MODES OF ACQUIRING IMMOVABLE PROPERTY

MODES OF ACQUIRING IMMOVABLE PROPERTY

Before dealing with the different modes of acquiring immovable property, we shall understand what immovable property is.Transfer of Property Act 1882 describes immovable property as one, which does not include standing timber, growing crops or grass (Section 3).Though various landmark judgments are there as to what constitutes standing timber, growing crops or grass it is generally accepted that standing timber means the trees which are fit and ready to cut and which do not require any nourishment from the soil.

Registration Act 1908, describes immovable property as land, building, hereditary allowances, rights of way, light Terries, fisheries, or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything which is attached to the earth but not standing timber, growing crops or grass.

Immovable Property is acquired by various means:

Direct Purchase: The immovable property is purchased from the owner by the sale process.

Gift: The owner of the immovable property donates the property to a person voluntarily without valuable consideration.

By Exchange: The owners of two different   properties   mutually transfer the ownership of one property for another.

Will: ‘Will’ executed by the owner of the property in favor of the beneficiaries. This is also known as Testamentary Succession.

Inheritance and Succession: By succeeding to the property of the deceased by legal heirs. This is also called as Intestate Succession.

Ownership: The degree of ownership in immovable property is of two types

(1) Freehold, where the owner has all the rights and privileges like right to possession, transfer, and

(2) less than freehold where his rights and privileges are not full and absolute.

We are dealing with acquiring freehold interest in immovable property.

Transfer of Property Act 1882, deals with Sale, Gift and Exchange.

Sale: Section 54 defines what a sale is and how it is made. This is the most popular mode of acquiring the immovable property. According to Transfer of Property Act 1882, it is transfer of ownership, exchange, for a price paid, or promises to be paid, or part paid or part promised.

If the value of the property is one hundred rupees or more such a sale can be done only by a registered document.

The person who transfers the Property is called the Seller or Vendor and the person who gets the property transferred is called the Purchaser or Vendee.

The law (Transfer of Property Act) imposes certain duties and rights on the seller and the purchaser. These duties and rights are subject to the terms of contract; if the contract is silent on any duties and rights, then law will prevail. If the contract expressly avoids such duties and rights, then the terms of the contract will prevail. As such it is necessary to avail the services of good legal expert.

Duties of Seller

(1) A seller should disclose to the purchaser any material defect in the property, or in the seller's title, which the seller is aware and the buyer is not aware, and the buyer could not discover the defect with ordinary care.

(2) Seller is bound to make available to the purchaser the documents of title to the property, which are in seller's possession or power, for purchaser's scrutiny.

(3) Seller should answer all the relevant questions of the purchaser in respect of the property or title thereof.

(4) The Seller is bound to execute a proper conveyance deed (Sale Deed) subject to the following.

(a) The purchaser should pay the amount due in respect of the sale.

(b) The purchaser should tender the conveyance deed for execution at proper time and place 

(5) During the period between the contract of sale and the delivery of the property, the seller is bound to take diligent care of the property and documents to the title.

(6) The seller is bound to give to the purchaser or his agent the possession of the property.

(7) (a) The seller is bound to pay all public charges and rents accrued in respect of the property.

(b) Pay interest on all encumbrances on the property, on due cases.

(c) Discharge all existing encumbrances except where the property is sold, subject to encumbrances.

(8) Seller is bound to give Warranty that the interest, which the seller is professing at the time of sale of the property, subsists and he has power to transfer the same.

(9) On payment of full purchase money the seller is bound to deliver all the documents to title of the property, which are in seller's possession or power subject to 

(a) Where the seller is retaining any part of the property comprised in such documents he is entitled to retain them.

(b) When the whole of the property is sold to different buyers, the buyer of the lot of the greatest value is entitled to such document.

Rights of the Seller

(1) The seller is entitled to the rents and profits of the property till the ownership passes on to the buyer.

(2) Seller is bound to charge on the property where the ownership has passed on to the purchaser before the payment of the whole purchase money.

Duties of the Purchaser

(1) The purchaser is bound to disclose to the seller any facts, which the buyer is aware, which materially increases the value of the seller's interest, but the seller is not aware of it.

