Session Coverage

• Introduction 
• Mortgage of Property  - Various Legal Provision
• Why search report of property is required ?
• Period of Search 
• Valuation report of property
• RERA Guidelines

 Search Report of Property

• A search report of property required to be obtained as security for the purpose of providing loan is an essential requirement of bankers as lenders 
• It helps in examining a property's history, including who was the initial owner and how the property changed hands over time before reaching the current seller. 
• A property search report means digging down to the history of the Land or Property like who was the original owner and step down series of property till it reached the present owner.
• Doctrine of Adverse Possession
  The period of limitation for acquiring ownership by adverse possession is 12 years for private property and 30 years for public property, as per Article 65 and Article 112 of the Limitation Act, 1963 respectively.
• Acquisition of Ownership: Under the Limitation Act, 1963, any person in possession of private land for over 12 years or government land for over 30 years can become the owner of that property.
• Thus there are two type of search :- full search or limited search
• Banks typically require a 30-year search report of a property to be mortgaged in order to assess the property's title history and ensure that there are no outstanding legal claims or issues that could affect the property's ownership.
• Article 63 (b) of the Limitation Act, provides a limitation period for filing a suit for possession of mortgaged property is 12 years from the date of the mortgaged debt becomes due. Hence, banks ask for 12-13 years of a prior title deeds from the Sub Registrar Office before sanctioning a mortgaged based loan
• Usually the report is prepared by an Advocate who after visiting the Registrars Office inspects the documents and issues a Title Certificate.
• It contains the detail of property like description of its location , measurement ,name of owners , etc. 
• The report clearly mentions whether the property is encumbered or not and also whether it has a clear marketable tile. Advocate is expected to issue a certificate in this regard
•  If any court proceedings are carried on and pending in courts, needs to also be mentioned in the Certificate. 
• It is mandatory for the builder to annex the Title Certificate along with “Agreement to Sale” at the time of purchase. It gives a buyer the confidence that he is undertaking a transaction with a genuine party and the same is free from mortgage. 
• The Search Report & Title Certificate helps banks while providing loans against the property
  
  Mortgage
• It is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of the agreement which may lead to a pecuniary liability. The borrower is called the 'mortgagor' and the lender the 'mortgagee'. 
• Forms of mortgage: As per Sec. 58 of the Transfer of Property Act, there are six types of mortgages: 
• Simple mortgage                 
• Mortgage by conditional sale 
• Usufructuary mortgage         
• English mortgage 
• Anomalous mortgage
•  Mortgage by deposit of title deeds/ equitable mortgage 
• Generally only two types of the mortgage are preferable by the   banks
• Simple Mortgage; according to section 58 (b) of the Transfer of Property Act, 

A simple mortgage is a transaction whereby without delivering the possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money and agrees, expressly or impliedly, that in case of default the mortgagee shall have a right to cause the mortgage property to be sold by a decree of the court. 

• Equitable mortgage or Mortgage by deposit of title deeds:
• According to section 58(f) of Transfer of Property Act, where a person delivers the documents of title to the immovable property to the creditors with an intention to create a security thereon, the transaction is called equitable mortgage.
• The essential features of the equitable mortgage are as under:
• Delivery of the documents title to the immovable property to the creditor
• Intention of the mortgagor to create a security thereon in favour of the creditor.
• The delivery of the title deeds must be by the owner of the  property or his / her authorized agent only.       
• The owner of the property must be either our borrower or a guarantor.

 Priority of Mortgages

• Indian Law of priorities is provided in Section 48 of the Transfer of Property Act. The rule is based on maxim ‘he has a better title who was first in point of time.’ 
• How the rule of priorities operate in respect of different instruments creating mortgages.
• Priority among registered instruments
• Section 47 of the Registration Act, 1908 provides that a registered document operates, not from the date of its registration, but from the time of its execution. Thus, a document executed earlier, though registered after than another, has priority over the documents executed later.

(b) Priority between registered and unregistered instruments

• Let us now deal with the exceptions to the rule, that priority is determined by order of time, which either have been created by statute or owe their origin to the ancient rule of Hindu Law, which required delivery of possession in the case of a security of land. There are also some exceptions recognized in the Indian System founded upon those general principles of justice and equity, which in the absence of any express enactment, Indian judges are bound to administer, and which, have been mostly borrowed, from the English Law.
• The first exception is that contained in Section 50 of the Registration Act, which under certain circumstances allows a registered mortgage priority over unregistered mortgage. However, it may be noted that prior mortgage by deposit of title deeds is not affected by subsequent registered mortgage as the same need not be registered. This, is provided in Section 48 of Indian Registration Act.

