Thursday, 9 July 2015

TRUST AND TRUST PROPERTY




Holding of property by a trustee involves various obligations and duties on the parties to a trust deed and these are enumerated in the Indian Trust Act 1882, which regulates the formation, and function of the trusts, powers and duties of trusties in dealing with trust properties.

Parties to a Trust

Trust is an obligation attached to the property thereby indicating how the property is to be used and who are the beneficiaries of the trust Property. It is an agreement between the Author of the Trust and the Trustee i.e. the manager of the trust property and the owner of the trust property. A trust may be formed by any person competent to contract, or with the permission of the court by a minor or on behalf of minor. A trust consists of more than one person that is at least two persons. The person that is the owner of the property, who reposes the confidence in another to manage the property is called author of the Trust or a settler. The person who manages the property as per the directions of the author of the trust is a trustee. 

Both the parties, i.e. the author of the Trust, and the trustee are parties to the document called a trust deed, which defines the objectives and functions of the Trust. The institution is called the Trust. Apart from the author of the Trust, and the Trustee, the third party who is entitled to the benefits is called the beneficiary, who is not a party to the Trust Deed. The beneficiary has the right to insist that the trust property can be used for their benefits although they are not a party to the said trust deed. Any person capable of holding the property can be trustee but not the government of India. Likewise a government servant cannot be a trustee of mosque, temple, church or other religious institutions.

Ingredients of a Trust:

The important ingredients of a trust are - the objectives must be certain, the beneficiaries must be certain and clear and definition of the trust property must be clear and identifiable. The trust cannot be created orally, must be in writing duly signed by the Author and it can also be created by a Will. The Trusts are of many types. A private trust, where the beneficiaries are the legal heirs of the author, or a group of individual. A public trust is one where the beneficiaries are whole lot of public. The trust may be partly public and partly private. A charitable trust is created for relief, advancement of education, religion and other purposes beneficial to the community at large.

A trust cannot be created for the following purposes 
1. Purpose, which is forbidden by law.
2. The purpose if permitted would defeat the provisions of law.
3. Fraudulent purpose.
4. Involves or implies in injury to the person, property of another.
5. The court regards the purpose as immoral or opposed to the public policy.

Creation of Trust:

A trust may be created only by a non-testamentary document that is a Trust Deed. The Trust Deed is compulsorily registerable under section 17(b) of Indian Registration Act 1908. The stamp duty payable on Trust Deed is governed by the Indian Stamp Act 1899, and falls under the powers of the States hence the stamp duty varies from State to State. It is created by a deed, it is to be registered if the value-exceeds Rs. 100. The trust act does not apply to public or private religions endowments. Section 18 of Transfer of Property Act 1882 relaxes all restrictions, in case of properties transferred for benefit of public like advancement of knowledge, religion, commerce, health and other allied objectives. A trustee cannot delegate his duties to another, except clerical duties and must have the final control over such delegation.

Bailment and Trust:

Often bailment and trust are confused. In bailment, there is delivery of goods from one person to another person for some purpose and on completion of such purpose; the goods have to be returned. In case of Trust, the property is transferred in favour of Trustee for the benefit of another person. In bailment, the person who received the goods is not the legal owner, but the trustee is a legal owner of the property.

Rights and obligations of Trustee:

The duties of the Trustee shall be well defined; he should comply with the terms of the Trust Deed, as per the directions of the author of the trust. He has to get acquainted with the property of the Trust and take required care about the genuinety and recoverability of the investments of the Trust money. The Trustee should, protect the title of the Trust property, if necessary by instituting legal proceedings. He should not set up any title adverse to the beneficiary.

He has to exercise proper care and be impartial and should prevent wastage and convert any perishable property to permanent or profitable in nature. He has to maintain proper accounts and adopt proper investment strategies. The trustees cannot commit any breach of trust, cannot set off the loss occurred because of breach of trust in one portion of the trust property against profit of another portion of trust property. When a breach of trust is committed by one trustee, all the trustees are liable to the beneficiary for the whole loss sustained. Like-wise, the trustee has certain rights, like possession of the trust deed, title deeds of the trust property, reimbursement of expenses, right to settlement of accounts, right to seek the opinion of the court. 

