PRESENTATION Immovable Property and Importance of Title Documents

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ON

IMMOVABLE PROPERTIES AND CREATION OF MORTGAGE

R-26, South Extension, Part-II,New Delhi-110049

Phone: (Delhi) 011-46175500/41551533(Mumbai) 022-43470005

Fax: 011-41551537Email: [email protected]

WHAT IS A “PROPERTY”WHAT IS A “PROPERTY”

The Transfer of Property Act 1882 (“TPA”) does not define the word “Property”.

Many other statues define the word “Property” on the basis of their objects, e.g: Sale of Goods Act, 1930: Property means the general property in

goods, and not merely a special property. Wealth Tax Act, 1957, Section 4, Expln. C: The expression

“Property” includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale thereof and where the property is converted into any other property by any method, such other property.

Gift Tax Act, 1958, Section 2(xxii): Property includes any interest in property, movable or immovable.

WHAT IS A “PROPERTY”WHAT IS A “PROPERTY”….. continued…..….. continued…..

Income Tax Act, 1961, Section 64 (2), Expln I : The expression “Property” includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale thereof and where the property is converted into any other property by any method, such other property.

Section 2(t) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (“Securitisation Act”) defined the word “Property” exhaustively as follows:Property means :- (a) Immovable property; (b) Movable property (c) Any debt or any right to receive payment of money, whether secured or secured, (d) Receivables, whether existing or future, and (e) Intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any other business or commercial right of similar nature

IMMOVABLE AND MOVABLE PROPERTYIMMOVABLE AND MOVABLE PROPERTY

TPA defines the word “Immovable Property” as follows: Immovable Property does not include standing crop, growing crops or grass.

General Clauses Act 1897 defines the word “Immovable Property” as follows:

Immovable Property shall include land, benefits to arise out of land and things attached to earth, or permanently fastened to anything attached to earth.

General Clauses Act 1897 defines the word “Movable

Property” as follows: Movable Property shall mean any property of every description

except immovable property.

CLASSIFICATION OF IMMOVABLE CLASSIFICATION OF IMMOVABLE PROPERTYPROPERTYImmovable Property Can Be Classified On Various Basis Such

As Interest: Freehold or Leasehold Property

Usage: (a) Residential, (b) Commercial, (c) Agricultural,(d) Industrial, (e) Special Economic Zone (SEZ) etc

Tangibility: Tangible or Intangible Property

Ownership: Private or Public or Joint or HUF property

FREEHOLD PROPERTIESFREEHOLD PROPERTIES

Freehold properties are the properties for transfer of which no permission from any person is required. These properties are the properties which are freehold in nature since inception or were leasehold which have been converted into freehold later on after payment of conversion charges etc.

EXCEPTION:However there are few Freehold properties for transfer of which permission of government authorities is required in some form. E.G. Properties allotted by HUDA. HUDA maintains its first charge on the properties allotted by it towards various dues payable by the owner and thus for transfer of these properties, permission from HUDA is required to be obtained.

LEASEHOLD PROPERTIESLEASEHOLD PROPERTIES

Leasehold properties are the properties which are owned by a person (“Lessor”) and have been leased out by the Lessor to a person (“Lessee”).

On execution of lease deed, the Lessor continues to be the owner of the property but the Lessee acquires leasehold interest in the property.

The Lessee, subject to the contract to the contrary, is permitted to sub-let, lease out or transfer or part with possession of the property to any third person. However in most of the cases, the lease deed usually restrict such right of Lessee and stipulates that except with the permission of the Lessor no third party interest can be created.

Examples of such properties are the properties allotted by NOIDA, L&DO, State Industrial Corporations etc.

LEASEHOLD PROPERTIESLEASEHOLD PROPERTIES….Continued……….….Continued……….

LEASEHOLD LAND WITH FREEHOLD SUPER STRUCTURE CONSTRUCTED THEREON

The superstructure built of leasehold land can be freely transferred by the Lessee to any person. However, transfer of the land underneath the super structure can only be made only with the permission of the Lessor who owns the land.

