Whether the valuer is expected to verify the legality of the title deed?

QUESTION & OPINION

B. Kanaga Sabapathy 11.01.2022

Question :

Whether the valuer is expected to verify the legality of the title deed?

Opinion :

The answer is “No”. He is not expected to verify the legality of the title deed.

The judgment dt. 18.12.2009 on Criminal Revision Petition no. 406 of 2008 issued by the High court of Karnataka at Bangalore is referred.

A valuer is a petitioner in this case. The CBI (State) is the respondent.

On the basis of a complaint by the bank, CBI registered a case against the panel valuer and others.

The special judge for CBI cases (Trial court) passed an order against the panel valuer. The valuer (petitioner) filed criminal revision petition before the Karnataka High court

After analyzing and discussing various points, the Hon’ble Justice made the following remarks in his judgment dt. 18.12.2009.

Para 33 :
1. The strong contention of the learned counsel for CBI that the petitioner, being approved valuer of the Bank, ought to have verified the title of the purported owners of the said sites with reference to the title deeds and other relevant documents, but he failed to do so and therefore, it has to be inferred that he conspired with the Bank officers and others.

Para 34 :
2. It is the contention of the learned senior counsel for the petitioner that the petitioner, being the valuer, not a legal expert, he could not be expected to verify the legality or otherwise of the title to the said properties nor could he be expected to identify the true owners thereof.

Para 37 :
3. If there were any defects in the title deeds pertaining to the said properties, this petitioner whose responsibility was only to inspect the properties, measure the same and submit his report as to the fair market value thereof, could not be held responsible for any defect in the title to the said properties.

Para 38 :
4. The legally or otherwise of the title to the said properties was to be examined by the advocate who furnished his legal opinion. In fact, as the records of the case disclose, the Bank obtained legal opinion from its Advocate and it acted upon the said opinion in giving financial facility to the said firm. If any defects were there in the title to the said properties, it is only the said Advocate who could be held responsible for the same, but not this petitioner who was only a valuer and whose duty was only to inspect the properties and submit his report as to the true and correct market value thereof.

Para 42 :
5. … The Trial court committed a serious error in holding that there are grounds to presume that this petitioner – accused committed the said offenses and therefore charge shall have to be framed against him for the same. Consequently, the charge framed against this petitioner – accused of the said offenses has to be set aside.

6. i) The present revision petition is hereby allowed.
ii) The impugned order is hereby set aside.
iii) The petitioner – accused is hereby discharged of all the said offenses for which he is charge-sheeted.

7. Therefore, the opinion to the question raised is :
It is not the duty of the valuer to verify the legality of the title.

8. What is the precaution a valuer can undertake while certifying the market value for bank purposes?
In the certificate column, he should always mention that “Legal aspects have not been considered in this valuation”.

(B. Kanaga Sabapathy)

 

WHETHER THE VALUER IS EXPECTED TO VERIFY THE LEGALITY OF THE TITLE DEED?

(Revised opinion)
17.01.2022

The above article circulated by me on 11.01.2022 in the WhatsApp group as a part of my routine sharing has received comments from three experts.

1. Opinion expressed by Mr. Hardikar :

The recently circulated judgment regarding legality of title is likely to convey the wrong message that a real estate valuer is not required to verify clients’ title n tenure to the property to be valued. The judgment does not define what is “legality of the title”. ‘Verification of title’ to a property and ‘legality of the title’, I think, are two different concepts. Verification of title n tenure with reference to a sale deed, lease deed, etc. is limited to ascertaining whether a property to be valued is freehold, leasehold or held under tenancy / live n license agreement, which is a broad point in law which a valuer is expected to know n follow/implement in practice. The legality of title, on the other hand, implies the examination as to whether a sale/lease deed, etc. itself is legal or not, which is a finer point in law to be dealt with by advocates and is outside the preview of a real estate valuer.

A R.E. valuer should always bear in mind that he is required to estimate market value, not of a “physical asset” but of clients “Interest” in a property i.e. clients legal right to derive benefit by the legal use of a property. A valuer is therefore required to verify n ascertain the client’s title n tenure to hold, occupy etc. a property to be valued by referring to not only to P. R. card but also by referring to the sale/lease deed, etc. He is not expected to examine whether the sale/lease deed etc. itself is legal or not, which is the domain of advocates. I.V.S. 400, Para 20.5 prescribes that (a) a description of the real property interest to be valued and (b) identification of any superior or subordinate interests that affect the interest to be valued be included in IVS 101, Para 20.3 (d) regarding the identification of the asset i.e. a valuer is required to” ascertain n consider clients legal right to the property to be valued.

Please imagine what will happen if a leasehold interest is valued as freehold interest and the lease period expires without payment of arrears due I.e. the amount of loan n interest accrued thereon. In such a case a valuer will be certainly found negligent n may have to face consequences.

2. Opinion expressed by Mr. Nelson :

Yes, the valuer is not at all responsible for or competent to verify the title of the property undervaluation.

However, the valuer can not escape from the responsibility of ascertaining what right and interest he or she is valuing and who is holding such R&I in the property under valuation according to the documents provided. We all know that- No right, No value.

It amounts to misguiding a client if valuer fellows the following opinion-

‘In the certificate column, he should always mention as “Legal aspects have not been considered in this valuation”.

The legal aspect is one of the valuation maxims and a valuer has to consider the legal aspect in valuation.

Yes, a valuer may mention that – Title of the property is not verified and the same is outside the purview of the valuer and scope of the assignment. But cannot mention that – “Legal aspects have not been considered in this valuation”.

3. Opinion expressed by Mr. R.K. Gandhi :

Suggestion by Nelsonji to mention in the report that TITLE OF PROPERTY IS NOT VERIFIED AND SAME IS OUTSIDE SCOPE OF ASSIGNMENT appears to be better statement than “Legal aspects not considered.”

My remarks on the above opinion:

I stand corrected. The corrections expressed by the experts are incorporated in the said article and reproduced again.

Request

The readers may highlight the errors if there are any. Suggestions for further improvements are certainly welcome. Similar topics may also be suggested.

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With best wishes,

B. KANAGA SABAPATHY
bkvaluer@gmail.com
www.bkanagasabapathy.com

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