Stridhan property-Dowry law in India

Meaning of the word is absolutely clear. “Stridhan” denotes the sole and exclusive property of a woman which is earned, acquired, obtained and possessed by her in a lawful manner. This includes movable and immovable property.

A woman is totally free to use, enjoy and deal with her stridhan in the way she likes without any interference from any body including her own family members either before or after her marriage. Every woman has exclusive and sole right and authority to sell, gift, charge, mortgage and alienate her stridhan.

What constitutes stridhan and how it is acquired?

Any kind of movable and immovable property such as cash, ornaments, deposits, investments, receivables and immovable property in any form may constitute stridhan. The sources of acquisition of such property may be any, all and combination of the following:-

1. Main and primary source of Stridhan is Gift. It might have been received before her marriage, during marriage and after marriage. The gift may be of immovable or movable property and may be received from parents, in-laws, husband, son(s) & daughter(s), relatives, friends and any body.
2. Property received as her exclusive share during partition of family property.
3. Property received by her as a consideration for any compromise.
4. Property earned and accumulated by service, profession, business etc.
5. Property received in lieu of maintenance.
6. Property purchased from her own stridhan.
7. Property inherited by a woman.

Status of Stridhan vis-à-vis family members:- As said above stridhan is the sole property of a woman. No one else, including her husband, in-laws, parents, children have any right or authority to deal with her property without her consent and permission. The Apex Court has also ruled that if the stridhan of a married woman is in the custody of her husband or in-laws, they would act as trustees only and would return the same when demanded by her.

To avoid any dispute regarding stridhan, The Dowry Prohibition Act, 1961 has provided that a list of the presents be made at the time of marriage and maintained according to the rules under the Act.

Denial of a woman’s right over her stridhan is a criminal offence under section 405 & 406 of IPC and is punishable with imprisonment up to 3 years.

Partition of HUF property

In the previous article, we discussed What are the rights over property of female in HUF? In this article, we will discuss about the Partition of HUF property under Hindu law.

The Hindu Law defines the HUF (Hindu Undivided Family or Joint Hindu Family) as a family, which consists of males lineally descended from a common ancestor and includes their wives and unmarried daughters. HUF is also recognized under Income and Wealth tax Act, as a separate legal entity and is liable to pay tax, is entitled to deductions and exemptions and to hold/own property (both movable and immovable) in it’s name.

Affairs of HUF are managed by it’s Karta. Hindu law is comprised of two schools of law governing HUF, Dayabhaga and Mitakshara school. Dayabhaga is applicable only in West Bengal and Assam whereas Mitakshara is applicable in rest of India.

Partition of HUF property under Hindu law can be total or partial. In total, partition all the members of HUF cease to be members of the HUF and the entire property of the HUF ceases to be property of HUF. In partial partition some of the willing members get out of the HUF and rest continue to be members. Again, the partial partition may be property specific also when some of the properties are divided among the members and balance continue to be property of the HUF.

Partition of property under Hindu law and under Income tax Act are different on two accounts:-

1. For partition under Hindu law division of the property by metes and bounds is not necessary, but for partition recognized under Income tax Act, division of property by metes and bounds is necessary.

2. Partial partition of HUF property, either property specific or member specific is valid under Hindu law, but under Income tax Act, 1961 it is not recognized.

Partition of HUF property can be done either through family settlement OR through a partition deed. Family settlement does not attract stamp duty and is not required to be registered, but partition deed attracts stamp duty and must be registered. To avoid expenses inherent with “Partition deed” family settlement is preferred, but must be ensured that:-

1. The family settlement is bona fide, for fair and equitable division of property amongst the members and to resolve family disputes.

2. It must be voluntary and without any force, threat, coercion, misrepresentation and fraud.

3. Fair and equitable family settlement, though unstamped and unregistered, is final and binding on the family members.

FAQs about converting leasehold property to freehold property

The owner of leasehold property in India can enjoy the right to use the property up to a certain period of time but cannot enjoy undisputed, unrestricted and absolute right of the property. Following are some of the important factors or questions you should ask before opting between a leasehold property and a freehold property.

Difference between a Freehold property and a Lease hold property.

Any property is neither a freehold nor leasehold, it is the nature of the rights and authorities enjoyed by a person over a property which makes it freehold or leasehold.

When a person enjoys undisputed, unrestricted and absolute right, title and interest in a property and such right, title and interest in the said property is not time bound then the said property is classified as freehold property. The owner of such property can transfer, sell, gift, convey the same right, title and interest to anybody as and when he / she desires to do so. Not only the land but any construction / structure over the land or anything attached thereto is also the sole property of the owner of a freehold property. Such ownership rights over a freehold property can be enjoyed by the owner forever or till he / she willingly relinquishes his / her rights in favor of any other person. Such relinquishment of ownership rights, title and interest may be either against a valid consideration (Sale) or without any consideration (Gift).

