Legal Terms That Landlords And Homebuyers Should Know

We now have a legislation in place that promises to protect property buyers in case anything goes wrong — yes, we are referring to the Real Estate (Regulation & Development) Act, 2016. However, it would still be the best policy to be careful in matters related to the property. Prevention is any day better than cure, do you not agree? One way to ensure you do not have to knock at the doors of the law is to familiarise yourself with some legal terms.

Here is a look at certain legal maxims, the knowledge of which is a must for all of us in general, and landlords and homebuyers in particular.

Stay alert: Abundans cautela non nacet

First things first ─ at a certain juncture, if you started to think that doing things with a suspicious mind was not really fair, nip that thought in the bud. The law is of the view that there is no harm in being cautious, the literal meaning of the Latin phrase, abundans cautela non nacet. Even rules made by Parliament are not to be taken as sacrosanct, and states in India have the right to interpret them and point out faults, in case there are any. Excess of anything may be bad, but in matters of property, an excess of caution is preferable.

Act of God: Actus dei nemini facit injuriam

The knowledge of the Latin phrase, actus dei nemini facit injuriam ─ which can be translated as the act of God prejudices no one in English ─ is important for each one of us, especially if you are a homebuyer.

Almost all builder-buyer contracts have a force majeure clause which is based on the act-of-God-prejudices-no-one doctrine. Using this clause, a developer may delay delivery of his project, citing unexpected circumstances that prevented him from doing something that is written in a contract. Basically, the law does not hold a man to a legal duty where he is prevented from performing it by an act of God.

Also read: ‘Act of God’ Causing Construction Delays? How To Avoid It

An act of God is an event that takes place independently of human intervention. These may include storms, earthquakes, tsunamis, etc. However, this rule is not applicable to a mere “inevitable accident”. In case human intervention may have stopped something wrong from happening, the erring party will be responsible for paying damages, as has been reiterated by the Supreme Court on several occasions.

Worth it: ad valorem

Rates of taxes on goods and services are based on either the quantity or the quality. The tax you pay on your petrol purchase is of the first kind; the taxes you pay on property purchases are of the latter sort, also known as ad velorem. The terms could be translated into English as according to value. Stamp duty you pay on your house purchase, for instance, is ad valorem.

Ground reality: aedificatum solo, solo cedit

The meaning of the phrase is, what is built on the land is to be regarded as having become part of the land. However, the Indian law does not agree with that entire import. According to the local law, land can belong to one party and the structure built on it to another. 

At will: ambulatoria est voluntas defuncti usque ad vitae supremum exitum

The law says that a person can change his will as many times as he wants to in his lifetime. The literal meaning of the Latin phrase is that the will of a deceased person is ambulatory until the latest moment of life.

Taking charge: ab intestato

When a person dies without leaving behind a will (such a person is known as intestate), his property is divided among his legal heirs according to the prevalent laws of the land. The meaning of the term ab intestato is “from an intestate”.

Let it go: alienatio rei prefertur juri accrescendi

Do be mindful of the fact that the law favours alienation rather than the accumulation of property. That would be the guiding principle when courts pass judgements in matters related to property hoarding.

Prove it: affirmanti non neganti incumbit probatio

According to the law, the burden of proving the fact lies upon him who affirms, not upon him who denies, the meaning of the maxim, affirmanti non neganti incumbit probation. So, in case you take a developer to the court and he denies the charges as mere allegations, the responsibility to prove them as facts lies with you.

The sense of belonging: adversus extraneous vitiosa possessio prodesse solet

According to the Indian law, an imperfect possession is accustomed to prevailing as against outsiders claiming adversely ─ adversus extraneous vitiosa possessio prodesse solet. In case someone is occupying someone else’s property for a long time without the right over raising the issue, the squatter’s “imperfect” right over the property will likely prevail.

Also read: SC Ruling To Make Adverse Possession Tougher

On the same page: ad idem

It is only after two parties in a transaction are of the same mind, ad idem, that a contract is made. However, to make a contract, both the parties should have equal bargaining power. There cannot be a contract between a powerful and a weak party as it may amount to one pressuring the other.

