Legal due diligence is conducted to verify the ownership over the title of a property. It is important for such due diligence to be conducted in order to verify that there do not exist any claims on the property which may affect the ability to transfer the property. The main objective while conducting due diligence is to collect information regarding the real estate property. The information collected may be with regards to the type of property, the nature of the transaction of the property, legality of the construction, encumbrances on the property, etc. It is also important to verify as to how the person obtained the right over the real state property and that the right is valid in nature.
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How to check the legality of the construction of a property?
A prospective buyer can check whether the project is RERA approved or not. If yes, then everything is legally approved already.
What does RERA approval imply?
The implementation of RERA has brought about accountability and transparency in the real estate sector. It has led to the creation of a regulator in the real estate sector. A RERA approved project ensures that standard practices are followed by the authorities in the development of the project. It ensures that the builders/promoters/developers are prompt in the delivery of the project and that the buyer is aware of all the stages of construction of the project.
Checking for RERA approval of a project:
The registration of a real estate project is mandatory under the RERA Act. However, there may be chances that the claim made by the builders of obtaining a RERA approval is false. In such situations, it is always advisable for the buyers to verify the status of the real estate project. This is done in the following way:
- Since RERA is a state subject, each state has a different RERA portal which has to be identified by the potential buyer.
- After visiting the RERA portal, there will be an option called ‘Approved Projects’. This option contains a list of all those projects that have their applications approved or rejected. It also contains a list of projects whose applications are under process.
In this manner, a potential buyer can check whether the project has received the approval of RERA.
What should I check for when I buy agricultural land that is subleased?
- Title due diligence
- Search in the offices of the sub-register, this search reflects the transactions (change of ownership by deeds) and encumbrances (legal fees) in relation to the land proposed for acquisition.
- Placing a public notice in local newspapers (preferably in English and in local language daily newspapers), inviting any claim over the land.
- Power of attorney, the land is sold by a person who has a power of attorney (POA) on behalf of the owner. This POA should be closely examined to make sure that it is the same land that is being sold.
- Review of original documents for land purchase
- Permits and permissions to buy land in India
- Verify that the approved plans required permits and NOCs
- Taxes and Khatha
- Tenure of the land, if the land is under lease and the excess tenure of the lease is short and if no renewal is foreseen for the same old lease, the additional lease may be payable by the buyer of the land.
- Measurement of the land, to ensure that the dimensions and its boundaries are accurate.
- Floor space index (FSI) to show how much construction can be done on a piece of the land. FSI is determined by the state’s town and country planning department.
Category of States
|Nature of Restrictions in Tenancy Laws|
|Kerala and Jammu & Kashmir||Leasing out of agricultural land is legally prohibited without any exception.|
|Telangana, Bihar, Jharkhand, Karnataka, Madhya Pradesh, Chhattisgarh, Uttar Pradesh, Uttarakhand and Odisha||Leasing out of agricultural land is allowed only by certain categories of landowners such as disabled, minors, widows, defense personnel, etc.|
|Punjab, Haryana, Gujarat, Maharashtra and Assam||Leasing out of agricultural land is not specifically banned, but the tenant acquires the right to purchase the tenanted land after a specific period of creation of tenancy (six years in Pune and Haryana) except if landowner is disabled.|
|Andhra Pradesh, Rajasthan, Tamil Nadu, and West Bengal||There are no restrictions on land leasing, although in West Bengal, only share cropping leases are legally permitted.|
|In Scheduled Tribe areas of Andhra Pradesh, Bihar, Odisha, Madhya Pradesh and Maharashtra||Transfer of land from tribal to non-tribal even on lease basis can be permitted only by a competent authority. The idea is to prevent alienation of land from tribal to non-tribal.|
Can I buy a property from people belonging to SC, ST and OBC?
There are situations in which people may obtain property after influencing the current owners of the property. These owners may belong to lower castes such as scheduled castes, scheduled tribes, and other backward classes. They may not be aware of the rights that they possess on the property and may sell the property to another person under influence.
Buying property owned by SC, ST, and OBC is allowed in only certain circumstances. Agriculture land can be bought from an SC person who has self- acquired the land and the land is not granted by the government. A non-agriculturist can only buy land on permission from the deputy commissioner and the required condition to seek permission is that the family income should be less than 25 lakhs.
The significance of conducting due diligence is important, as it gives complete information regarding the real estate property. It is important to be aware of the legal capacity of the seller of the real estate property, and if the seller has the right to transfer the property or not. There may be circumstances in which the property which is owned by a person may have a condition stating that the property cannot be sold to another person. Or there may be conditions attached to the use of the property in a specific manner.
It is also important to verify issues regarding the title, permitted use, the legality of construction, and encumbrances which may be present on the property. There is also a need to verify if the property being sold is part of an acquisition process. In such a situation, the property belongs to the government and the owner has no rights over such property. Thus it can be seen that conducting due diligence before the property is purchased gives the buyer a clear picture of the rights and liabilities that are with the property.