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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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.
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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 Companies 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. 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 Information Technology Act, 2000 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. 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 Act Sec 50 Document means a document which is legally enforceable.
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 mortgage 58(e) English mortgage 58(f) 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 STAMPING -Limitation -Filing Claim REGISTRATION BUSINESS LAWS IMPACT
LATEST DEVELOPMENT On 16 th 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 4 th 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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