Movable and immovable properties constitute wealth and the root cause of family disputes across the spectrum of households at every stratum from subsistence or marginal to opulent families invariably get embroiled in disputes over property matters and that makes occurrences of property disputes quite common in India. The natural solution for the vast majority of disputing families is dragging the issue to courts rather than opting for an out-of-court settlement. What the vast majority of people fail to realize is that given the fact that the process is long-drawn and expensive, the courts cannot provide assurances of a favorable outcome eventually. Therefore, for a quick resolution of the matter, opting for an out-of-court settlement amongst the family members is far more advisable and in fact, recommended.
What exactly is Family Settlement?
Briefly, a family settlement is essentially an agreement between family members mutually working out the distribution of the sale proceeds amongst each other. All parties to the out-of-court settlement ought to be relations and claimants to the wrangled property’s share. Claims aren’t restricted to real estate or immovable property and can go beyond real estate to movable properties including jewelry or cash/cheque deposits in bank accounts. A family settlement ideally is for settling common or jointly-owned property that belongs to the family rather than individually inherited property or property acquired by oneself.
Family Settlement Agreement for Partitioning of Property
Any written agreement amongst family members is referred to as a family settlement, usually made to avoid taking property issues to court and partitioning the family property amicably with mutual consent. The format for family settlement agreement is the same as a partition deed. Furthermore, registration and stamping aren’t required for a family settlement agreement.
All family members ought to voluntarily and of their free will sign a family settlement agreement without instances of fraud perpetrated, coercion or any family member pressurizing. Besides, it's unnecessary to draft a family settlement agreement in writing as executing the agreement is possible either through a compromise or by family members settling mutually.
Unique Selling Points
A family settlement is a conciliatory process involving a third person, who is a property lawyer or a senior family member, aiding and abetting the family to find a mutually acceptable solution to the property wrangle.
A family settlement may not be the one and only legal document with the distribution of the property also mentioned; in fact, it could be one of many in a series of documents throwing light so to speak on each and every family member’s property rights.
According to the provisions of the Income Tax Act, a family settlement is neither a gift nor a transfer of property. Hence, the exclusive transfer of property documents would need to be prepared besides the family agreement in making a real transfer of property. The property tax aspect must be considered while making a decision on the transfer of property.
Partition/Settlement Suit In Family Disputes In India
Prior to filing a partition suit in court for the partition of property, a legal notice ought to be sent to the other co-owners of the property intimating them about the impending partition or settlement of the family property. Stating the shares of each co-owner can be found on the legal notice along with the details of the disputed property in its entirety as well as the required action to be taken. Not replying at all to the legal notice or the co-owners sending inadequate replies would result in filing a partition suit in the court.
A partition suit is essentially the filing of a court case in instances of disagreements amongst co-owners about the terms and conditions of division of property, and co-owner(s) intend on partitioning the property based on their shares. A partition suit is filed in the court with jurisdiction over the location area of the property.
The court has to first establish as to whether the person filing the partition suit can stake a claim on the property or not. As soon as the claimant establishes his/her share without any further inquiries required, individual right to ownership of the property may be assigned to the co-owners.
If it's impossible to partition the property merely based on the partition suit, the court’s order, in that case, would be conducting an inquiry into the matter and making a preliminary decision of appointing a Commissioner who would be evaluating the property and submitting a report. Thereafter the court establishes each co owner’s share according to the report and partitions the property based on the share of each co-owner.
Can Self-Acquired Property go for Family Settlement?
Executing settlement of self-acquired property during the lifetime of the acquirer is impossible. However, simultaneously, the self-acquired property automatically devolves as a part and parcel of the ancestral property after the property owner's death. Nonetheless, the person may assign the self-acquired property through his/ her will to
any the person he desires.
Even if there is a consensus, it's not enough; as there are quite a few legal formalities that need to be completed to ensure that there is a valid agreement.
The next step is registering the agreement. According to Section- 17 of the Indian Registration Act, a family settlement that aims to assign immovable property must be registered as a mandatory requirement or else the deed would be invalid. Applying Stamp duty to such deeds is the norm and the amount of stamp duty varies based on the value
of the said property.
While a family settlement that has been duly executed is irrevocable, the only exception being through a decree from the court, it can be challenged though, based on specific circumstances that may exist.
Heeding these commonly occurring tripwires while drafting an agreement would result in a flawless, amicable and mandatory family settlement, benefiting one and all.