Title due diligence is an important milestone in any project development. Having clear title for the land to be undertaken for development is paramount before we start any work. Seldom in India, we come across land parcels with clear marketable title. Most of the times there are unresolved disputes, court cases and claims which suddenly emerge the moment we start evaluating the land. As a matter of good practices, we should do a thorough job and establish clear title before spending any monies on a land for development. Since this is a specialised subject requiring legal coordination and review of land records for the last 50-75 years, this exercise is done through specialised law firms in this field. Finance Department shall take the lead in getting the Title due-diligence done in consultation with the CMD’s office.
Rule 6.7
Following best practices shall be adopted for title due diligence of the property >
- The Finance Department shall shortlist reputed law firms and the scope of title verification exercise (standard) in due course and uploaded in the ERP's repository.
- Title due diligence of the property shall be carried out only by a shortlisted legal firm appointed for this purpose.
- The scope shall not only limit to identifying the issues in the title but also to mitigate the same by taking appropriate steps and make the Land free of any title defects.
- The law firm who carries out the title diligence should present not only the Title Report but also handover the complete set of documents collated by them from various resources, such as courts, land revenue department, sub-registrar office and mutation record etc. for establishing the title of the property, for future reference.
- The finance department shall manage this process in consultation with the CMD's office.
Rule 6.8
The following process shall be adopted for title due diligence of the property.
- CMD office shall issue a communication to the Finance department, requesting title verification for a specific property along with preliminary title documents available with them.
- The finance department shall vet the documents based on the intensity of issues involved and location, identify a suitable legal firm from the shortlisted list of firms, and carry out the due diligence.
- The Finance Department shall have an initial discussion with the identified law firm about the engagement, location of the property and make sure there is no conflict of interest.
- Based on the confirmation that there is no conflict, the Finance department shall discuss the scope, timeline and fees payable with the law firm.
- The finance department shall issue the letter of engagement.
- Finance department shall carry out periodical progress review of the engagement and discuss the draft report with CMD office, once presented by the law firm.
- Based on the CMD office's feedback, the finance department may ask the law firm to carry out further work within the agreed scope or amend the engagement letter for enhanced scope.
- Once the law firm issues the final Title Report, the same shall be shared to the CMD office for final review and way forward.
- The final Title Report from the law firm should include the defects in the title and possible mitigation measures to rectify the defects and all the relevant documents verified by them (collected from various sources).
- The title mitigation measures if any suggested the law firm may be rectified by asking the law firm to take up the same as additional scope under the assignment.
- Should the Law firm be engaged in taking up the mitigation measures as well, the Finance department shall ensure that the law firm issues a clear title report post-execution of mitigation measures.
- Post completion of the all of the above activities, the title documents along with relevant supporting documents and the title report shall be uploaded in the data repository of the ERP.
- The finance department may use the above report for future references, especially for sourcing the funding/equity for the project and prospective client’s audit.
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