MORTGAGEMORTGAGE

Section 58 of TPA:

Mortgage is transfer of interest in any specific immovable

property for the purpose of securing payment of money

advanced or to be advanced by way of a loan, any existing or

future debit, etc. The person who mortgages the property is

called as “Mortgagor” and the person in whose favour

property is being mortgaged is called the “Mortgagee” and

the instrument by which mortgage is created is called the

“Mortgage Deed”.

TYPES OF MORTGAGESTYPES OF MORTGAGES SIMPLE MORTGAGE In simple mortgage the mortgager without delivering the possession of

the mortgaged property binds himself to pay the loan and agree that in the event of his failure to repay the amount, the mortgagee shall have the right to cause the mortgaged property to be sold and apply the proceeds against the loan.

MORTGAGE BY CONDITIONAL SALE In mortgage by conditional sale, the mortgagor ostensibly sells the

property with condition that on default of payment of loan, the sale shall become absolute or in the event of repayment of loan, the sale shall become void and thereafter the buyer (mortgagee) shall re-transfer the property to the seller (mortgagor).

USUFRUCTUARY MORTGAGE In Ususructuary Mortgage, the mortgagor delivers possession of the

mortgaged property to the mortgagee and authorizes him to retain such possession until payment of loan. The Mortgagee is authorized to receive the rent and profits accruing from the mortgaged property.

TYPES OF MORTGAGESTYPES OF MORTGAGES…..continued……….…..continued……….

ENGLISH MORTGAGE Where the mortgagor binds himself to repay the loan on certain

date and transfers the mortgaged property absolutely to the mortgagee but subject to a proviso that he re-transfers it to the mortgagor upon payment of mortgaged money as agreed.

MORTGAGE BY DEPOSIT OF TITLE DOCUMENTS As name itself indicates, to create a mortgage, a person delivers to

the creditor, the documents of title to immovable property with intent to create security thereon.

ANOMALOUS MORTGAGE An Anomalous Mortgage is a mortgage which does not fall in any of

the aforesaid category but is a mixture of any two or more aforesaid mortgages.

MOST COMMON FORMS OF MORTGAGES MOST COMMON FORMS OF MORTGAGES

Simple Mortgage (which is also known as Registered Mortgage) and

Mortgage By Deposit Of Title Documents

SIMPLE OR REGISTERED MORTGAGESIMPLE OR REGISTERED MORTGAGE

A property can be mortgaged by execution and registration of mortgage deed after payment of requisite stamp duty etc. thereon. Any property can be mortgaged in this manner.

The Delhi Land Reforms Act, 1954 bars creation of an equitable mortgage by deposit of title deeds. Section 34 of The Delhi Land Reforms Act, 1954 is relevant in this context. This Section permits only a Simple Mortgage in case of agricultural land

While mortgage deed is registered with the concerned Sub Registrar of Assurances, original title documents along with chain of title documents are retained by the mortgagee so that the mortgagor cannot create further interest or encumbrance in the property by deposit of title documents.

MORTGAGE BY DEPOSIT OF TITLE MORTGAGE BY DEPOSIT OF TITLE DOCUMENTSDOCUMENTS

Any person in any of the notified towns can deliver to the Bank documents of title to the immovable property with intent to create security thereon.

Before accepting the title documents, Bank needs to ensure that :- That the title documents being deposited are necessarily evidencing

the title of the property. The title documents are being deposited in a town which is notified

by the State Government though the property may be situated somewhere else, may be in a town not so notified.

Original title documents are being deposited with intent to create equitable mortgage and not for safe custody.

The intention to create equitable mortgage is to secure payment for a debt.