When a person enjoying absolute ownership rights, title and interest over a property authorizes some other person to use and utilize the said property for a predetermined period and purpose against a valid consideration then the person to whom such right and authority is conferred is called “Lessee” and for him the said property is a “Leasehold” property. In this case the ownership rights remain with the original owner who is also called “Lessor”. The lessee acquires only the right to use and utilize the property for the term of the lease and for specified purpose only. So in leasehold property the ownership rights are with the “Lessor” not the “Lessee” and right to use the property is restricted up to a certain period of time (the lease term) and for specified purpose(s) only.

Leasehold vs Freehold property-What ownership one should go for?

Ownership can be of freehold property only. The leasehold is not at all ownership, it is only the right and authority to use and utilize the property for a certain predetermined period and purpose which expires with the expiry of the term of lease. So obviously, if one has the option to choose between two, then he/she should go for freehold property.

For a buyer of immovable property nothing can be better than buying a freehold property. Other types of properties such as Leasehold, mortgaged, under acquisition and / or requisition, charged, under litigation etc. require a lot of attention and formalities and are riddled with apprehensions and uncertainties. Whereas buying of freehold property is absolutely and literally free of all these hassles and the buyer is in a better position to realize his dream, purpose and goal of such investment. This is the reason why a freehold property commands a higher price than all other categories of property.

In case of a leasehold property the ownership is out of the question. It’s a temporary arrangement (unless it’s a Govt. property on long term lease such as 99 years lease) by which the lessee acquires right and authority to use the property for a predetermined and specified period and purpose against a valid and agreed consideration. The ownership remains with the original owner the “Lessor.”

Should you convert the leasehold property to freehold property?

If there is an opportunity certainly yes. Such conversion is possible by outright purchase of the leasehold property from the owner of the same, if he is willing to do so. The option to choose for conversion of a leasehold property to freehold property is with the lessee only because it is he / she for whom the property is leasehold property. For the owner (lessor) the same property is a freehold property which is leased out for a certain period of time and after expiry of the lease term the lessee vacates the same and the owner repossesses it. There is no change in ownership status for the “Lessor.”

From the foregoing, it is quite clear that the need and / or option for conversion are for the lessee only. In a leasehold property, there is a lot of restrictions applicable to the lessee regarding mode of use, period up to which it can be used, maintenance, timely payment of consideration etc. If the lessee can acquire ownership of that property then he / she breaks free of all these restrictions and can utilize the property in his / her own way and will. Therefore, it is always ideal to get the leasehold property converted into freehold at the possible earliest if circumstances permit to do so. However, the willingness of the owner (Lessor) is of paramount importance because until the owner is willing to sell the property the lessee cannot buy that, hence the conversion of a leasehold property to freehold property is the priority of the “Lessee” but dependent upon the “Lessor”.

When is the best time for the conversion?

It depends upon the need and financial capacity to purchase the leasehold property. It also depends upon the willingness of the owner to sell the said property. The need for conversion of a leasehold property to freehold property, which can be done by purchase only, is that of the lessee but the lessor must be willing to part with the said property in favor of the lessee against a valid and agreed consideration. Hence, when the lessee is prepared to purchase the leased property he should immediately approach the owner with offer to buy the property.

If the owner readily agrees it’s fine but if he is unwilling to sell the property or wants improvement in consideration or terms then the matter needs to be dealt with accordingly. In any case, persuasion will have to be continued till the owner is ready to sell. The earlier the better, to avoid any glitch in the materialization of the deal.

Allotment Letter: An important tool for you to buy a property

What is an allotment letter?

If you are booking an under-construction property, you are required to receive an allotment letter from the builder. This letter includes all the details regarding the flat, the payment options and any extra charges that you may have to pay in case of maintenance or additional facilities. It also includes construction schedule, house plans, delivery date and builder’s liability in case of late completion or problems after possession. Generally, it is issued to you upon payment of the 15% of the property value to the developer.

An allotment letter is an important document for the buyer. Generally, while you will be pursuing bank loan to buy a certain property,the builder/housing society issues the allotment letter to the buyer which includes details pertaining the description of the subject property being sold/bought by the two parties.

The allotment letter also includes about the specifications of the project on the whole. You must discuss any preferences, such as choice of floor or view, of yours before receiving the allotment letter as the options can be included in the allotment letter.

What is the significance of the Allotment Letter?

 

Allotment letter is vital in availing loan from the bank, as the letter mentions the amount of money which you have to pay to the builder/housing society, so that remaining amount can be financed by the bank. On the basis of this letter, generally the bank finances the remaining amount.

Although the general impression is such that the sales agreement holds supreme importance in property deals, the allotment letter comes in when you are deprived of what you were being promised.

For example, if on one of the pertinent aspect which is mentioned in the allotment letter, builder refuses to give adequate documentary proof subsequently, as a buyer you can opt not to make subsequent payment and can demand that unless builder satisfies the disputed aspect, you will not make subsequent payment. It will legally bind the builder to refund the buyer all the money that has been paid.