Stating the obvious: affidavit

An affidavit is a sworn statement in writing, made by an authority. A homebuyer has to sign so many of them to complete the process. However, before you jump to sign the papers and finish things off, do note that you will be held to the declarations you make in an affidavit. So, never be in a hurry to sign, read the documents utmost case. Also, the person administering the oath is equally responsible for fact-checking.

Property Sale Through GPA Is Illegal

In case an owner is open to cut you an unbelievable deal by selling his property through a general power of attorney (GPA), an aware homebuyer would outright reject the offer. Through an order in 2011, the Supreme Court (SC) held that transferring property title through GPA is not valid. Before we delve into the SC order and explain the illegality involving property through GPA, let us first understand what GPA is.

Understanding power of attorney and its types

By giving someone power of attorney (PoA), one gives them the right to carry out certain specific legal and financial businesses on their behalf. It is common practice among NRIs, for example, to give PoA to someone they trust to represent them to carry out their businesses in the country of their origin since it is inconvenient for them to travel frequently. Within the country also, people appoint a PoA to act as their representatives in case they are not able to take the physical exertion because of old age or disability. For someone busy who has numerous assets —businessmen or politicians, for example, who have too much on their plate all the time and can hardly be expected to pay, say, their utility bills — granting a PoA to act on their behalf is nothing less than a necessity.

“Power of attorney is a legal instrument that provides ease of doing business to people who may otherwise not able to do so,” says Himanshu Yadav, a lawyer at the Supreme Court. A PoA is of two types, a general power of attorney and a special power of attorney. What differs one from another?

“While a GPA grants broad powers to a representative, an SPA talks about a specific act the representative can carry out on the behalf of the principal. If you grant someone a GPA, they can pay your utility bills, collect rent on your behalf, manage and settle disputes, carry out all bank-related work acting as your representative,” says Yadav.

“Through an SPA, the principal grants specific powers on the attorney. If you, say, direct the SPA to act as his legal representative in a particular case, it is only in that particular case that the person will be able to represent you,” says Brajesh Mishra, a senior lawyer at the Punjab & Haryana High Court.

Also note here that a PoA has to be registered at the Sub-Registrar’s Office to get a legal validity. Another important thing to note here is that a PoA remains valid only till the life of the principal. Within their lifetime also, one can revoke the PoA. An SPA gets revokes on its own as soon as the specific transaction for which it was executed is completed.

PoA and real estate

Having understood the legality involved in PoAs, it is now clear to us that is not a valid instrument to transfer property titles. However, selling property through GPA had become common practice across Indian cities, owing to the monetary benefits it offered, both the buyer and the seller.

Typically, a sale deed must be carried out for transferring property titles, following which the buyer has to pay stamp duty and registration charges. The seller will also have to bear the burden of capital gains tax on the transaction. By transferring property title through a GPA, these charges are avoided.

“From sellers’ perspective, a GPA makes it possible to carry the transaction even if they do not hold clear property titles. GPA in fact is their only option. From buyers’ perspective, they can afford a property at much cheaper rates than the market price. They can also possess a property which they otherwise might not using this method,” says Mishra.

“Legally, an agricultural land could not be sold for residential purposes without converting the land use. Most land owners sell their land parcels without getting into what they call the legal hassle of conversion and sell their land parcels through GPA,” adds Mishra.

There are other legal restrictions that prompt property owners to engage in sale through GPA. In most government housing schemes (DDA, Mhada, etc.) where units are allotted on a lease-hold basis, there is a specified gestation period before the allottees cannot sell the property to another party. To sidestep this process, such units are often transferred through a GPA. GPA was also seen as a medium to invest accounted money in real estate. In some cases, members of a family confer property rights through GPA.

In many cases, naïve homebuyers fall prey to frauds and invest in properties without understanding the illegality involved in the traction.

The SC order of 2011

Stating that “a power of attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property”, the top court directed municipal bodies not to register/mutate properties based on these documents. The SC, however, said that genuine transactions carried out through GPA would be valid. “Nothing prevents affected parties from getting registered deeds of conveyance to complete their title. The said transactions may also be used to obtain specific performance or to defend possession under Section 53A of the Transfer of Property Act,” the SC said.

