Releasing Property Interests: Unveiling the Secrets of Effective Release Deeds

Real estate is a popular investment option for those looking to build an asset that will grow and provide an attractive ROI with time. However, due to the high value of real estate properties, disputes, litigation, and conflicts of interest are very common. The property laws in the country are thorough and are well-equipped to deal with most challenges that arise in this area. Once any dispute or conflict is resolved, though, it is important to secure your rights with the help of a robust release deed. Here is a comprehensive guide to understanding the necessity and advantages of a release deed.

What is a release deed?

In matters of real estate, a release deed is a legally binding agreement between two parties in which one of the parties agrees to relinquish all future claims on a piece of property. So, when two parties are involved in a dispute or wish to terminate a prior agreement, signing a release deed can indemnify one of the parties against future litigation or liabilities and bring closure to the matter. It is a legal document that must be duly signed, stamped and registered for it to be legally binding. The release deed is registered under Section 17 of the Registration Act, 1908 and becomes a matter of public record.

In some cases, a release deed is also referred to as a relinquishment deed. 

When do I need to enter into a release deed?

• When two parties are involved in a dispute or litigation over a real estate property and have finally managed to reach a resolution, a release deed is required to ensure that one party agrees to release the claim on the property and ends the possibility of future claims.
• When a property owner obtains a loan using their property as collateral, the lender has a legal right to the property until the loan and interest are fully repaid. When the borrower successfully pays off the loan and interest, they must enter into a release deed agreement with the lender for the latter to relinquish their claim on the property.
• If two parties have a claim over an inherited property as legal heirs or successors of the previous owner or if a property is held in joint ownership, and if one of the parties decides to give up the claim, whether voluntarily or in exchange for monetary compensation, it is necessary to register a release deed. This legal document formally releases the claimant's right to the property and transfers it to the other party.
• A release deed is also essential if a property owner decides to gift the property to someone. Here, both a gift deed and a release deed must be registered, and the registration charges and stamp duty paid. This secures the receiver's right over the property.
• Suppose there is a sale agreement or a builder-buyer agreement for the sale of a property and, for some reason, one of the parties is unable to complete the terms. In that case, a release agreement is entered to bring closure and forestall future disputes. Apart from real estate dealings, any agreement or deal that falls through and cannot be completed is followed by a release agreement.
• Similarly, a release deed is necessary to prevent future disputes when a property is rented or leased to a tenant, and one of the parties ends the lease deed before the stipulated period or term.

How to execute a release deed?

A release deed is a legally binding agreement, and it is a good idea to consult a lawyer dealing in property matters to draft this document. It will require additional supporting documents such as property title, lease or sale agreement, gift deed, property tax receipts, etc. A notarised affidavit of release is also necessary. Once both parties and the witnesses have signed the agreement, it must be registered with the sub-registrar's office. The registration charges and stamp duty must be paid. Different states have different stamp duty charges for registering a release deed. This can be between 0.5 to 2 percent of the transaction value.

Conclusion

A release deed is a very effective tool to bring closure to disputes and prevent future challenges between parties involved in real estate dealings. It must be carefully worded and understood by both parties to be effective. Consulting a legal professional can help draft a robust release deed and protect both parties' interests.