Buying or owing a house or property might be in the wish list of many people. But at the same time this dream of wish list may become worst nightmare if all the details related to property have not been fully checked before purchase. It is highly advisable to check all details associated with title of the property before buying it. A person may face legal as well as financial difficulty in case of defected title of the purchased property. With the help of title verification person so intended to buy property can scrutinize that seller is real owner of the property and the same is free from any kind of encumbrances.
What is Title Search Report?
In simplest terms, title indicates rights arising out of lawful ownership of the property. Clear title is considered to be a conclusive proof of ownership. In real estate transactions title search report is prepared to ensure clear title to avoid any future hassles. Title verification is a process of checking and verifying property documents to ascertain the legal ownership of the property and to find out any defects in the title of the property. It is the lawyer dealing with real estate matters who prepared the Title Search Report. Such report is prepared on the basis of verification.
Who may require it?
The following categories of individuals or entities may need the title search report before buying any property:-
- Investors who are intended to invest money in the real estate.
- Companies interested in making real estate transactions.
- Banks and other financial institutions.
How much is the extent of verification?
The extent of the verification of the title depends on the time period of transaction i.e. whether it is for long term or of short period. The title verification is of two types. First is full search and second is limited search. As per full search the chain of ownership of last 30 years is taken into consideration while making verification. Full search is opted for sales and long term lease. On the flipside, the record of last 15 is required to be checked under limited search. This verification is suitable for transactions like short time lease and licence.
What is to be checked and verified?
Details of ownership: –
It is one of the key components of the search report. To check and verify the ownership plays pivotal role before making any property transactions. It is required to check whether vendor of the property is an absolute owner of the property. The same can be ensured by checking and verifying the documents relating to title of the property such as title deed, sale deed, conveyance deed, gift deed, transfer deed and so on.
The revenue record concerned with the property is also required to be checked by visiting appropriate authorities. Such revenue records include Jamabandis, spot, mutation certificate and so forth.
Chain of ownership:-
It is very common that property might be transacted and its ownership has changed multiple times. Thus, checking the details of past owners is also a prominent factor while verifying the title of the property. Chain of ownership includes past record of the title of the property. It commences from the present owner and ends at the original owner. It is necessary to inspect all the documents relating to the chain of ownership.
Mode of ownership:-
Apart from checking the title of the property it is also germane to check the manner of transfer of ownership. The transaction documents depict the mode of transfer of ownership for instance if property is transferred by way of gift then valid gift deed must be in a favour of the proposed vendor. The title of the property can be derived through any mode such as sale, gift, partition, inheritance and lease so on.
Kind of ownership:-
To know the kind of ownership whether it is limited or absolute is also a part of title verification process. Ownership is said to be absolute when owner vested with possession, right to transfer the property without any restrictions. Absolute ownership is not restricted to any limitations. It is necessary to know for valid transfer that whether owner has right to dispose of the property or not. Revenue records can be considered as trust-able sources in order to determine the rights of the owner.
Type of the property:-
While doing title verification it is mandatory to ascertain the type of property that whether it is govt. owned property and private property. As before transferring any govt. owned property certain permissions are required to be taken. Along with that to know the use of property is also important.
For example in India agricultural land cannot be used for non-agricultural purposes. It is mandatory to obtain Change of Land Use (CLU) before using the agriculture land for commercial, residential, and industrial purposes. This can be ensured by checking the columns of concerned revenue records.
Development and construction:-
If proposed property has some development and constructions then it is needed to be checked that whether construction has been made according to the building and sanction plan of the concerned authorities. Along with that, other details such as approvals for sewage, water, electricity, environment compliances and so on are also to be verified.
Encumbrances:-
It is no secret that property can be used to take loans. The encumbrance charge got created over the property which indicates that property is subject to lien or mortgage and cannot be sold further without prior permission of the lender. It is a revenue department who is responsible to maintain record of the property concerning encumbrances, charges and mortgage if any in favour of any person, bank or financial institution. Thus, by searching these records details related to encumbrances can be received.
Litigation aspect:-
It is also a part of title search because pending litigation on property to be purchased may land the proposed buyer into a trouble. It is advisable to check that any litigation is pending involving proposed property as a subject matter.
What should be included in the report?
The title search report must include some basic components. These are enumerated below:-
- It must specify the details and particulars such as location, measurements relating to property.
- Owner of the property whether it is individual, company, trust and other legal entity.
- List of scrutinized records, deeds and documents.
- Nature of the right of vendor.
- Specify any charge, dues, mortgage, or lien if any.
- Any kind of encumbrances if any for instance unpaid loans.
- Any ongoing litigation in which property is a subject matter if any.
- Any third party interest if any.
- Elucidate if property has clear title.
- Any advice or opinion can also be inserted at the end of the report.
To cap it all, it can be said that it is highly recommended for the investors and companies who are planning to invest their money in real estate. As per new FEMA guidelines now NRI investors can invest in immovable property in India. These NRI investors especially needed search report because of their foreign land residence they are not known to the ground realities of real estate sector.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali
