Download drafting of documents of real estate transactions

DRAFTING OF DOCUMENTS OF REAL
ESTATE TRANSACTIONS
Presented by:
CA Vijay Joshi
CONTENTS
What is Drafting?
Different Terms in Drafting
Drafting v/s Conveyancing
Qualities of Good Draftsman
Real Estate Transactions & their peculiarities
Documents covering Real Estate Transactions
Applicable Laws
Scope for Chartered Accountants
Conclusion
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capital assets, like the good will of an
old partnership… For many, they are
the only tools with which to hew a
pathway to success. The money spent
in acquiring them is well and wisely
spent.”
-----------Lawyers:
“Persons who write a 10000 word
document and call it a brief”
----------------
What is Drafting?
It is the preliminary stage of a written work in
which the draftsman begins to develop a more
cohesive product.
A draft also describes the product writer creates
in the initial stages of the writing process.
It is the composition as legal – as dealing with or
affecting rights – which we have in view for this
presentation.
“Notwithstanding the provisions of subsection 3 of section A
of Clause 214 of Administrative Procedures (Scotland) Act
1978, it has been agreed that in so far as the
implementation of the statutory provisions is concerned, the
resolution of anomalies and uncertainties between
responsible departments shall fall within the purview of the
Minister of Administrative Affairs.
. . . . Yes Minister (Edited by Jonathan Lynn & Antony Jay)
Legal Drafting
Legal drafting is different from literary drafting.
Legal drafting is free from all colours and emotions.
It is impersonal i.e. it does not speak or represent
any single person or side.
It is expected to state in plain language with the
simplest, fewest and fittest words, precisely
conveying the matter to the reader.
Before we dwell more upon the subject, let us look
at few common terms in drafting.
FREQUENTLY USED TERMS
Document
Deed
Deed Poll
Instrument
Conveyancing
Memorandum of Understanding (MoU)
Only
important are covered herein leaving many
others.
WHAT IS A DOCUMENT?
A document is something that furnishes evidence and
shall also include matter written, expressed or
described upon any substance by means of letters,
figures or marks or by more than one of those
means which is intended to be used or which may
be used for the purpose of recording that matter.
VARIOUS STATUTORY DEFINITIONS OF
“DOCUMENT”
Statute
Section
Definition
General
Clauses Act
S. 3(18)
“Document” shall include any matter written,
expressed or described upon any substance
by means of letters, figures or marks, or by
more than one of those means which is
intended to be used or which may be used for
the purpose of recording that matter.
Companies
Act
S. 2(15)
“Document” includes summons, notice,
requisition, order, other legal process and
registers, whether issued, sent or kept in
pursuance of this or any other Act or
otherwise.
VARIOUS STATUTORY DEFINITIONS OF
“DOCUMENT”
Indian
Evidence
Act
S. 3 The word “document” denotes any matter
expressed or described upon any substance
by means of letters, figures or marks, or by
more than one of those means, intended to be
used, or which may be used, as evidence of
that matter.
Information
Technology
Act, 2000
S. 2 “Document” includes an electronic record as
defined in clause (t) of sub-section 1 of Sec. 2
of The I. T. Act, 2000
Registration Sec “Document” means a document which is
legally enforceable.
Act
50
WHAT IS A DEED?
It is an ‘instrument’ written on a paper or even a
parchment or vellum executed by a party under
seal and delivered as his act or deed expressing
that the person so named makes, confirms, concurs
in or consents to some assurance, other than by
way of testamentary disposition of some interest
in the property or some legal or equitable right.
DEED - Characteristics
Writing
On parchment or paper
A person able to contract
By sufficient name
A person able to be contracted with
By a sufficient name
A thing to be contracted for
Apt words required by law
Sealing; AND
Delivery
WHAT IS DEED POLL?
A ‘Deed Poll’ was so called because it was
originally polled or cut at the top.
The term applies to all the documents, which are
made and executed by one executing party,
although the parties thereto may be more than
one.
Power of Attorney, Release Deed, Declaration of
Trust, Deed of Appointment etc. are examples.
WHAT IS INSTRUMENT?
Instrument is so called because the document was
executed in two parts and they were indented or
cut off in a waving or uneven line to show that the
two parts tallied or fitted properly.
A Deed of Conveyance or Deed of Mortgage is an
instrument though generally these are executed by
one party.
In present day world, the words ‘deed’ and
‘instrument’ are used a synonyms.
WHAT IS CONVEYANCING?
The subject of Conveyancing is restricted to
documents regarding property or related
commercial transactions between two or more
parties.
It is a process by which legal title to property is
transferred.
Such documents are generally called deed or
instruments.
Generally, one may call drafting of a deed as
‘Conveyancing’ but ‘Conveyancing’ is not mere
drafting.
DRAFTING v/s CONVEYANCING
Conveyancing may be called as process of synthesis of
law and the facts in a language form.
Hence, (i) Law; (ii) Effect and (iii) Language are
essentials of good conveyancing.
One also needs to have prior knowledge and
understanding of the details concerning the formation of
contracts.
Legal Documents are distinct from literary drafting in as
much former does not have room for poetic or artistic
imagination or flowery language or similes, metaphors
or alliterations.
Language is expected to be in legal terminology, exact
and without verbosity.
