Payment of stamp duty is no guarantee your property is legal

There is a great misconception among the home buyers that once a certain percentage of the cost of the apartment as stamp duty is paid and the flat got registered with the revenue department of the state government, they believe that their property has got all legal/requisite approvals. But this is plain nonsense.

Take for example the case of the residents of 106 flats in the Campa Cola society in Mumbai. They had all alone believed that since they had got sale deeds executed in their favour from the builder during the late ’80s by paying stamp duty of Rs. 1 lakh to Rs. 4 lakh each to the state revenue department, their illegally built apartments were legal. But such was not the case. Payment of stamp duty can’t turn any illegality into legal entity. Today they stand to lose everything as the Supreme Court has ordered the demolition of their flats as these were built in violation of sanctioned plans.

Though this case might be headed for closure after the SC refused to regularize the illegal structures, it has left many questions unanswered, provoking other apartment owners to raise pertinent questions. Why did the sale deeds, executed in their favour by the builder, not help their cause in establishing their title over the properties, especially when the government earned hefty revenue from stamp duty?

Vinodbhai Kothari, a resident of controversial Campa Cola society, who died on June 14, 2014, was the first person to get his apartment registered in 1985 by paying Rs. 1.5 lakh as stamp duty and registration fee to the revenue department of the state government. Since then, he and his family have been regularly paying property taxes which were revised and raised from time to time by the government. Had the revenue department refused to register the sale deed in favour of Kothari way back in 1985, holding that the flat was illegal, more than 800 residents would not have fallen prey to the greed of the developer,” says Vidya Srinivas, a flat owner in the Campa Cola society.

She has the point when she says: “Now if the flats are illegal, so are the revenues of the government. Can the government return the money with interest that it has charged from us in form of stamp duty and property tax?” asks Srinivas.

In India, it’s compulsory to get sale of apartment or land registered with the revenue departments of states. However, the Indian Registration Act of 1908 doesn’t require the registration authority to verify history of the apartment or ownership from the seller. One should also know that the apartment registration is not registration of title, but a deed of transaction. All these legal provisions make the home buyers vulnerable to a property fraud.

“Registration of properties is a fiscal instrument which helps the state earn revenues. However, it doesn’t provide any legal support of certainty to title. If the Registration Act of 1908 is amended and a mandatory provision is added for the registration authority to verify history of the land/apartment, the registration of illegal property will stop,” says a revenue official, requesting anonymity.

Legal and urban experts say that in India land ownership is “presumed,” which is questionable and can be challenged on multiple fronts: ownership, extent of boundaries, financial encumbrances, etc.

“In Delhi, the revenue department has issued several administrative orders to the sub-registrars, directing them not to register properties in unauthorised colonies. Sub-registrars comply with the orders as not doing so invites action against them. However, the Registration Act, which is a Central act, allows a sub-registrar to register any property without verifying its history. Those who have been penalised for doing so have had their suspensions revoked from the court as the existing law favours them,” says a former inspector general (revenue) from the Delhi government on conditions of anonymity.

In addition to amendments in the Registration Act, there’s need for a system that provides for individual rights and the ability to transfer these rights. In such a scenario, what is needed is a guaranteed title certification system that protects rights to land and property, say experts.