In today’s transactional world, you need evidence even to prove a single point. There come legal deeds that play pivotal roles and are used as evidence for transferring a variety of rights in a property, from one person to another. Focusing upon the various types of deeds in property, they include all the minute details of the property explaining who holds the rights at first and and to whom the said rights are being transferred. This article will hunt through the kinds of deeds and their specific requirements.
Types of Deeds in India
There are different deed types in India which come in use at different circumstances. Basically, it is a legal instrument which usually transfers certain rights over a property from one party to another. It serves as an evidence of transfer of such rights. Given below are the major kinds of deeds:
- Sale deed
- Gift deed
- Mortgage deed
- Release deed
- Deed of Power of Attorney
- Lease deed
- Trust deed
Sale Deed
It is one of the most common deeds in India. Sale deed is a legal document which transfers the right of the ownership of property from one party (seller) to another (buyer) in lieu of consideration paid by buyer to seller. It mentions detailed information about the property, buyer, seller, sale consideration.
In other words, a sale deed reflects the price fixed for the property between the buyer and seller; if any advance payment has already been made; and whether the title of the property is free from any encumbrances. If there are any encumbrances, like somebody else claiming any rights over the property, then the seller should indemnify the buyer.
Features of Sale Deed
A sale deed being among the well known types of deeds in India, is the primary document which shows the transfer in the name of the buyer. The buyer becomes the owner only after the registration of property as per the Indian Registration Act ,1908, which states that an interest in the immovable property of value more than 100 rupees will be transferred only by registration of the document in the Sub-Registrar’s local office (commonly known as Tehsil). The sale deed is made on the non-judicial stamp paper, and the stamp duty is levied according to The Stamp Duty Act, since different states have different stamp duty. An unregistered sale deed has no value in the eyes of the law.
Key Points in a Sale Deed
1. It should be in written form
2. It needs to be registered
3. It should be attested by two witnesses.
Gift deed
A gift deed is a legal instrument which allows the owner of the property (donor) to transfer its ownership to another party (donee) voluntarily without any consideration. For a valid gift deed, there must be at least two witnesses to attest the gift deed. A gift deed must be executed on the non-judicial stamp paper or e-stamp paper which is available in certain states. The value of the stamp paper for a gift depends on the state where the deed has been executed, or the property is situated.
In India the gifted property is also subject to tax but there is certain exemption under section 56(2)(x) of the Income Tax Act, if the property’s stamp duty does not exceed Rs 50,000. Also, gifts received from parents, siblings or spouses are fully tax exempted irrespective of the value of property. Gifts received at weddings or through inheritance are exempted too. However, gifts from other relatives are taxable under income from other sources, if the value exceeds 50000 in value.
Mortgage Deed
A mortgage deed is a legally binding contract between the borrower (mortgagor) and the lender (mortgagee). The deed contains details of the loan, from principal to the rate of interest along with the repayment plan and extra fees or penalties. It mentions all the rights and duties of the mortgagor and mortgagee, as in right to foreclosure on the property if mortgagor fails to repay the loan. There are different types of mortgages governed under section 58 of The Transfer of Property Act like simple mortgage, mortgage by conditional sale, mortgage by title deposit, usufructuary mortgage, English mortgage and anomalous mortgage.
The mortgage deed is an essential document, as it specifies who is the borrower/mortgagor and who is lender/mortgagee in the loan arrangement. This provides protection to the lender in case of default on the payment from the borrower. Therefore, it assures the lender that their loan is secured.
Types of Mortgages
Simple Mortgage
In this type, the borrower doesn’t transfer the possession of immovable property to the lender, but agrees to pay the mortgage money by personally binding himself. The mortgagee has the right to foreclosure on property if he fails to pay the money.
Usufructuary Mortgage
The type of mortgage where the borrower transfers the possession of the property to the lender and enjoys the profits generated from the property but does not own the property as such, is termed as a usufructuary mortgage.
Mortgage by Conditional Sale
When the legal ownership of the property is transferred to the lender only until the loan is fully repaid, it is called mortgage by conditional sale. It means that the mortgagor supposedly sold the property to the mortgagee on a condition that if he fails to repay the mortgage money the sale becomes absolute.
Lease Deed
A lease deed is a legal document which clearly enumerates the terms and conditions under which one party known as lessor or property owner, agrees to rent the property to another party, known as the lessee. The tenure for lease agreement is generally more than a year unlike rent agreements. In a lease deed, the lessee buys the lease rights to use the lessor’s property by paying in lump sum. All terms and conditions are mentioned in the lease deed. In case the lessee or the lessor feels like terminating the lease deed before the mentioned period, they can do so by giving advance notice to either party. The notice period may vary as decided by the parties. If in case any loss is suffered to any party due to termination of lease deed, the party suffering losses will be compensated by the other party. The registration of lease deeds is mandatory under section 17(1)(d) of The Registration Act ,1908.
Mortgage by Title Deed Deposit
As reflected by its name, mortgage by title deed deposit is the deposition of the title deed with the lender as security for the loan amount. In this case, no registration is required.
Release Deed
A deed of release means removal of previous rights/interests/claims on the property. It comes into play during property transactions or settlements. The sole purpose of a release deed is to transfer/relinquish/release one party’s rights/interests/claims in the property in favour of another. A release deed may be required between co-owners or joint owners, family settlements, etc.
Power of Attorney
The power of attorney (PoA) is a legal instrument which authorizes a person to manage things and take decisions on behalf of someone else. The person who delegates his authority is principal and the person to whom the authority is delegated is the attorney. One must be cautious while appointing the attorney as he’ll be taking decisions on principal’s behalf, and if anything goes unfavorable, then the principal will be held accountable. A power of attorney can be revoked by giving written notice to the attorney. The revocation naturally happens when the principal dies. If the POA is one of the spouses, then revocation of PoA also takes place on divorce.
Trust Deed
A trust deed is an agreement where a neutral and independent third party holds the property in trust until the loan is paid by the borrower to the lender. The Lenders are known as beneficiaries, borrower is known as trustor and the third party is known as trustee. It may be noted that the concept of trust deed is not very common.
The concept of types of deeds in India has been simplified by Ms. Aanchal Jain, who is interning at Lawgical Shots and assisting the team to bring the most informational and valuable legal blogs for the legal fraternity.
