VALUATION OF PROPERTIES – A BANKER’S VIEWPOINT

Advocate S Selvakumar|Property advocates in Bangalore|Property lawyers in Bangalore

Whenever a customer approaches Bank seeking credit facilities from the Bank, invariably securities are insisted upon.Sometimes, loans are sanctioned on the worth of movable assets and advances are collaterally secured by evenhanded or straightforward mortgage of lands/buildings. Typically facilities extended by one Bank are taken by another Banker, not solely with regard to the previous securities given by the purchasers however with respect of the assets generated out of Bank’s finance.

In essence, valuation of the properties is an important operates within the day-after-day disposal business of the Banks.  Even to shield the assets charged to the Bank or funded by the Bank, insurance policies need to be taken and for that purpose additionally valuation is required. 

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Usually, the worth of a property depends upon the materials of that it’s created of, the age of the property, the geographic location, the surrounding developments, the neighborhood, etc.  One necessary issue that contributes to the worth of a property is that the clarity of title of its owner and also the encumbrances riding on that.

Some folks have a conception that a appraiser want solely to require care of the fabric and placement facet and it's not his orbit to appear into the title facet of it. However the conception isn't correct because the title to the property incorporates a touching on its valuation.  A property infested with long-drawn litigations or varied claims won't actually, fetch the worth it'd have otherwise got with a transparent title.  Similarly, a property occupied won't be able to command a similar worth if it's owner occupied, since the buyer should pay right smart quantity of cash and additionally time to induce vacant possession of the property.  Thus, possession of the property is as title thereto whereas inward at its worth.  Hence, whereas crucial the worth of a property, the appraiser ought to detain his mind the devolution of title, the particular possession of the property, varied claimants over it like minors or court orders adversely affecting possession and title to the property.

A valuer, whereas assessing a property, ought to ascertain the custody of the first title deeds to establish the likelihood of evenhanded mortgages over the property.Discreet searches within the Sub-Registrar’s workplace, Taluk/ Municipal Offices and also the Offices of assorted Township/Development Authorities that have an effect on the native administration of the property for ascertaining whether or not the property is constructed on any reserved space or prohibited space or the likelihood of a buying deal by regime – of these factors have an effect on the valuation of the properties.

In one instance, once the valuation of the property was done by one appraiser for ‘X’ Bank, another appraiser of a similar Bank seen a similar set of documents were deposited with another establishment and also the aforementioned establishment has already place a similar property for auction.  Such things will happen once there are made-up set of documents given as security.

In another incident, it happened that aside from being multiplicity of establishments claiming to own taken mortgage of the property, there happened to be multiple persons bearing a similar name as patron and once the Bank determined to require possession of the encumbered property, they may not do therefore because the identity of the property which of the owner of the property couldn't be tallied because the person speculated to have encumbered the property denied even having gone to the Bank in question and lodged a police report.

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Apart from such risks in identity of property and its holder, the appraiser should be additional careful whereas submitting his report on valuation. tho' it's necessary for the appraiser to enquire concerning the genuineness of the owner of the property and also the property in question, he ought to submit his report back to the involved authority, ideally head to head or with ample care to avoid interpolations.  In one instance, a Bank entrusted the valuation of secured property to its empanelled appraiser however later it transpired that the particular valuation and also the report on valuation accessible to the involved authority varied terribly wide and iniquity was suspected.

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Advocate Selvakumar

BUILDERS AND DEVELOPERS ARE STRUGGLING FOR “VAT” RECOVERY BY THE BUYERS

Advocate S Selvakumar|Property advocates in Bangalore|Property lawyers in Bangalore

Burdened by the excise (VAT) demanded by Maharashtra’s excise Department on all property deals, Developers are troubled to recover the number from flat consumers to attenuate their tax load.

Some Developers seem to own given up attempting to recover the number from folks that have already taken possession of flats, however they're hoping to be able to get this payment from consumers who have nevertheless to require possession.

According to the President of geographic area Chamber of industry (Navi mumbai Unit) Arvind Goel expressed, “God is aware of whether or not they are able to collect the VAT quantity or not. If a Developer tries to recover an quantity of Rs.50, 000 by any means of VAT from a personal flat customer, he could ought to pay the maximum amount in judicial proceeding. Even at the moment they're undecided whether or not they are able to recover the cash.Goel has VAT dues totalling regarding Rs. 25 large integer that he's seeking to get over consumers who have already occupied flats. Most of those flats are resold and he doesn’t have the facilities to trace down these defaulters, send notices, or pursue legal cases.

