Property buying is highly capital intensive, and any mistake made during the process can cause trouble. So, it is imperative to know the dos and don’ts.
A property buyer must do basic legal due diligence to ensure that there are no legal disputes related to the property s/he is buying.
All the property transaction amount needs to be secured. These amounts need to be recorded and put on paper. There must be indemnity and forfeiture clauses as well. Most important is dispute resolution. When you go to a court, the process is lengthy, and it will take you 2-3 years to get relief. That is why you should press for an arbitration clause where you can mutually decide on an arbitrator to settle a dispute.
It is important to know the seller, but how can you verify the seller’s identity?
The first thing to check is whether the person selling the property is the actual owner of that property. The sanctioned plan is critical in a ready or under construction society or project. If you purchase an under-construction property, it must be registered with somebody. If you are directly buying it from the builder, the project should be registered under RERA. About 90% of things are safeguarded if the property is RERA registered. If one buys from a particular person, one needs to go to that concerned builder and check every receipt and see if any amount is due on the seller. One should also see whether there is any litigation over the concerned property. One must conduct due diligence through an advocate. For ready properties, one needs to check the occupancy certificate and government approvals/NOCs.
Approvals you need to check from the government authorities:
The most critical document is the title document. The title document is the first document of the property which is executed. You need to check that you have this first document and chain of documents that will have complete transactions in detail. After that, you need to check taxes, encumbrance certificates and whether the property is mortgaged to any bank or financial institution. In the case of a mortgage, you can take an indemnity affidavit or certificate from the seller. For an empty plot, you need to have a Khasra number and get in touch with the patwari and identify the land. Identification of land is very critical. In case of lease and entering before a sale agreement, you have to check taxes, dues, and any other encumbrances that are present, and those should be mentioned in the agreement as well.
Risk of buying a property without legal due diligence:
General Power of Attorney (GPAs) do not give you a complete title. The title is conferred only through a registered conveyance deed. A registered conveyance deed means a registered sale agreement or an agreement of a gift, and GPAs do not create such legal right. Since property transactions involve a lot of money, legal due diligence is necessary before investing. You need to have an expert on your side who can tell you where you are lacking and look through the paperwork and protect you.
For more information
What is a Conveyance Deed & Why Is It Important?
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What is Title Deed of Property? All You Need to Know.
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What is an Encumbrance Certificate - Types, How to Apply, and more.
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