Following the order, states banned the registration of properties sold through GPA. “The court’s decision will help to curb the circulation of black money to some extent in the real estate sector, where titles are manipulated. Besides, many property transactions where prices are rounded off will be affected,” Navin Raheja of Raheja Developers told Indian Today after the SC verdict. After imposing a blanket ban on registration of such properties in 2012, the Delhi government allowed registration in favour of spouses, sons, daughters, brothers, sisters and any other relative or person of trust by registered owners.

What if you bought a property through GPA?

You may be in “possession” of the property of the property but it in the absence of a registered sale deed, you will not be its legal owner. In the absence of clear property tiles, it would also become almost impossible to sell the property in future, unless of course, you do it through a GPA, prolonging the illegal course of action.

What if you plan to buy a property through GPA?

Apart from the above-mentioned issues, you would also find it impossible to get bank finance. “As a standard practice, banks do not lend money to property transaction done through GPA. For banks to lend money, clear property tiles are the first and foremost requirement,” says a banking executive working with the State Bank of India.

So what powers can you grant through GPA as for as property matters are concerned?

By giving a GPA, one can make them responsible to manage their estate, to manage rented properties, pay utility bills and act as their representative in home loan-related transactions. You can also authorise an attorney to register your property through a GPA.

Also read: Managing From Abroad: How Power Of Attorney Helps NRIs Manage Their Assets

What Does Due Diligence Mean When You Buy A Property?

In real estate transactions, due diligence is a vital step in the home-buying experience. Due diligence in real estate transactions refers to reasonable measures which every individual should adapt before executing an agreement in relation to the real estate and immovable property.

By conducting due-diligence, you assess the risks associated with the property you are planning to purchase. You review the documents and ensure that there are no legal encumbrances on the property. It basically means to do your homework before actually making the purchase.

Due-diligence is performed by a property lawyer, but it is crucial for you to understand the basic terms used in the report and what do they imply in order to make a wise decision.  

The types

First and foremost you must know that they are two types of due-diligence reports.  

Full search report: When a full search due-diligence report is prepared, it is generally conducted for a title period preceding 30 years from the date on which the seller in question came into existence. This report includes a detailed search of all aspects relating to the history of a property.

Limited search report: Limited search report is prepared generally conducted for the transactions where the property is taken on a lease. It is generally restricted to 15 years.

The significance

Through due diligence, one confirms all facts relating to a property’s history, title, etc.

A title means right in the property. The word title does not always imply ownership in the property. It can also mean the right over the property as owner or possessor permanent lessee and a marketable title mean a title free from all reasonable doubts. The title documents should also have papers showing sanctioned plan layout. This plan should be certified by the officer of the land records.

Things to check in a due-diligence report

Check legal capacity of the seller: A due-diligence report should categorically state the legal capacity of the seller.

*The present owner or any other predecessor title holders should not a minor or a person of unsound mind.

*If the owner of the property is of unsound mind, only a person appointed as a guardian by a competent court under the Mental Health Act, 1987, can sell on behalf of the owner.

*If the current owner is a minor, the property can neither be purchased nor taken on the lease without the permission of the competent authorities.

*The report should also mention the nature of current owner’s right over the property.

*If the property is in joint names, an NOC should be obtained from the co-owners.

*When a property is held by a Hindu Undivided Family, check the family tree and verify facts accordingly.

*When the property belongs to a partnership firm, society or trust, check the copy of the partnership deed.

Ensure all your taxes are paid

You must also check whether all the taxes have been paid or not by the seller. Taxes such as property tax must be paid by the seller till the time he held the property.

Make sure documents are in place

Occupation and completion certificates: Occupation certificate is given to a building by the municipal authority after verification of all supporting documents. The possession of flat is valid only after it receives a completion certificate and an occupation certificate.

Sale deed: You must check the original sale deed which should be in the name of the seller and ensure that property is not mortgaged.