According to Anand Patvardhan, who has conducted seminars on this matter says, however, Tax consultants are still questioning the reasonableness of social control of VAT. It’s a violation of the constitution. A flat is an immovable property, thus VAT can't be obligatory. This anomaly ought to be challenged in Court.Patvardhan had suggested flat consumers to form Right to information (RTI) applications to induce details regarding the VAT paid by the Developers and conjointly request a breakup. If the Developer has not paid the number, one ought to demand associate inquiry, as a result of the govt is liable for the mess.Other Tax consultants inform that a petition has been created to the State Chief Minister to rationalize the charge to a quarter rather than five-hitter, however they're thwarted that they need not detected something nevertheless from the govt.

According to the decision maker of Puranik Developers, his workplace was causation out demand letters to defaulters. They’ll pursue the matter. people who have gotten the possession of the flat can ought to pay before obtaining possession of the flat can ought to pay before obtaining possession. But, within the case of these who have already got possession it'll be troublesome. I hope they'll perceive and pay the VAT quantity.Developers are causation these VAT demand letters by mail with associate aim that if the matter goes to Court the registered notices can have a Legal basis.

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“CERSAI” AND ITS IMPORTANCE

Advocate S Selvakumar|Property advocates in Bangalore|Property lawyers in Bangalore

The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) is set up under section 20 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). At the request of the Department of Financial Services, Ministry of Finance, the Indian Banks' Association has taken steps to obtain incorporation of the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) licensed under section 25 of the Companies Act, 1956. The said Company shall be maintaining and operating the Central Registry for and on behalf of the Central Government.

The Central Government has issued the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011 and prescribed the Forms to be used for the purpose of filing information for registration in respect of transactions of securitization, asset reconstruction of financial assets and security interest over property. The Forms prescribed by the Central Government for registration are as under: 

FORM I - For Creation and modification of Charge.

FORM II - For particulars of Satisfaction of Charge.

FORM III - For Securitisation or Reconstruction of Financial Assets.

FORM IV - For Satisfaction of Securitisation or Reconstruction of Financial Assets.

It may be observed from Form I relating to creation and modification of charge that it is restricted to charge on immovable property by way of mortgage by deposit of title deeds. At present, the Government has not prescribed any forms for other categories of charges on immovable properties and movable properties.The Registration System will therefore initially operate for registration of mortgage by deposit of title deeds as also for transactions of securitisation and asset reconstruction under the provisions of the SARFAESI Act.

Attention of the banks and financial institutions as well as the borrowers of the banks is invited to sub-section (4) of section 20 of the SARFAESI Act which reads as under:

The provisions of this Act pertaining to the Central Registry shall be in addition to and not in derogation of any of the provisions contained in the Registration Act, 1908 (16of 1908), the Companies Act, 1956 (1 of 1956), the Merchant Shipping Act, 1958 (44 of 1958), the Patents Act, 1970 (39 of 1970), the Motor Vehicles Act, 1988 (59 of 1988) and the Designs Act, 2000 (16 of 2000) or any other law requiring registration of charges and shall not affect the priority of charges or validity thereof under those Acts or laws."

In view of this provision contained in sub-section (4) of section 20 of the SARFAESI Act, the validity of the charges created or the priority of various claimants in respect of the property mortgaged or charged shall not be determined by the provisions of the SARFAESI Act. It may also be noted that Registration of security interest is not a condition precedent for the purpose of exercise of rights of enforcement of securities conferred on the banks and financial institutions under section 13 of the SARFAESI Act.

The object of setting up the Registration System under Chapter IV of the SARFAESI Act is to create a public data base about encumbrances created on properties to secure loans and advances given by the banks and financial institutions, as also transactions of securitisation or asset reconstruction undertaken pursuant to the provisions of the SARFAESI Act. As the provisions of SARFAESI Act now stand following transactions are not covered by the Central Registry system. 

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-Securitisation or asset reconstruction done outside the provisions of the SARFAESI Act ; or

-Security interest created in favour of any lender not included in the definition of "bank" (section 2(1) (c) or financial institution (section 2(1)(m)) of the SARFAESI Act.