What are the rights over property of female in HUF?

Transfer of property of minors by natural guardian, widows, managers of Hindu joint family, karta of Hindu Undivided Family (HUF) is legally valid, if such transfer is for genuine requirements of the minor or family respectively and the purchaser is aware and satisfied of such requirement. In “Mitakshara” law the Karta of joint family can sell joint family property for legal necessities and in justifying circumstances.

After the enactment of The Hindu Succession Act 1956, w.e.f.17th June 1956 the status of Hindu female and her capacity to deal with property has considerably improved. As per section 14 of the said act, any property possessed by a Female Hindu, whether acquired before or after the commencement of this Act, shall be held by her as full owner thereof and not as a limited owner.

What in case the family residential property is sold?

After enactment of Hindu Succession Act, 1956, the position and rights of widow, daughter, predeceased son’s wife and certain other female heirs of a Hindu family has changed considerably. Right of residence of such persons has to be considered in the light and context of section 23 of the said Act, which lays down a special provision in respect of family dwelling house, as given below:

(1) In an undivided Hindu family having two or more male members if one of them dies leaving behind a widow then she is entitled to reside in the family dwelling house, after death of her husband.
(2) If the house is sold by surviving coparcener or coparceners without necessity and justifying circumstances then by such sale she does not loose her right to stay in that house. The purchaser of the house cannot evict her until another suitable residence is arranged for her.
(3) If the purchaser buys the house with full knowledge that such widow is residing and is being maintained in that house then the purchaser cannot evict her even if the family possesses another property by which she can be maintained.
(4) If the sale is for family necessity, in justified circumstances and the purchaser was aware of such widow’s occupation of the house, she is liable to be evicted.

Patta: Why is it necessary?

What is Patta?

Patta is basically a revenue record. It is an extract issued from the Register of Land holdings maintained, usually at the office of the Tahsildar. This is issued in the name of the person or persons in whose name the records relating to the holdings are maintained.

Patta: A legal document

Patta is an instrument showcasing possession of property. Rights to property may arise in three ways:

(i) Through voluntary act of parties – The transactions which fall within this classification are those covered by the Transfer of Property Act.

(ii) Inheritance or bequest – Laws relating to succession covers this type of rights of properties.

(iii) By orders of courts, tribunals, State action, etc.

Similarly, there are three levels of documents supporting claims to the title – title documents, approvals or other municipal records and revenue records. Depending on the nature of the property and the nature of its possession, Patta can be obtained in respect of the above mentioned three transactions.

Why is it important to have a Patta?

• The issuance of Patta signifies that you have lawful possession over the property. It is issued in the name of owner or in the case of joint holdings, in the names of the joint owners.

• If there is any problem or title conflict with the Government or any third person regarding the land, then the Patta can be given in as useful evidence.

• Even if the Government wishes to acquire land, it has to pay compensation to the Patta holder, since the Patta holder has the first right to title over that property.

• If there is any sale of the property, the Patta will be the main determinant of the ownership of the property.

What is the procedure for obtaining Patta?

• You have to apply to the Tahsildar in the form of a simple requisition to issue the Patta

• Along with it, you have to provide necessary details and documents related to the property

• The concerned officer may hold an enquiry or conduct a survey of the land/property before granting the Patta.

Is it mandatory to have a Patta for every property?

In case of vacant plots of land, Patta is a must, as it is the main document for establishing lawful possession. Even in case of properties with buildings and structures, Patta is the primary document to establish lawful possession. It also includes other vital details including the extent of holdings and the measurements of the property.

Is Patta required for apartment owners?

Patta is primarily a document relating to land and not buildings. However, the Patta may include particulars relating to the buildings. In case of apartments, the land is usually owned by the co-owners in undivided shares and Patta is not issued for undivided shares of land. However, it may be possible to get the Patta in the names of all the co-owners jointly.

In what cases are Patta transferred?

• If an owner having a Patta on his name, dies without leaving a will, the legal heirs of the deceased person are entitled to have Patta for the property in their names.

• In the case of a person leaving a Will, Patta can be transferred to the beneficiary with the consent of others who will be the immediate heirs of the deceased person.

• In case of purchase/sale of properties, it is possible to have the Patta directly in the name of a purchaser or a transferee.

Property inheritance- Nominee vs. Legal heir

According to the Hindu Succession Act, 1956, the property of a deceased is distributed equally among sons, daughters, the wife and the mother. The Hindu Adoption and Maintenance Act, 1956 governs the adoption of children and the maintenance allowance to the wife.

Who is a Nominee?

As per the law, a nominee of a immovable property is a mere trustee entitled to receive the money/proceeds receivable by a deceased person on behalf of his/her legal heirs. The nominee will be in charge of the property only till the court decides who is entitled to the property as per the succession laws. To make it simpler, the nominee is only a caretaker of the property and not the owner of the property. He/she will only hold the asset as a trustee and will be legally bound to transfer the property to the legal heirs.