 Valuation of property

• Property valuation report is a comprehensive document that provides an estimate of the value of a property. 
• The report typically includes a detailed analysis of the property and the surrounding area, as well as any factors that may affect its value. 
• key components of a property valuation report:

 What is RERA ?

• The Real Estate Regulatory Authority Act (RERA) was introduced to bring in transparency, accountability, and financial control into the highly disorganized Indian real estate sector. 
• It came into effect on May 1, 2017, and has recorded registrations of 40,000+ real estate agents, and 52000+ projects till date. 
• The act has made it mandatory for the states and union territories to constitute a regulator and devise the rules to govern the functioning of the regulator

 RERA Guidelines

• The Real Estate Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules to govern the functioning of the regulator.
• Promoters cannot book or offer these projects for sale without registering them. Real Estate Agents dealing in these projects also need to register with Real Estate Regulatory Authorities.
• 70% of the collected amount from buyers must be deposited in an escrow bank account for construction of that project only and the withdrawals have to be certified by Architects, CA and Project Engineers.

Benefits under the Real Estate (Regulation and Development) Act, 2016 to Consumers:

• The Act prohibits unaccounted money from being pumped into the sector and as of now 70 per cent of the money has to be deposited in bank accounts through cheques is now compulsory.
• A major benefit for consumers included in the Act is that builders will have to quote prices based on carpet area not super built-up area, while carpet area has been clearly defined in the Act to include usable spaces like kitchen and toilets.
• Fast track dispute resolution mechanism through Real Estate Regulatory Authority and Appellate Tribunals across Country.
• Provision of equal rate of interest to be paid by the promoters and buyers, in case of default or delays thus brining equity in operations.

 Benefits under the Real Estate (Regulation and Development) Act, 2016 to Developers:

• The Act eliminates fly-by-night operators from the sector promoting genuine developers. It infuses credibility by making the sector mature and transparent.
• Channelize investment into the sector.
• Act/Rules would restore investment sentiment of consumers.
• Regulatory mechanism will increase the confidence of the financial institutions in real estate sector.
• Proper regulatory mechanism of the Act will increase foreign investment (FDI, ECB) in the real estate sector.

 RERA Act: RERA approval and its benefits

• Some of the important RERA compliances are:
• Informing allottees about any minor addition or alteration.
• Consent of 2/3rd allottees about any other addition or alteration.
• No launch or advertisement before registration with RERA
• Consent of 2/3rd allottees for transferring majority rights to 3rd party.
• Sharing information project plan, layout, government approvals, land title status, sub-contractors.
• Increased assertion on the timely completion of projects and delivery to the consumer.
• An increase in the quality of construction due to a defect liability period of five years.
• Formation of RWA within specified time or 3 months after majority of units have been sold.

 Some Important features - RERA

 How to file complaint in RERA?

• A complaint under the RERA, is required to be in the form prescribed under the respective states’ rules. The complaint can be filed with respect to a project registered under RERA, within the prescribed time limit, for violation or contravention of provisions of the act or the rules or regulations framed under RERA.

How to check RERA registration number?

• Buyers can check the RERA registration number from the respective states’ portal. Every web portal has a list of registered projects along with RERA registration number, approvals and other documents.

What is RERA approval?

• Usually, RERA approved means RERA registered. There are few guidelines that every builder has to follow to register its project with the authority. This includes approvals, land titles, insurance etc.

 How RERA will help buyers?

• RERA protects the interest of homebuyers and investors by making the real estate market organized and transparent. Almost 70 per cent of the total real estate projects in the country are covered under RERA jurisdiction.

What happens if the builder does not follow the RERA order?

• If the developer does not comply with the RERA order and fails to enforce the order passed by the regulatory authority in favor of the homebuyer, the homebuyer has the right to file an application for the execution of the order against the developer with the same RERA Authority.

 Advance payment rules

• The builder or developer can only take advance or deposit from you after entering into a contract first. After forming an agreement, the builder cannot accept an advance amount exceeding 10% of the property cost. The agreement of sale should specify details such as project development specifications, property possession date, the interest rate payable by the builder in case of defaults and so on.

Interest paid for defaulting by both parties

If the builder fails to complete the property construction or is unable to give possession of the property, then the builder is liable to return the amount received by the property buyer with interest. If the property buyer does not withdraw from the project, the builder must pay interest for every month of delay until possession.

Moreover, as the property buyer, if you fail to make payments to the builder within the agreed-upon timeframes, you need to pay interest as well. Payments can include registration charges, municipal taxes, utility charges, etc. .