(2) The purchaser is bound to pay to the seller the entire purchase money on completion of sale.

(3) The purchaser is bound to bear any loss arising from the destruction injury or decrease in the value of the property not caused by the seller, where the ownership has passed on to the purchaser.

(4) Where the ownership has passed on to the purchaser he is bound to pay all public charges, rents, and money due on encumbrances and interest there on.

Rights of the Purchaser

(1) When the ownership has passed on to the purchaser, he is entitled to the benefits from improvements increase in the value of the property, rents and profits.

(2) The Purchaser is entitled, unless he has improperly declined to accept the delivery of the property, to a charge on the property as against the seller and all persons claiming under him.

Initial Steps towards Property Purchase – Verification of the Title

Initial Steps towards Property Purchase –

Verificationof the Title.

Scrutiny of title deeds of the property is the first and foremost exercise the purchaser's advocate has to undertake before entering into an agreement with the seller. A clean and marketable title, free from all doubts and encumbrances vested with physical possession, is very important. The ownership of the titleholder can be traced from the title deeds and revenue records.

It is the duty and responsibility of the purchaser'sadvocate to safeguard the interest of his client. The advocate shall thoroughly search and scrutinize the marketable title of the property and genuineness of the documents. He shall make it very clear to his client the extent of risk involved in the transaction and how to make payments to the seller.

Origin of the Property

The origin of a property is very important to trace the title of the property. It is otherwise called 'Root of the Title'. It is the safest way to determine the origin of the property and trace it's marketable title. Documents covering a minimum period of 42 years must be scrutinized. In the case of Adverse Possession against individuals or Conflicting Claims (other than mortgage) against individuals, documents covering a minimum period of 12 years must be checked. As regards the period of limitation against the Government, documents covering a minimum period of 30 years must be checked. If a person is enjoying the property for more than 30 years, he will get title by adverse interest against the Government as per the Limitation Act (article 112 of the schedule as per section 21J) and 3 of the Limitation Act. Also, as per the Section 90 of the Indian Evidence Act 1872, a document executed 30 years before is presumed to be valid.

Subsequent Transfers

After ascertaining the origin of the property, it should be followed up by methodical examination of events and further transaction, if any, in an uninterrupted and sequential manner, involving the previous owners and the present owner of the property. Here, the purchaser's advocate has to very carefully look into all aspects from various legal angles as to how the property was transferred from the previous owners to the present owner. Such a transfer may be by possession, inheritance, settlement, will, sale, mortgage, release, gift etc., involving such intermediate parties. For  supporting such a transaction, the advocate has to carefully examine the title deeds and other supporting documents like revenue documents and other records. Also, verification of the identities of the names of the parties and their family connection, wherever they are relevant, and proceedings, if any, involving the parties before any court of law, other legal forums and authorities including revenue authorities, must be done.

Statutory Clearance

The nature of various statutory clearances obtained from the relevant authorities like revenue, land reforms, income tax, etc., required for completing the transaction must be informed to the parties. In case of purchase of agricultural land, various clearances must be obtained before executing the deed of conveyance.

Present Status

The 'present status' of the property is the most important point to be examined. The advocate has to find out who is the present owner, how he got the property, what title deeds and supporting documents he is holding, is it ancestral property or self acquired property and who are his legal heirs. If the legal heirs are majors in age, the vendor must ensure their presence while executing the deed of conveyance. If they are minors in age, the vendor has to get the permission from the court before executing the deed of conveyance. In some cases the vendor may conceal the fact of legal heirs. To find out the truth, the advocate must ask the vendor to produce either the succession certificate or the family genealogical tree issued by the revenue authority. If necessary he must see the family ration card for further clarification. The advocate must find out in whose name the khata stands, whether the khatedar possesses up-to-date tax paid receipt in his name and up-to-date encumbrance certificate, to establish his right, title and interest in the property. The advocate has to check Encumbrance Certificate for a relevant period, generally above 12 years up to 42 years from which it would be known what kind of charge has been created on the property and whether such an encumbrance is existing or not. Municipal and other revenue authorities too maintain records as to who is in possession of the property, what is the amount of tax payable on the property and up to what period tax has been paid. All this can be learnt from these records. 'Present status' is one of the important factors to establish the present ownership of the property.

