Written in : July 1999

There have been some major changes in the registration law in Andhra Pradesh which affect all of us. Since there has been no discussion on it so far, let us do it today.

The purpose of stamp duty law is to collect some revenue for the state government. However, the purpose of registration is to authenticate and assure various types of rights, title etc. Both serve different objectives, yet go together and both generate revenue for the state.

There are many documents which require registration compulsorily. That is, if a specified document is executed, it must be registered by you with the concerned authority - a Registrar, Joint Registrar or Sub-Registrar of Assurances. If the document is not registered, it has no value and cannot be evidence of any fact or act (besides there being other consequences).

Those documents which were not specified could have been executed by the parties without getting them registered. These documents would remain legally valid and be evidence of the transaction or acts specified in them.

If you entered into lease agreements which were for periods of a year or more, they had to be registered. However, if lease agreements were for periods of less than a year, registration was not compulsory. That is the reason you saw so many eleven-month leases all over. The usual practice was to execute an eleven-month lease and renew it for periods of eleven months thereafter as long as the parties desired. The eleven-month lease did not require registration and executing them on the required stamp paper was good enough.

The law has now been amended. The minimum period of one year has been removed. All lease agreements now require registration regardless of the period for which they are executed .

If you execute lease agreements without registering them, they have no value.

It was not uncommon for people to file civil suits claiming ownership or other rights over property which was owned or held by someone else, most likely a family member. A 'compromise' would often by arrived at, or other circumstances created under which the court had no choice but to allow the suit and order that the person filing it was the legal owner and not the respondent. This led to a situation where properties got transferred from one person to another by a decree, award or order of a civil court. This did not require any registration.

The law has now been amended.

If a civil court passes any decree, order or award or a copy of it by -

• consent of the defendants, or
• on circumstantial evidence
• but not on the basis of documents which are admissible as evidence like registered title deeds produced by the plaintiff,

where it transfers, declares, extinguishes etc rights, title or interest in immovable property, then the decree, award or order is required to be compulsorily registered.

This closes a convenient route used by some people to transfer property without going through it legally.

The manner in which the law is drafted is, however, likely to create difficulties.

Until now, only sale deeds were to be registered. Agreements were required to be executed on stamp paper (sometimes with quite high duty) but may have been registered only optionally.

Hereafter all agreements to sell (and not merely sale deeds) are required to be registered (where they purport to sell immovable property of the value of Rs.100 and above, which is almost always). The consequences of the changes are significant.

According to another change, even a Memorandum of Understanding which itself does not create any right but creates a right to another document, say an agreement to sell or sale deed, is also required to be registered.

Consider this: builders will now have to execute and register all agreements to sell on stamp paper which requires heavy duty payment and follow these up with registered sale deeds.

When you enter into an agreement to buy or sell property, there is a definite chance that one of the parties will not fulfill his obligations, or there may be other reasons because of which the agreement does not fructify and get converted to a sale deed conveying the property. That is why, agreements were not to be registered compulsorily.

However, Hyderabad must be having the distinction of the largest number of falsely created claims on property in the country. Most of these claims are based on unregistered 'agreements to sell', powers of attorney to sell, etc. These false claims would simply not have been there if the title was to be determined only through registered documents. This, perhaps, is one reason for the change in laws.

At least hereafter, claims on title to property will arise only from registered documents and not otherwise (in sale and lease transactions, at least).

We shall discuss some related issues next time I write.