Thursday, June 10, 2010

KSFE/ CHITTY/ ADVANCES AND LOANS/ IMPORTANCE OF FLAWLESS PROPERTY DOCUMENTS

HOW TO AVOID FAKE DOCUMENTS


OR

FLAWLESS TITLE OF DOCUMENTS

[Based on an article by Advocate C Muraleedharan in the INDIAN VALUER (Journal of Institution of Valuers) Vol. XLII - June 2010]

(some parts have been edited)



[This may be of help to all who deal with Acceptance of Property as Security, and also to the General Public, who may fall victims of unscruplus entities when they invest in Land]





INNOCENT purchasers of plots in many cases are victims of unchecked real estate promoters for the following reasons:

1. Ignorance

2. Impatience and anxity

3. Inherent apathy to consult a properly qualified professional for proper guidence.

4. Self investigation without adequate knowledge and skill.

5. Trap by Realtors.

6. Fraud played by Realtors.



These elements are so mixedup that there cannot be a discussion on each of these factors separately.



The object of this article is not to frighten anybody or abuse anybody , but only to create an awareness to the issue.



It is not an exageration to say that there is quite an amount of illiteracy among the literates.

When they are confronted with a situation where they are supposed to have obtained certain basic documents that are essential; they will come out with excuses like: "I'm inexperianced. I've not purchaced property earlier. I don't know about Documentation and Registration. I'm unaware about the requirements governing purchace of immovable properties.



No body can find fault with somebody's ignorance.

But the question is:....If it is an ordinary Headache, you will go to a medical shop (or even a grocer who stocks such over the counter pills) and just purchace pop in a few Anacins, or Crocins or Action 500s.

Will you do the same way if you developed a Chest Pain?....

WHY?

'Cause it is a matter affecting your LIFE.



Only if you CARE to THINK equally in your venture in purchacing a Property.



Investing your hard earned money without taking proper advice from a qualified professional is like attempting at self medication during critical ailments.



You may seek advice from Document writers or Advocare's Clerks, whis is just like approaching a quak to cure your Critical diseases.



Our Country follows the DEED SYSTEM of Registration of Documents. One must understand that a mere Registered Document is no proof of Absolute Title.

The Sub Registrars or the Registering Officers have no Authority to investigate the Title or the Right of the Executants of a Document that is presented for Registration.

They can refer the same for adjudication of proper Stamp Duty only if they are convinced that the Document in Question is deliberately undervalued.

There are several limitations on this power of Sub Registrars and they cannot use it arbitrarily. They have no Authority to refuse to register the Document nor can they withhold the Document after Registration.



People seem to believe and are also convinced that it will suffice if there is a Registered Document of Title. They don't realise that a Title Deed without proper Title (Right) is no good and that it could be only a waste paper. The possession of all title deeds including anterior title deeds is as important as possession of the property is, and that one without the other will tell upon the marketability of the title to their property.



The laws may be there in existence in the statute books, but the largeness of collective violations coupled with apathy of statutory authorities to prevent unlawful layout of house sites or construction even at inception fail to bring proper awareness There is also an unfortunate meek surrender by Government by offering regularisation schemes that are also not effectively implemented. Thus the apathy of statutory authorities coupled with the indeference of purchasers to care for investigation of legal title sought to be conveyed to them encourages large number of Real Estate Brokers who earn on anothers savings without any accountability for them to anybody. This emboldens the real estate brokers to play havoc on many innocent purchasers.



Even worse is that after the sale of the properties, the real estate brokers can never be found. They will be busy else where, dealing with some other property. And even if they are found out, and asked about the documents of title and other details regarding the lineal descendants of the deceased original title holder, the cool indifferent answer will be "we have done everything properly. The project is over and we don't have any papers with us. They have all been handed over" - to whom? nobody will ever know. And no body can know what all documents were handed over, and the poor purchaser will be running after the document writers- to the Registrar's Office etc. to get certified copies, where again they will be exploited. A certified copy issued by Sub Registrar's Office can never be a substitute for the Original title deed.



There is confusion among the general public between investigation of Title and Documentation. They think that Document writing is itself investigation of Title, and they depend upon pseudo professionals like Document Writers and persons like Advocate's Clerk, perhaps feeling that they are the best at investigating title. Even if the Document Writer scribes the document, the purchasers in their best interest should consult a professional who has an active practice, after which he may proceed to get the document engrossed on stamp paper of proper value and submit the same for Registration.



But no one really does this. May be to reduce cost. (whose cost?)



Hence the net result is the purchace of a property without knowing who the real owner was, and whether the person reported to be the real owner is the only person who holds title or whether there are other stake holders or whether there is any other encumberance on the property, and so on and so forth.



It is only when these purchasers go to a panel lawer of a bank for obtaining a legal opinion to avail a loan, they are confronted with several queries attendant on the title. It is only then they realise that the real estate broker of the the site purchaced a few years ago cannot be located, or the details of the previous owner cannot be obtained, or the lineal desendants of the previous owner (now deceased) are not obtainable, or they do not even know who the actual power of attorney holder was. In many cases the power holder would be a close accomplice of the real estate broker. So the actual person who was instrumental in the sale of the property would never be in the record at all. However he would have reaped the benifits of the transaction sumptously. The signatory would disown his present day connection with the real estate broker. In many cases, the purchasers do not even know who the actual owners are. They fail to collect the details from the Original owners.