Genuineness of documents

After thoroughly scrutinizing the documents, the purchaser or his advocate has to check up all documents for legality with the concerned departments just to ensure that the documents are genuine, that they originated from the departments and that they are not fakes. In addition, the advocate has to find out from the department whether there is any attestation, notification or proceedings against the present owner. In case of buildings it must be ensured that it has not been served with a demolition notice.

Identity of the property

The identity of the property must be checked on the spot. Measurements mentioned in the documents must tally with actual physical measurement of the land available on the property. It must also be ensured that there is no encroachment on the property. In case of encroachment, the measurement of the available land must be recorded and this must be mentioned in the deed of conveyance. The boundaries mentioned in the schedule surrounding the property must be checked physically. Also, the purchaser may make enquiries tactfully with the adjacent property owners about the ownership of the property he is proposing to buy.

Paper Notification

Though the paper notification is optional, it is always advisable to notify in a leading local newspaper about the buyer's intention to purchase the property. This is done to safeguard the interest of the purchaser. Even after examining the various documents, the Advocate may not be able to find out whether the property is truly free from any claim or not. A paper notification will beget response from a genuine claimant. Therefore, paper notification is the best way to avoid legal problems for the purchaser at a later date.

Physical Possession

In case of vacant site, the purchaser may, with the permission of the vendor fence the property with barbed wire or he may construct a compound and put a signboard, if necessary, to intimate the ownership of the property. Verification of title is very important. It is not merely tracing the title on the record but also examination of the genuineness of the records, identification of the property, notification in a newspaper and physical possession of the title of the property. Even after entering into an 'Agreement to Sell', the purchaser still makes queries about the Title on the Scheduled Price to the vendor. A doubtful title cannot be forced upon the purchaser. Purchaser is not bound to complete the sale if there are defects in the title, material or latent, which are not discernible in ordinary course. A mere suspicion of fraud that cannot be made out will not make the title doubtful and the purchaser cannot reject the title.

Purchase of BDA Property

While buying a BDA site from the allottee, the purchaser shall collect the following original documents from the seller at the time of execution of the Sale Deed.

1.  Allotment Letter.

2.  Sale consideration paid receipts.

3.  Possession certificates.

4.Agreement to sell executed by the BDA and the original allottee.

5.  Katha Certificate.

6.  All up-to-date tax paid receipts.

7.  Encumbrance from the date of allotment.

8.  Absolute Sale Deed executed by the BDA.

9,Other papers  mentioned  in the above said Documents.

Revenue Sites 'Buyer Beware

Revenue Sites 'Buyer Beware

Revenue site is a site that is formed on the agricultural land without proper approval under the relevant law pertaining to town and country planning  and  also  as  per  other provisions of law.

Under the law, no building shall be constructed on an agricultural land without obtaining conversion and other   approvals from the concerned authorities..

All around Bangalore, it is a very common practice for people to buy a piece of agricultural land, which is  more popular as 'revenue site,'  without knowing the hassles involved in the buying of such sites. Consequently local brokers, aided  by   certain  landlords  also misguide buyers of revenue sites. So hard earned money of these innocent people goes down the drain, ruining them forever.

Middlemen Ride

The middlemen and the local brokers have perfected their profession. This is how they operate. A nominal sum is paid as token advance to the landlord and a general power of attorney is obtained; and then, the search for the victim begins. The middle men, like double edged razors, hike the price of the land and at the same time, do not properly settle the accounts with the illiterate and ignorant land owners.

Then, there are clever entrepre¬neurs, who consider themselves above law. They form layouts on agricultural lands without sanction, approval, planning, design etc. To increase the saleable area of the 'sites', they encroach on roads and as a result the roads get narrowed down. These layouts are formed without civic amenities and facili¬ties, since there is no intention of providing them. However, they know the art of marketing. They make colorful brochures with photographs of certain parts of structures including 'Vidhana Soudha', Utility Building, etc., to paint a picture of the property, which a prospective buyer would like to own, as his 'intelligent investment'. They know that NRIs and local purchasers are very particular about presentation. Better the presentation, deeper the deceit, which very few people understand. After the process, one earns money, and the other bitter experience.

