Property Dispute and Family Settlement

Bydeb

Property Dispute and Family Settlement

Wars over wealth take place across every stratum from low-income households to ultra-rich families, hence making property disputes a common occurrence in India. Property disputes are a common occurrence in India. The obvious solution for most is to drag the matter to courts instead of settling down. However, most people don’t realize that apart from being a tedious and expensive process, courts in no way guarantee a satisfactory resolution. It is, therefore, advisable to opt for a family settlement. Here are some points that will make you understand the concept of settlement better.
 

WHAT IS FAMILY SETTLEMENT?

In a nutshell, a family settlement is an agreement where family members mutually work out how a property should get distributed among themselves. All the parties should be related to each other and have a claim to a share of the disputed property. The latter need not be limited to real estate, but can also cover movable assets like jewellery or money in bank accounts. A family settlement is usually used to settle common property or joint property that the family owns as opposed to individual or self-acquired property.

PARTITION THROUGH FAMILY SETTLEMENT AGREEMENT:

A family settlement is an agreement between family members, generally made to avoid any court disputes and divide the family property with mutual understanding. A family settlement agreement is made in the same format of a partition deed. Moreover, a family settlement agreement does not require registration and stamping.

A family settlement agreement must be signed by all the members of the family voluntarily, without any fraud, coercion or pressure from any family member. In addition to this, it is not necessary that the family settlement agreement is drafted in a written document and can be executed either by a compromise or by a mutual understanding between the family members.
 

USPs:

  • For those who wish to avoid protracted, public and messy court battles
  • Quicker, more harmonious way to resolve disputes.


PROCEDURE:

A family settlement is a conciliation process where a third person, usually a lawyer or a senior family member, helps the family arrive at a mutually acceptable solution to the property dispute.

A family settlement may not be a single legal document incorporating the distribution of the property; it can also be a series of documents spelling out the property rights of each of the family members.

A settlement instrument is neither a gift nor a transfer of property as per the provisions of the Income Tax Act. Therefore, separate transfer of property documents will have to be drawn up in addition to the said family agreement in order to bring about an actual transfer. The tax fact must be taken into consideration while a transfer of property is decided.


PARTITION/  SETTLEMENT SUIT IN FAMILY DISPUTES IN INDIA:

Now, before a case is filed in court for partition of property, a legal notice has to be sent to the other co-owners of the property regarding family property partition/ settlement. The legal notice for partition suit must state the shares of each co-owner, complete details of the property in dispute and the requisite action required to be taken. If the co-owners do not reply to the legal notice or send an insufficient reply, a partition suit can be filed in the court.

A partition suit is a court case filed when none of the co-owners agrees to the terms and conditions of property division, and one or more co-owners want to divide the property according to their shares. A suit for partition is filed in the court which has jurisdiction over the area in which the property is located.

The court first determines whether the person who has filed the partition suit has a rightful claim in the property or not. One the share is established and no additional inquiry is needed, the court may assign individual ownership of the property to the co-owners.

If the property cannot be distributed merely on the partition suit, the court may order for an inquiry to be conducted and pass a preliminary or initial decision for appointment of a Commissioner who will then evaluate the property and submits a report. The court then determines the share of each co-owner on the basis of the said report and divide the property according to each co-owner’s share.
 

CAN FAMILY SETTLEMENT OF SELF-ACQUIRED PROPERTY TAKE PLACE?

Self-acquired property settlement can’t be executed during the lifetime of a person who had acquired it, but at the same time, the self-acquired property automatically becomes a part of the ancestral property on the death of such person. However, the person can assign the self-acquired property through his/ her will to any person he desires.
 

LEGAL REQUIREMENTS:

Merely reaching a consensus is not enough; there are a few legal formalities that must be completed to ensure that the agreement is valid.

  • The settlement document must be signed by all the family members involved. A missing signature can easily become ground for challenging the document in court at a later date.
  • As a safety measure, the document should be attested by two witnesses, though it is not mandatory.
     

REGISTRATION:

The next step is to register the agreement. According to Section- 17 of the Indian Registration Act, a family settlement that purports to assign immovable property must be mandatorily registered or the deed would be invalid. A stamp duty is applicable to such deeds and the amount would depend on the value of the property involved.
 

BINDING FACTOR:

While a duly executed family settlement cannot be revoked, except by a court decree, it can be challenged in a court of law under the following circumstances.

  • An agreement that is brought about by fraud or coercion
  • Any misrepresentation of facts regarding the title of the disputed property, too, can lead to future altercations.
  • Improper execution.


Paying heed to these common tripwires while drawing out an agreement will result in a foolproof, amicable and binding family settlement, which benefits everybody.

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