Power of attorney: When the seller is not physically present to sell the property, he might appoint an agent with the power to sell by giving him a power of attorney (PoA).  In case of the owner is an NRI and the PoA is executed in a foreign country, it should be notarised before the Indian Consulate for the purpose of authentication. It needs to be attested by the sub-registrar, too.

Allotment letter and possession letter: When a property is acquired from the State Industrial Area Development Board like the Delhi Development Authority, documents relating to allotment, lease-cum- sale agreement, possession certificate or builder-buyer agreement needs to be checked.

Land records and mutation entries: These are the record of rights, tenancy and cultivation, issued by the registrar of land holdings. They could be obtained from the Tehsildar’s office.

Khata extract and certificate: For any registration obtained after paying the tax, a khata certificate is issued to the owner of the property or to his family members. This certificate is required to apply for water and electricity connection.

Additionally, you should also check whether a green clerance has been given to the project.

What Are Franking Charges?

A property purchase involves several big and small payments that have the potential to substantially jack up rates. For instance, if you are taking a home loan, you have to pay a processing fee to the bank. You may also have to bear the cost of a technical appraisal of the property that the bank would carry out.  Now, to make the purchase legal, a buyer has to pay stamp duty (depending on the state where the transaction takes places, charges may vary from four to 10 per cent of the value) and registration charges (typically, one per cent of the total value). What might not have caught your attention so far is the fact that you may also have to pay a franking charge while stamping the property papers. More importantly, if you thought stamping and franking are the same things, you thought wrong.

Difference between stamping and franking

Stamp duty is a tax you pay to your state to buy a property. Franking, on the other hand, is the process to stamp property documents. Using franking, authorised banks stamp your document or affix a denomination on it, which acts as a proof that the stamp duty for the transaction has been paid. Banks and other authorised agents use a franking machine to affix the documents.

Franking charges

The authority franking your documents would ask you to pay a price for providing its services. While some may do it for free, others may charge as much as 0.1 per cent of the total purchase value as franking charges. So, if you are buying a property worth Rs 50 lakh, you may have to pay franking charges of Rs 5,000. However, you may offset this amount against the stamp duty you pay. For instance, if the stamp duty in your state is 5.2 per cent, you will have to pay only 5.1 per cent as stamp duty if franking charges of 0.1 per cent have been paid.

Source of franking 

Not all banks or agents are authorised to offer franking services. In case they have the official permission, banks often have a limited franking quote and offer the services only for certain hours of a working day. This means prior preparation is needed in case you want to get your property documents franked from a bank or an agent. It is advisable not to entertain them without being certain that an agent is authorised to do the franking.

Franking rules

Not all banks follow the same rules when it comes to franking and the charges involved in the process. Rules and charges could differ from one state to another, from one bank to another and from one agent to another.

Franking is optional

More importantly, it is not a must to go for franking. You could choose to go for e-stamping or could alternatively buy stamp papers to do so. There is also an option to buy papers that are already stamped.

Also read: Going To Buy A Home? Know The Stamp Duty Rate In Your City

Tricks To Save More On Your Home Purchase

Owning a property is a ‘dream’ that most of us nurture. And, as soon as we can, we would want to enter what is perceived as our own personal heaven on earth. The sentimental value attached to owning a home often overshadows the materialistic point of view — that is, the money involved in making this dream come true. When the dream becomes a reality, the rising expenditure starts pinching, often forcing you to think whether the 2-BHK apartment you bought after taking the hefty loan that you will spend your lifetime repaying is worth it. This is why rather than being completely emotionally driven, you should also focus on the money part in the matters of property purchase.

Now, how can you keep the burden as low as possible?

