3 steps to take when you inherit a property6 min read . Updated: 23 Dec 2015, 01:37 AM IST
Make sure the house is transferred to your name, apply for mutation of title, and take legal advice
Disputes related to properties are common and court cases related to ownership rights over a property can go on for decades. Such disputes are more common in cases of inheritance. When you inherit a property, it may not include conducting any financial transactions, until and unless you give away your share to someone against a consideration or vice-versa.
But you still need to go through the legal formalities to obtain ownership of that property. You may want to sell or gift it to someone, but even to do that in a legal manner, you first need to make it legally yours.
Legal formalities may differ depending up on the nature of the property, your rights over it, number of legal heirs and other aspects. Here is how and what to do once you inherit a property.
Step 1: Legal ownership
When you inherit a property the first thing you need to ensure is to get it transferred in your name. “If it’s a movable property, which may even include bank balances and securities, it should be transferred in the name of the beneficiary. Similarly, if it’s an immovable property, it should be transferred and mutated in the name of the beneficiary in the relevant government and/or revenue records depending upon the nature of the property," said Rajesh Narain Gupta, managing partner, SNG & Partners, a law firm.
But a property can be transferred only if you have substantial proof to claim your inheritance. “When a person dies leaving a Will, his executors are required to administer the property as per his wishes set out in the Will, provided the same are not contrary to law," said Bijal Ajinkya, partner, Khaitan & Co, a law firm.
However, problems arise when there is no Will. In such cases, “the legal heirs of the person can appoint amongst themselves one or more administrators who then obtain Letters of Administration to the estate of such person," said Ajinkya. The distribution can be decided mutually or can be settled by the court. All the legal heirs can pass on their rights mutually to a single heir or to another person.
Typically, in absence of a Will, the appropriate succession laws come into effect. So, for example, according to the Hindu succession law, if a Hindu man leaves behind property without a Will, it is primarily passed on to Class I heirs (which include the widow, children and mother), in equal share. If there aren’t any Class I heirs, Class II heirs (which include father, grand children, brother, sister and other relatives) can claim the property. If the owner is a Hindu woman, her husband and children become equal shareholders of the property. If none of them are present, the property goes to the heirs of her husband; failing that, to her mother and father, and so on. So, if a Hindu woman wants the property to go to, say, her sister, she has to say so in her Will.
Also, do remember that one can only pass on the property as per her wish if the property was self-acquired and not inherited. If it’s inherited, succession law comes into play. As the succession laws depend upon the religious faith a person follows, or upon marriages solemnised under Special Marriage Act, 1954, take a detailed legal view on the matter and choose accordingly.
Step 2: Documents
Once the beneficiaries and their shares, rights and liabilities are decided, the property has to be transferred in their names. For this you need to apply for property transfer at the sub-registrar’s office. “In most of the cases (documents needed are) Will; or Will with probate or succession certificate. In relation to the assets, the ownership document of movable and immovable assets are required," said Gupta. In absence of a Will, you may also need to prepare an affidavit, along with a no-objection certificate from the other legal heirs or their successors. If you have paid any consideration (in kind or cash) to any heir or claimants to acquire their share, do mention this in the transfer papers.
Once property gets transferred in your name, the next important task is to apply for mutation of property title. It is done to record the transfer of a title of an immovable property from one person to another in the land revenue records. This is required for the purpose of payment of property taxes, or to transfer or apply for utility connection in the name of new owner. It also adds evidentiary value in respect of the title to the property. Mutation of property records takes place at the local competent municipal authority office in whose jurisdiction the inherited property is located. The mutation process, required documents and fees differ from state to state.
When you inherit a property, besides proving your claim or rights, the other important thing is to have clear ownership evidence of the property. If proper property documents are available, the process of transfer becomes easier, but if it’s an ancestral property and proper documents are not available, the job becomes tough. “In such cases, one needs to trace the title of the property," said Gupta. First, you should “find out whether any consideration was paid by the deceased in acquiring the property and make out a claim based on the evidence available together with the details of the consideration paid," said Gupta. Take help of a legal adviser or a lawyer.
Step 3: Liabilities
Given the high capital values of properties, most are bought with the help of home loans. So, what happens if you inherit a property that has an outstanding home loan?
“Whatever assets or estate you inherit, you do so with clogs, mortgages, disputes and so on," said Gupta. So, if there is an outstanding home loan against the property, then that also gets passed on to the inheritor. Besides that mortgaged property can be transferred only with the written consent of the lender. This means that if a person passes away while the home loan was still running on the property that has to be bequeathed, the beneficiary—who could be the spouse, or children of the deceased—will have to pay the outstanding loan. However, if home loan insurance was taken, the insurer pays the outstanding loan to the lender. In such cases, once the payment is made by the insurer, you must collect the loan clearance certificate from the lender and the original documents of the property that were given to the lender to avail the loan.
If the property you inherit has been let out, you become obliged to adhere to the lease agreement signed between the lessee (the predecessor) and the lessor. Similarly, if there is any dispute related to the property or if there is any litigation which involves the property, you also become part of it. “Lease agreements with the consent of the lessor would be inheritable. In civil litigations, the heirs of the deceased are brought on record in place of the deceased with all his rights and obligations," said Ajinkya.
Mint Money take
Inheriting a property is not a regular incident; you should take utmost care to have all details in place. Mere possession of property does not make you a legal occupant or owner; a proper transfer is must. If needed, do take legal advice and help to get the inherited property transferred in your name.
If you are not an occupant of the property you inherited or if you live in any other city, it becomes difficult to manage it. Also, if it’s an old property it may require regular or major repairs for upkeep or to be let out, for which you will need to spend money.
If you do not intend to keep the property for long, it may be better to not spend much on its repairs and renovation. Though emotions are attached with inherited and ancestral property, sometimes it becomes a burden and selling it remains the only financially viable option.