlement by executing and registering Settlement Deeds. writing. 1882. The term ³Document´ has very wide import. 2) Transfer by way of Gift by executing and registering Gift Deeds. Documents: The documents relating to property or commercial transactions are generally called Instruments or Deeds. Assignment Deed coupled with Patta issued to assignees of excess land under the Kerala Land Reforms Act. that furnishes evidence.
Decrees and Judgments of Courts. So is the case with land tax receipts. transferred.. limited. This can be done after obtaining documents as per check slip/ Abstract of title deeds CHECK LIST On Abstract of Title Deeds Serial No 01 02 Name of documents Yes Absolute Sale Deed/ Conditional Sale deed/ Auction Sale deed extended by statutory bodies Encumbrance Certificate from sub-register. nature of document to be written. With the introduction of Cyber law. extinguished or recorded. date should be related. A testamentary document ( e. Generally it may be done for a period of 30 years. a Will while the testator/ author of the will is alive) an Award . Corporation resolutions. Share Warrants . abstract of encumbrance ( at least for 30 years or right for the date of original or mother deed) should be obtained.g. If you came to know of any transaction or conveyance as per encumbrance certificate but that document is not found in list then clarification should be obtained from the intending customer & gap should be filled up by requisitioning those requisite deed or document.etc are not considered as Deeds. allotment letter etc. extended. municipal resolutions. particulars of owners & predecessors has to be noted. documents should be mentioned seriatim. Then all the documents of transferor have to be arranged chronologically. from date of allotment title date or 30 year earlier till date.This would mean that even a piece of paper on which something is written or typed or printed is to be treated as µdocument¶. Certificates of Shares . electronic documents are also now legally recognised in our country as having evidentiary value Instrument: The Indian Stamp Act defines an ³Instrument´ to include every document by which any right or liability is purported to be created. Whether produced? No . any change in mutation has to be mentioned. After that. these documents here to be compared with encumbrance. This would open on eyes to so may transitions regarding the said property which he may not be aware of Always it is better to prepare the abstract of title deeds in a tabular form. Abstract of title deeds: Abstract of title this depicts the chain of transaction that has taken palce regarding the property under opinion.
Latest Tax Paid Receipt Auction Sale Confirmation issued by the statutory body/Society. The safest thing is to peruse the title deeds for the last 30 yeas. Genological Tree Investigation.03 04 05 06 07 08 09 Possession certificate issued by statutory body/ Society. ( 1 ) The period of Limitation against Government is 30 years . Allotment Letter issued by the statutory body/ Society. Tracing & Scrutiny of Title in case of Mortgage of property offered as security in SME Loan Agreements : Verification of Encumbrances and Charges: 1] Investigation of title starts with the present owner¶s original title deed which will always be µthe document of title ¶to the property under study. a document 30 years or more are presumed to be validly executed. 3]To what extent and up to what period the prior title deeds are to be perused will vary from case to case. . ( 2) . then it is necessary to go back as much as necessary. Certified or copy of the Lease Cum Sale Agreement. Under Section 90 of the Evidence Act . However a search for the last 12 years is treated as normally sufficient . ( 3) The contents of any document are presumed to represent the correct agreement or understanding between the parties there to . 2] Once the original deed is perused the investigator proceeds to verify the parent documents or the prior title deeds. If the title cannot be reasonably be ascertained with in 12 years. The reasons for this proposition are . Khatha Certificate issued by the statutory body/ Society.
The Advocate who examines the title of the owner of immovable property . it could be returned after substituting a reliable copy of it. In addition to ascertaining the owner¶s title. to be on the safer side all the six original deeds from 1988 onwards and at least a copy of B¶s own title deed are to be perused. whether there are any encumbrances created . Besides the original of A¶s title deed is to be examined. This practice however is good.or any other claim subsisting .whether the property stands in the name of its owner in the Revenue records etc. This property was originally sold by B in 1988. But in Karnataka provisions are made in the law for getting Encumbrance Certificates from the concerned Sub-Registrar¶s Offices. but it is sufficient to get Certificate for 13 years so that full 12 years will be covered. . Out of it A sold seven cents to B in 2003. it is the duty of the investigator to rule out the possibility of any subsisting charge by way of equitable mortgage on the property under investigation. Another Illustration: An owned 10 acres of land by a Gift Deed of the year 1965. makes or causes to be made searches in the Offices of the Sub-Registrar and the Revenue Authorities as well as the Municipal Offices concerned . Thus if there is no prior Deed with in 12 years the earliest available one has to be looked in to. In this case B¶s original deed is to be perused.´ In this case. To make an Illustration : ³A owns 10 cents of land by a sale deed of the year 1999. The best and ideal thing is to obtain Encumbrance Certificates for 30 years. For this. After that there were five transfers and A is the 6th transferee.Whether all the title deeds including parent documents to be examined should be originals will also differ from case to case. to find out whether any transaction has taken place in respect f the property during the past relevant period. whether any lis pendens notice is registered . This is because the same land was again and again transferred and re-transferred. perusal of all original title deeds for the last 12 years or even more may become necessary. Such Certificates will contain all transactions relating to the property covered by such Certificates and the Investigator will be able to ascertain whether there exists any registered charge or encumbrance over the said property.