A society member can make a nomination which can be cancelled at any time. In case of death of the member, the society transfers the shares to the nominee or the legal heir/s. In case there is no nominee, then the society puts out a public notice inviting claims. And the nominee takes care of the property until the court decides who is entitled to the property as per the succession laws.

Who is a legal heir?

A legal heir of a deceased person’s property is the one who is mentioned in the will. The legal heir is entitled to be the real owner of the assets of the deceased. If the will is not made, the legal heir/s are decided based on succession laws which also defines about who gets how much share of the assets.

For example, if Mr. X would have mentioned that his brother Mr. Y will be the nominee of all his assets. But in his Will, Mr. X would have written that his children will receive his assets after his death or he would not have written a Will. In either case, based on the Indian Succession Act or Hindu Law or Mohammedan Law, the brother Mr. Y will receive all the assets but he will have to distribute it among the children of Mr. X. But in case, Mr. X has written a Will which says that all his assets belong to Mr. Y then Mr. Y will become the owner of the property.

To sum up, a nominee has the right to receive the property while a will decides who will eventually own the property.

What if there is no will?

If there is no will, then as per the Hindu Succession Act the property will pass on to Class 1 heirs who include spouse, children and mother of the deceased. In case of absence of Class 1 heirs, it would pass on to the Class 2 heirs comprising of father, grandchildren and siblings.

How co-operative societies define it?

According to the Section 30 of Maharashtra Co-operative Societies Act, 1960, in case of death of a member of a society, the shares of the person will be transferred to the nominee. However, such transfer does not imply transfer of the property contained under the shares of the society. The nominee acts only as a trustee for the deceased person’s estate.

Self acquired property

If a property is a self-acquired by a person, then after the death of that person, whether a “Will” is made or not, legal heirship determines the vesting of the deceased person’s property.

Inherited property

In case of inherited property rights of “Successors” of the deceased person overrides all other modes including Will. All members of the immediate family acquire the right to get equal share of the property.

Jointly-owned property

In case of joint ownership of a self acquired property, the surviving owner becomes the sole owner after death of the co-owner/s.

To conclude, it is advisable that merely nominating a property is not enough. To pass on your property to the right hands, as per your wish, making a “Will” would be helpful. However, even when there is a will made, there are chances that your inheritors may end up facing some legal issues that may arise. It is better to have a fair understanding of the rules and regulations pertaining to inheritance of properties.

Buyers Not To Be Charged Extra For Parking Space

The Central Mumbai District Consumer Disputes Redressal Forum recently said that developers cannot charge buyers extra for a car parking space. This verdict came out in response to a complaint lodged against Tata Housing Development Company in the forum. The developer was directed to refund a buyer car-parking charges and pay him compensation.

The Supreme Court had passed a judgment in August 2010 saying that a developer cannot sell an open space or parking space as it was a part of the society common area. Upholding this judgment, the consumer forum said that the developer could not charge any amount for use or sale of parking space.

While this verdict is welcome by most prospective buyers, there are counter arguments for this verdict. Here is a critical look about the pros and cons of this verdict.

A fair verdict

The verdict is encouraging as it makes sense from a legal and economic point of view.

1) When a developer sells a flat to a buyer, the charges for the flat not only includes the carpet area (the buyers private area), but also for the common spaces and support structures such as staircases, lifts, corridors, sewage disposal system, parking spaces and so on. In fact, many states have regulations that require adequate parking spaces. Builders incorporate these costs into the market price of the flats they sell. Hence, it becomes illegal to charge extra for parking space or any of the common amenities.

2) Allowing developers to charge extra for parking space is also bad economics, especially during times when demand for parking increases multifold in a very short span of time. This is because, with limited parking space, the developer has no incentive to maximize supply of parking slots. With that, the developer can withhold supply of parking slots and charge maximum prices for each parking slot. If the parking slots are free, the flat owners can attempt to come up with innovative measures for maximizing the number of parking slots.

Doesn’t account for ground realities

While this may sound a fair deal, many argue that the verdict does not take into account the ground realities. Some of the counter arguments for the verdict are:

1) The number of cars in India are constantly increasing. With this trend, paying for parking ought to become normal. This is also the only way of dithering people from buying more cars while encouraging them to use public transport. It however needs to be understood that the public infrastructure and transport services must be improved and can happen only if more people use those options and demand better services.

2) Big metros such as Mumbai and Delhi have parking space constraint. It is in this scenario where ‘pay for parking’ becomes relevant. Developers of residential properties receive almost no support from municipal authorities. Most of the residential projects are self-sustained units with provisions for water supply, electricity and parking spaces. It is only fair that developers are allowed to charge for parking spaces. While on one hand, this will force more people to use public transport, on the other hand, it will assure buyers of the space guaranteed parking everyday.