GOOD DRAFTING
Draftsman should be thoroughly familiar with the
facts and background of the transaction being
covered by the draft.
He must properly co-relate the facts with the
sequence of the events that have bearing on the
transaction.
Knowledge of applicable of laws governing
property or related transaction is essential.
GOOD DRAFTING
Before commencement of drafting any deed or
document, the whole design of the transaction and
related documents proposing to cover should be
conceived in the mind of the draftsman.
Order of the draft should be logical. Unfolding of
events indicating of passing down of title and the
obligations of the parties to the transaction to be
performed should be sequentially recorded.
Language should be precise and accurate leaving
no room for ambiguity.
GOOD DRAFTING
One should avoid simply writing too much choosing the
appropriate words and precise construction of language
so as to keep the length of the document optimum.
Even complex ideas can be explained in simple
language understandable by the general reader.
After completing first draft, one should seek its editing
from someone else or should re-read it after a lapse of
some time.
Similarly editing some one else’s draft is also a process
one should write remarks in margins avoiding redrafting
or too many corrections, unless circumstances warrant
otherwise.
REAL ESTATE TRANSACTIONS - PECULIARITIES
The transactions relating to real estate have a life
time lasting effect.
The transfer of interest, creation or cancellation, in
real estate is unique and peculiar.
Applicable of laws also recognise the uniqueness of
the transactions.
Delivery of possession, physical or symbolic also is
unique.
DOCUMENTS RELATED TO
PROPERTIES
Sale Deed and Agreement to Sell
Leave and licence agreement
Lease deed
Development agreement
Memorandum of Understanding (MoU)
Gift Deed
Trust Deed
Release Deed, Surrender and Purchase of
Reversionary Rights. . . . And more
DOCUMENTS RELATED TO
PROPERTIES
Mortgage Deeds-Section 58 of transfer of
property act 1882
58(a) definition of mortgage
Transfer
of interest in specific immovable property
for securing advance
58(b)
Simple
mortgage
58(c)
Mortgage
by conditional sale
DOCUMENTS RELATED TO
PROPERTIES
58(d)
Usufructuary
58(e)
English
mortgage
58(f)
Mortgage
mortgage
by deposit of title deeds
58(g)
Anomalous
mortgage
LAWS APPLICABLE TO REAL ESTATE
The Indian Contract Act, 1872.
The Transfer of Property Act, 1882.
The Indian Registration Act, 1908.
The Specific Relief Act, 1963.
The Urban Land (Ceiling & regularization) Act, 1976.
The Land Acquisition Act, 1894.
The Indian Evidence Act, 1872.
The Indian Stamps Act, 1899.
The Rent Control Act.
The State Laws governing the real estate.
The Consumer Protection Act, 1986
The Arbitration & Conciliation Act, 1996
Income Tax Act, 1961.
The Wealth Tax Act, 1957
The Co-operative Societies Act, 1912
The Multi-state Co-operative Societies Act, 2002 and the list continues . . .
LAWS APPLICABLE TO REAL ESTATE
In addition to the previous list, local laws and
regulations governing development of land and
construction are also to be referred.
Of course, the special laws governing special
structures like high rise buildings, Special
Economic Zones or set of structures like Hospitals,
Theaters, etc. also need to be referred for
appropriate drafting.
The exhaustive list may not be complete at any
time and one needs to draw up the list peculiar to
each transaction.
SCOPE FOR CHARTERED ACCOUNTANTS
Chartered Accountants have a unique advantage with exposure to taxation
and business related laws and environment. With their expertise and
experience, they can undertake one or more of the following activities:
Consultation
Drafting of Various Documents
Vetting of drafted agreements
Modifications
Due Diligence
-Limitation
-Filing Claim
STAMPING
REGISTRATION
BUSINESS LAWS IMPACT
LATEST DEVELOPMENT
On 16th December 2009, Bombay High Court has
decided that section 29 of the Advocates Act, 1961
includes areas non-litigious areas of practice in the
expression ‘practice of law’.
Hence, any person undertaking practice of law can
do so only after registering himself with Bar Council.
The judgment was directed against the permission by
RBI to foreign firms to open liaison offices in India.
Hon’ble Supreme Court has delivered yet another
decision on 4th July 2012 restraining RBI from
permitting foreign law firms to practice in India
without obtaining registration with Bar Council.
LATEST DEVELOPMENT
The fallout of the above judgment is that professionals like
Chartered Accountants, Company Secretaries are restrained
from undertaking even non-litigious practice like drafting,
giving of opinions etc.
Bill covering proposed law called ‘Legal Practitioners
(Regulations and Maintenance of Standards in professions,
Protecting the Interest of Clients and Promoting the Rule of
Law) Act, 2010 for establishment of Legal Service Board
called is pending before parliamentary committee.
The proposed definition of ‘Legal Professionals’ therein
includes practitioner of income tax and sale tax and those
appearing before various authorities, which covers Chartered
Accountants.
Supreme Court is likely to rehear the matter after a gap of
10 weeks.
CONCLUSION
Drafting requires skill and expertise in expression
of thoughts.
It is also an art which can be developed and
mastered through continuous reading and writing,
even if it means writing different documents.
Command over language, legal provisions,
visualization of possibilities and probable solutions,
principles of fairness and equity would help one
achieve excellence in drafting.
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