Role of Title Search Report in Real Estate Transactions

Introduction

Real estate transactions involve significant investments and are often financed by loans from banks or financial institutions. To ensure the legitimacy of property ownership, a thorough title search is conducted. This process is critical to avoid legal and financial complications arising from defective titles. The time frame for a title search typically spans 12 to 13 years, aligning with the limitations prescribed by the Limitation Act, 1963.

When delving into the intricacies of property transactions, it’s essential to have a solid understanding of the legal landscape. If you’re curious about the broader legal aspects of property verification in India, our comprehensive guide on Legal Verification of Property in India is a must-read. Explore the nuanced legal processes, regulations, and safeguards to fortify your real estate decisions.

Understanding Title

Title refers to ownership rights over a property and serves as conclusive proof of ownership. It can be created through various means, such as purchase, inheritance, or adverse possession. A clear title is essential to establish ownership unequivocally.

Importance of Title Verification:

1. Ensuring Legitimate Ownership:
   • Verification is essential to confirm that the person transferring the property is the legitimate owner.
   • Original property-related documents must align with public records held by local authorities.
2. Duration of Title Search:
   • Typically conducted for 12 to 30 years, with 12 years rooted in the Limitation Act, 1963.
   • Originating from Article 64, 65, and others in Schedule I of the Limitation Act.
3. Adverse Possession:
   • Recognized globally, adverse possession allows continuous possession to confer title.
   • Duration varies; in the UK, the Land Registration Act, 2002 governs adverse possession.

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The Limitation Act, 1963

1. Balancing Rights and Remedies:
   • The Act bars remedies but not rights, prescribing a period for legal action (12 years for private properties, 30 years for government-owned).
   • Section 27 extinguishes rights if not enforced within the specified time.
2. Banker’s Perspective:
   • Banks rely on the Act’s limitations to take legal action.
   • Article 62 specifies a 12-year limitation for mortgage debt recovery suits.

Title Verification Process:

1. Ownership Details:
   • Verification includes ensuring the transferor is the genuine owner with clear and marketable rights.
   • Documents like sale deed, conveyance deed, and power of attorney are scrutinized.
2. Chain of Title:
   • Full search for sale or lease transactions spanning 30 years; limited search for short-term transactions over 15 years.
   • Ensures a complete chain of title from the present to the original owner.
3. Derivation of Title:
   • Verification of documents proving transferability, including sale deeds, conveyance deeds, wills, etc.
4. Nature of Transferor’s Right:
   • Inspection of property-related documents to ascertain absolute ownership rights.
5. Record of Rights and Mutation:
   • Examination of records reflecting the transferor’s right with respect to the property.
6. Legal Competency:
   • Verification of legal competence of the transferor and former titleholders for a valid transfer.
7. Nature of Property and Land Use:
   • Determination of property nature (government or private) and land use (agricultural or non-agricultural).
8. Development and Construction:
   • Verification of adherence to building and sanction plans, necessary permissions, and completion certificates.
9. Encumbrances:
   • Identification and examination of property encumbrances, charges, liens, and mortgages.
10. Litigation:
    • Verification of pending litigation related to the property.
11. Restrictions and Allowances:
    • Scrutiny of society bye-laws and easementary rights affecting the property.
12. Public Notice:
    • Suggested publication of public notice to invite claims and objections regarding the property.

Title Search Report:

1. What it Includes:
   • Details of property location, ownership, and legal personality of the owner.
   • Table of scrutinized records, deeds, and documents.
   • Information on charges, dues, liens, mortgages, and encumbrances.
   • Confirmation of ongoing litigation or government acquisition.
   • Conclusion on the clarity and marketability of the property title.
2. Who Needs It:
   • Prudent buyers, investors, NRIs/OCIs, companies, banks, financial institutions involved in real estate transactions.

Conclusion

A property’s value lies in its title. Conducting a thorough title verification is crucial to ensure a clear and marketable title, free from doubts, risks, and defects. Buyers, investors, companies, and lenders must prioritize title searches to safeguard their investments and transactions. Ultimately, a clear title provides the assurance of legitimate ownership and is fundamental in the realm of real estate.