3) It is also better to allow the developer to charge extra for parking space. Otherwise, they will pass on the cost through other hidden means to the buyer. Ultimately, it is again the buyer who bears the brunt. A buyer who does not use the parking space will pay the same as the one who parks multiple cars. Moreover, common parking spaces can create chaos, which may lead to disputes and fights. ‘Pay for parking’ is the only alternative to avoid this scene.

With both arguments having equal weightage, measures will have to be taken which can appease the buyer as well as the developer.

Rectification Deed: Rectification of Error

 

Sale deed is a legal document authenticating transfer of right, title and interest in immovable property and evidences devolution of the same from seller to buyer. It is executed on a stamp paper; hence any error may make the entire deal cumbersome and invite litigation. Since it is executed on valuable stamp paper, it is not possible to make fresh sale deed on every detection of error.

Correction at pre-registration stage

(1) Some common errors such as errors in names and addresses of the parties, description of the property, sale consideration etc. may be corrected on the deed itself and authenticated by all the parties.

(2) In case of factual errors such as defect in the title of the seller, measurement of the property, additional rights of the buyer etc, the relevant page should be changed, whatever may be the cost of stamp on that page.

 

Post registration stage

 

Any error detected after registration of the concerned sale deed, can be corrected by a “Rectification deed” only which also has some conditions and limitations.

Conditions

(a) Error must be genuine
(b) It must be inadvertent not intentional
(c) All the parties must agree to the rectification thereof.

Limitations

Rectification deed can rectify only factual errors NOT error of law, such as
(A) Deficient stamp duty
(B) Jurisdictional error of Sub-Registry office
(C) Basic character of transaction e.g. Sale transaction cannot be corrected as Gift
(D) It is meant to rectify defects in the original deed NOT to change the nature of the transaction OR Intention of the parties involved.

Procedure for Rectification by Rectification Deed

 

(1) Rectification deed must be signed by all parties
(2) It is to be executed on stamp Paper as per rates of registration in respective states
(3) Rectification deed also must be registered with the same Sub-registrar’s office where original deed was registered.
(4) For minor mistakes the stamp duty and registration charges are Rs.100/- each
(5) For rectification of major errors viz. names of the parties, measurement of the property, location and any other description of the property, the stamp duty and registration charges apply as per rate of registration of the original Sale deed
(6) It must give reference of the errors in the original deed which is being rectified now.

Why registration of immovable property is important?

A person is considered lawful owner of a property only after s/he gets it registered in his / her name. Section 17 of the Indian Registration Act 1908 makes it mandatory to register the document regarding transfer, sale, gift or lease of a property.

Registration of the sale deed by which the right, title and interest in a property is transferred from seller to the buyer, must be done for legitimate transition of the ownership of the property.

The Apex Court has ruled that transfer of all right, title and interest in a property would be considered invalid unless the sale deed was duly stamped and registered. Under Section 49 of the Indian Registration Act, 1908 sale deed will not have any bearing on the property and will not confer any “right to the property” if it is not registered. Further, section 23 of the same Act states that “Document of Title” must be registered within four months of execution.

However, if due to unavoidable reasons the desired registration cannot be done within the stipulated period of four months, then the buyer can request the District Registrar, for extension of another 4 months by paying a penalty of up to 10 times of the registration fee.

Usually the penalty levied is 100-300% of the registration fee. This extension of time limit for registration of “Document of Title” with penalty is allowed under Section 34 of the Indian Registration Act, 1908.

Sale deed is the only “document of title to a property” and must be prepared very carefully. Any discrepancy and / or error in the sale deed may have very serious repercussions both for the buyer and the seller. It may lead to legal tussle between the seller and the buyer or by their respective legal heirs.However, if there is any genuine and inadvertent but grave error in the sale deed then legally prescribed process is there for rectification of such error(s).

How does the new land acquisition law work?

The new land law,“Right to fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013”, will replace the old Land Acquisition Act,1894. So, how the new law will affect the Land Acquisition by Govt?

Acquisition of immovable property in India is governed and regulated by “The Requisitioning and Acquisition of Immovable Property Act, 1952” (Act 30 of 1952). Acquisition of land is governed and regulated by Land Acquisition Act, 1894. Both these acts are applicable to whole of India except the state of Jammu and Kashmir. Under both these acts the Central Govt. as well as State Governments are empowered to requisition and acquire land and immovable property for public purpose (present or future). Since land is a state matter every state Governments have their own respective land acquisition laws and rules to acquire land in respective states.

However a new bill named and titled “Right to fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013” has been passed very recently by both the houses of Parliament and after getting Presidential assent and notification will replace the old Land Acquisition Act,1894.

Once the competent authority formed for the purpose of acquisition of immovable property decides to acquire any immovable property they must send a notice of requisition under section 3 of the said act (Act 30 of 1952) to the owner of the property in this regard.