  • Keeping the loan amount low: In the good old days, they used all their retirement money to buy a house. While that phase might be passé, there is a lot you can learn from the old ways. Back then, people did not have to take loans to fund their houses. They certainly did not enjoy the many tax benefits and the luxury of living in their own homes early in their lives, but they also did not struggle with a lifetime of loan burden. They also did not pay huge money as interest on their home loan amount. The logic that you become a house owner while you are still young may also be overrated in a way. Technically speaking, you do not become a house owner till you repay the bank every penny that you have taken as loan. Now, though there is no need to wait till you retire before you buy a house, there can be a middle path. You should try to keep the loan amount as low as possible. For this, you should try to arrange a large part of the property cost from your own savings and take a home loan to only bridge the deficit, if necessary.
  • Family before bank: They tell you the benefits of availing of a home loan are many. The interest rates are low at present, the tax benefits are too attractive to ignore, etc. But even a naïve buyer knows that he has to pay off everything with a huge interest, and what is termed a ‘benefit’ may not actually be that beneficial. So, before you decide to approach a bank with your home loan application, do weight the other possible options that you have. Consider taking a good look at family resources and savings and asking family members if they can help you with a loan. Remember that a borrower is busy paying off only the interest for a large part of the bank loan tenure. If you take the loan from family, it would be much easier to pay the debt.
  • Space or convenience? The benefits of living in bigger cities are many and we all want to have a piece of them. This is why we are willing to pay any price for them. However, often ignored is the fact that in big cities you pay a huge price for a tiny space, which might not serve the purpose as your family expands and your needs change with time. The bad traffic conditions in your large city will bother you more as you grow old. Do think whether the quality of air that you will have to breathe now and, more importantly as an older person, is worth the price you are going to pay. Smaller cities, by comparison, have bigger spaces to offer for the same amount, or even less, their traffic conditions are better and the air is less polluted. 

Renting Your Apartment By Room? Consider These

Renting by room is a strategy that many landlords apply to earn higher rentals every month. Here the landlord has multiple tenants who do not rent the whole property but just one room. A win-win situation for both the landlord and the tenant, this strategy is mostly followed in areas where a large population of students lives.

In such a scenario the rooms are rented out to individuals and all of them together have collective access to the common living area, the kitchen and terrace if any.

While it sounds like a financially enticing strategy, it comes with its share of challenges for the landlords, too. Think about managing not one but three or four tenants together.

MakaaniQ shares certain challenges that you might face and gives you tips that would help you make the most of renting by room:

Too many tenants

The first and the foremost challenge you will face is multiple queries coming to you the moment you put each room on rent. Popular among student or single working tenants, renting by room can call for a wide variety of tenants who would want to rent the room in your property. Get ready to screen each and every tenant with great detail. Understanding that the property will be shared by different individuals, it is important to ensure everyone’s safety and also, temperament. You don’t want to get calls in the middle of the night about the fight two of the tenants had.

Stability

Living in a property where the tenant only has to pay for a room is enticing for many. While the whole process begins with zeal and a positive of saving on rent, it fades away as quickly with many. Some find sharing the space uncomfortable, the other doesn’t like someone else using their grocery kept in the kitchen, or some that want to have friends over for a party but can’t due to other flatmates. In such a scenario, as a landlord, be ready to see frequent coming and going of tenants. And, keep a list of potential tenants ready for replacement. Also, keep hiring an agent who could help you replace a tenant quickly.

Resolving issues

Getting phone calls from tenants will become common. Imagine four individuals who are not related to sharing a common home. Disconnect, discomfort and day-to-day arguments are bound to happen. Be prepared to resolve issues small or big. The complaints can go to extreme levels, too, like stealing, beating or others. Be ready to resolve conflicts. In conflict, situation takes your agent along.

Hidden expenses

In a property meant for two or three individuals, four are living, the property will call for maintenance. Also, the way a student would deal will the property is different from how the property will look when occupied by a family. Imagine a home occupied by a family would only use one or two air conditioners in one go, in a scenario where a property is rented by room, each room will have to have an air-conditioner and also, all of them will be working at a given time. Each amenity in the property will be used more and hence, would call for frequent maintenance. Moreover, here the landlord will have to charge a certain amount in rent for paying bills because you cannot track each of the individual’s usage from a commonly generated bill. What if you are paying a higher bill than what you are taking from the tenants?

