Watch out for fake documents
Property buyers should know that even experts on the panel of banks/HFCs find it difficult to tell the difference between genuine and fake titles
It is frightening to note that one out of every 10 properties is sold on forged ‘title deeds' and three out of 10 on fabricated ‘link documents.' Title deeds are documents conferring ownership, normally registered, and they include sale, gift and partition deeds; link documents refer to encumbrance certificates, khata certificates, affidavits, declarations, genealogical trees etc.
Since property prices have skyrocketed in recent times and ‘black money' is invariably involved in property dealings, criminal elements have flooded the market with fabricated documents.
Even expert lawyers on the panel of banks and Home Finance Companies (HFCs) find it difficult to differentiate between genuine and fabricated documents. As a result, there has been a multi-fold increase in fraudulent properties being funded. This has lead to an increase in defaults and heavy loss to banks and HFCs.
Technological advancements have made it easier to forge title deeds and link documents with the connivance of corrupt employees in government departments. Such documents are made to look authentic by putting official seals and forged signatures on them. There is no foolproof mechanism to find out whether a property document is genuine and whether there are any encumbrances (charge, mortgage, lien etc) on it.
If you think a nil EC (Encumbrance Certificate) issued by Sub-Registrar will give you peace of mind, think again! It is clearly mentioned at the bottom of the certificate that the EC-issuing office is not responsible for any mistakes/omissions. It is ironic that after collecting huge amounts of money (stamp duty and registration fees, fees for issuing EC etc.), government agencies do not even certify that the property is free from encumbrance.
Ideally, the government should guarantee the title to the property, which is the practice in countries such as Australia.
Hence, when it comes to property dealings, the message is: ‘Caveat Emptor' (“let the buyer beware”)
What precautions should be taken while purchasing an independent house?
Collect copies of all property documents from the seller, but don't rely on them. The main documents are the sale deed in favour of seller, parent deed, EC for the past 15 years, latest khata, latest tax-paid receipt, copy of approved layout/construction plan etc. Visit the Sub-Registrar's office and obtain a certified copy of sale deed, parent deed and apply for fresh EC for the past 15 years. Visit the Corporation/Municipal office and verify whether the khata certificate, tax-paid receipt and approved plans are genuine.
If you find it inconvenient to visit government offices, engage a lawyer to verify the documents given by the seller. Seek a legal scrutiny report in writing from the advocate. It is worth spending a couple of thousand rupees on professional advice when you are planning to buy property worth lakhs of rupees. Your lawyer may also rely on the EC, but you should still insist on a ‘search report' from the Sub-Registrar's office. This report involves a lawyer physically verifying the records at the Sub-Registrar's office, noting down all transactions recorded for the particular property and providing the information to the purchaser. The search report helps in detecting any mistakes/omissions in the EC issued by the Sub-Registrar.
The next step is to ensure there are no mortgages or other charges, which are not recorded in the books of the Sub-Registrar. Since the details of deposit of title deeds (equitable mortgage) are not furnished to Sub-Registrar's offices, such encumbrances will not be reflected in EC/search report.
So, the buyer should verify all original property documents available with the seller before entering into a purchase dialogue.
Before entering into a sale agreement, be sure there is no prior agreement already executed by the seller. If any agreement was executed earlier, the original cancelled agreement has to be verified. The sale agreement needs to be signed by all co-owners and all such parties who have right/title/interest in the property. The purchaser needs to ensure that the seller had peaceful possession of the property and there are no encroachments by neighbours.
For an existing building, the seller should have obtained a construction plan approved by municipal authorities and the building must have authorised connections for basic amenities such as water supply and electricity.
Another important issue is to ensure that property has no litigations/claims pending in court. Precaution can be taken by publishing a notice in newspapers seeking if there are any claims on the property.
If you are considering taking a home loan, you may assume that the bank will verify the genuineness of the property documents. However, don't take chances as many banks and HFCs only do a routine check and not thorough legal scrutiny.
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