Whose ancestral property?

In the recital of a sale deed, it is customary to mention how the seller has   acquired   his title, interests and rights to  the immoveable property.  In case of  revenue   sites,   the brokers at the office of  various  sub- registrars  have devised a very ingenious method to  hide this fact from the unsuspecting buyers.  They merely advise the I parties concerned to mention in the recital that the property is the 'ancestral property' of the  seller.  In this way the property passes on from one GPA holder to   another GPA holder, till such time an unlucky person becomes  the  owner  of such  an 'ancestral property'.

There are several instances where the land notified for acquisition and the land granted for schedule cast people have been converted into sites. Then the law stipulates that certain lands, when granted to the

schedule castes, will revert to them if purchased by anyone else. And there is no guarantee that the money paid for such lands will be re¬funded.

GPA Transaction:

Very few people care to check the legality of the GPA executed by the original vendor. Nobody bothers to find out whether the GPA is registered or not, whether the executor of the GPA is alive or not.

All that everyone is concerned is how to become the owner of the site. Few people realize the danger when a GPA is revoked. A joint GPA executed by two owners becomes invalid if one of them dies.

Form 9 and Form 10 transactions

Certain dishonest and insincere revenue officials to circumvent the law and cheat the government have devised these transactions. Form no. 10 is for a house coming under gramthana village panchayat area. Form no. 9 is for a vacant site coming under gramthana village pancayat area. Originally, a property falling under the village panchayat area alone has the government site status. The middlemen and the revenue officials have made bogus forms no.9 and 10 and have registered immoveable properties in favour of innocent purchasers. Earlier, when the Urban Land Ceiling Act was in force, hundreds and thousands of revenue sites were registered by merely mentioning in the sale deed the expression 'one square asbestos sheet house'. This was mentioned just to avoid getting the relevant clearance under the said Act. After the Act was abolished the term 'one square asbestos sheet house' was also  removed from the  broker's dictionary.

It is not legal to form layouts in the agricultural land/green belt area. In such lands, the record of rights (RTC) will be in the name of the original land owners.

The sites, being 'ancestral proper- ties' of non-existing persons, will be sold by the GPA holders. The numbers assigned to these sites will never match with the survey numbers assigned to these lands by the government. The purchaser of the revenue site doesn't get the title of the property. What is purchased is an 'imaginary site' only. If, however, the original owner is good then any purchaser can enjoy the property. In Tamil Nadu, only properties with proper titles are registered. If the Government of Karnataka makes similar rules, lots of innocent people will be protected from the onslaught and greed of the middle¬men.

Difficult_to_get_loans

If the title deeds are not clear and marketable, it is difficult to obtain bank   loans   for   construction  by mortgaging the sites. Generally, these sites are situated on the city out-skirts. There will be no proper roads, electricity or water supply. There is no scope for immediate development or occupation. After all this, if the prices of the sites appreciate over a period of several years, the original landowner will appear from nowhere and start cultivating the area. He will remove all the demarcating stones planted by the GPA holder to fool the purchaser. The purchaser will then find it difficult to identify his property. In certain cases the GPA holder sells the same sites to several persons and collects money from all of them. Consequently, a marathon litigation awaits him. The laws are so complex that they give rise to multiple interpretations. To add to his woes, the court fees, which are very high, drain his already depleted resources. All these are sufficient for anyone to forget everything and be done with it. Only a fraction of the deceived purchasers feel that the laws are helpful under such circumstances. It is hoped that people will exercise utmost care and restraint, when they go about purchasing 'revenue sites'.

A little caution in time will save lots of botheration in future. Instead of purchasing a 60 x 40 site a purchaser can as well go for a 20 x 30 site with a clear marketable title within the city limits. Moreover, all the sites formed in and around Bangalore must have BDA or BMRDA approval. The buyers, therefore, instead of wasting their hard earned money on revenue sites and spending sleepless nights, would rather be wise to consult qualified legal experts before investing their well earned money.