DIY Eco-friendly Measures For Homes

The 21st century has us all worried about various environmental issues like climate change and the fear of the melting ice caps. In such a time of mass disarray, we are ready to take drastic measures to ensure that the later generations aren’t born into an Earth as portrayed by most dystopian-era movies or novels. One of these methods is to make the homes eco-friendly. Contrary to popular opinion, making your homes eco-friendly isn’t challenging as there are a plethora of home-made methods to reduce wastage. The government has also come up with various schemes and incentive programs to encourage people to shift tracks and adapt a more eco-friendly way of life. Following are some of the effective ways to make your house more eco-friendly and less hostile to the planet.

 

Rainwater harvesting

Considered to be one of the most effective methods, rainwater harvesting doesn’t require much preparation and yet help when facing an acute water shortage. With serious water shortage problems envisaged, simple hacks like a rainwater harvesting tank in your home will help a lot.

 

Avoid felling of trees

What will you do if there is a fully grown tree in the middle of your property? Do you mow it down to make way for your home? Avoid that. There are various options that don’t involve that inhuman action, like accommodating the branches or other parts of the tree as an integral part of the home decor, or even transplanting the tree. This way, you have the beauty of your home intact and you’ve actively avoided the ruination of the environment.

 

Better quality wiring and appliances

Buying good quality materials for your electrical appliances help reduce wastage and emissions. Worn-out wirings and imperfect insulation increases the chances of fire hazards. Moreover, modern electronics and wires adhere to the environmental norms and thereby, work towards minimising wastage, while improving efficiency and quality provided to the consumer.

 

Installation of solar panels

Although a fairly expensive remedy to the environmental problems, it’s considered to make a big change. Solar panels convert solar energy to electricity. The panels are installed in an open area with direct sunlight, which they absorb all day, charging the cells which re-route the converted electricity to the entire house. In a bid to encourage people to use this method, the government provides a considerable amount of financial support to home-owners.

 

5 Ways To Use Bamboo In Your Décor

Those who love nature, add plants to their home decor. But, there is another element from the nature that can add to the beauty of your abode. It is bamboo. Raw in look, these long and hollow sticks can be easily installed and are known to merge with various elements, including modern and vintage, of your home only to enhance the décor.

MakaaniQ lists five ways in which you could add nature to your home by using bamboo:

Divide and rule

Bamboo separator(Dreamstime)

A perfect fit for those who live in a studio apartment or for those looking to divide their living room into two section, one of lounging and one for dining, bamboo can be a great room divider. Opaque in nature, when placed next to each other, they provide complete privacy, almost like a wall. To further enhance the look, frame these bamboo sticks between two glass walls and lay some stones on the floor between the two glass frames. This would instantly give a walk-in-the-woods look.

A forest in the frontyard

 

Bamboo Garden 1(Dreamstime)

For those planning to create a seating area on their porch or in a spacious frontyard, bring nature amid nature. Create a pergola using bamboo i.e. bamboo flooring, bamboo fence, bamboo roof. To complete the look, add some white chiffon curtains, a seating area with bright-coloured cushions. Want to do something elaborate? Create a small pond around this pergola and you will have your own small forest like garden in your home. A perfect place to lounge and soak up the sun.

On the top

Bamboo Porch(Dreamstime)

Bamboo roofing will not just add to your home’s close-to-the-nature look but also add to your environment-friendly quotient. Use bamboo to roof your porch area and hang some beautiful basket plants. You could also add some cane furniture to the porch to complete the look. This roofing would allow the natural light to seep in along with keeping away the rain water from your porch.

Walk on the bamboo

Bamboo Flooring(Dreamstime)

Along with being an eco-friendly option, bamboo flooring is easy to maintain. A natural material it also doesn’t expand or contract with the rise and fall in temperature or with water spillage. Moreover, this flooring is in vogue and is durable. So, go ahead place this flooring all across your home without thinking twice.

Brighten up by nature

Bamboo Lighting(Dreamstime)

While we all talk about conserving energy with the use of LED, why not couple this with nature’s conservation by using lighting fixtures made of bamboo rather than using plastic ones? And not just conservation, these fixtures add a new level of aesthetic appeal to your décor. Imagine LEDs placed in bamboo sticks and hung on your dining area. While it emits faint light in the room, it ensures focused lighting on the dining table which is an important aspect when designing a dining area. Go ahead, the market is full of some interesting pieces.

