The issue ofvalid title is one of majorproblem in the real estate sector.Buyers solely depend upon the assurances of the developers with regards to the title. There are many instances where objection on the tile are raised even after the registration and mutation of the property putting buyer / promoter on the dock. Therefore, a question arises how to protect the interest of buyers and promoter? The answer is “Title Insurance “which is prevalent in many developed countries.
Title insurance is different from other forms of insurance which provide protection against future loss whereas the title insurance provides cover for an event in the past which has resulted in unclear title or led to a dispute and thus having a retrospective effect where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy.
In this regard Section 16 ofthe Real Estate (Regulation and Development) Act 2016 (RERA) imposes an obligation on the builder / promoter to obtain the requisite insurance policies to secure the development of a real estate project and all such insurances as may be notified by the government, including but not limited to insurance in respect of the title of the land, building and construction of the real estate project. The builder / promoter is also liable to pay the premium and charges in respect of these insurances and shall pay the same before transferring the insurance to the association of the allottees once the project has been completed. The relevant portion of Section 16 of RERA reads as under:-
Obligation to take title insurance is on the respective builder/ promoter and it also require the developer has to provide an affidavit to the buyer confirming that the legal title to the land on which the construction is planned contains legitimate documents of ownership.
The aforesaid Section 16 of RERA is a golden step to safeguard the interest of both buyers and promoters as title insurance indemnifies the insured against all the loses and claims that are suffered by the insured as a result of defect in the title of a property which is discovered even after the purchase.Title insurance further safeguards the consumer with legal protection and ensure that the developer honors his commitments.It also covers title problems caused by forgery/ fraud/ impersonation , failure to transfer conveyance,lein or charges of the Govt. authorities due to unpaid taxes on date of cover, documents improperly created or executed , legal defence costs, out-of-court settlements and also act as a due diligence mechanism for home finance institutions.Since Title Insurance is generally for property for which a loan has been taken, it can cover the risk of a buyer and the mortgage lender. Title insurance also act as a safeguard tool towards the financial interest of real estate owners, investors, lenders against property issues, increase private equity investment etc..It also protects investment in real estate and provides coverage against financial loss arising from title defects and other irregularities relating to property acquisition.
Title insurance ensures that the land on which the project is proposed will not be faced with delays in construction and delivery due to title disputes. If property value appreciates, the policy is endorsed to increase the limit of indemnity.
Nemo dat quod non habet – “no one can give better title than what he has” a defective title holder cannot pass on a valid title to his/ her buyer.Therefore , in order to avoid any complication qua title , the individuals can also by title insurance at the time of buying the property from builder/ property owner in order to safeguard his property from any future dispute.
However, before issuing the title insurance the insurer will have to carry out the following:-
That despite of the fact RERA makes it mandatory for the builder / promoter to have it but still insurance Co. showing their reluctance on account of volume of title related swindles , title disputes , costs and time involved in conducting due diligence , lack of centralized record about land , multiple transaction , lack of transparency and courts liberal approach while of condoning the delay with respect to the proceeding challenging the title .
RERA is definitely going to boast the scope of title insurance in India. However, the Government is still required to do some more exercise such as digitization of land record and common procedure of registration and keeping of record across the country and also time frame to decide the title dispute.
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