WHAT ARE TITLE DOCUMENTSWHAT ARE TITLE DOCUMENTS Title deeds or title documents are the documents which evidence

ownership, whether freehold or leasehold, of any property. Allotment Letter Receipts evidencing Payments made. Possession Letter, if applicable Share Certificate. Revenue records Lease Deed Conveyance Deed Sale deed / Gift deed / Exchange deed Relinquishment Deed Will

Existence of title deeds depends upon the nature of the property, how and from whom the ownership has been acquired etc..

DOCUMENTS REQUIRED FOR THE CREATION OF DOCUMENTS REQUIRED FOR THE CREATION OF MORTGAGE OF PROPERTY IN DELHIMORTGAGE OF PROPERTY IN DELHI

A. ORIGINAL DOCUMENTS OF TITLE IN RESPECT OF FREEHOLD DDA FLAT/PROPERTY:DOCUMENTS TO BE OBTAINED:

Conveyance Deed executed by the President of India Sale Deed in favour of Owner/Borrower – (If applicable) Allotment letter issued by the DDA. Possession Slip/Certificate In case the property has changed hands by way of Agreement to

Sell, General Power of Attorney, etc., all the intervening documents – whether registered or not, in original upto the stage of last purchaser’s name appears, in whose name the conveyance has been executed and registered.

Proof of mutation of the said property in the name of the borrower in the municipal records.

DOCUMENTS REQUIRED FOR THE DOCUMENTS REQUIRED FOR THE CREATION OF MORTGAGE OF PROPERTY CREATION OF MORTGAGE OF PROPERTY

IN DELHIIN DELHI…….Continued……….…….Continued……….

B. ORIGINAL DOCUMENTS IN RESPECT OF FREEHOLD L & DO PROPERTY: Lease Deed in favour of original lessee/owner. Conveyance Deed executed by the President of India In case the property has changed hands by way of Agreement to

Sell, General Power of Attorney, etc., all the intervening documents – whether registered or not, in original upto the stage of last purchaser’s name appears, in whose name the conveyance has been executed and registered.

C. ORIGINAL TITLE DOCUMENTS IN RESPECT OF OTHER FREEHOLD PROPERTY. Conveyance /Sale Deed/chain of title documents Latest house-tax payment receipt and bill. Proof of mutation of the said property in the name of the borrower

in the municipal records.



D. ORIGINAL TITLE DOCUMENTS IN RESPECT OF OTHER FREEHOLD PROPERTY. Conveyance /Sale Deed/chain of title documents Latest house-tax payment receipt and bill. Proof of mutation of the said property in the name of the borrower in

the municipal records.E. ORIGINAL DOCUMENTS IN RESPECT OF CO-OPERATIVE SOCIETY

Share certificate Letter of allotment of concerned flat. Letter of possession of flat to be mortgaged. Completion certificate issued by competent authority. Letter submitted to DDA to record charge / mortgage created in

favour of bank acknowledged by DDA. Copy of letter of allotment of land by concerned Government

authorities in favour of society Original house-tax bill and receipt



E.ORIGINAL DOCUMENTS IN RESPECT OF CO-OPERATIVE SOCIETY ….continued….

Copy of lease deed executed by Authority in favour of society or the letter from the society confirming that the lease deed in favour of the society has not been executed.

Certified copy of bye-laws of the society. Original sub-lease executed by society in favour of a member. Certificate from Society regarding the following :

No loan outstanding towards society or any other agency /lender Permission to Mortgage the flat and Noting / charge by way of mortgage in favour of bank In case a member has got his flat converted into a freehold, conveyance deed

executed by DDA becomes the main Title Document and the mortgage can be created in such a case by deposit of Original Conveyance Deed itself. No permission for mortgage from the society, copies of lease deed etc. as above are not required to be deposited.

DOCUMENTS REQUIRED FOR THE CREATION OF DOCUMENTS REQUIRED FOR THE CREATION OF MORTGAGE OF PROPERTY IN GURGAON AND MORTGAGE OF PROPERTY IN GURGAON AND

FARIDABADFARIDABAD

A. ORIGINAL TITLE DOCUMENTS IN RESPECT OF HUDA PROPERTY : Deed of Conveyance of Building Site Sold by Allotment Allotment letter/Memo, along with Terms & Conditions/Re-allotment

letter, if any. Possession Slip Payment receipts of installments / payments made to HUDA. Non-encumbrance Certificate by HUDA Permission to mortgage from HUDA.

