Settlement of Property

Settlement

Settlement is a kind of transfer of property, predominantly immovable, by its owner. In other words, a settlement is a disposition of property or properties, movable or immovable, as per the wish of the owner of the property. The settlement shall be in written form only and is to be registered.

The settlement of a property can be made by a person, only when it is self-acquired one. The property acquired by partition of family properties is also considered as a self-acquired one. The Transfer of Property Act authorizes the settlement.

Normally, in settlements, consideration would not be there directly as in the case of sales. A settlement can be made in favour of family members or even non relatives due to the love and affection that the executant/ owner of property had over the claimant. Thus 'love and affection' is considered as a consideration here in settlement. A property can be settled in favour a Trust also for religious or charitable purpose and the mental satisfaction is considered as the consideration.

Here, the executant is called as Settlor and the claimant or the beneficiary is called as Settlee. A settlement can be made as absolute or conditional and it can be made to take effect or to come into force immediately or after lifetime of the executant/s. The settlor can impose certain conditions that the settlee has to take care of the settler or pay certain amount every month to the settlor towards the maintenance which implies that the event of non fulfilment of the condition or direction shall invalidate the settlement and the deed becomes voidable revocable by the settler on the ground that the condition is not complied. On the other hand, if the settlement is made as absolute, without any duty or conditions, then it shall transfer the title and ownership completely to the claimant/ settlee, settlor shall  not have any lien or interest over the property and the settlement cannot be revoked. The settlor can retain the life interest and enjoyment right and receive the benefits, yields, rental income from the property during his/ her life time along with spouse.

Registration of Settlement Deed

The settlement amounts to conveyance of a property and hence the deed is to be compulsorily registered and the stamp duty and registration fee have concessions if it is made in favour of family members.

Family members, in general, means mother, spouse, son, daughter, grand children, wife of predeceased son. However, various state government made different stands in defining and listing the relations in the family members.

As the cost of preparing and registering the settlement deed is very less, most frauds are done through settlement deeds and it is also noted that some of the settlement deeds are drafted without legal prudence which make the deed as invalid or challengeable and let the settlee in trouble in acquiring the property and its marketable title. This necessitates that more care has to be exercised while scrutinizing the settlement deeds. Moreover, it may be noted that some of the settlement deeds are drafted without any legal prudence which shall let the beneficiaries in trouble at a later stage.

Gift and Settlement

It is often people got confused by the terms Gift and Settlement. Somebody even say, locally, 'Gift-Settlement'.

Gift and Settlement are not same, there is no consideration for a gift, whereas love and affection is considered as consideration in settlement, marriage may be a consideration for some settlements.

Gift requires acceptance, whereas there is no acceptance in settlement as it is mostly made in favour of family members.

Trust and Settlement

Here also, people have unclear idea and mistook due to a trust deed as a settlement deed. In trust deed, executant is called as Author, vests the property. In settlement deed, the executant called Settlor transfers the property directly to the claimant called settlee, who shall be absolute owners of the property subject to the conditions if any.

Whereas the trust deed, the Author vests the property to the Trustee for the benefit of beneficiary. The Trustee shall manage the property as per the direction of the Author and the beneficiary shall enjoy the benefits and shall not have any administrative control over the property.

Voidable Settlement due to unknown witness

A house in Madurai for sale for a reasonable price. One person is interested in buying the same, negotiated the terms, got the Xerox of deeds and documents pertaining to the property and gave to the lawyer for scrutiny and opinion.

The owner of the property has got the property from his mother through a settlement deed. It is understood from statements made outside the documents that the owner has an elder brother (another son of original owner who executed the settlement deed), who was excluded from the subject property vide the settlement deed on hand. The reason for transferring the property to the younger son alone and that for excluding the elder son is not spelt out in the deed.

Then the lawyer looked into the witnesses, whose details and whereabouts are unknown. It is further understood that the person who witnessed the executant of the settlement deed is ‘caught witness’ or ‘caught witness’, popularly known as ‘pidi saatchi’, who is not at all related to the executant of the deed and is available on verandah of registering offices for a meager payment.

We shall discuss about the above ‘on the spot witness’ (pidi Saatchi) at a later relevant stage and its voidability.

Hence, the client was advised to get an affidavit executed by the mother of the present owner stating the reasons as discussed above. In the event of death of herself, the owner has to arrange to get a consent deed or ratification deed executed by his brother, the probable challenger of the settlement deed, stating that he has knowledge about the execution of settlement deed on hand before or after execution of the same and he shall not pose any challenge on the said deed.

The owner refused to arrange for the consent deed and later it was come to know that his brother challenged the settlement in a Court of Law and hiding the fact, the vendor tries to sell the same in order to toughen the situation for his brother.

Hence, the client dropped the proposal of buying the property.

Voidable Settlement due to a warranty clause

A set of documents pertaining to a property was produced to a proplawyer for scrutiny and opinion. On a fast scanning of the documents, he noticed that an abnormal number of transfers of ownership were taken place within a short span of time, say about five transactions in two years. The lawyer suspected that there must be some disputes in the property.

The scrutiny of the documents showed that the documents are intact and the transfer in each event was perfect. There he started to study the previous document which is a settlement deed.

This settlement deed was executed by a father in favour of his daughter excluding his son. He clearly stated why he excluded his son. The witness also perfectly traceable (that is not ‘on the spot’ or ‘caught’ witness). All the things were found normal. He had stated in the settlement deed that the transfer of property shall take effect after the lifetime of the executant. This is also valid and perfect. He further added a clause, as usually available in all sale deeds, that there is no charge, lien, encumbrance in the property and assured that he would clear them, if any, found later.

Now, the prop lawyer assumed that the brother might have initiated a suit to nullify the settlement deed. Even if it is executed by the original owner with good intention to settle it to his daughter, because of the inadvertently appeared above-cited clause of warranty cum indemnity, the deed may be declared as null and void.

Because it is clear from the deed that the transfer shall take effect only after the life time of the executant. And in the event of finding any lien or charge or encumbrance, the promise of clearing the same by the executant would not be possible when he would not be alive.

Thus the above clause depicted that executant had not understood the meaning of the contents of the settlement deed or in fact he did not study the document, which shows that the document is invalid and void.