In In Real estate, legal due diligence is an investigation of real estate records and everything else which is related to the lease, sale, purchase, or mortgage of the property. A buyer has to understand the legal risks that exist in a potential acquisition. The main reason behind conducting due-diligence is to achieve a crystal-clear vision of the title of ownership, of the immovable property including all encumbrances, permitted uses, charges vested in property, and compliance of statutory requirement.
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How to do Due Diligence for Property Sale and Purchase transaction?
Before investing in a property, you must take certain precautions. Before entering into a purchasing agreement, it is important to ensure that the title of the property is marketable and clear.
- You should make searches at Sub-registrar’s offices which will show some transactions and encumbrances on the land.
- Placing a public notice before the purchase of the land in local newspapers will help you in knowing the existence of any claim or third-party rights over land.
- Verification of the original documents of the Land is important before purchasing the land
- If the land already has buildings/structures, then it is advisable to verify the approval plans, NOCs, and necessary permissions
- You should also ensure that the property tax is maintained and paid up to date.
- The buyer also has to make sure that the seller has made the payment of all the amounts due on the land.
- Check the measurement of the land before registering the land in your name
- FSI (Floor Space Index) amount should also be checked as this indicates the construction which can be done on a piece of land. This is determined by the state’s town and country planning Department
What documents should property buyers check before buying a property?
Before buying a property, you must ensure that all the documents are legal and are available with the seller or the previous owners of the property.
Documents to check before buying a house:
- Absolute sale deed in the seller’s name.
- Latest receipt from the tax payment.
- Information about any loan which is outstanding on the property, the latest bank statements.
- Encumbrance Certificate till the date of purchase should be checked and verified.
- Latest receipt and electricity bill for the house.
- Apartment association’s NOC.
- Sanctioned building plan.
- Occupancy or possession certificate from a builder.
- Title receipt and electricity bill for the house.
- Apartment association’s plan.
- Occupancy or possession certificate from the builder.
- Title document of the landowner.
- GPA, joint Development Agreement & Sharing/supplementary Agreement, between the builder and landowner.
- Copy of all Registered previous agreements.
- Power of Attorneys(if any).
- Photocopy of Society registration certificate and Society share certificate.
Documents to check while buying a Land:
- Documents like the Title deed, Mother deed, Conveyance deed, Sale deed
- Katha Certified and Extracts.
- RTC Extracts
- Mutation Registration EXtracts
- Power of Attorney
- Joint Development Agreement
- Loans on property verification
- Occupation certificate
- Deed of Declaration
- Completion certificate
- Layout approval plan
- Latest electricity bill
What documents confirm the seller’s Identity?
There should be an identity of the seller before buying the property. A conversation with the seller, the seller’s agent, and a review of the public records can fill in detail blanks that will help you make a better decision The following instances may be noted.
- Residence status and nationality of the seller, and consents from government authorities are required for the sale. Documents that establish the identity of the seller include PAN, Aadhar Card, Passport, etc.
- The identity of all the sellers should be verified if the property is held by joint owners.
- In case the seller is not an individual but a company, firm, society, association, etc, the constitutional documents of the entity to confirm its ability to own and transfer the property, apart from ascertaining that the person executing and registering the sale deed is duly authorized.
- Where the property is held by a minor or a person of unsound mind, orders from the competent court, permitting the sale of the property, and appointing a guardian.
What documents should be verified to check the rights of an owner over a property?
Showing the registered deed of the house having your name is the simplest way to prove the ownership of the property. There are several documentations that can be used to verify the title of the property.
- By getting a copy of the deed of the property
- By producing the copies of your purchase documents
- Certificate of title which serves as the proof of ownership in case of mobile homes
- The receipt of property taxing you have been paying for several years can also be produced.
- By providing a copy of mortgage payment records if a deed or other ownership documents are not available
- Proof of homeowner’s insurance on your name
- Utility bills issued in your name has the value to prove the ownership of the property.
Is it necessary to hire a lawyer for property verification?
It is not mandatory to hire a lawyer while purchasing a property. If one is aware of all the legal procedures there is no necessity to hire a lawyer. As the real estate transactions are complicated, even if there is the slightest doubt, it is advised to avail of the services of a lawyer because, for most people, investment is a one time process. Even though the cost would be incurred for this process, it would enable the investor to enjoy peaceful possession as the attorney provides unbiased advice and would also take the necessary legal action if any such cases arise.
Legal due diligence is one of the significant aspects of a transaction involving real estate. This process has the potential of not just impacting the commercials but also determining the feasibility and viability of the transaction. It is recommended to determine and ensure that all the documents, insurance certificates, and authorizations are in accordance with the statutory requirements.
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