Title Insurance – An immediate need

Rajesh Narain Gupta [left] and Munish Upadhyay [right] look at the need of Title Insurance in India. They feel that the need today, is for a ‘one stop shop’ that provides a title verification report, together with a ‘Title Insurance’ i.e., if the title of the property to be purchased or mortgaged is found to be bad, the insurance company will be required to reimburse the buyer or mortgagee, as the case may be..Buying immoveable property, or creating mortgage on an immovable property, is at most times, a nightmare. One is not informed of how to obtain an accurate title verification..The need today, is for a ‘one stop shop’ that provides a title verification report, together with a ‘Title Insurance’ i.e., if the title of the property to be purchased or mortgaged is found to be bad, the insurance company will be required to reimburse the buyer or mortgagee, as the case may be..Though this product exists in other countries our regulators have not paid adequate attention in this regard which is a pity. In India till date there is no independent company which insures or guarantees the title of a property. US companies like LandAmerica, Fidelity National Financial and Stewart provide title insurance under the auspices of independent regulators. The Insurance Regulatory Development Agency (the ‘IRDA’), responsible for all Insurance related business has failed to come up with any suggestion on provisioning title insurance. It is also not clear whether IRDA can be responsible for such a product/service. While the importance of Title Insurance has been discussed number of times at number of forums, including the Reserve Bank of India and National Housing Board, no steps have been taken in this direction..Maintenance of land records in most States are poor. There is no single agency which can certify whether or not a property or project is free from encumbrances or litigations. Although the lender or buyer may obtain title verification reports from lawyers, obsolete techniques amplify the risk of mistakes and fraud..It is common knowledge that title verification in India is a tedious, risky and a complicated affair. The land records needs to be revamped completely and a hassle free mechanism needs to be created where any investor or lender or interested party may know as to whether the property is free from encumbrances or whether there exist any legal disputes?.The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitization Act) provides for creation of a Central Agency responsible for keeping a record of charges, irrespective of who created the charge. Unfortunately no steps have been taken up till date to create such agency..If this agency had been functional, at least there could be a central body holding records of encumbrances and charges of assets of individuals, partnerships and companies. This could have facilitated searches and investigations on the title of properties and other connected matters..The authors are Partners at S.N. Gupta & Co. The views expressed in this column are their own and do not necessarily represent or reflect the views of S.N. Gupta & Co.