Way to Ensure the Future of your Property-Title Deed Insurance

The current COVID crisis has brought back the desire of home owning among Indian Millennials, especially with an increased work from home trend. As Real estate is likely to see an increased inflow of willing buyers (which previously preferred renting homes) it is important to know about the safeguards one can opt for in order to save themselves from incurring any preventable losses.

The Stamp and Registration Department has suggested providing Title deed insurance to protect individuals against encroachment and manipulation. Title deed insurance is a standard practice in the U.S, Europe and Australia. The department has roped in many big insurance companies and it is suggested that the one time premium for the insurance be set up at 0.05% of the property.

What is a Title Deed Insurance:

Title Deed Insurance or Title insurance is a type of Indemnity Insurance*.

*Indemnity Insurance is a policy that compensates an insured party for certain unexpected damages or losses up to a certain limit – usually the amount of the loss itself. Insurance companies provide coverage in exchange for premiums paid by the insured party.

Title deed insurance protects lenders and homebuyers from financial loss sustained from defects in title to a property.

Traditional insurance usually covers future events whereas a title deed insurance protects against claims for past occurrences.

As a part of it the insurance company undertakes the burden of title search on behalf of the prospective purchaser/lending agency.

Defects in Title Deed:

A title is a legal document that entitles an individual right to ownership over property.Therefore,It is of utmost importance that the property does not have a bad title deed. 

It requires a long list of legal processes to rectify a bad legal deed. A property with bad legal deeds cannot be legally bought or sold.

For example, if you buy (or inherit) a property and you later discover that it has unpaid dues on it, you cannot sell the property till you pay back those dues and the title is bad or defective.

Importance of Title Deed Insurance:

A clear transaction is necessary for any Real Estate deal. One must do extensive research on title for any kind of encumbrance or liens in order to ensure that a title is clear. 

This is taxing and legally complicated  as it requires an examination of public records to determine and confirm a property’s legal ownership and to find out whether there are any claims on the property.

What is Covered by Title Deed Insurance?

  • Ownership by another party,
  • Fraud, forgery or incorrect signature in documents,
  • Incomplete/flawed records,
  • Cases against the property or any sort of encumbrances,
  • Anything that hampers the enjoyment or value of land which was previously unrecorded.

Types of Title Deed Insurance:

Lender’s Title Insurance: It protects the lender in the event the seller was not legally able to transfer the title of ownership rights. A lender’s policy only protects the lender against loss. An issued policy signifies the completion of a title search, offering some assurance to the buyer.

Lender’s Title Insurance: It protects the lender in the event the seller was not legally able to transfer the title of ownership rights. A lender’s policy only protects the lender against loss. An issued policy signifies the completion of a title search, offering some assurance to the buyer.

 Benefit of a Title deed insurance:

  • Title insurance protects lenders and buyers from financial loss due to defects in a title to a property.
  • A one-time fee paid for title insurance covers pricey administrative fees for deep searches of title data to protect against claims for past occurrences.
  • Insurance companies with their expertise can minimise the litigation which is already lower as compared to the total volume of registrations.

Observation:

Title deed insurance is a boon for the new age urban property buyer who buy and sell to people who are virtually unknown to them (as opposed to the rural sellar who usually sell to known individuals).

With one time premium at almost negligible cost it is a must for someone who has ever bought or sold a property.

About the Author – Aditya Pratap

Aditya Pratap is a lawyer practising in Mumbai. He argues cases in the Bombay High Court, Sessions and Magistrate Courts, along with appearances before RERA, NCLT and the Family Court. For further information one may visit his website adityapratap.in or view his YouTube Channel to see his interviews. Questions can be emailed to him at aditya@adityapratap.com.

This Article is made by Aditya Pratap in assistance with Aditi Dixit.

Cases argued by Aditya Pratap can be viewed here.

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