Real estate transactions involve typical document verification. Buying a home or property is a significant investment, which can be a dream of many. When you are taking a big risk, ensure that the property is free from any legal and financial complications. Before getting into the registration formalities, a thorough title search should be conducted.
According to the Limitation Act, 1963, the time frame of this title search can be valid for 12 to 13 years. While delving into the property transaction, it’s quite necessary to have a complete understanding of the legal landscape.
If you are curious to know more about title search reports, read this comprehensive guide.
What is a Title Search?
A title search report basically refers to the ownership rights over a land or property. It can be determined through many sources, such as court judgements, tax liens, land records and deeds. Normally, this title search report is ordered by businesses or individuals who want to confirm the property’s legal ownership. A clean title indicates that a property is ideal to own. Registration or transaction can be restricted when there is any lien on the property.
Key Components of a Title Search Report
A title search report includes crucial information about the property, such as legal boundaries, ownership, or any other restrictions associated with it.
Chain of Ownership: Verifying the history of ownership clarifies the gaps or inconsistencies possessed with property ownership. If this conclusive proof is not clear, avoid further transactions.
Liens and Encumbrances: Identify any encumbrances or liens that could potentially impact your ability to secure financing (loans from banks or lenders) or your property’s marketability in the future. An outstanding lien clearly means that the property requires loan repayment.
Property Description: An inaccurate property description can be an integral part of title failure. So, it is important to describe the parcel of land accurately to identify exactly where the property is located.
Easements: Easement should be clear for a property or home that you are buying. If easements exist, they grant rights to others to use this property.
Types of Title Search Report
Title search reports can be classified into two types: full search and limited search. Before financing a property purchase, understand that these differences protect you from several fraudulent transactions.
Full Coverage Search
In order to conduct a detailed investigation, a full coverage search can be helpful. It provides a comprehensive review of the property’s history and title for a period of at least 30 years. This examination can be performed when a property is about to be sold, resold, or when construction loans are involved.
It transparently provides details of every aspect of the property, such as easements, legal issues, liens, ownership rights, covenants and restrictions, litigation status, and ownership rights.
Limited Coverage Search
Limited coverage search, on the other hand, is usually performed for simple title guarantee reports, refinance transactions, and short-term leases. Its license is restricted to fifteen years. However, the scope is also limited to encumbrances, disputes, and recent transactional history.
How Title Searches Work
As noted above, a title search report verifies that the property or home has a clean title and checks whether it has any defects like liens. The public record errors associated with the property prevent the transaction between parties.
This title search is conducted by a prospective buyer or a title company who is interested in making an offer on the property. The process is generally initiated by a lender to check whether the property claims any legal issues or judgements. If you have a plan to apply for a loan or other credits, it is essential to verify this title search before approving.
The requesting entity or buyer can conduct research using legal documents or other public records to identify that property is possessed with any liens or judgements.
How Long Does a Title Search Take to Complete?
The process of a title search report can approximately take between 10 and 14 days to complete. The time may extend due to various significant factors such as type of property, property’s age, liens and title issues, transaction history, and availability of documents.
What Needs to be Checked and Verified?
Title History
It is usual that a property has been transacted through multiple hands before. By doing title verification, you not only get to know about the current owner but also the chain of past owners. You can verify all the linked documents, starting from the mother deed to the latest deed. But if you find the continuity link is broken, it indicates that there is a major red flag hidden behind the transaction.
Land Use and Nature of Property
During verification, it is essential to verify the nature of property, like whether it is private-owned or government-owned. When it belongs to the government, it cannot be used or transferred without any legal permission. Further, the land usage is classified into two different categories: agricultural and non-agricultural land. When conducting a search, determine the land use status of a particular property. If it is non-agricultural land, again it is classified into commercial, residential, industrial, institutional, etc.
Development and Construction
It is important to identify that the construction plan adheres to the prescribed regulations of municipal authorities. Additionally, the builder has to seek various approvals and permissions with respect to infrastructure like environmental compliance, water, electricity, sewage, etc. Ensure all this information related to the construction is clear and transparent before the transaction.
Encumbrances
Any previous owners may use this property as collateral to take loans. It results in an encumbrance charge over the property and may be subject to a mortgage or lien. Such properties cannot be transferred to anyone without the legal permission of the lender (bank or financial institution). Identifying encumbrances, mortgages, charges, or liens is important and can impact the title of the property.
Ownership Details
It is absolutely essential to verify that the transferor is the real property owner possessed with clear and marketable rights. These details can be identified using property-related documents authorised by local authorities. You can consider legal documents as evidence of property ownership, such as a gift deed, deed of partition, sale deed, will documents, conveyance deed, etc.
Final Wordings
A property value can be easily examined through the title itself. A property with a clear and transparent title has huge value in the market and acts as a proof that you have rights to own or sell the property. So, if you are planning to invest money in real estate, be aware of the marketable title, which determines that it is free from any risks or doubts