Saturday, April 19, 2008

Legal opinion safeguards property transactions

Getting a legal opinion is important during acquisition of any property. This is an integral part of the property acquisition process. The purchase of property is a complicated process. This is compounded by the fact that each State has its own systems of acquisition and transfer of property. The land records are generally in the local language. Going through the property documents is not easy.

You need to go through a host of documents to trace out the ownership of the property. Although the purchaser can do an initial review of the documents, it is always advisable to have these documents vetted by a legal expert. The legal experts are in a much better position to review and give their opinion on the status of the property. They are generally much more aware of the local laws, and rules and regulations.

A legal opinion should cover the status of the property:

Who is the owner of the property

What has been the chain of holding and transfer of property over a period of time
Is the property free from encumbrances or has it been already offered as a security for a loan

Is there any dispute on the ownership of the property Whether the transferor or seller has complied with all the requirements to get the ownership of the property Whether the transferor or seller is competent to transfer the property
The legal expert may prepare a search report. The search report traces the history of the property - who were the original owners of the property and how it has moved over a period of time before reaching the present seller. Also, it traces out any charges or encumbrances created on the property and their present status - whether the charges have been cleared and the property has been released or if there are some charges pending to be cleared.

This search on the title of the property is taken for a period of the past 30 years. It is mandatory for the seller to annex a copy of these reports with an agreement to sell with the intended purchaser of a flat. These documents would state whether the title to the property is clear, marketable and free from encumbrance. In other words, it would state whether or not there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely.

In order to avail a housing loan one of the preconditions is that the title of the property should be clear and marketable. 'Clear and marketable' means the seller is genuine and the actual owner of the property. Further, the property should not be under any dispute or litigation. The search report traces this history of the property.

The title certificate would state whether the property is unencumbered and has a clear marketable title. This search report and title certificate can be obtained from the advocate who will conduct a survey of the title of the property at the office of the registrar.

Getting such an opinion reduces the chances of getting into legal disputes at a later stage. The costs of obtaining such an opinion are not very high. They generally depend on the nature of work to be done. But still, these constitute a small part of the property transaction.

In case one is opting for a housing loan from a bank, generally, the bank obtains the legal opinion before sanctioning the loan amount to the borrower. In many cases, the lending bank has its own advocates who specialise in this exercise. Usually, the cost is nominal and is built in the processing and administration charges charged by the bank for sanctioning and disbursing the loan. Others charge a nominal fee for this exercise.

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