What is Legal Scrutiny Report or Search Report or Title search Report For Loans

In the aftermath of COVID-19, when economic condition not only of the nation but also of the Individuals has been disestablished. Everyone requires financial support, Whereas there are various means for the government to bolster the economy. Individuals either take the loans from the money lenders at an exorbitant rate of interest or he may borrow from the Financial Institutions Such as Banks or NBFC's (Non-Banking Financial Companies). For the loan/debt by the banks, they often ask for the various documents viz. Identity card, Bank Statements, PAN Card and Legal Scrutiny Report, etc. Among these documents, the most prominent is the Legal Scrutiny Report. Herein I will deal with various facets of the legal scrutiny report.

What is Legal Scrutiny Report (LSR) or Search Report or Title Search Report (TSR)

Legal Scrutiny Report is an account of immovable property (Which may be offered as collateral security or on which charge or mortgage sought to be created) prepared by the designated Advocate of the Bank, Howsoever Certain Banks permits this account to be prepared by any advocate of the client's choice. In this Report Advocate while investigating the documents relating to the property gives his opinion on various aspects viz.

1. Whether the Person sought to create charge/mortgage or offering the immovable property as collateral security is the owner of it?

2. If he is not the owner then in what capacity he holds the property? e.g. he may be occupancy tenant or lessee of the property.

3. By which transaction such person became the owner of the property or acquired an interest in the property? e.g. by inheritance or self-occupied.

4. Whether there is any prior encumbrance on the property?

5. Whether Property is free from all type of dues?

6. Whether Property is subjected to any acquisition proceedings under any law for land acquisition for time being in force?

7. Whether the Property is affected by any local laws or other regulations having a bearing on the creation of the security? e.g. Agricultural Laws, SEZ Regulations, Coastal Zone Regulations, Environmental Clearance, etc.

8. In the case of Building or Flat, Whether all the Modalities as to Real Estate (Regulation and Development) Act, 2016 (RERA) have been complied with?

9. Whether any litigation is Pending regarding the property?

10. Whether any assessment/recovery proceeding has been pending under the Income Tax Act,1961 against the person concerned?

11. Whether any Proceedings under Insolvency and Bankruptcy Code,2016 is pending against the concerned person?

12. Whether the property is SARFAESI (The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002) compliant?

Documents required for the Legal Scrutiny Report (LSR) or Search Report or

Title Search Report (TSR)

1. Sale-Deed/ Partition Deed/ Will as the case may be.

2. Khasra/Khatauni Or Any document containing a record of rights. e. g. in Madhya Pradesh Rin Pustika is Prepared for individuals containing a record of right.

3. Revenue Receipts duly given by Municipal Corporation Or Municipal Council as the case may be.

4. No Objection Certificate (NOC) issued by the Income Tax Department. (In case assessment/recovery proceedings commenced against the concerned person)

5. An Affidavit to the effect that there is not an encumbrance on the property, this affidavit to be made by the concerned person.

What Procedure adopted by the Advocates for making Legal Scrutiny Report (LSR) -

After perusal of the above-mentioned documents, advocate applies for the Search Procedure in the Registrar Office Where the instrument (Sale-deed/ Will/ Partition-deed) relating to concerned immovable Property has been registered. In the registrar office, advocates search as to Chain of Titles relating to the Property usually of a period of the last 30 years.

After making this search and assessment of the requisite documents, He submits his Report to the bank While answering the above-mentioned questions.

Conclusion -

The Legal Scrutiny Report or Search Report helps the banks to assess whether any prior encumbrance exists on the immovable property and in what capacity the concerned person holds the immovable property. Banks after perusal of the Legal Scrutiny Report Submitted by the Advocate and considering other relevant factors may either grant or refuse to grant the loan.

(This Article deals with the cases when loans are granted in Individual Capacity)

By

Nilesh Mulatkar