Most property owners feel their job is complete once the purchase formalities are over. But, obtaining conveyance is an equally important aspect home buyers often ignore. Ramesh S. Prabhu explains its significance
There have been numerous cases of home buyers being unable to exercise a number of rights on property, resulting in issues between the property buyers and builders. The reason behind the discrepancy is often the fact that conveyance of the property has not been obtained.
What is conveyance?
In real estate transaction, flats are sold by the builder under the Maharashtra Ownership Flats Act, 1963. As per section 10 of MOFA, 1963, the builders and the flat owners register a co-operative Housing Society under Maharashtra Co-operative Societies Act, 1960 to manage the complex by the flat owners themselves. The main objective of housing society is to obtain the conveyance of land and building, maintain the same and provide common services like water, parking, security etc to the flat owners as collective legal entity.
The conveyance of land and building is done in favour of the society as the individual flat owners cannot be conveyed the undivided right, title and interest in the land, building and the common areas. As per section 11 of MOFA read with Rule 9 within 4 months of registration of legal body of the flat purchasers are legally bound to convey the land and the building to such legal entity.
Conveyance Deed is a document in writing between the vendor / seller / transferor and the purchaser / transferee evidencing the transfer of right, title and interest in the movable or immovable property in favour of the purchaser / transferee or the legal body formed by the flat purchasers. This document has to be executed by affixing proper stamp duty as per applicable stamp act, incorporating the legal provisions of the applicable Acts such as Transfer of Property Act, 1882, Registration Act 1908, Indian Contract Act, 1872, Income Tax Act, 1961, Maharashtra Ownership Flat Act, 1963 etc.
Objective of Conveyance
i) To become legal owners
Any movable/ immovable property ownership is identified on the basis of title documents for example; immovable properties are recorded and identified on the basis of Survey No., Hissa No. and such other identity marks in government records. When such identity marks are recorded in the title document (Conveyance Deed) and such documents are duly stamped and registered with appropriate authorities and such authorities notify the transfer of right, title and interest in the property in favour of purchaser / transferee, then it is conclusive evidence of ownership of such property.
ii) To make entries in government records
When the property transactions are recorded in government records, it becomes conclusive evidence of ownership of property. To make entries in government records, a Conveyance Deed has to be executed as explained above. For example - Property card, 7/12 ledger extract (mutation entry), 6/12 ledger extract (hakkache patra – letter of derivation of rights)
Advantages of Conveyance
A) Getting the proper title
When the land and building is conveyed in the name of the purchaser / society, the purchaser /society gets proper title of the property which means the property gets transferred in his/its name. All future municipal tax bills are drawn in their names.
B) Retaining additional FSI/TDR
A plot of land has a development potential in terms of Floor Space Index (FSI). The FSI in respect of a plot of land denotes the square meter area which can be constructed upon that plot of land. It varies depending upon the location and user zone of the plot. The benefit of this F.S.I. can be availed by Housing Society only when conveyance of land and building is completed and transferred in favour of the Society.
C) Property will be free and marketable:
On registration of the society, the possession of the land and building is vested with the society. The society starts maintaining the property as per the provision of the registered bye-laws. However, the land and building continues to be in the name of original owner. Thus, when a particular person/society has paid full consideration and is in possession of the property but the title documents are continued in the original owners’ name, the purchaser will not have a free and marketable title on the said property. It is only after proper conveyance that the purchaser will derive free and marketable title over the property.
D) Loan can be raised by mortgage
When the society wants to undertake major repairs and requires huge funds, the society would be looking for financial assistance from bank or other financial institution. If the property is standing in the original owners name and the Conveyance is pending, the loan will not be granted by the lender as the same cannot be mortgaged by the society.
E) Permission for reconstruction of property
Once the conveyance is completed, the society can obtain No objection Certificate for reconstruction of the building from the respective town planning sections of municipal authorities. If Conveyance is pending, the society may have to approach the original owners for their consent for reconstruction and the original owner may not agree to the proposal of the Society or the owner may not be available or may ask for additional compensation and delay the reconstruction proposal. When all the flat owners have paid the full consideration to the builder, it is advisable to obtain the Conveyance at the earliest.
F) Construct additional floors by TDR
The society can construct additional floor by availing TDR subject to having load bearing / sustaining capacity. This is possible only when Conveyance is completed.
G) Receive compensation on development
When Conveyance is completed, the society can reconstruct entire building with additional FSI and by purchasing TDR from others. If the land is located in the prime area, builders / developers would come forward with all necessary permissions and also offer additional area to the exiting flat owners. They may also receive additional compensation. When the society is having additional FSI, the same may be transferred in the form of TDR and compensation for the same received. These are all possible only when Conveyance is completed; otherwise the entire benefit will go to the owner / builder.
H) Complying with legal provision
As per section 11 of Maharashtra Ownership Flat Act, 1963, a promoter shall take all the necessary steps to complete his title and convey the land and building in favour of the registered organisation of flat purchasers. By completing the Conveyance, a legal obligation on the part of builder will be complete.
I) Attaining main objects of society registration
As per model Bye Law No.5 – the main object of the Registration of the Society is to obtain Conveyance from the owner/promoter (builder), in accordance with the provisions of the Ownership Flats Act and the rules made there under, of the right, title and interest in the land with building/buildings thereon. The details of the land and building of which the Conveyance has to be obtained is also given in the said bye-law.
(Ramesh S. Prabhu is Chairman, Maharashtra Societies Welfare Association)