Title Insurance Can Deliver Real Value
The RERA Act prescribes for a mandates to developers to purchase title insurance for their benefit during the construction phase. By Reema Mannah, UK Qualified Solicitor In a recently publicised case residents of the Raheja Vijar development in Chandivali Mumbai were notified of a competing claim to the title to their properties by the Yusuf Mohammed Trusts. The case highlights precisely the rationale for the inclusion of a mandatory title insurance provision at Section 16 of the RERA Act. On the one hand there is the Trust claiming that it has a competing or better title to the property and on the other hand there is the developer K Raheja Corp claiming that the title which it transferred to the residents is good and marketable having been traced back to India Cork Mills which acquired it from the Trust in 1964. Wedged in the middle of this dispute are the residents of the 22 housing societies in the complex who received notices in June this year from the Trust restraining them from buying, selling or renting their flats. Whilst the developer and the Trust seek to resolve the dispute through legal channels, the homeowners’ peace of mind is being eroded. Delivery of consumer peace of mind is now ubiquitously accepted as the intent of the RERA Act. Its provisions seek to achieve enhanced consumer protection by mandating greater transparency in developer’s dealings from deposit protection, to disclosure of planning permissions to adherence to completion deadlines. The independent State RERA Commissions have the unenviable task of implementation and enforcement of these transparency provisions to effect real change for the benefit of the consumer and at the time of writing consumer groups are showing increasing signs of vigilance on holding these Commissions to account. The RERA Act ambitiously extends beyond the creation of transparency and accountability norms for developers. It seeks to introduce risk management solutions which will underpin a new real estate regime for the benefit of the property owner. The RERA Act prescribes for a mandates to developers to purchase title insurance for their benefit during the construction phase and ultimately to benefit the Society and individual property owners post construction. This is a monumental step in a positive direction given the slowness of implementation of Land Titling legislation which would improve land records and land tenure and the imperfections endemic in current land ownership records in India. Inadequate storage of records, problematic access to registries and lack of homogenisation and digitisation of title information has resulted in a proliferation of unknown title defects, frauds and inconsistencies on the majority of property titles in India which ultimately impact on the consumer. This phenomenon is often what leads to the consequences arising in the Raheja Vihar case. It is precisely in situations such as the Raheja Vihar case that title insurance can deliver real value. Title insurance is a no fault guarantee that would place property owners in a position as if no loss were suffered if the title to their properties were found to be defective due to incomplete land registration records, missing documents and searching errors. Defects in title are often unknown or moreover cannot be detected at the time of property acquisition. As a consequence, a faultless developer such as K Raheja Corp and by extension its innocent Society Members can run the risk of purchasing properties which might be subject to future competing title claims and encumbrances. Had title insurance been obtained for this transaction, both the developer and the Society Members would have benefitted from the peace of mind that the insurance policy would have provided: that it would defend the challenge to the title, pick up all legal costs in so doing and ultimately pay them for any actual losses suffered including up to the full value of their property if this were entirely lost to the Trust. Hopefully this case will serve as an inflexion point for developers and RERA regulators in their approach to the incorporation of title insurance as a risk management tool for future real estate transactions. Reema Mannah is UK qualified solicitor with 26 years’ experience of global real estate practices and the Managing Director of Title Insurance Global a special title risk services management consultant. She is an acknowledged title insurance industry expert with in-depth knowledge of the product applications across varying jurisprudential and transactional systems.
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