Objects of Investigation of Title: The object of investigations of title is to ascertain the ownership and title of a given property. in most cases immovable in nature. Location Certificates will help to ascertain the exact location of the property and its present boundaries .Other charges can be ascertained by perusing the title deeds for sufficient number of years and the possibility of subsisting equitable mortgage can be ascertained by calling for and verifying the original prior title deeds . The recitals in the title deeds will clearly reveal if any charges are created by the maker of the deed. (2) right to prevent interference by others . (3) Power of alienation (4) liberty of using the object according to owner¶s will . Location Certificates and Field Map / Survey sketch can be dispensed with. . in some Partition Deeds monetary obligations are fixed for equalisation of shares. The attributes of ownership are : (1)right to have and to get possession . (5)liberty of enjoying the fruits and to avail of the object owned . How ever in cases where there are approved Building plan. For example. It follows therefore from the foregoing discussions that for a proper investigation of title the following Title Deeds / Documents are necessary: y y y y y y Original Title Deed of the present owner Parent Documents /Prior Title Deeds covering 13 years Encumbrance Certificate for 13 years Possession Certificate from Village Office Up to date Basic Tax Receipt Up to date Building Tax Receipt. In some Gift Deeds the right of alienation will be restricted till the death of the donor or monetary obligations in favour of some individual or individuals are made a precondition for the enjoyment the gift. (6) liberty of changing its form and even destroying it. license. and Permit. if any There is also a practice of obtaining Location Certificate from the Village Office along with the Possession Certificate. Title to immovable property is ascertained by perusing relevant ³Documents´ and ³Deeds´ pertaining to such property.A Field Map / Survey Sketch of the property also can be obtained from the Village without much difficulty.
On what basis is this aspect certified. 1872 The Registration Act.The following aspects should come out in investigating title to immovable property: y y y y y y y y y y y y y y A full description of the property. Law of Succession.The Schedule Tribes Act . Special Statutes like the Kerala Land Reforms Act .. Trust. What is the nature of document presently available? If the mortgage is by deposit of title deeds. or other legal person how title is affected by its rules or bye laws or any special laws or Statutes. in residential or Commercial Complex. Is the title clear and marketable. freehold. are to be thoroughly known to the Investigator in order to make a proper tracing of title. What is the type of mortgage is possible. Whether the land is affected by any Revenue. how far independent title is ensured. The nature of title of the owner i. Whether the owner is in actual possession of the property. What is the result of the perusal of encumbrance Certificates on the title to the property in question Whether the possibility of any subsisting equitable mortgage is rule out. what are the documents to be kept for the said purpose? Investigation of Title: How to trace title: Tracing the flow of title is the most important part of the investigation of title . If the property to be mortgaged is a Flat / Apartment. leasehold and whether the title is less than full ownership Whether the title is tainted by any minor¶s claim. Different land tenures prevalent in the locality.e. the modes of obtaining title through decrees of Court etc. 1882 The Indian Contract Act. 1908 . Tenancy Legislation or other special Statutes. Examples of Laws that directly affect property transactions In the Kerala Context: y y y The Transfer of Property Act. Whether the documents perused are original / photocopies / true copies/ registration copies etc. Whether land tax has been paid up to date and whether any dues recoverable as arrears of land revenue are outstanding. free from encumbrances and claim by minors. both inter vivos and intestate.Thorough knowledge of the various aspects of law especially civil law is a must for this. Partnership. Law relating to Minors and the legally disabled. A chronological list of documents / deeds perused. If the owner is a Company. The Land Assignment Act .
1884 The Powers of Attorney Act. The Karnataka Land Revenue Acts 1964 and Rules and Notification there under 2.Rules and Notifications there under 5. 1963 The Income Tax Act. 1956 The Hindu Adoption and Maintenance Act. 1899 The General Clauses Act. 1925 The Companies Act. Requisition and Acquisition of Property Act and Rules 8. 1957 The Indian Succession Act. 1976 The Indian Easements Act. 1882 The Land Acquisition Act. The Kerala Apartment Ownership Act 10. Karnataka Land Reforms Act 1961The Kerala Government Land Assignment and Act Rules issued there under 3. 1961 The Wealth Tax Act. The Kerala Joint Hindu Family System (Abolition) Act 1975. 1955 The Court of Wards Act Personal Law ± Intestate Succession The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. The Karnataka Survey and Boundaries Act. 1882 The Indian Limitation Act. 1897 The Code of Civil Procedure. The Transfer of Registry Rules 6. 1963 The Urban Land (Ceiling & Regulation Act). 1999 The Indian Stamp Act. 1890 The Hindu Succession Act. 1874 The Guardians & Wards Act. The Escheats and Forfeitures Act and Rules 7. The law relating to transfer of immovable property is governed by the Transfer of Property Act Two other Acts closely connected to it are the Indian Registration Act and the Indian Stamp Act. 1955 The Hindu Minority and Guardianship Act.y y y y y y y y y y y y y y y y y y y y y y y y The Specific Relief Act. The Kerala Building Tax Act 1975 9. 2002 State Laws (Karnataka): 1. 1956 The Indian Trusts Act. 1882 The Foreign Exchange Management Act. 4. Scheduled Castes & Schedule Tribes (Restriction on transfer of Certain lands) Act and Rules issued there under. 1908 The Married Women¶s Property Act. 1956 The Hindu Marriage Act. . 30 of 1976.
