Why is title search for a property conducted for 12-13 years?
The sale and repurchase of a house requires substantial investment. The transactions are mostly done with loans from banking or financial institutions. Under the Constitution, land is a state subject and hence property laws may differ from state to state. Besides the local laws, several laws enacted by the Central government also govern acquisition and ownership of property (including an interest in property) through purchase or sale, transfer, mortgage, inheritance or gift.
One important law is the Limitation Act which prescribes the time frame within which an aggrieved party can avail legal remedies and approach court for enforcement of its rights.
Every property has a title
Title means the ownership right to property. Title of property concerns every buyer purchasing property or anyone using such immovable property as a collateral for loan advanced by a bank or a financial institution.
Every property has a title. Title is the evidence of the right of ownership or the ground of right of ownership. Title can be created by act of parties or by operation of law. A clear title is conclusive proof of ownership. Whenever a real estate transaction takes place, a thorough title search is conducted to ensure clear and marketable title because a defective title may land you in legal and financial trouble.
Title verification is a process of checking and verifying property documents for ascertaining the legal ownership of property and determining any defects in the title of the property. Generally, title verification is conducted by a real-estate attorney or a professional title search company and after that a report called ‘Abstract of Title’ or ‘Title Search Report’ is produced on the basis of verification.
Verify that the person transferring the property is its real owner
It is absolutely necessary to verify that the person making the transfer is the real owner of the property and has clear and marketable right with respect to the property. This can be ensured by checking the original property-related documents and verifying if they correspond with public records held by the local authorities.
Title search conducted for 12 to 13 year period
Generally, a title search is conducted for a time period ranging from 12 to 30 years, which can be extended or reduced as per the objective of the party and nature of the transaction. In case of title search for private immovable property, the lender or the buyer, as is customary, insists for a title search for a period of 12 to 13 years unless the property in question is a new allotment.
The origin of 12 years title search lies in the Limitation Act, 1963. The Limitation Act prescribes time limit within which a party can enforce its legal rights, including rights arising out of immovable property.
A person acquires title over property through purchase by paying adequate value and completing formalities like execution of Sale Deed, Registration and Mutation. Another mode though less publicised but legally recognized is through uninterrupted continuous possession of the property and this is recognized in law as doctrine of adverse possession.
The time period of this continuous possession may vary from country to country as per their existing law. The time period is generally longer in case of a registered property or a government/ public property.
All about law of adverse possession
The concept of possession of land traces back to the Code of Hammurabi which contained 282 rules including Rule 30 which somehow closely resembles the law of adverse possession which we even follow till date.
The Rule 30 of the Code stated “if a chieftain or a man leave his house, garden, and field and hires it out, and someone else takes possession of his house, garden, and field and uses it for three years: if the first owner return and claims his house, garden, and field, it shall not be given to him, but he who has taken possession of it and used it shall continue to use it.”
Even in countries like the UK, the USA, Germany, France and Australia, the concept of adverse possession of land is recognised till date with different limitation period of every country. Under English law which still recognises the law of adverse possession, the true owner could recover the possession of his land within a period of 20 years from the date of dispossession as prescribed under the Statute of Limitation, 1639. However, with changing times the said law also saw some changes in the English law.
Currently, the law of adverse possession in UK is governed by the Land Registration Act, 2002 which lays down two scenarios through which adverse possession can be claimed by a squatter.
Where the land is unregistered or where the land is registered but the trespasser notched up 12 years adverse possession before October 13, 2003, i.e. when the Land Registration Act, 2002 came into force, the rules given in Land Registry Guide 5 will apply and if the trespasser in the case of registered land did not acquire 12 years of adverse possession before of the Act of 2002 coming into force then rules stipulated in Land Registry Guide 4 will apply
This means that in case of an adverse possession, the original owner may have the title over the property but he loses the right to claim such right through a court of law.
The Law of Limitation which provides time period within which a legal right can be enforced has to balance two contradictory aspects. A very short limitation period becomes unjustified for the Right Holder whereas a very long limitation period to enforce claims would mean courts being flooded with various stale claims.
The Limitation Act, however, only bars the remedy available and does not extinguishes the right of a party meaning thereby that it prohibits a party who has delayed from approaching the Court beyond the period prescribed.
An unjust or unsatisfactory rule of limitation that bars the institution of legal proceedings means that the remedy contemplated by the law for the enforcement of a legal right becomes futile, or if the injustice or unsatisfactory character of the rule consists in it allowing an unduly long time for the pursuit of a legal remedy then the interests of justice are defeated, because stale demands would thereby be encouraged.
The principle on which the Limitation Act is based is that ‘limitation extinguishes the remedy, but not the right’. The Act prescribes a period – 12 years for private properties and 30 years for government-owned ones – within which you have to stake claim on your property.
However, there is an exception regarding extinguishment of right under the Limitation Act, 1963 as provided under Section 27, which provides that in case the person has not taken any action for recovery of possession during the period of limitation then his rights get extinguished.
So, in a situation where a person does not take any action for recovery of possession of land within a period of 12 years as provided under Article 61, 63, 64 or 65 in Schedule I of the Limitation Act, 1963 his rights get extinguished and therefore the land is left in abeyance.
The Limitation period for various cause of action e.g. suit for possession, for redeeming mortgage, recovery of Debt etc. in India is governed by the Limitation Act, 1963. The Limitation Act, 1963 specifies certain prescribed period, within which any suit appeal or application can be made in a Court of Law.
A banker is allowed to take legal action by filing a suit, prefer an appeal and apply for recovery only when the documents are within the period of limitation. Article 62 of the Indian Limitation Act, 1963 provides limitation period of 12 years for filing suit for the recovery of mortgaged debt, in the event of non-payment of mortgaged debt. Article 63 (b) of the said Act, provides a limitation period for filing a suit for possession of mortgaged property is 12 years from the date of the mortgaged debt becomes due.
Hence, banks ask for 12-13 years of a prior title deeds from the Sub Registrar Office before sanctioning a mortgaged based loan. Article 64 of the Limitation Act provides for limitation of 12 years for filing suit for possession by a person who was in possession but does not have title for the same. Article 65 of the Limitation Act again provides limitation for 12 years for claiming possession or title of the immovable property in cases of adverse possession.
Thus, we see that as per Part V of Schedule to the Limitation Act, 1963, the limitation i.e. outer limit for filing suit for possession or challenging title is 12 years and therefore, it becomes safe for a purchaser or a lending institution to get title of previous 12-30 years searched. In case, the dispute is prior to 12 years, the said party will not get a chance to get the same adjudicated or its right enforced from Court of Law in view of Section 27 of the Limitation Act, 1963.
Section 27 of the Limitation Act is in radical departure to the general trend of limitation act and this section extinguishes the rights of the party, if the same is not enforced within 12 years.
The author is partner at the law firm MV Kini
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