B. ORIGINAL TITLE DOCUMENTS IN RESPECT OF FREEHOLD PROPERTY DEVELOPED BY BUILDER / PROMOTER / DEVELOPER: Original Allotment Letter/Flat Buyer’s Agreement No Dues Certificate from Builder/Developer. Original latest house tax bills and receipts. Original Sale Deed in favour of Borrower


IN NOIDAIN NOIDA

A.ORIGINAL TITLE DOCUMENTS IN RESPECT OF LEASEHOLD PROPERTY IN NOIDA

Lease Deed executed by NOIDA in favour of Borrower Original house tax bills and receipts, if applicable. Mutation Certificate issued by the NOIDA Authority, mutating

the property in the name of the Borrower, if applicable. Allotment letter Possession letter along with site plan Challans – lessee’s copies, towards payments/installments

made/paid to NOIDA Permission to mortgage the property from NOIDA Authority.


IN NOIDAIN NOIDA…….continued……….…….continued……….

B. ORIGINAL TITLE DOCUMENTS IN RESPECT OF LEASEHOLD PROPERTY, WHICH IS DEVELOPED/CONSTRUCTED BY AWHO/AFNHB/DSHS

Allotment letter/Agreement with AWHO/AFNHB/DSHS Possession letter Payment receipts made to the AWHO/AFNHB/DSHS Sale Deed in respect of construction only. Proof of mutation of the said land in the name of the borrower in

the municipal records. Original house tax bills and receipts. Permission to mortgage from Noida/AFNHB/DSHS True copy of Lease Deed in favour of AWHO/AFNHB/DSHS


IN GHAZIABADIN GHAZIABAD

ORIGINAL TITLE DOCUMENTS IN RESPECT OF LEASEHOLD PROPERTY

Lease Deed Proof of mutation of the said land in the name of the borrower in

the municipal records. Original house tax bills and receipts. Allotment letter Possession letter/slip Challans – lessee’s copies, towards payments/installments

made/paid to GDA/U.P. Awas Vikas Parishad Limited. Permission to mortgage from Ghaziabad Development Authority.

INHERENT RISK IN THE MORTGAGEINHERENT RISK IN THE MORTGAGE Non-availability of chain documents in original. Impossible to detect legal disputes which are pending the Court

with respect to the property which disclosure is concealed by the borrower.

Non-disclosure of outstanding under the Income-Tax Act or House-Tax Act.

Mortgage in favour of more than one bank by forging various copies of title documents.

Title arising out of transaction within a family. Share of a minor in the property Mortgage of HUF property for purpose other than the permitted

one. Construction of property without sanctioned building plan or in

violation thereof.

CENTRAL REGISTRYCENTRAL REGISTRY

To avoid fraudulent transactions by a borrower, the Government has established a Central Registry under Section 20 of the Securitization Act.

All charges created on immovable property – whether by individual or HUF or partnership firm or trust or a company is to be registered with such Central Registry within 30 days of creation of charge.

Any person can inspect the records of Central Registry to check if the property proposed to be mortgaged has been previously mortgaged with any other bank or not.

IN CASE THE PROPERTY IS OWNED BY A IN CASE THE PROPERTY IS OWNED BY A COMPANYCOMPANY

The company should have power to borrow – any object clause as contained in the Memorandum of Association of the company.

The Board of Directors should pass a resolution for borrowing and to mortgage the property.

Only authorized Director/person should execute the mortgage documents.

Charge on the immovable property of the company is registered with the Registrar of Companies by filing E Form No.8 with the Registrar of Companies within 30 days of creation of charge.

Charge should also be filed with Central Registry.

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