Maintenance of Trust Properties

The trustee may lease the Trust property for a period not exceeding 21 years without the permission of the court, may sell the property in lots, by public auction, or by a private contract. He may also sell under special conditions, and buy and resell. He has powers to make the investment of the trust property, which must be in securities listed in trust act. Any variations in investment other than listed securities must be with the written consent of the beneficiary. 

He may apply the property of the minor for maintenance of minor with proper care and discretion. After he accepts a trust he cannot renounce it except with the permission of the court, or with the consent of all the beneficiaries. Trust property cannot be used for his own benefit, and any benefit must be transferred to the trust. It is to be noted that, the trustee cannot purchase the trust property in respect of which he is trustee for sale. Even his agents cannot buy the same. Further, trustee or his agent, cannot buy the beneficiaries interest and cannot be a mortgagee, lessee of the trust property without court permission. Similarly co-trustees cannot lend among themselves. If trustee wrongfully sells the trust property, the beneficiaries have a right to follow to so long it is traced notwithstanding the intermediate ownership except in case of bonafide sale for value without the notice of the trust.

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Wednesday, 8 July 2015

Deed of Covenant for Production of Title Deeds



The transfer of immovable property by way of sales, gift, will, releases etc., presupposes that documents to the title of transferred immovable property are delivered to the transferee on completion of process. This is statutory obligation. Section No. 55(3) of Transfer of Property Act, puts this responsibility on the seller. But the section has a provision, that in case where only a part of the property is sold and the seller retains a part of the property the seller is entitled to retain the original documents, and copies of such documents are delivered to the purchaser.

In case, where the property is transferred to different persons, in different lots, the transferee of greatest portion is entitled to hold the original documents of title and others are provided with copies of such documents.

In the circumstances dealt above, the persons holding the documents, either the seller or one who holds the greatest portion has some responsibilities. He has to keep the documents in safe custody and in good condition. He has to make available the documents for inspection to other buyers, and also furnish the true copies of such documents; extract from such documents, whenever required.

But the cost has to be met by the buyer who needs such inspection or copies, extracts. These responsibilities of person who holds the original property are required to be recorded properly.

The document, which records such obligations of safe keeping the documents; producing them for inspection, providing copies, extracts is called “Deed of Covenant for Production of Documents”.

The deed of transfers like sale, gift, will and release may contain such a convenant by the vendor in favour of purchaser or a separate deed may also be executed by the vendor in favour of purchaser (or) after making the same covenants can be incorporated in the sale deed.

In case of the person holding greatest portion, a separate convenant deed about his obligations becomes necessary. A separate deed in favour of each transferee of other portions or a common deed in favour of all other transferees jointly may be executed.

In the deed of transfer of the greatest portion or of higher value an explicit convenant, that, the transferee shall safe keep the documents in good condition, produce for inspection of other transferee and furnish true copies or extract should be included. Similar relevant convenant should also be incorporated in deed of transfer of other transferees.

Generally all the portions of the property are not transferred at the same time, and the above suggested procedure may not be possible. In such cases, the transferor should give a convenant of production of documents in each of the deeds of transfer and it should further provide that if and when the transferor hands over the documents to any other transferee at a later date he would procure a similar condition from the such transferee. Under a convenant of production of document, the original owner liable indefinitely unless a condition provides that he is no more responsible after he parts with the remaining portion of the property.

Flats are constructed on land and are sold to different purchasers. But the original title deeds for the entire land, will be only one and cannot be given to each and every purchaser. Each purchaser will get original sale deed, which is executed in his name and registered. He will get copies of other original documents and not originals. The original title deeds of the land will be in the custody of the Flat Owners Association. The association has the responsibility of maintaining them safely and make available the documents for inspection by the owners and to provide copies, extracts the promoters or builder shall incorporate such clause in individual sale deeds. The articles of the flat owners association shall contain the clauses relating to safe custody, inspection and making available the copies, extracts of the original documents.

