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Legal Review for Property Purchase Transactions


LEGAL REVIEW FOR PROPERTY PURCHASE TRANSACTIONS

When buying a new Property, legal due diligence is essential to avoid getting entangled in legal issues later. Here are some of the precautions you can take before finalising a property deal.

Check the title of the property-

The title of the property forms the foundation of any contract. According to the Indian Contract Act, no seller can pass on to the purchaser a better title than what he already possesses. Therefore, the title of the seller must be clear and free from any encumbrance. Before you buy a property, verify the title of the seller. A search of the records at the sub-registrar’s office may be carried out for documents that may affect the property and may have been registered .The report will show the recorded owner of title of the property and changes in the title of the property. If the land is an agriculture land than khata of that land or “Kisan Bahi” can be requested from the seller.

Khata is basically a supporting document of title. It is the entry of the present owner in the municipal records. The absence of khata in the name of a current owner can be rectified at any time by applying for khata transfer. Khata has become important because it is required for loans, title opinions, electricity meter name change, registration, etc. Khata is changed after a sale deed is executed or after a property is inherited through a will, gift, partition, etc.

Sale by holder of power of attorney-

If the sale documents are being executed by a person holding power of attorney on behalf of the owner, the said power of attorney should be scrutinised closely. The person must not only possess the power to sell property, the power of attorney should also be validly executed before the appropriate authority. An agreement holder (as explained above) who also has a power of attorney to sell the land and/or building is normally a developer. Alternatively, a person may have paid the entire consideration to the owner and holds on to the property for some time to sell it at a later date for a profit. The sale will be effected by the power of attorney holder on behalf of the owner. Such power of attorney must be properly stamped and registered. It should also not be revoked.

Check the original documents- Always inspect the original documents of the seller and read all the documents carefully before signing them.

Place a public notice- A public notice may be placed in newspapers calling for claims in respect of the property being purchased. Claims can come even afterwards, public notice helps in proving that you purchased the property bona fide and in good faith

Inspect the plans:

If the building is under construction, then inspect the plans to check whether they have been sanctioned by the concerned authority.

Payment of stamp duty: Always verify documents of title to check payment of stamp duty. If the ownership of Property has changed hands more than once, examine all the documents for payment of stamp duty by the predecessors.

If the property belongs to a minor:
In case where the property is owned by a minor, prior approval of the court is required to enable the minor’s father/natural guardian to sell the property. In the absence of such permission, the sale could be voidable at the option of the minor on attaining majority.

Check the minimum tenure of land if taken on lease:

If the flat that is being purchased is in a building built on a land which is given on lease, lease rent would have to be paid for the land by the flat owners. If the lease is to expire shortly, it is possible that the lease rent may increase substantially. Hence, the terms of the lease must be verified before buying the flat.

Other precautions:

Check the occupation certificate: Occupation certificate should be inspected to ensure that the building has been built legally, especially in case of new buildings.

Check the carpet area:You can verify the carpet area by taking actual measurement of the property if the same is ready.

Search for records: A search of the records at the sub-registrar’s office may be carried out for documents that may affect the property and may have been registered.

NOC of the society: It is advisable to obtain a no dues certificate and no encumbrance certificate from the society (if the property is in the society) to ensure that all dues are paid and no mortgage is registered with the society in respect of the property being purchased. In case the property is in a society, check that all the society forms are duly filled and signed.

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