Not doing so can hurt buyer even years later, when he tries to sell the unit
Nagendra Rao (name changed on request) bought a ready commercial unit from a developer for Rs 50 crore. He executed the sale agreement, paid the money, registered the property in his name, and began to run his office from those premises. Years later he decided to sell it. The prospective buyer he planned to sell it to appointed a law firm to do a title search. The search revealed an outstanding loan of Rs 30 crore from a nationalised bank on that unit.
Rao then hired his own title search agency. The agency, too, found that the Rs 50 crore paid to the developer had not been utilised to pay off the bank loan. Rao doesn’t possess a no-objection certificate (NOC) from the bank for the loan. He is now stuck with a property that has a large liability attached to it. He can’t dispose of the property unless he pays the bank’s dues.
According to experts, the majority of real estate cases in Indian courts pertain to title disputes.
“If a person purchases a property with an unclear title, that issue can come back to haunt him years, sometimes even decades, later, when he wants to sell, lease, or take a loan against it,” says Anand Moorthy, co-founder and chief business officer, asset management services and data intelligence, Square Yards.
To avoid this problem, get a title search done. “Get the title vetted by an efficient and experienced team of lawyers,” says Amit Kumar Agarwal, founder and chief executive officer (CEO), NoBroker.com.
Many real estate agencies also carry out this task.
Two title searches
A developer first purchases the land and then builds an apartment block on it. “A separate title search needs to be carried out for the land and for the apartment,” says Moorthy.
In case of a RERA (real estate regulatory authority)-registered project, a one-page report is usually available on the regulator’s website. That, however, is not sufficient. “Ask the developer for a complete title report on that piece of land. The report should have been produced and signed by a law firm,” says Moorthy. If the land has any issues or encumbrances, the report will contain that information.
According to Sudip Mullick, partner, Khaitan & Company, “In a RERA-registered project, the promoter has to provide a title certificate and is also liable for any defect in the title.” Nonetheless, he suggests conducting a title search.
Next, a title search must be done on the apartment for at least the past 15 years. If the unit has been sold to someone (another buyer or investor), mortgaged to a bank and has a loan against it, the title search will bring these issues to light.
Essential in secondary purchases
A title search becomes even more important when purchasing a property from the secondary market.
“One issue we find is that the original title chain of papers is missing,” says Amit Goyal, chief executive officer (CEO), India Sotheby’s International Realty.
Incomplete documentation portends trouble. “When the legal team asks for additional documents, the owner says he doesn’t have them. That is a sign that the title or the approval is not proper or can’t be ascertained. This could lead to problems in the future,” says Agarwal.
A title search must also be done on a secondary property to avoid the risk that the current owner may have created encumbrances on the property.
Mistakes to avoid
A developer may try to fob you off by saying that the project is bank approved. Even then insist on seeing the title report.
Many people buy a property that doesn’t have a clear title if it is available at a lower price. They hope to make the title perfect and then sell the property at a higher price. “Ordinary buyers should avoid this path as they may not have the acumen or the wherewithal to deal with an imperfect title,” says Mullick.
Real estate agencies do the title search for anywhere between Rs 5,000 and Rs 20,000. Don’t scrimp on this relatively small expense for a property whose value runs into lakhs or crores.
Is the property already mortgaged?
- The best way to learn if there is a mortgage on a property you plan to buy is to go to the CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) website
- Any bank or other lender that gives out a loan on a unit has to report there
- This practice started from 2013, so you can get to know of any mortgage created over the past 10 years
- To conduct the search, you must know the seller’s name and PAN number, or the address of the property
- The cost of a search is only Rs 11