It may also be noted that the Rules notified by the Government in the Official Gazette shall be effective from the date of publication of the Rules in the Gazette. The requirement of registration under section 20 of the SARFAESI Act is therefore applicable to all mortgages of property by deposit of title deeds created on and after the date of publication of the Rules in the Official Gazette. 

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Pending amendments to the SARFAESI Act, extending the Registration System to existing mortgages to secure the loans mortgaged prior to the date of notification, the Registration System will cover only mortgages by deposit of title deeds created on or after the publication of notification. The records of the Central Registry shall be maintained in computer compact disks (CDs) or any other forms as provided under the provisions of the SARFAESI Act.

Any person interested in search of the records of the Registry shall be entitled to do so by payment of fees prescribed by the Rules through any bank or financial institution or any other intermediaries authorized by the Central Registry.

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Advocate Selvakumar

REAL ESTATE ISSUES AND CONSUMER COURTS

Advocate S Selvakumar|Property advocates in Bangalore|Property lawyers in Bangalore

One of the most flourishing industries in India today is the real estate industry. The number of builders and developers who offer special features to attract prospective buyers as the demand for residential and commercial property is increasing day by day. The Builders/Developers’ role in this industry is very important.  Naturally there is mismatch between the promises made and what actually delivered, which is the rising cause for the consumers, i.e., buyers, dissatisfaction and grievances.

The Consumer Courts plays an important role in redressing the grievances of the Buyers/Consumers who have suffered in the hands of the Builders/Developers.In cases where the builders make false promises to the flat purchasers and do not comply with their statutory obligations, the allottee has an option to file a criminal case in a criminal Court for cheating, breach of contract, not responding the grievance and delivery of poor quality construction against the builder along with the consumer complaint to be filed in consumer forum.,. The allottee can issue a statutory notice to the builder. In case the builder does not respond to the notice, parties have a right to approach the Criminal Court.  A police complaint can be filed after the issue of notice and then a criminal complaint can be filed before the Metropolitan Magistrate. The complainant should bring out irregularities committed by the builders while executing the constructions of the building. 

Following are the general complaints/grievances of the buyers, apart from some specific complaints:

1. Sub standard work:

The Builders/Developers, in the competitive market, throw number of promises, discounts and lucrative description of the property at the time of booking for a property by a prospective buyer.

a)In one of its judgment the Supreme Court of India has held that if a builder uses sub-standard material in construction of a building or makes false and misleading representations about the condition of the house then it is denial of the facility or benefit of which a consumer is entitled to claim value. 

b)In cases where the end product delivered to the buyer is of substandard in quality, the buyer has the remedy to file a consumer complaint in the Consumer forum against the Builder/Developer for deficiency in services. In such cases the consumer forums have ordered the builders to remove the defects and also pay compensation to the allottee. The allottee also has an option to file a civil suit against the builder claiming damages for breach of obligations.

2. Construction without approvals:

a)The consumer forums have held that where the plot has been sold by the authorities/Builders without taking proper approval of the layout plans and as a result of which the possession could not be delivered to the prospective allottee, such an act on the part of the builder amounts to deficiency in service. 

b)In case where the builder constructed the property without the required approvals from the authorities, the allottee/buyer can file a consumer complaint against the builder for deficiency in service. He can also file a civil suit against the builder for refund of the amount. In such cases the allottee can also approach the regulatory authority that was to issue the required approval which can statutorily force the builder to obtain the approval.

c)In such case, subsequent to allotment of the plots, the Supreme Court had banned the construction activity in five km radius of Badkhal Lake and since the complainants’ plot fell within the said Supreme Court directions and the Commission directed the builder/developer to refund the amount along with interest, holding that the complainants/ allottees were entitled to compensation. 

3. Construction on illegally acquired land:

a)In cases where the construction has been made on illegally acquired land, the buyer/allottee can approach the consumer forum or the civil court for his grievance redressal. In such cases the allottee can either claim the refund of the amount invested by him in the property or he can ask for an alternate accommodation by the same builder.

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b)The Supreme Court has held that even the advertisements inviting applications for allotment without having title to the land was deceptive and unfair trade practice of the builders.

4. Fraud in booking:

a)In cases of fraud in booking, the buyer/allottee can file a complaint against the builder in the consumer forum or file a civil suit in civil court. In case of fraud, the allottee can also file a criminal complaint before the police.

