While the very thought of owning your own home is a dream come true and fills one with pride and immense joy – the process itself may be anxiety ridden, time consuming, and fraught with legal hassles. As a potential owner, your top priority should be to safeguard your property, your interests thereof, and ensure that the proper legal process of property transfer has been followed.
If the asset you are transferring is not legally in your name, with clear titles and irrefutable documentation – there is grave risk of the property being tagged as ‘benami’ – without clear name and ownership title and it may not be long before the dream turns into a nightmare.
Before diving into the categories and complexities of the asset transfer world, let’s look at the two basic types of property transfers – Voluntary & Involuntary
- All voluntary property transfer – be it residential or commercial – as the name indicates is intentional. For example – property sales, gifts etc.
- All involuntary transfers of asset or property are mainly done through confiscation, appropriations, legal government action etc. – where property is transferred against a person’s free will
A property transfer should always be supported with a deed. The deed is a legal document that provides clear property titles and makes the property transfer legally binding.
Here are the 5 main types/modes of Indian real estate transfer:
|Types of Property Transfer||What it entails|
|Sale Deed or Transfer Deed||Sale involving outright Property Transfer, with clear titles through a ‘buy and sell’ procedureThe document has clear details of the sale – namely parties involved in the transfer, price, terms & conditionsA registered sale deed needs to show exchange of money between the parties involved|
|Gift Deed||Popularly used as a legal way of transferring property to a relative or friendThe gifting is voluntarily done by the donor to the donee and the transfer cannot be reversedThe transfer process is done without money exchanging hands; however, the gift deed has to be registered for the transfer to be deemed as legal and binding|
|Inheritance or Will Deed||Legal transfer deed, where the drafter outlines clear guidelines of property disbursement, post his/her demiseThis type of real estate transfer is revocable by the owner of the will, during his/her lifetime|
|Relinquishment or Release Deed||Used when a property owner wants to voluntarily transfer his/her real estate asset to a co-owner and relinquish share in the propertyLike Gift Deeds, Release deeds are also irreversible|
|Family settlement and Partition Deed||The end goal of both is to divide the property amongst family membersRegistration and stamping are not required for family settlement, but both are needed for a partition deed|
Property transfers may also be of a temporary nature and for a fixed period – in accordance with the terms and conditions agreed on, between both parties involved in the transfer. For example – Lease and Mortgages
Now that you know a bit more about the different types of property transfers, let us look at the key steps to be followed during an asset transfer –
Recommendation 1 – Verification of clear Property Titles
The title deed of a property serves as proof that you are the rightful owner of the property. Hence it is vital to ensure that you have all the documents that establish clear property titles while buying a property. Furthermore, if your transaction involves a leasehold land or land owned by government you need to obtain a mandatory No objection certificate[ from the authorities. It may be worth your while to spend time researching and familiarizing yourself with the entire ownership and documentation chain related to the property, so that you know it is in the clear.
Recommendation 2 – Memorandum of Understanding
While this may not be an essentially legal step, it is a great place to start -A memorandum of understanding (MOU) is a non binding agreement between the parties involved in a sale/transfer process and outlines the terms and conditions, role and responsibilities and essential sale details. It is akin to a document of understanding and is often the first stage in the formation of a formal contract.
Recommendation 3 – Ensure the deed is registered
Legal experts advise that one should not only identify and utilize the proper transfer deed category, it is also important that the deed be registered – so that the rightful owner can actively control, build, mortgage or sell their[ real estate assets in India.
Recommendation 4 – Mutation of property
Mutation is basically the transfer of title ownership, from the current property owner, to the new owner, when the property is sold or transferred. The mutation ensures that the new owner gets the property legally recorded in his/her name. Once the document is registered, then based on the document, the buyer can get his name mutated in the municipal or revenue tax records. Always ensure that a qualified real estate advisor and legal expert are consulted during property transfers. It is a major decision and as they always say – better safe, than sorry!