Why do banks generally insist for a 30 year search report of a property to be mortgaged? What is the logic behind this?

Mortgage is valid for twelve years from the date of creation or any subsequent modification . Hence the normal tracing of any encumbrances is verified for thirteen years .

In certain cases it is verified for eighteen years to ensure whether there is any minor interest in the properties . That is to verify whether the sale had been made for and on behalf of any minor in the capacity of the natural or legal guardian , for the purpose of his life maintenance , education, health treatment . Then the sale is tenable provided there is sufficient proof for that .

In all other cases the minor who has become a major can invalidate the contracts as they are voidable . As per law of limitation the option of invalidating is available only for three years from the date of knowing the transaction . That is not from the date of attaining age of majority .

As such if there is no sufficient proof that sale is made for the benefit of minor, towards necessities, health education etc., a note of ratification is entered and it is registered .

In view of the intricacies involved , some lenders do verifications of title for thirty years .

Of late , the sale is registered , if there's minor interest , by showing the share of minor by making deposit till the date of attaining age of majority and the deposit receipt no is incorporated in the sale deed .

Search Report is to trace the history of the property and to confirm whether the property is free from any encumbrances and has a clear marketable title.

Why the search is to be conducted for 30 years is a debatable issue. I have handled mortgage related issues in different states, had interface with prominent advocates and they used to prefer search for 24 years. I presented Bank’s cases in DRT, CBI and Courts and usually discussions never used to happen for a period beyond 12 years.

However, during my ‘Chennai days’ a Senior advocate informed me of following 2 reasons for 30 years’ search report.

1. 30 years is the period of Limitation against charges in favour of the Government Departments.

2. Under Section 90 of Indian Evidence Act 1872, a document purportedly executed earlier than 30 years or more are presumed to be validly executed, in case the property is in possession of third parties.

There are a number of reasons for seeking 30 years search certificate before any mortgage is created in a bank.

Normally banks donot insist for 30 years title deed if proper narration is available in the sale deed or title deed for 30 years and more. Besides the Government or local authorities can't evict a person staying in a place for 30 years or more and he gets adverse possession if property is encroached.

Further minority rights, oral partitions, and private agreements are properly protected if a time period of 30 years is allowed so that there can't be any benami transfer of property.

Banks satisfy them about ownership and right of sale of the owner after obtaining search certificate, rent receipts and legal opinion before creating any mortgage to secure bank advance.