Opportunities of protection and fair compensation

1. After issuance of “notice of requisition” under section 3 and before issuance of “notice of acquisition” under section 7 of the said act, the acquiring authority gives an opportunity to the owner of the property to explain why the said property should not be acquired and after considering the causes the authority passes order as it deems fit and proper.
2. If in spite of valid reasons the authorities insist to acquire the property then the aggrieved owner may appeal to the central Government within 21 days from the date of order.
3. No property or any part thereof can be acquired which is being used by the owner as residence for himself or his family member(s) or which is used for religious or public purposes.
4. If a property is not acquired within 5 years from the date of notice of requisition, it will be released and restored to the owner.
5. Compensation for the acquired property will be paid to the owner and quantum of such compensation may be decided by mutual agreement of the owner and acquiring authority.
6. If no agreement is reached arbitrator will be appointed, the owner of the property has right to state fair amount of compensation.
7. If the owner is satisfied with the award of the arbitrator regarding quantum of compensation, he may appeal to High court having jurisdiction over the area.

What is a Sale agreement?

 

Property sale agreement or Sale agreement is a document in writing executed, signed and delivered by the parties to the agreement i.e. Seller and Buyer and witnessed by at least two witnesses. It is prepared on non-judicial stamp paper. In a buy /sale transaction for immovable asset, till the final sale deed is registered, sale agreement is the most important, legally valid and enforceable document.

When the seller and buyer conclude negotiations and finalize a deal, the entire gamut of the terms and conditions for the particular deal are recorded in this document which becomes the basis for subsequent actions by both the parties.

What does it contain?

This document contains the complete identification of the parties and the property, area and measurement of the property, amenities and facilities available to the buyer, details pertaining to the quality of construction, agreed consideration payable by the buyer, mode of payment of the consideration, time frame for conclusion of the deal and handing over possession of the purchased property to the buyer, penalty clauses for delay in completion of the project, registration of the final sale deed and possession by the buyer and all other relevant terms and conditions agreed by and between the buyer and the seller.

Execution of sales agreement

After due execution and delivery of the sale agreement the parties are bound to act in terms of the contract and unilateral violation of any of the terms mentioned in the agreement makes the defaulter liable to compensate the aggrieved party by proper legal adjudication. Though the sale agreement is not a “document to title” but it confers right to the buyer to acquire the property after compliance with the terms of the contract. As provided under section 10 of “Specific Relief Act,1963” party to a contract has to perform in terms of the contract and failure to act makes the defaulter liable to compensate the aggrieved party for all the losses, cost and damages.
A sale agreement may or may not be registered, however if agreed by the parties it may be registered by paying ad-valorem stamp duty and appropriate registration fee pending registration of the final sale deed. In such cases at the time of registration of the final sale deed the stamp duty and registration fee already paid is deducted from the actual payable stamp duty and registration fee. Thus it is clear from the foregoing that it is a very important document and must be prepared very carefully by competent legal professionals.

How to stop benami transactions of property?

Benami property ownership means ownership of a property in the name of a person who has not actually paid the consideration for purchase of the property. Benami owner(s) only lend their name(s) for purchase of a property where consideration is paid by some other person. Such lending of name is done for some gain and the property is held by the owner on behalf of some other person who has actually paid the consideration. A person lending his name for such transaction is called “Benamidar” and such transaction is called “Benami transaction”.

Ostensible ownership and Beneficial ownership Ownership

Ownership of the property standing in the name of a “Benamidar” is “ostensible ownership” but the “beneficial ownership” of the property does not vest with him, rather it vests with the person who has actually paid the consideration money.

Purpose of benami transactions

Benami transactions are a conduit to channelize black money earned through corrupt and illegal practices. This route is also used to circumvent certain socially beneficial acts such as Land ceiling act and to conceal assets disproportionate to the known source of income. Property is purchased in the names of family members, relatives, friends and sometimes in fictitious names. Such transactions are very common and rampant in real estate sector. Very recently it has been alleged in 2G scam that even some telecom companies which got 2G license, were in fact merely acting as front face hiding the actual investor behind them. The scam in Adarsh Housing, Mumbai has also revealed that a good chunk of properties therein was “Benami property”.

Benami Transaction (Prohibition) Act, 1988

To tackle the menace of black money, benami transactions and corruption, this Act was enacted in 1988. The act has provisions of imprisonment of up to 2 years and/or fine or both, but the act has never become effective because rules to make it operational could not be framed. Central Board of Direct Taxes was the implementing authority for the law and was supposed to frame the rules.

Benami Transactions (Prohibition) Bill, 2011

The Government proposes to replace the earlier act with enactment of the new law for stricter control over benami transactions by plugging off the loopholes in the existing law. This Bill has provisions for confiscation of benami property by the Adjudicating Authority after the person concerned has been given due opportunity of being heard.

Gift and relinquishment deed for transfer of immovable property

 

Of the various methods for transfer of ownership rights in a property “Gift” and “Relinquishment” are two such methods. Both the aforesaid terms serve the same purpose of transfer of property, have similar implications, but the circumstances in which these are executed are different.