when the loan remains unpaid and when the necessity arises to seek intervention of the court for the sale of properties secured them. For that purpose the Sale Deed relating to the purchase of the property by the seller should be scrutinized. we have qualified and experienced law officers and advocates on the panel to check in to the title deeds and provide advises as to whether such properties could be taken as security for the loan to be offered or enhanced. if the seller has acquired the property by purchase under a Sale Deed. The person who handover the title deeds.Law of Contract. While the deeds of title to property are accepted as security to the loan offered to the borrower. the deeds of title have to be checked for its validity in the eye of law and its marketable title. To play safe and to be secured. Up to date Tax Paid Receipts. or entrepreneurs. 2. Arising out of the scrutiny of the Sale Deed the following related documents should also be examined:1. it may be found that the said properties may not exist or may have a defective title so as to deprive the fruits of the preliminary decree. Tracing & Scrutiny of title is the survey on to the ownership of the property the prospective customer offers as security. Title of the person claiming to be the owner of the property should be traced and scrutinized based on the nature of the property which he is offering because his title depends upon the mode by which he acquired the property or devolved upon him as the case may be. there is an absolute necessity to check and verify the title deeds and make an investigation into the title. there is a necessity. and the property is offered as mortgage. In SCUF. In case of parties who are individual. Up to date Encumbrance Certificate . Scrutiny of title deeds :Scrutiny of title deeds of the property is the first and preliminary step to be taken to establish the ownership of the seller as relating to the property. be he. Law relating to succession is another important area connected to investigation of title. Otherwise. the borrower or the guarantor might even hoodwink the creditor but it rarely happens. and the various Statutes passed by State Legislatures from time to time have important bearing in the matter of ascertaining title to immovable property.
.3. He deposits the original title deeds of his property on first December. Documents as relating to partition. As on date only certain areas are included under the notified area.20. Coimbatore.000/-. For example.000/. he deposits the original documents of his property 5/6 days after the date of borrowing. In such places. But. The scrutiny of Sale Deed along with the above should further escalate to scrutiny of parent documents being title documents relating to the immoveable property to be traced from the original owner of the immoveable property especially if the property had been a larger property. are covered by the notification. Similarly for registered mortgage deeds also.. In the event of the potential purchase being with reference to only a plot/site. recently the Government of Tamilnadu has made an amendment that irrespective of the value of the property mortgaged by deposit of title deeds. With regard to stamp duty on deposit of title deeds. you cannot have a uniform or standard practice of following the procedure in case of borrowing by resorting to deposit of title deeds. If the property had been a consolidated agricultural property and if the present purpose is to acquire the same for any other purpose the conversion order relating to the consolidated property should also be scrutinized and examined.50/60 lakhs. The Govt. they have reduced the stamp duty from 4 % of the amount borrowed to 1 % with a maximum stamp duty of Rs. each immoveable property would have certain issues peculiar to it either as arising out of the situs of the property or out of ownership of the property which would impact the passing of ownership and title to the purchaser.000/. borrowing by deposit of title deeds cannot be done as these are not coming under the notified area. So.5. In other words. the stamp duty will be Rs. etc. Khata as issued by the Corporation/Municipality as relating to the specific State. in case of mofusil areas like Gummidipoondi.5.000/. For example. the maximum stamp duty payable is only Rs.and the Registration fees is Rs. In case of mortgage by deposit of title deeds. only registered mortgage deed is the answer. etc. Notwithstanding the basic requirements to be examined as above. the point to be noted is that promissory note is to be on the date of borrowing and the deposit letter must be on a subsequent date. Chennai. from the time to time may notify the places in which borrowing by deposit of title deeds can be followed. it depends on the place in which the property is situate and whether it is a notified area or not. A serious point to be noted here is that borrowing by deposit of title deeds is restricted to only the notified areas. Hence. division. all development agreements should also be examined to ensure proper documentation between the original owner of the land and the developer if both are two different parties to ensure no third party claims to the property. even if the borrowing is about Rs.. etc. Tiruchirapalli. Madurai. I have . if a person borrows money on 1st December and executes a promissory note evidencing the said borrowing. Chettipunniyam.only.20. should also be examined by the potential purchaser. still.
you should register the mortgage deed and there is no question of giving second loan on the deposit of title deeds for the initial borrowing. . In such cases. Answer for this would be emphatic no.enclosed Xerox copies of model forms for deposit of title deeds as well as registered mortgage deed (first simple mortgage) SECOND TIME BORROWINGS: A question is often asked that after the initial borrowing by deposit of title deeds. if the borrower wants further accommodation whether we can extend the lending by means of a simple letter on the same security of immovable property offered by the borrower for the initial borrowing.
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