Stamp Duty: in case the conditions is including in the transfer deeds itself, no separate stamp duty is payable. If a separate deed is executed, it attracts the stamp duty as that of an agreement depending upon the stamp duty prescribed by the state.

Registration: this deed of convenant does not required the registration, but it is advisable to get it registered.

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Tuesday, 7 July 2015

Prohibition on Registration of immovable properties


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Property market in Bangalore was buoyant in recent times. Rates which were upwardly mobile were settling, as mostly end users were purchasing the property. As the Real estate which is considered as mother of all industries, trades, was pulsating, many other sectors, which depend on this sector, were also prospering.

But recent government orders have stalled the growth of the property market; the sudden unexpected decisions have the effect of applying airbrake to fast moving vehicle, jolting the passengers.

Prohibition on registration:

Registering authorities have stopped the registering the sale, gift, exchange, mortgage, agreement to sell, lease or assignment or otherwise of the following properties from 06.05.2005; consequent to government notification dated 23/April/2005.

1. Site with or without building in agricultural land which is not converted for non-agricultural purpose under section 95 of Karnataka Land Revenue Act 1964.

2. Site described as Gramathana site (form no. 9, 10) or other site declared under form no. 19 under rules framed Karnataka Municipality Act 1964, but not actually converted as such site.

3. Site on a revenue land described as Gramathana Site or other site or a site with a building on which no layout plan is approved and a release certificate is issued from local planning authority like BDA, BMRDA, BIAAPA, BMIC, etc.

4. Site on a revenue land described as Gramathana site or other site, flats, industrial site, commercial site, without requisite permission under section 79 A and B read with section 109 of Karnataka Land Reforms Act.
Thus the transfer of only the following properties are permitted.

a. Properties falling under Bangalore Mahanagara Palike.
b. Properties allotted by BDA
c. Properties in BDA approved layouts
d. Properties in layouts approved by other local planning authorities like BMRDA, BIAAPA, BMIC etc.

This prohibition on registration of transfer of certain properties has given a death blow to the property market in and around Bangalore and kept it in suspended animation.

To further compound the issue, the government by its order dated 02/05/2005 has ordered not to grant permission for conversation of agricultural land in and around Bangalore until further orders. Conversion of land is prior requisite for any development, and formation of layouts. By suspending the conversion of land, the government is promoting artificial scarcity of land, it will also lead to construction of unauthorized structures.

Impact:
Many people have entered into sale agreements for purchase of properties in areas of village panchayats, City Municipalities by paying substantial amounts of advance. Most of them are of middle class. It would be difficult to get the refund of the advance paid, and the limitation period also operates against the purchaser. The properties cannot be registered. Thus hard earned money gets blocked, or may have lost for ever.

Many property developers have also invested crores of rupees in properties in forming layouts, constructing flats, villas, houses, but such layouts are not approved by planning authorities. BDA and other planning authorities are very lethargic and do not have proper infrastructure to approve the layouts in this fast developing sector. Prohibiting the registration of sites, flats in such layouts causes heavy loss to investors. Cordial relationships existed between the vendors and purchasers would disappear, and may lead to enimity, court cases.

The expected revenue from 12 registering offices in Bangalore is about 1000 crores. This is likely to go down by 50% as number of registrations come down, because of the said prohibition on registration.

Demand for sites:
The worst impact will be on price of the land, which was settling to a reasonable level in recent times. As the availability of the land is considerably reduced the property prices will shoot up to unaffordable level, as even before this prohibition the supply was short of demand. About 20,000 sites are blocked in Arkavathy Layout and their availability for public will be after protracted legal battle depending upon court verdict. The BDA has introduced the system of 10 years Lease cum Sale method, which will make the availability of the land very scarce.

Importantly, the method of operation will change. The parties will transfer the properties by executing power of attorneys, clandestine transactions will dominate the market, and no legally valid title will pass. The middle man will exploit the common man. 

No, doubt the action of the government is correct in order to ensure proper and orderly grow of Bangalore and other cities and to avoid exploitation of innocent agriculturists from land mafia. But this should have been done much earlier. It would have been better if the government has allowed registration of dealings agreed under agreements upto a particular date. 

