Keep calm and verify!

Keep calm and verify!

More often than not, purchasing a house is an achievement of a cherished personal and financial goal in an individual's life. It is often a result of years of hard work and involves a huge investment of one's savings. The right decision, when taken with due care and verification, will lead to a sound investment and peace of mind.

However, negligence of the purchaser to verify the antecedents of the seller and the property will not only burn a hole in the pocket but may also lead to long drawn litigation and hardship. It is essential for the purchaser to safeguard his/her rights and interest and invest in the property only after obtaining appropriate legal advice, including verification of title to the property.

Some of the key aspects of title verification are set out below:

Importance of ascertaining the title to the property & ownership of the seller

It is the buyer's prerogative and duty to ascertain the title of the seller and request for relevant documents and information. It is recommended to trace the title of the property to the earliest time depending on availability of documents, but no less than 30 years. However, in case of non-availability of documents, it can be for a minimum of 12 years to confirm the uninterrupted title and possession of the seller. The key documents are listed below:

Documents of title: Title to a property is acquired and transferred only by duly executed and registered documents, which form the primary source of title. By way of illustration, title documents may be in the nature of sale deed, the order of grant from government, inheritance certificate, will, gift deed, partition deed, settlement deed, joint development agreement, or power of attorney. Since it is a settled principle of law that a seller cannot convey a better title than what he himself has, it is imperative to ascertain the nature of seller's title - freehold, leasehold basis, or by way of development right; and the buyer should call for an inspection of the original title documents in the custody of the seller.

If the seller has deposited the original documents with a third party - as security for a mortgage, or any other encumbrance, under an escrow arrangement, etc, the buyer is entitled to insist that prior to conveying the property, such impediment shall be cleared and original documents are released.

Revenue documents: Revenue documents are secondary documents in the nature of municipal records such as khata and do not per se confer title to the property, but merely support the seller's title. However, it is necessary to verify and confirm that all revenue documents are updated and correspond with the title documents, reflecting the name of the seller.

Identification documents of the
seller: It is also important to ascertain and confirm the identity of the seller and his legal capacity - (a) major in age, (b) of sound mind and (c) is not otherwise incapacitated or prohibited under any law or order of a court, from transferring the property. The buyer may insist on the seller providing all documents of identification confirming the residence status and nationality of the seller, permissions from government authorities for effecting the sale (if so required under any law) and details of joint owners (where the property is held jointly). In addition, where the seller is a corporate entity, partnership firm, trust, association, etc, the constitution documents, along with the resolutions authorising the sale of the property, are required to be provided.

Statutory and regulatory permissions and approvals

Besides the verification of title and the identity of the seller, the buyer should also verify that the property is permitted to be used for the purpose for which he is purchasing. Towards this end, the buyer should also inspect the following:

Non-agricultural permission and land use order: Since several state laws restrict or prohibit transfer of agricultural property, the buyer should inspect the orders obtained for conversion of the property for non-agricultural use and the master-plan and zoning regulations, including orders obtained for change of land use, such as residential, commercial, industrial, public or semi-public, parks and open spaces etc.

Building plan approval: For purchase of an apartment or land with building, the buyer should inspect the approval from the municipal authorities for construction of the building or development plan for the layout or project, along with the approval for providing necessary infrastructure facilities and utilities such as water, electricity and sewage. The buyer may also conduct a physical inspection and measurement to ascertain that the extent of the built-up area conforms to the approved plan.

Completion and occupancy certificate: It's the seller's responsibility to obtain the completion and occupancy certificates before conveying the property, particularly an apartment. Bear in mind that occupying a property without the necessary clearance entails the risk of penalty and demolition, in case of serious violations of the building plan.

Receipt of payments: The seller is responsible for clearing all property taxes and other payments in relation to the property, prior to the execution of the sale deed and non-payment of property taxes constitute a charge on the property. The buyer may also check the payment details with the relevant municipal and other authorities.

Encumbrance: The buyer is advised to undertake searches at the office of the jurisdictional sub-registrar of assurances and the official web portal of the Ministry of Corporate Affairs, in case of the seller being a corporate entity, for details of any charges or encumbrance on the property.

Compliances for residential apartments

In addition to the verification listed above, where the property proposed to be purchased is an apartment, the buyer is also advised to verify that the seller or builder has complied with the relevant law, rules and regulations, among other things.

Registration under the Applicable Apartment Ownership Act / Co-operative Societies Act.

 

Formation of apartment owner's
association.

 

Registration of the Deed of Declaration for the apartment.

 

Registration of the project under the Real Estate Regulation and Development Act, 2016.

While buying a property, it is better to err on the side of caution. With proper legal advice, scrutiny of documents and verification of relevant information pertaining to the property, the buyer can ensure that the investment brings peace of mind and a sense of security.

 

(The author is associate partner, Khaitan & Co LLP)

 

 

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