Common Frauds In Transfer Of Property

NRIs face numerous property-related frauds due to a lack of transparency in the processes and documentation of property transfer. It, thus, becomes important for NRIs to understand the nuances of the transfer of property.

Laws Regarding Property Transfer

Transfer of Property Act of 1882 defines ‘transfer of property’ as an act by which a living person transfers property in present or in future, to one or more other living persons, or to himself and one or more other living persons (joint ownership).

For NRIs, rules mentioned under Foreign Exchange Management Act, 1961 and RBI regulations are applicable for the transfer of property. FEMA Act [Section 6 (3), (4), (5)] empowers the Reserve Bank of India for regulating, prohibiting and restricting the acquisition and transfer of immovable property by an NRI in India. Also, with coming into force of the Real Estate Regulation Act (RERA), one needs to keep a check on compliances.

An NRI may transfer any immovable property in India to a person resident in India. Also, he may transfer any immovable property (other than agricultural land or plantation property or farmhouse) to an Indian citizen resident outside India or a PIO resident outside India.

Disclaimer: - When a property is transferred, liabilities related to the property are also transferred. NRIs need to be very cautious about liabilities attached to the properties as any discrepancy may lead to huge court battles.

Types Of Frauds Committed During Transfer Of Property Are:

    1. When there is an unclear status of ownership of property, such as either no clarity on co-owners, impersonating as owner or presenting fake title deed as the original.
    2. Concealing facts regarding liabilities, such as defects in the property or any dues related to property will jeopardize the property’s transfer.
    3. When a property is encroached such as encroachment on someone else’s land or on the government’s land, it will make property’s ownership illegal and void.
    4. If no proper permission has been obtained from concerned authorities, then the property will invite legalities. In this case, the Reserve Bank of India is the concerned authority.
    5. When a property is not free from encumbrances from the bank loan, financial dues or mortgage, then the owner cannot make the transfer of property.
    6. When the property has multiple buyers (due to fraudulent representation) and there are already court battles going on to establish their ownership.
    7. When a person who is not authorized by law, transfers the property, then that transfer will be termed as fraudulent.
    8. When the power of attorney is misused by the legal representative, this kind of misuse can lead to the illegal transfer of property.
    9. When NRIs transfer agricultural or plantation property or farmhouse to any person who is not a resident of India.

Common situations related to property transfer:

  • Transfer of property inherited through will or law of succession
  • If the owner is alive and has given consent to transfer
  • Property can be transferred as a Gift through a Gift Deed without the exchange of money but needs to be registered, failing which it becomes null and void
  • Property transfer through registered sale deed: a regular process of buy and sell which further requires title deeds, revenue records, and mutations in your favor

A property is termed to be transferred when there is a conveyance of property, which means the creation of a new title or interest in the favor of the transferee. If the new title or interest has not been created in favor of the transferee, then the property cannot be said to be conveyed, hence there is “no transfer of property”.

In order to make a better decision regarding the transfer of property, NRIs can consult our property lawyers to understand the technicalities and to make sure that all documentation is covered and is original.