The government should have fore-warned before issuing such far reaching notification. The value of the properties will increase in some pockets, and it will reduce in certain pockets where the registration is prohibited. People who are unaware of the government notification will invest money on such properties and finally have to loose the money.


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Monday, 6 July 2015

GUIDES TO PROPERTY BUYING


Purchase of Property
Purchase of Flats
Market value of the land

Purchase of Property:

This book covers all important topics providing useful information and guidance to investors.  It deals with some of most important topics on purchase of properties such as selection of location, selection of builders, general precautions, revenue sites, gramathana building license, comprehensive development plan, women’s finance, mortgage of immovable property.  The appendix has been especially included giving the model drafts of sale agreement, sale deed, release deed, gift – deed, general power of attorney, public notices and deed of partition.  The topics cover, modes of acquiring immovable property, holding of property by company, partnership firm, Trust and H.U.F. are worth going through, which will enlighten the public and other professionals.  The topic on purchase and transfer by NRIs will enable the NRIs to have better knowledge of the restriction and acquisition of the immovable property.

Purchase of flats

This is a complete and exhaustive text for purchase of flats which deals with purchase of flats/apartment which is altogether different transaction from that of purchaser of an independent house, which is also governed by the multiple laws, governing immovable property transactions, these aspects have been dealt in a comprehensive and simple manner.

In addition, it deals with the Bangalore apartment scenario, section of location, general precautions, points to remember at the time of purchase of flats / apartments, scrutiny of title deed, selection of builder, agreement to sell, occupancy certificate, mortgage of immovable property, housing co-operative society, acquiring property by share allotment, income tax provisions for sale and purchase, the Karnataka ownership flats Acts 1972.


The Karnataka Apartment ownership Act, 1972 are some of the important topics, which are dealt to give an overall idea to the purchasers of the flats.

The annexure at the end of the chapters provides the readers an insight of the terms and conditions that are normally entered by the parties.


Market Value of Land:

This book contains guidance value of the property in Bangalore as published in the gazette.  The special feature of this book is an addition chapter on stamp duty, registration charges and other useful information is included.

The book deals with the latest notification of the estimated market value of the immovable properties coming under the jurisdiction of the various sub-registry offices as specified and published by the government of Karnataka.

The book serves as a ready reckoner, not only to the parties dealing with immovable property, the information with regard to purchase of stamps and registration charges but also the general public, advocates, developers, promoters, property consultants, document writers and real estate agents as well.

The copies of the gazette notification are not easily available to every one.  The book includes latest changes made by the government and a latest text of government notification.

The revised stamp duty payable on some of the instruments as on 1/4/2003 is provided in a nutshell showing the instrument and article showing side by side.


This book has tried to cover the wide range of problems concerning to property transaction questions by the citizens in the form of question and answer.  The book has 210 questions with answers on the following topics namely, Agreement to Sell, Agricultural land, Apartment and Flats, Building Bye laws, Comprehensive Development Plan(CDP), encumbrance, Mortgage, Lease etc., General questions, the book also deals with questions raised pertaining to Housing Finance, Inheritance. 

The one important thing to keep in mind is that all these four books are written in simple and straight forward style devoid of legal jargon.
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Friday, 3 July 2015

Persons exempted from appearance at registration office




Indian Registration Act 1908 has mandated that who should present the document for registration personally. The executant of a document or any person claiming under such document or representative or assignee of such executant or duly authorised power of attorney holder has to present the document for registration. These are detailed in sections 32 and 33 of the Act. Karnataka Registration Rules stipulates the document shall be presented for registration to the registering officer and not to a clerk or peon. In ordinary course, the registration or deposit of documents has to be made only at the designated office.

The Act also provides for  exemption of certain people from personal appearance and present the document for registration.

Section 31 of the Act gives power to the registering officer under special cases to attend the residence of any person desiring to present a document for registration or to deposit a will and accept for registration of  such document or deposit of will.

Section 38 of the Act lists the category of persons who are exempted from appearance at registration office to present the document for registration.  

