News & Articles
Before we accept the property to be mortgaged as security for our loan, it is necessary to enquire into the borrowers title over the same. For this purpose a report on title is prepared to indicate whether the borrower has a clear and marketable title over the property.
For this purpose, we may ask the borrower to furnish the following information :
- Situation, extent and brief description of the property along with a site map.
- How and when the properties were purchased/allotted/acquired by the borrower.
- Whether the property is free hold or lease hold.
- Photocopy of all the title deeds relating to the property alongwith record of rights, municipality/city survey record for the past 30 years.
- Whether mutation in respect of the property is complete in the municipal records.
- Whether any suit or other proceedings are pending in a court of law concerning the said property.
- Is there any charge/encumbrance over the said property.
- Whether there is any restriction under the local laws/ lease deed affecting transfer or mortgage of the said property.
- Encumbrance certificate from the concerned Sub Registrar.
Check Lists : While examining a document check whether :
- The property is heritable and transferable
- The transferor has the right to transfer
- The transferor has the capacity or power or authority to transfer
- The transferee is competent to take the transfer
- Consent of any person or body or authority to transfer the property was necessary and if so obtained.
- All necessary parties have been joined in the documents.
- The whole interest of the transferor has been transferred.
- The identity of the property is preserved
- The consideration or object of the transfer is lawful.
- The document has been duly stamped, executed and attested
- The document was presented for registration by a competent person and all executing parties had admitted execution and it was duly registered.
Title Report : The examination of title involves the enquiry whether the title deeds show that the vendor/borrower has a good title. The Report on title should start with a good root of title and the devolution of title should be traced from the first beneficial owner down to the vendor/borrower. Under Indian law there is no fixed period for which title is required to be shown by the vendor. The vendor has therefore to make out a good title for a sufficient period. What is a sufficient period would depend on the facts and circumstances of each case and the factors to be taken into account would be personal laws by which the vendor and his predecessors-in-title governed, the tenure of the property (whether it is free hold or leasehold or held under a Government grant or sanand ) law of limitation, whether any minor or person under legal disability had or has any interest in the property, usage of the place, modes of transfer which have been in use etc. Generally speaking 30 years is considered as sufficiently long period. May be because 18 year is the age for a person to become major under Indian Law and 12 years is the period of adverse possession. From the good root of title, we have to see that there exist a unbroken link down to the vendor.
Defects in title to a property include outstanding encumbrances, restrictive covenants, unusually onerous covenants in the Lease, notification of intended requisition or acquisition, pending litigation, pending municipal dues etc.
Searches : To ensure that property is free from encumbrances or charges or any litigation, searches are taken in various offices.
The following searches are normally undertaken :
- Office of the Registrar of Assurances to ascertain whether any transaction affecting the property is registered. Normally, searches are taken for a period of more than 12 years. It is for the reason that under Indian Law, a person acquires adverse possessory rights over the property if he enjoys the same unhindered or unobstructed for a period of 12 year. Searches are taken with reference to Index I and Index II Register maintained by that office.
- In the case of company borrower, searches are taken in the office of Registrar of Companies.
- Mutation /Revenue records maintained by Panchayat /Municipality to check whether the property is duly transferred or any revenue/property tax is outstanding.
- Local courts to ascertain pending litigation involving the property.
Contents of a Report on Title and Search Report : A report of title prepared in-house or by an advocate should contain the following :
- Complete description of the property
- Details of the documents examined by him confirming that the originals of the documents have been seen by him.
- Devolution of title clearly establishing chain of title from its root. Normally he should go back for a period of 30 years. However, in case of Government allotment, it is from the date of allotment by the Government, as it transfers the property free from any encumbrance under the law.
- Result of searches in various offices. –Sub Registrar of Assurances, Courts, Registrar of Companies, Municipal/ Panchayat Records.
- Whether there is any restrictive covenant in the document requiring consent or permission from any third party before execution of mortgage deed and whether the same has been obtained.
- List of all the documents to be taken in mortgage.