Gift of immovable property

Gift is defined under section 122 of Transfer of Property Act, 1882 being voluntary transfer of ownership rights in a property, without any material consideration, where natural love and affection to a living person is the only consideration. It must be free, voluntary, absolute and unconditional except where it is given for any specific purpose such as educational, charitable and /or religious. Generally gift is irrevocable but in case of gift for specific purpose, the property reverts to the donor when the object fails due to events not depending on the will and pleasure of the “donor”. It must be made through a written document called “Gift deed”, duly accepted by the “Donee”, witnessed by two witnesses and the deed must be registered with Registrar/ Sub-registrar of assurances as mandated under section 17 of Registration Act, 1908. If the gift is made to spouse, blood relation of either of the spouse, lineal ascendant or descendant of either of the spouse, any family member then there is no tax implication except the cost of the stamp paper on which the gift deed is prepared. Though there is no restriction on gift to non-relatives but such gift is taxable.

Relinquishment of right

Relinquishment of right is referred to the surrender of one’s ownership rights and claims in a property in favor of another person. It is not defined under Transfer of Property Act. but is an established practice. Relinquishment of right is not without any consideration, the consideration may be in the form of money, exchange of property or arrangement between family members. Relinquishment of right in immovable property also needs to be done only through a written document called “Deed of Relinquishment” which must be signed by all the parties, witnessed by two witnesses and must be registered. Unlike gift relinquishment does not enjoy tax benefits and is taxed for capital gains.
In both the aforesaid cases the “Donor” and the “Relinquisher” must not be a minor, must be mentally sound and capable of taking rational decision pertaining to disposal of property and must be capable to contract.

Essential terms of purchase and sale contracts for immovable property

The transactions involving sale or purchase of immovable properties need to be handled with utmost care, transparency, honesty and dignity. If these are followed, a lot of heartache and drainage of investment can be avoided. However a common citizen may not be aware of the legal stipulations or obligations while transacting in immovable property.

Section 55 and sub-sections of the “Transfer of Property Act, 1882” confer certain Duties, Rights and Liabilities on the Seller and the Buyer. They’ve been listed below and they should be taken in to account while entering into any deal of immovable property.

Responsibilities and Liabilities of the Seller

• The seller has to disclose to the buyer any material defect in the property or in the seller’s title.
• The seller is deemed to contract with the buyer that he / she enjoys full rights over the property which he / she intends to transfer to the buyer, and that he / she has authority to transfer the same to the buyer.
• To produce to the buyer all documents of title relating to the property and to answer relevant questions of the buyer in respect of property and the title.
• To execute a proper conveyance of the property, on payment of the due amount, at a proper time and place. Generally, it is the sub-registrar’s office.
• To pay all public charges, rents, taxes, in respect of the property up to the date of sale.
• To deliver, after receipt of the price or as agreed, to the buyer all documents of title relating to the property which are in the sellers’ possession and power.

Rights and Liabilities of the buyer

Section 55 (5) (a) to (d) of “Transfer of Property Act, 1882”, imposes upon the buyer certain duties, while Section 55 (6) (a) and (b) of the “Transfer of Property Act, 1882”, entitles the buyer to certain rights, as detailed below:

Duties of the buyer

• Where the buyer is aware of the seller’s interest in the property of which the seller himself is not aware, then the buyer must disclose it to the seller.
• To pay or tender the purchase price, to the seller or his authorized agent, at the time and place of completing the sale.
• To bear any loss arising from the destruction, injury or decrease in value of the property after ownership of the property has passed to the buyer and such destruction / injury is not caused by the seller.

Rights of buyer

• To the benefit of improvement or increase in value of the property where the ownership of the property has passed to him.
• Where two properties are subject to a common charge and one of the properties is sold, the buyer is entitled to get the charge satisfied out of the other property without affecting the property purchased by him.
• To compel the seller for specific performance of the contract to the extent of the seller’s interest in the property, where he has paid the purchase price

Can a property buyer Own or occupy terrace of a society building?

 

Owning or occupying of terrace of a society building is unfair and illegal practice. 

Builder/developer has no right to sell the terrace.

Some developers of the co-operative housing societies resort to the unfair practice of selling the roof top / terrace. It has also come to light that in some housing societies, owners of the flats at the top floor claim ownership of the terrace and dissuade other owners from using the same. Both these actions are contrary to the stipulations made in law.

According to section 4 (1A), (iii), (viii), (x) and section 10(1) of Maharashtra Ownership Flats Act, 1963, builder/developer has no right to sell terrace. No measure either individually or collectively give any authority to any builder or even the society to sell terrace of a building. As per law all open spaces in a building including the terrace is a common easement for benefit of all the members, who are entitled to enjoy the same as shown in Municipal Corporation records. No single member can appropriate and deprive others of the benefit of common easement. When the BMC sanctions a building plan the terrace is not taken into consideration for the purpose of calculation of Floor Space Index as it is for the use and benefit of all the members (flat owners) of that society.