BANGALORE'S PROPERTY PROMOTER'S Never Ending Woes

BANGALORE'S PROPERTY PROMOTER'S

Never Ending Woes

Promoters by their shrewd planning contribute sky scrapers with attractive elevations to the city's face lift. Hence they are playing the leading role of building a 'Global city'. But the sad news is that the Government machineries are not equipped to develop the city to take it to the status of a 'Global City'. The Government boasts of provid­ing quality infrastructure every time to a city. However the quality of the infrastructure from the Government is such that a good road becomes a bad road within a couple of months. In spite of such a situation promoters continue to play their role even as the problems which they face is never ending. The promoters in Bangalore too are no exception. Like promoters in other parts of the country the apartment promoters in Bangalore too continue to face many difficul­ties.

It is very difficult for a promoter   to acquire land with proper title. Most of the titles pertaining to land, on which apartments are built, are not 100% perfect. Purchasing land falling under the CMC and on the developing outskirts is risky as it may lead to prolonged litigation or some authority may find that the land is suitable for acquisi­tion for the purpose of laying roads, bridges etc. Once the final notification is announced, it is next to impossi­ble for the owner to get the same returns, if the project fails on account of defective title. This apart, in a number of cases Government department personnel themselves present fake records as authentic.

Then there are a maze of laws, rules and regulations, which the pro­moter has to comply with for the construction of an apartment. Most of these laws are so complicated that different courts interpret them differently. As a result there are several contradictory judgments on the same point of law. The promoter tries to comply with one law after the other but the chain is long enough to exasperate anyone trying to get to the end of it. Government officials take advan­tage of the law, which is in their favour, in taking decisions but often ignore the other provisions of the law.

Construction on certain categories of land requires NOC of the Bangalore Development Authority. Getting BDA permission is not an easy task. There is no law that can force the BDA to give its decision within a time frame. You will have to wait for how long nobody can tell you. Here's where money speaks. Open your purse and take out currency notes, you will then see a miracle. Illegal becomes legal. In expecta­tion of this loosening of purse strings the BDA will not reject your application straight away even if it is not in order. Rather, it will make you wait till you open your purse.

The Government for developmental purposes  may have notified for acquisition certain types of land that were used for agriculture and other purposes. Even after a lapse of 25 years, Government may not have taken possession of the lands as these are in various stages of litigation.   The owners of such lands are very happy to see a buyer  or  a promoter  just  because of the fact that they get hundred times more money from the purchaser than what the pittance govern­ment pays them by way of of compensa­tion.

Once the purchaser starts con­struction work on such lands, troubles start one by one. He will have to walk through the corridors of various courts for decades, to set right the damage and loss suffered by him. Whether he will succeed or not only time will tell. In the end, wisdom dawns on him that the system does not encourage true entrepreneurship.

Various statutory authorities want to enjoy power without the statu­tory responsibilities that go with it. Usually they avoid taking statutory decisions and if by chance they did and thereafter anything went wrong they would find a scapegoat in the higher or lower echelons of the organizational hierarchy. While the authorities are very prompt 'in collecting stamp duties, they do not take the legal responsibility of ensuring that only properties with proper titles are registered. Irrespective of the rules, the sub-registrars are always ready and willing to register the property provided a deal is struck successfully, if not they will raise various objections against registering the property.

According to certain rules, one cannot purchase the land granted by the government to a person belonging to the schedule caste. If anyone purchases such a land, the government may direct him to return it, but the chances of getting back the money invested are remote.

Certain land laws are odd and very confusing. According to Karnataka Land Revenue Act, only an agricul­turist can purchase agricultural lands but his annual income should be within two lakhs per year and he should be an agricultural labour.

