Property investments are capital intensive and small mistakes made during the purchase process can result in a great deal of trouble for the buyer. This makes it essential for a buyer to exercise caution while examining the property documents.
Several documents must be verified and validated to prove the ownership status of the property.
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.
1. Property documents checklist
As a first step, the buyer should undertake due diligence, to ascertain the existence of the title with the seller, the nature of the title and its marketability and the ability of the seller to convey a clear and marketable title, free from encumbrance.
Documents, for a period of 30 years, if not more (and where documents are not available, for a minimum period of 12 years), must be examined and the seller may be called upon to provide the following documents/information:
- Title documents of the property: Government order for grant, succession certificate, sale deed, gift deed, will, partition deed, etc., evidencing the transfer of title over the years, culminating in the vesting of property with the seller.
- Nature of title: Leasehold, freehold, or development right.
- In case of the seller claiming development rights to the property, the development agreement and power of attorney, executed by the owners in favour of the seller.
- All title documents being duly stamped and registered at the office of the jurisdictional sub-registrar of assurances.
- Khata registered in the name of the seller.
- Information on pending or past litigation.
- Availability of original title documents with the seller.
2. Verify the identity of the seller
The buyer should also ascertain the identity of the seller and any specific conditions, governing the ability of the seller to convey the property. The following should be noted:
- Residence status and nationality of the seller, in case of an individual and whether consents from government authorities are required for the sale.
- Identification of all owners, in case of properties held jointly.
- Where the seller is a company, trust, partnership firm, society, etc. The constitution documents of the entity are necessary to confirm its ability to own and transfer the property, besides ascertaining that the person executing and registering the sale deed is duly authorised.
- Orders from the competent court, permitting sale of the property and appointing a guardian, where the property is held by a minor or person of unsound mind.
Documents that typically help you to ascertain the identity of the seller, include one’s Aadhaar number, PAN number, passport, income tax returns, salary certificates, etc.
3. Conversion and land-use permissions
The buyer must examine the Master Plan and verify that the property is developed in accordance with the zoning plan – such as residential, commercial, industrial, public/semi-public, parks and open spaces, etc.
4. Construction approvals
For purchase of apartment or land with constructed buildings, the buyer should also verify the building plan/layout plan sanctioned by the local municipal authorities, along with approvals issued by government, statutory and regulatory authorities, for providing infrastructure facilities, water, sewage, electricity, environmental clearance, fire safety approval, etc.
It is important to request the builder for copies of NOCs from various departments, such as the Pollution Board, Environment Department, Sewage Board and Traffic and Coordination Department, which forms the ‘intimation of disapproval’ or the first permit required for building construction.
5. Occupancy certificate
It is mandatory for the seller to obtain the occupancy certificate (OC) from the competent authority. Use of the property, without obtaining occupancy, exposes the buyer to penalty under the applicable building bye-laws and the risk of demolition of the property.
6. Status of tax payment
Non-payment of property taxes constitute a charge on the property, which in turn affects its marketability. Hence, the buyer must verify with the municipal authorities that the seller has not defaulted on payment of property taxes.
It’s important to ask for all utility bills from the seller.
7. Physical survey and access to the property
The buyer may undertake a physical survey and confirm the extent and measurement of the property.
8. Compliance under the Real Estate (Regulation and Development) Act, 2016 (RERA)
The RERA mandates that developers should register their projects with the authority constituted under the Act. A buyer, intending to buy a property in a project coming under the ambit of the RERA is advised to verify whether property has been registered with the authority.
The information available on the official web portal of RERA for each state also provides details of any cases/complaints filed against the developer of the project and default by developer, if any and thus, provides useful insight into the credibility of the developer and the project and helps the buyer make an informed choice.
Buyers should take note of the fact that the law mandates that all real estate brokers should be registered with the state RERA, in order to operate legally.
Also, note that agents need to get their RERA registrations renewed, periodically. Ensure that you are dealing with the right person.
9. Documents required in case of loan outstanding
In case there is any loan outstanding on the property you are buying, it is important to perform due diligence and check documents, before signing a deal.
As a potential buyer, you can ask the seller to clear the outstanding home loan amount or a part of it, obtain the original property documents from the bank and get the property registered in your name, after which you can pay the remaining amount.
It is advisable that the buyer requests for the closure of the loan and gets a ‘no dues certificate’ from the bank, before the purchase.
These are just some of the points a buyer must keep in mind when buying a property. As an individual investing in property, the investment starts with the purchase and is followed by several other tasks before you can achieve the best ROI on your investment.