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� Qualities of Good Draftsman

� Real Estate Transactions & their peculiarities

� Documents covering Real Estate Transactions

� Applicable Laws

� Scope for Chartered Accountants

� Conclusion

“Reputation and learning are akin to 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 in acquiring them is well and wisely spent.”

------------Lawyers: “Persons who write a 10000 word document and call it a brief”

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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.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) Actof 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.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� 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 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 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. 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 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 byin 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� 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,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 todocuments regarding property or relatedcommercial transactions between two or moreparties.

� It is a process by which legal title to property is� It is a process by which legal title to property istransferred.

� Such documents are generally called deed orinstruments.

� Generally, one may call drafting of a deed as‘Conveyancing’ but ‘Conveyancing’ is not meredrafting.

DRAFTING v/s CONVEYANCING

� Conveyancing may be called as process of synthesis oflaw and the facts in a language form.

� Hence, (i) Law; (ii) Effect and (iii) Language areessentials of good conveyancing.

� One also needs to have prior knowledge andunderstanding of the details concerning the formation of

� One also needs to have prior knowledge andunderstanding of the details concerning the formation ofcontracts.

� Legal Documents are distinct from literary drafting in asmuch former does not have room for poetic or artisticimagination or flowery language or similes, metaphorsor alliterations.

� Language is expected to be in legal terminology, exactand 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 � 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 � 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.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.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� 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 � 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� 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 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 andregulations governing development of land andconstruction are also to be referred.

� Of course, the special laws governing specialstructures like high rise buildings, Specialstructures like high rise buildings, SpecialEconomic Zones or set of structures like Hospitals,Theaters, etc. also need to be referred forappropriate drafting.

� The exhaustive list may not be complete at anytime and one needs to draw up the list peculiar toeach 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� 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, (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, 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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