Probably, this peculiar law is in force only in Karnataka and Kashmir. Kashmiris can buy land anywhere in India, but people of Indian origin of other states cannot buy land in Kashmir.  While   the   government  can acquire any land and form layout  by  paying  a nominal compen­sation to the landowners, promoters or develop­ers or individuals cannot do so because there is no provision in the law to make private layouts even though they are ready to fulfill all the terms and conditions imposed by the authorities. What is right for the government is not necessarily right for others.

Agricultural lands located at green belt area cannot be used for any building construction. Conversion of the land use in green belt is not possible. However, they are entitled to construct pump set room and small farmhouse.

Another peculiar rule is with respect to the "change of land use." A shopping complex cannot be constructed on a land earmarked for residential purposes. An industry cannot be set up on a land earmarked for commercial use. Lands around Bangalore within a radius of twenty kilometers, have been declared as "Green Belt " area on which no buildings can come up. Similarly, no construction is allowed other than what is mentioned on lands earmarked. Likewise, an apartment block cannot be constructed on a site allotted by the BDA. If the permission to change the use of land is denied, then the project can never see the light of day.

Even if the promoter is able to cross over all the hurdles and manage to get a proper land for construction, his problems do not end there. He has to collect various documents to perfect the title deeds such as betterment charges, clubbing of khata, etc. To regularize the property, the promoter has to put in great efforts at the revenue department. Thereafter he has to get  the  plan  sanctioned  by  the engineering department. The plan has to move up from the Junior Engineer level and after passing through various cadres of engi­neers it finally reaches the commis­sioner level. After the building plan is sanctioned, the promoter has to obtain the 'certificate of com­mencement' and finally 'comple­tion certificate' from the concerned authorities.

Getting the completion certificate from the Bangalore Mahanagara Palike is not an easy task. One among a hundred flats can get the completion certificate. The work cannot be completed unless and until the promoter parts with a huge amount of   'speed money'.  'No money - no certificate’ is the unwritten slogan. None of the authorities will respond to your application within a fixed time frame if you do not 'take care' of them. In short, public administra­tion has now come to mean public harassment. Delay in getting clearance and approvals leads to escalation in the cost of materials, wages and administrative over­heads, which eats into the pro­moter's wafer thin margin. Apart from the BDA and the BMP, there are several others the promoter has to contend with. Various squads such as BDA squads, sales tax squads, income tax squads, revenue squads, KTPCL vigilance and inspection squads, prevention of unauthorized construction squads, swoop down on the promoter to collect their periodic 'mamools.' Whether the promoter makes money or not, these people defi­nitely do. The Lok Ayukta has already nailed some, but many are still at large fleecing the entrepre­neur.

The promoter has to shell out nearly 25% to 40% of the project cost as bribes and government fees. Then he has to earn something in the thin margin by way of profit. As a result, there is bound to be deviation from the sanctioned plan, compromise on standard construc­tion, bad workmanship, poor finish and delay in completion of the project. That some buildings come crashing down now and then will bear testimony to these realities.

Then there are cases of missing files and bogus documents. Added to this are cases of genuine documents executed on bogus stamp papers. A promoter with such professional qualification   as   a   Bachelors, Masters degree in architecture or civil engineering learns that his learned knowledge is useless when it comes to getting clearances, approvals from government officials.

They learn that the only way to get their work done depends on how successful they are in warming the hands of the officials 'under the table.' Normally, promoters are not in a position to invest the entire amount on their projects. It all depends on the amounts they have been able to collect from customers. Some customers don't pay promptly. Sometimes to make up the deficit, the promoters have to borrow funds at high rates of interest. Promoters are forced to pay compensation by the con­sumer forums to those customers for the delay in the project. On the delayed payments, however, it is difficult for the promoters to collect interest as such rights can be enforced in civil courts only which is a long drawn process. Of course, a few unscrupulous promoters do make fast bucks by throwing ethics to winds.

Under  the  circumstances, only those few promoters, who have the capacity to hold on to their apartments till they get high prices, can survive in this busi­ness. Those promoters who desire to construct apartments and budget flats for middle class citizens at reasonable prices are struggling hard to make both ends meet.

Unless attitudes change and the bribe culture is rooted out, it will be difficult for the quality con­scious and value-oriented promot­ers to survive in the market.