What Is A Title Deed?

Those entering the world of property purchase have to enrich their vocabulary before they approach this uncharted territory in order to keep the process commotion-free. While you are at it, it is important to understand the difference between sale deed and title deed, the things that prove your ownership over a property. While you may have assumed the two things to be one and the same, that is not the case. Let us understand what the two terms are and they differ from each other.

Sale deed is a document but title deed is a concept

After a buyer and a seller reach an agreement to carry out a property transaction based on certain terms and conditions, they have to formalise the process in order to prove that the said property has seen change of ownership. They then have to prepare a document, known as sale deed, where every single detail related to the transaction is mentioned. According to the Registration Act, 1908, this document must be registered to become legally valid.  As soon as a sale deed is registered, it becomes a legal proof that the title of the property has been transferred in the name of the buyer. It is in this capacity that sale deed becomes a title deed. That way, a sale deed is also a title deed.

Also Read: How sale deed is executed

Sale deed is an agreement but title deed is statement

Sale deed is an agreement. And, two parties must be involved to make an agreement. This is precisely why all details related to the buyer/ buyers and the seller/sellers are mentioned in a sale deed even though the ultimate purpose of this document is to state that so and so property has been transferred in the name of such and such person. Because this document proves the ownership of the buyer it by default becomes a statement about the title of the property, hence the name title deed. Also, at the time of property registration, the transacting parties have to establish past ownership and title transfer of the asset. A sale deed is a documentary proof of that too. 

How Property Rights Of HUF Members Are Limited

It is painful to see a large chunk of your income go as taxes. You try every trick in the book to save much as possible. Among the many popular tax-saving exercises is the formation of a Hindu Undivided Family (HUF) by people belonging to the faiths of Hinduism, Sikhism, Jainism and Buddhism.

Before we move forward let us quickly understand what an HUF is. An HUF consists of a common ancestor and all of his lineal male children together with their spouses and spinster daughters. This means Ram, his wife Sita, their unmarried daughter Rama, their married son Rahul and his wife Rajni can together form an HUF. Rama would become a part of the HUF of her husband’s family once she gets married. At the same time, she would remain part of her father’s HUF.

Because an HUF is taxed separately from its members, it can claim deductions and exemptions under various sections of the Income Tax Act. As a combined entity, member benefits greatly if the HUF is registered and reports its income as a separate taxpayer. In fact, members will find banks more welcoming in case they are approached for a home loan, etc.

However, members an HUF also have to face certain restrictions.

Your share is constantly diluting

Each member has an equal right to the property owned by an HUF. This means the said property cannot be sold without having each member of the family on board.  New members that get added to the family by way of birth or marriage also have an equal share in the property. In fact, even an unborn child, who is still in the womb of its mother, has a right to the property.

This means the share of the existing members keeps diluting with new additions. While all goes well till there are no disagreements among members, matters might go out of hand in case of any discontent arises. By its very nature, an HUF is an ever-increasing entity as new members keep getting added. In such a scenario, managing the family and its finances might get quite complex.

Separation may turn ugly

In case there is disagreement among the members of an HUF and they decide to part way, they will have to dissolve the entity through a legal process known as a partition. Cases lying with courts across India testify partition process often goes ugly.

It must be noted here that once an HUF is formed it has to keep filing income tax returns until the time it is partitioned. When an HUF is dissolved, assets held by it are sold to be equally divided among all members. Now, each member will have to pay taxes on the profit thus made; the law perceives this gain as their individual income. Even if a new HUF is formed by married people who have exited the previous HUF, the income of the property would be taxed in the hands of new HUF.

Her dilemma

Property owned by women members is known as stridhan (the property of a woman), and income from it is not taxable as income of an HUF. This also means women members of an HUF cannot combine their separate assets with the property of the joint family. However, they can gift their property to the HUF.