1) Any person who is bodily infirm because of illness or age and cannot attend the office without risk or is inconvenience, 
2) any person in jail under civil or criminal process or 
3) persons who are exempt by law from personal appearance in court are exempted from personal appearance or through their agents.  

Persons who are exempted from personal appearance in court as per Civil Procedure Code are (1) Women who according to the customs and manners of the country ought not to be compelled to appear in public, persons of rank especially exempted by the government. In such cases the registering officer shall personally go the house of such person or the jail where the person is confined and examine him or may appoint a person or visit and examine such person. 

Procedure for attending at Private Residence

Karnataka Registration Rules 1965 has formulated procedure for attendance if the registering officer at Private residence.  The relevant rules are detailed in chapter 10 and under Rule Nos. 56 to 32.  Any application for attendance at private residence shall be in writing and has to be signed by the person who requests the attendance at his residence.  Such letter may be presented by any person to the registering officer.  

The request has to be complied with as early as possible.  If such attendance at private residence disturbs the regular routine of the office or requires closure of office and if the case does not fall under section 31 of the Indian Registration Act, a commission may be issued, which means another person other than the registering officer may be requested to attend the private residence and complete the registration formalities.  The attendance of sub-registrar at private residence or issuing commission has to be reported to the registrar within 24 hours.  The Sub-registrar shall not proceed out of his sub district for this purpose, but registrar may attend the private residence situated in his district though it may not be situated within the sub district under his immediate charge.

The commissioner appointed to attend the private residence will examine the witness and persons to give evidence and the registering officer will examine the commissioner personally in his office connected with discharge of his commission and voluntary nature of admission of execution.

During the course of attendance if the registering authority has to record the admission or execution of persons not exempted from personal appearance in the respect of the same document executed by a person exempted from personal appearance, the registering authority may comply with the request provided attendance fee is levied.

Government Officers

Section 88 of the Act refers to documents, which are executed by government officers or certain public functionaries who are exempted from personal appearance.

Any officer of the government, any administrator general, official trustee or official assignee, the sheriff, receiver or registrar of High Court, any holder of such other public office as notified is official Gazette of the state government are exampled from personal appearance or through their agents at registration office in connection with registration of any instrument executed by them or any document executed in their favour in their official capacity. They are also exempted from signing the document for admitting the execution as required under section 58 of the Act.

When documents are forwarded by government officer with a covering letter stating that documents executed by him and be registered, the covering letter will be sufficient to satisfy the genuineness of the signature of the executant.  If such document is presented by a private party, who is also a party to the document, the registering authority will satisfy as to the genuineness of the signature by a brief enquiry.  The fact of exemption from personal appearance and presentation of the document by covering letter will be endorsed.  

Only Copies to be sent

Certain category of documents like copies of orders, certificates and instruments need not be presented for registration but may be sent to the registering office for filing as per section 89 of the Act.  In following cases, the copies have to be forwarded to the Jurisdictional registering officer under whose jurisdiction the immovable property in question is situated.

Every officer granting a loan under Land Improvement Loans Act 1883.  Every court granting a certificate of sale of immovable property under Civil Procedure Code, 1908.

In case of loans under Land Improvement Loans Act 1883, the details of any land to be granted as collateral security.

Every officer granting a loan under Agriculturists Loan Act 1884, a copy of the document whereby the immovable property is mortgaged to secure the repayment of the loan or if such property is mortgaged for the same purpose in order granting the loan, a copy of such order.

Every Revenue officer, who grants a certificate of sale to the purchase of immovable property sold in public auction.

The registering officer will file the copies of such orders, certificates, instruments in book No.1. The concerned officers need not appear in person at registration office.

State government has made rules as to the mode of making copies and manner of filing copies.


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Thursday, 2 July 2015

BANGALORE PROPERTIES


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Most of the Bangalore’s property title documents are very complicated.  It is because some of the very old documents are not available with the parties, or fast development of the City many unauthorized layout, constructions have come without complying with the statutory requirements, getting permission from the statutory authority, get this permission from Statutory Authorities is also very complicated  process in Bangalore.  The properties available at Bangalore and surroundings may be classified as BDA, BMP, Housing Co-operative Society, City Municipal Council, Private Layouts, Gramathana Sites and Revenue Sites.

