As per provisions contains in Section 118 of Transfer of Property Act, when two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both the things being money only, such a transaction is called an exchange. This definition is not restricted to immovable property only.
Thus, exchange implies, when two separate property owners mutually agree to transfer the ownership rights by exchanging the property. Further, exchange also mean exchange of lands and barter of goods too.
If one of the items that has been transferred in money, then it is not an exchange but sale, because sale should always be for a price. But money in one form can be exchanged for money in another.
In case of exchange, the transfer of ownership of one thing is not the price paid or promised to pay, but something else in lieu. For example: if a person transfers a land valued Rs.20,00,000/- to another and in return, the other person transfers a shop valued Rs.18,00,000/- and pay Rs.2,00,000/- in cash, it is an exchange.
This type of exchange transactions can be reduced into writing in the form of Property Exchange Deed. This Exchange Deed document for transfer of property rights need to be registered with the jurisdictional sub Registrar’s Office by paying prescribed stamp duty. While drafting the exchange deed and its registration including the document execution, its presentation and admission utmost care need to be taken, since this is a complex process.
Before drafting such complex type deed of transfer, it is very important to ensure that all the necessary requirements for the effective enforcement of such deeds are incorporated which only give legal sanctity to the document. The essential requirements for such deeds are discussed below:
Description of the Deed:
The deed has to specify the description, such as “This Deed of Property Exchange”, which may not necessarily be in bold letters, but is preferable, in order to highlight the nature of the deed.
Date of execution:
It is very important to mention the date of execution of the deed since the same is required to determine the limitation and also for recording of such exchange in the revenue records. Further, the date of execution of the document may vary from the date of registration. However, the documents can be presented for registration, anytime within four months from the date of execution.
Parties to the deed:
All the proper and necessary persons pertaining to the property intended to be exchanged have to be mandatorily made as parties to the deed in order to avoid possible future legal disputes, which may likely to be raised by the parties having interest over the exchanged property. It is also important to properly depict the status of each party to the deed.
The deed shall contain the previous history pertaining to the property in a precise way, explaining the nature of the interest and motive behind the exchange of property, which only authenticate the title, and is called as Recitals in the legal terminology.
A covenant is an agreement wherein either or both the parties to the deed bind themselves to certain terms and conditions, which create an interest over the property, which may either be express or implied. In recent times, with the advent of Apartment culture, it is very necessary to incorporate covenants of various types besides those for maintenance of common areas and facilities in the deed.
This is the part of the deed which states that the parties have signed the deed. This is very important in order to prove the authentication of the execution of the deed and the necessary involvement of the proper parties having interest in the property in legally conveying to the parties of the other part.
This is the witnessing clause wherein the witnesses signing the deed are introduced, along with their names, address and signature. This clause is also very important for the reason that the witnesses also play an important role to prove the execution of the document. However, it is advisable that both the witnesses are from purchaser/ transferee’s side.
This part of the deed depends upon the nature of conveyance. However, operative words clearly depict the intention of the parties conveying the property in favour of the other party/ies, which is necessary for transfer of rights over the property.
This means description of the property following the operative words. Anything intended to be conveyed/assigned has to be specifically mentioned. Every minute detail about the identification of the property has to be clearly incorporated. Any ambiguity about the description of the schedule property may lead to serious problems.
Exceptions and Reservations:
Property intended to be transferred by way of exchange must not fall within the ambit of those prohibited under any statute or the Government notification. This part of the deed speaks about the conditions restraining the alienation and assurance that such alienation does not involve any restrictions.Exception refers to some property or definite right which is existing on the date of conveyance and the same would transfer if not expressly excluded.Whereas, Reservation refers to the right which is not existing but created at the time of transfer.
Completion of transaction:
The deed can be enforceable only if the same is properly stamped under Indian Stamp Act. Apart from this, it is also necessary that the same has to be registered under the Indian Registration Act. Only after the registration of such documents, the right, interest and title over the property is validly transferred from the transferor to the transferee.
Execution of the document will be complete only after the parties put their signatures on the deed. However, special care should be taken when any of the deed is signed by the party who is an illiterate or blind or Pardanashin lady. In case any document is signed by some person by putting thumb impression, the documents has to be signed by the person who has taken the same and if any map or plan sketch is annexed to the document, then the same has to be signed by the parties.
Possession of property:
It is very important that the transferor transfers possession of the property in favour of the transferee. It is not necessary that actual possession has to be handed over to the transferee, but even constructive possession will transfer and create right and interest over the property.
Thus, the transfer or assignment of right, title and interest over the property, irrespective of the nature of transfer, entirely depends upon the deed of conveyance. Any ambiguity, inadvertent addition or deletion in the deed may give rise to lot of legal problems, thereby obstructing peaceful possession and enjoyment of the property.