Ensuring unrestricted ownership

In urban areas two types of properties exist freehold and leasehold.

In case of a freehold property plot or flat,the owners right over the property is full and unconditional within the provisions of the laws of the land. The title paramount the President of India acting through the land-owning agency has conveyed the property in favour of the purchaser by conveyance or sale deed. There are no restrictions on the rights of the latter to further sell and transfer the ownership of that property.

In case of a standalone property,the owner owns the property as well as the land on which it stands. In case of a multi-level property,land ownership is usually divided in proportion to the floor area of each owner.

The ownership of a freehold property is transferred to another buyer through registration of sale deed.

LEASEHOLD PROPERTY

In a leasehold property,on the other hand,the land-owning agency gives the land on lease to a lessee for a stipulated period. The land ownership rights remain with the lessor. The lessee pays a lease premium and an annual lease rent as fixed by the lessor. Further,the lessee requires the lessors prior permission if he wants to sell the property.

To cite an example,the Noida Authority and other new land-owning authorities in the NCR offer land on lease for 90 years. Same is the case in Navi Mumbai. After the stipulated period gets over,allottees have to renew the lease by paying the lease rent once again.

Leased properties can also be transferred,provided permission has been obtained from the land-owning agency. The buyer pays a stamp duty and a memorandum of transfer has to be executed.

If you are going to buy a leasehold property,a few points need to be kept in mind. Says BP Singh, mortgage valuation expert: Make sure that the ground rent has been paid up to date.

Buying a leasehold property has a few disadvantages. Says Singh: You cant take a loan on a leasehold property as you can in case of a freehold property.

Most transactions involving leasehold properties are done through Power of Attorney POA. Such a transaction does not confer a clear title on the buyer. It also ceases to be effective on the sellers death. If you are the buyer in such a transaction,ensure that you get a general as well as a special,irrevocable POA,which allows you to transfer the property. Moreover,buying properties involved in multiple POAs is usually fraught with difficulties.  

WHAT IS POA?

A power of attorney POA is an authority given through a formal instrument whereby a person,called the donor or principal,authorises another person,called the donee,attorney or agent,to act on his behalf. Section 1-A of the Powers of Attorney Act,1882 defines POA as follows: Power of Attorney includes any instrument empowering a specified person to act for and in the name of the person executing it.

Leasehold properties can be transferred through a POA only; no registry can be done on such properties. But POAs can be done on leasehold as well as freehold properties. To restate this differently,a freehold property can be transferred both through a POA and a registry while a leasehold property can be transferred only through a POA. The amount of stamp duty payable in the case of POA is less than the amount payable in case of registry of freehold properties,a factor that accounts for its undue popularity.

As mentioned earlier,buying a property on POA has several disadvantages: the property cannot be registered in your name,no loan can be taken by mortgaging it,and you will also not get the permission to renovate it or to expand it further by adding new constructions.

BROKERS MISDEEDS

In many property transactions,property dealers show prospective buyers a bundle of papers but do not give them the time to examine those papers closely. Experts recommend that the buyer should take a photocopy of all these documents and check them properly. It is also advisable to have the papers examined by a lawyer or a trusted property expert. 

Typically brokers want to get the deal done fast. So they do not allow buyers the time to examine the papers carefully. In the process,several minute but important details get overlooked. If any error happens,it can become a burden for the buyer in later years, says Singh.     

FROM LEASEHOLD TO FREEHOLD

The union government has modified the procedure for conversion of leasehold property to freehold in the capital city. If the buyer has a regular sale deed,he can get the property converted to freehold by paying a conversion fee.

There are several land-owing agencies in the city that wield control on land: the Land and Development Office Lamp;DO,the Delhi government,Delhi Development Authority DDA,Delhi State Industrial Corporation DSIDC,Waqf Board,and so on. If you want complete ownership of your property,it is best to pay the conversion changes and get the property converted. Conversion of flats and floors,shops and spaces in multi-storeyed buildings developed on leasehold plots has also been permitted,provided the buyer has a registered sale deeds,registered GPA general power of attorney or agreement to sell. Conversion is permitted after the lessee has paid his proportionate share of dues of lease rental.

PLUGGING THE GAPS

In order to prevent loss of revenue,some of the state governments such as those of Himachal Pradesh and the Chandigarh administration are laying stress on the use of POAs. In Chandigarh,the majority of commercial properties are on leasehold and cannot be sold under the law of the land. Registered with the Estate Office,these can only be transferred through POA. Flats in certain sectors of Chandigarh like sectors 41 to 52 and 38 West are also on lease. Hence the emphasis on POA.  

MUST-DO POINTS FOR BUYERS 

Since property deals involve vast sums of money,buyers must exercise all possible precautions.

The ownership status of the property is one of the first issues you must address. Confirm that the land has a clear and marketable title. Do not pay any advance before you have made sure that the person from whom you are buying the property is indeed its legal owner,and that the property is not entangled in any dispute. All this can be checked at the office of the sub-registrar. Verify the sellers title mentioned in the land-owing agencys records. The land-owning agency records will tell you if the title is disputed and if the matter is in court,because usually the rival claimant would have sent a notice to that effect to the agency, says Singh.

Several other papers also need to be examined: completion certificate of house or building; forms C amp; D and B-I which relate to electrical conduits and sanitation; building plan of the property it should have the necessary sanction from the concerned authority; a copy of the latest property tax bill with a receipt to ensure that all property tax dues have been cleared; latest water and electricity bills with a paid stamp to again ensure that these dues have been cleared.

From the legal standpoint,say experts,buying a freehold property is always preferable to buying a leasehold property. 

Only after you have conducted all the checks mentioned above should you enter into a sale agreement. Thus,you need to exercise a lot of caution right from the site seeing stage till the property has been registered in your name. l

praveen.singhexpressindia.com