Development Authorities are : -

1. Bangalore City Corporation

2. Bangalore Development Authority (BDA)

3. Karnataka Housing Board

4. Karnataka Slum Clearance Board

5. Karnataka State Road Transport Corporation

6. Bangalore Water Suppluy and Sewerage Board for the peripheral areas and City Municipal Councils under the BDA, 

7. Bangalore Metropolitan Region Development (B M R D A)

8. Karnataka Urban Infrastructure Finance and Development Corporation


BDA Properties :   These are the properties acquired by Bangalore Development  Authority through legal process and allotted to the applicants.  Legally, these properties are best provided  all the documents are available.  In this case the tracing of the title need not go beyond  the acquisition of the property by BDA.  Tracing Title from the date of allotment will be sufficient for this.

BMP Properties : These are properties falling within the jurisdiction of Bangalore Mahanagara Palike.  These properties are generally owned by individuals acquired through inheritance, partition, gift etc.  Vacant sites are very few in this category.  The title of the property is to be traced to its origin for a period of not less than 43 years and each and every document of transfer, revenue documents such as Khata endorsement, Khata certificate, tax paid receipt, and approved building plans should be examined other than general documents.

Housing Co-operative Society Properties :  These properties may be placed at par with BDA sites. Housing Co-operative Societies acquire the land through Government or development agencies like BDA.  They form the layouts, which are approved by statutory bodies and allot to its members.  Bye-laws, Registration details of the Society have to be examined apart from any prohibition on alienation of the property and eligibility criteria for allotment.  If there is any restriction on alienation during certain period, no objection certificate from society is a must.  Most important is one has to examine whether the Society is approved or not.  As per Supreme Court presently Government or B.D.A. is not empowered to acquire the property on behalf of Housing Co-operative Societies.

City Municipal Council Properties:   There are  8 local bodie, surrounding Bangalore.  They are 7 City Municipal Councils and one Taluk Municipal Council,  Bommanahalli, Bytarayanapura, Yelahanka, Dasarahalli, Pattanagere, Raja Rajeshwari nagar.


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Wednesday, 1 July 2015

Public Sector Banks Should Disclose Details of Bad Debts: Court




New Delhi: Public sector banks should disclose details of cases pertaining to persons and establishments whose bad debts of over Rs 100 crore have been written off, the Delhi High Court has held.

This disclosure involves an element of public interest and taxpayers have a right to know the manner in which state- run banks sanctioned them, Justice Rajiv Shakdher said. "Prima facie, in my view, this information may have to be disclosed," he said.

The court's order came on a plea filed by State Bank of India (SBI) against a January 20 order of the Central Information Commission (CIC) asking the bank to supply to RTI applicant Raju Vazhakkala information regarding total non-performing assets (NPAs) written off between 2004 and 2013.

The bank contended that it has a fiduciary relationship with the account holders and the information should be exempted from disclosure under Section 8(1)(e) of the RTI Act.

It also submitted that Section 44 of the SBI Act 1955 also prohibits disclosure of customer's information to any third party.

The judge brushed aside SBI's contention and observed, "I have come to this prima facie conclusion is this: the petitioner (SBI) is undoubtedly a nationalised bank, which on its own is showing written off as NPAs, its loan accounts having outstanding of Rs 100 crore or more."

"The sheer extent of the write-off would, in my view, perhaps, inject an element of public interest in the matter, which is the exception provided for in Section 8(1)(e) of the RTI Act, 2005," the court added.

It also said this "matter needs further examination" and issued notice to Mr. Vazhakkala, a Kochi resident. The court also asked the RTI applicant to file counter affidavit within four weeks. "Rejoinder, if any, be filed before the next date of hearing. List on September 2, 2015," the court said.

Mr Vazhakkala in his plea before CIC had contended that he has sought information in public interest and the disclosure of the names of individuals and establishments would deter them from availing the loan from the other banks due to their past defaults.

The commission had directed the SBI to provide the names, address of the individuals and establishments and amounts against them which were written off.

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