There are several instances of fake documents, wrong title and unlawful constitution of power of attorneys so on and so forth. There will be nothing on record to punish the wrong doer - viz. the real estate broker. He will block the land by payment of some advance amount and hook the owner of land under an agreement of sale. He will take a power of attorney from him in the name of his aid or accomplice. One may not know whether the executant of the power of attorney deed is dead or alive on the date of execution of the sale deed, which takes place after a long time. They may not be aware that a power of attorney dies on the death of the executant or that the executant can terminate it at any time.



This is a defective system of Registration of Power of Attorney Deeds, which is registered under Part IV of Indian Registration Act, which does not provide for Registration of General Power of Attorney Deed. The only word employed is authority to adopt. Other than this, there is no scope for construing a General Power of Attorney Deed to be brought within the ambit of Part IV of Indian Registrartion act. Yet it is being registered under this part of Registration Act. This part deals with the Registration of Previleged Documents like WILL, authority to adopt, etc. Certainly a Deed of General Power of Attorney cannot fit in within this frame. Yet practice has made the law.



The main difficulty is, if a person applies for Encumbrance Certificate, this Registered GENERAL POWER OF ATTORNEY DEED will not reflect in the EC.



At times, fraudulant power of attorney deeds are created and registered. The really affected person will not even know that his land situated elsewhere is being transferred through fake documents. This is possible because there are takers of property without any care to investigate into the title and verify availablity of original anterior deeds. A certified copy issued by Sub Registrar's Office can never be a substitute for the Original.



But who has the patience to see all this and then buy the plot? Hence there is a substantial possibility of sale of somebody's property without even the Owner knowing of it on the basis of fake Power of attorney deeds.



The unhealthy competition among the Real Estate Brokers does not perrmit tem to make any investigation and enquiry. Afterall they do not have anything to lose. They earn on somebody's name sell and go away.



A purchaser of Land does not even take the amount of care they would in purchasing vegitables or fish for their home. It is this indefference and deleberate lack of care or knowledge coupled with anxiety of these 'innocent' dreamers that is the capital of the Real estate brokers. Unless these blunders are realised, wasteful investmtnt and frustration can never be avoided. Housewifes can take a note of this and at least they can pester their husbands not to hurry in purchasing Land until the investigation of title is satisfactorily made by competent professionals.



Another gross misconception is misunderstanding the theory of adverse possession and fixing a flat 12 years of possession as a perfect mark of absolute marketable title. This is dangerously misleading. Even judicial decisions have not comprehensively defined adverse possession and it differs from case to case. Several decisions of Apex Court and High Courts lay down that the length of possession is hardly material. That being so, the unilateral conclusion by the Real estate Brokers or by innocent purchasers that 12 year long possession of properties gives title to the existing owner is again yet another pit fall that lands the purchasers in trouble.



INCIDENTLY this is a NATIONAL problem. Even a poor wage earner's income is made accountable in this country. Whereas, the Real Estate people's income is totally unaccountable. Scarcely sometimes, income tax raids will be conducted in the house or office of the real estate magnates, who are reported to be politicaly well connected. News papers and electronic media will flash the news for some time, till they get some other hot news. Those who suffered the raids will condemn the raids as a political vengence, and the officials will claim that important evidence was gathered. And the entire incident will slowly pass into oblivion. WHAT IS THE REMEDY????????



You may remember how unauthorised Chit fund business was going on in our State (and still is) . There was no way how the fraudulant promoters of these Chitties could be prevented. Unfortunately, subscribers did not worry about the accountability of the promoters and were madly throwing in their hard earned money into chitty transactions. Any Tom Dick and Harry could promote Chits and invite public at large to invest in them. A stage came when many a chitty promoter absconded with lots of money of the public, and the Government intervened and led to the formation of The Kerala State Financial Enterprises Ltd. KSFE by the Government of Kerala. Due to this intervention and enactment of the Kerala Chitties Act and Rules, every promoter of chitty is required to Register each chitty with the Ex-Officio Chitty Registrar (The Sub Registrars are designated as the Ex-Officio Chitty Registrars) Several mandates for running a chitty were stipulated. Firstly the promotor (Foreman) should register the chitty. He should furnish sufficient security for the Chit amount to the Registrar., Third, the bidding amount could not exeed a particular limit. Thus accountability created by the force of statute curbed the the entry of fraudulant players to a great extent. Now most of the states have enacted their own 'Chitty Acts' and the unscrplus players have shifted their official presence to either Faridabad or Jammu and Kashmir, where there is no such legal enactment.



Likewise suitable legislation must be enacted to curb the unscruplus play of Real Estate Agents. They must be made accountable, and they must be brought under the Income tax network, and also Service tax network. Sufficient security for recovery of tax must be ensured from real estate brokers.



It is imperative in the interest of a large number of people in this country who must be protected against exploitationin this field. This is where Banks, KSFE, lawers, and valuers play an important role. The physical verification of property is done bt the Valuers. The lawers verify the Title by making a thorough investigation. The bankers/ KSFE play their role by the report of Valuers and opinion of the Advocates.



In their view, there are no compromise made on legal and statutory requirements.

Certainly properties so checked and accepted will form a good security for the Banks/ KSFE for mortgages created to secure loans / chitty.

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