5. Change of land use, layout plan and structures without the approval of the buyer:

a)If the builder wants to undertake additional construction, which is not part of the layout plan shown to flat buyer at the time of executing the purchase agreement he must obtain the consent of the buyer. In cases of the builder/developer makes changes in the use of land or in the layout plan and the structures with respect to the one given in the agreement, the buyer must send a legal notice to the builder and if he does not respond to the same the allottee can file a complaint against the builder in the consumer forum or file a civil suit in a civil court. 

b)The buyer can also file a complaint before the Competition Commission of India if he is able to show that the builder is a dominant entity in the market and is misusing his position to the detriment of the allottee by unilaterally altering the layout plan or structures of the building.

6. Hidden charges:

a)If the allottee is overburdened by the excessive hidden charges in the Buyer Builder agreement, the buyer can file a civil suit in a civil court. 

b)The allottee can also file a complaint before the Competition Commission of India if he is able to show that the builder is a dominant entity in the market and is misusing his position to the detriment of the allottee by unilaterally imposing exorbitant hidden charges.

7. Enhanced external development charges:

a)If the builder demands enhanced development charges from the allottees, the allottee can file a civil suit in a civil court.

8. Cancellation of booking/project:

a)After receiving the booking amount, if the builder cancels the booking, the allottee can send him a legal notice regarding the same and in case the no solution comes out or the builder does not respond to the notice, then the  allottee can file a consumer complaint against him for refund for his booking amount. 

b)The allottee can also file a civil/Criminal case against the builder. 

9. Forfeiture of amount:

Insertion of a penalty clause which is biased in favour of builder/developer is also one of the unfair practices committed by the builders. In most of the cases, the agreement contains a penalty clause in which the buyer is charged a penalty @ 18% for delayed payments in the purchase of a flat, when the builder delays the delivery of the same flat, the rate at which the builder pays is only about @ 1 to 2 % showing an unfairly loaded contract. Precautions to be taken by a prospective buyer.

a)The terms and conditions of the agreement entered into between the builder and the allottee determines the refund of the booking amount. If the agreement contains an expert clause that the builder has right to forfeit certain percent of the booking amount, then there is no legal recourse. But if the agreement does not contain any such clause then the allottee can issue a legal notice to the builder. 

b)The allottee can also approach a consumer forum in case the cancellation is on account of the delay caused by the builder in the completion of the project. The National Commission has held that if the request for refund is made by the allottee on the ground that there has been a considerable long delay in development or handing over of the possession of the plots, then the allottee can approach the consumer along with 18 per cent interest.

10. Delay in delivering possession:

Non-delivery of possession on time is one of the major areas of conflict between the developers and the buyers. There are numerous cases where builders have taken more than the required time to finish projects while leaving home buyers to suffer financial loss. Whatsoever be the reason, the delay in completion of the project has a direct impact on the buyer. The buyer has to pay the EMIs of the bank and also the rent for his current residence. The financial loss and mental agony that the buyer has to face cannot be compensated except by giving him the physical possession of his house. The Supreme Court has held that when possession of the property is not given within the stipulated period, the delay is denial of service. Such disputes or claims are not with respect to immovable property but 'deficiency in rendering of service' of a particular standard, quality or grade.

In case of delay in delivery of possession by the builder, the legal options that are available to the allottee / buyer is:

a)to file a consumer complaint or file a civil suit against the builder for the refund of amount paid to the builder and the interest thereon.

b)file a complaint before the Competition commission of India if the builder is a dominant entity in the market and using his dominant position to the detriment of the buyer.

11. Creation of third party interests:

a)Where a builder creates a third party interest in the flat allotted to a person, the allottee /buyer can serve a legal notice to the builder and in case there is no response from the builder the allottee /buyer  can file a consumer complaint against the builder or can file a civil case. The allottee / buyer can also file a criminal complaint against the builder for cheating and fraud.

12. Not providing completion certificate:

a)In case the builder has not received the completion certificate from the concerned authority, the allottee/buyer can file a RTI application with the SPIO of the local Municipality demanding the copies of all the documents submitted for seeking approval of the concerned authorities and can file the required NOCs with the concerned authority and can obtain the completion certificate himself.

b)If the builder has obtained the completion certificate and not willing to give it to the allottee, then he can file a consumer complaint or file a civil suit against the builder.

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