Owning or occupying of terrace of a society building is not permitted by law and if any body does that it is totally illegal. The law and BMC rules are amply unambiguous and clear in this regard and there is no provision at all under which terrace of a society building can be sold or bought. There has been a landmark judgment delivered by Hon’ble Mumbai High Court in the year 1999 in this regard while adjudicating on writ petition No. 4577 of 1985, in the matter of Smt. Ramagauri Keshavlal Virani V/s Om Walkeshwar Triveni Co-op housing society Ltd & others. Advocate Vinod Sampat an expert in Co-operative Housing Society matters is also of the same opinion and says that no person can own, sell or buy terrace of a co-operative Housing Society building.

Hence any one who indulges in such unfair and illegal practice does so at his own peril because it has got no legal sanction and is always subject to litigation and a person doing so will be on the wrong side of law.

What are the factors affecting taxation in joint ownership?

It’s a very common practice that when a person purchases immovable property the name of his / her spouse is added as co-owner, though the consideration is paid by either of the spouse solely through her/his own resources. In such cases the property becomes joint property and ownership thereof becomes joint ownership with both the owners enjoying equal and similar rights. The sole purpose of adding the name of spouse as co-owner is smooth transition of the property to the surviving spouse after death of the other partner.
However joint ownership does not mean or stand for property in the joint names of spouse only. It may be in the joint names of family members, friends, business partners or rank outsiders, but in most of such cases the consideration is paid by all the joint owners and generally the ownership is in the ratio of respective contribution towards the consideration money.

Taxation in joint ownership

Sometimes this simple and innocuous practice, especially where the property is jointly owned by spouse, causes litigation between taxation authorities and the assessee in respect of capital gains. Section 54 of Income Tax Act, 1961 and it’s various sub sections (54EC; 54F) provide for exemption from payment of long term capital gains tax if the property sold has been held for more than 3 years and the sale proceeds are utilized for acquisition / construction of new residential unit within 2/3 years of sale of the old property. Section 54F of the act states that the new house should be purchased in the name of the assessee. This stipulation is the bone of contention and tax authorities allow exemption of only 50% of the capital gains tax where the property is purchased in the joint names of the assessee and his/her spouse.

Legal interpretation-CIT Vs. Ravinder Kumar Arora

Hon’ble Delhi High Court in the matter of Commissioner of Income Tax (CIT) Vs. Ravinder Kumar Arora has ruled that though the property was purchased in the joint names of the assessee and his wife but the entire consideration including stamp duty and registration fee was paid by the assessee from the sale proceeds of the property owned by him. Inclusion of wife’s name as co-owner is intended to avoid litigation after death of the assessee.

The court further observed that when we are advocating for empowerment of women, acceptance of tax authority’s plea to disallow 50% exemption because the property is purchased in the joint names of the assessee and his wife, would be derogatory step. The Hon’ble court dismissed the appeal of the tax authority.

Documents you need while purchasing a property

Documentation is an essential part of a property acquisition process. However, it may well turn out to be a complicated one. Different states in India have different requirements. There are many laws that govern the purchase of properties. There are various types of properties that you would want to buy and you’ll require certain documents while buying them. Let us have an overview of the most important legal documents to be verified in case of various properties -

(I) Purchase of freehold residential plot/house:

The main documents to be verified in such a case are -

# Copy of the sale deed through which the seller got his title to the property
# Copies of all earlier sale deeds to verify the chain of past owners of the property
# Registration details of the sale deed
# Agreement to sell the property
# Receipts of payments made by the purchaser to the seller
# Copy of the sale deed for registration purposes

(II) Purchase of property from original allottee of a government authority:

In case you purchase property from original allottee of a government development authority, i.e. DDA or MHADA, the documents you need are -

* Allocation letter
* Allotment letter
* Possession letter
* Receipts of payments made to authority

(III) Purchase of property from power of attorney (POA) holder of original allottee of a government development authority:

Apart from the documents mentioned above, the main documents you’ll need to verify here are -

# Permission to mortgage
# Authorisation letter signed by the seller
# Receipts of payments made by purchaser to seller
# Verification of signature of seller from his bank
# General power of attorney
# Special power of attorney
# Will Agreement to sell the property

(IV) Purchase of flat in a group housing society from an original member of the Society:

With the rapidly growing urbanization, there has been a surge in the number of flat buyers in India. The main documents to be verified while buying a flat from an original member of the apartment Society are -

* Share certificate issued by the society
* Lease deed of society
* Registration details of the society
* Bye-laws of the society
* No objection certificate from the society
* Approved building plan
* Title of builder
* Undertaking from society
* Allocation letter, Allotment letter and Possession letter
* Receipts of payments made to authority
* Permission to mortgage
* Authorization letter signed from seller
* Receipts of payments made by purchaser to seller
* Verification of signature of seller from his bank

(V) Purchase of flat in a group housing society from a power of attorney (POA) holder:

Apart from the ones required while buying a flat from an original member of the Society, the main documents needed here are -

# General power of attorney
# Special power of attorney
# Will Agreement to sell the property