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Introduction : Owning a house is an important thing in one’s life. However, one needs to be careful while buying land/house to avoid falling into legal hassles. A lot of care is needed from the beginning - right from site selection till the registration of the land. The legal status of the land is one of the first issues that you should address before confirming a property.
Don't give any advance before getting confirmation about the legal status of the property. Before buying a land, a number of checks need to be done to confirm that the land has a clear and marketable title. The first thing is to find out the tenure and legal right of the holder of the land in government records. The tenure or possession right could be freehold, leasehold or may be held under a government grant. Freehold land is always most preferable. The seller should provide all the necessary documents to the buyer.
Always consult a good lawyer and obtain his opinion before signing the agreement and sale deed.

Inspecting Title Deeds : The first step is to see the original title deed of the land which you are going to buy. Confirm whether the land is in the name of the seller and that the full right to sell the land lies with only him and no other person. Don't be satisfied with the Xerox copy of the title deed. Insist on seeing the Original Deed. Sometimes the seller may have taken a loan by pledging the original deed. It also needs checking whether the seller has permitted any entry/access to others through this land and whether any other fact has been suppressed/left undisclosed by the owner of the land. It is better to get the original deed examined by a lawyer. Along with the title deed, the buyer can also demand to see the previous deeds of the land available with the seller.

Inspecting Tax receipt and bills: Property taxes which are due to the government, corporation or municipality are a first charge on the property and, therefore the owner should possess the latest tax paid receipts, which you may inspect. Enquiries should also be made in various departments of the municipality to ascertain whether any notices or requisitions relating to the property have been issued and are outstanding and not yet complied with. Also inspect the bills regarding electricity and water charges to local bodies. While inspecting the property tax receipt, it can be noted that there are two columns in the tax receipt. Make sure that the name entered in the owner's column is correct. The second column will be for the name of the one who paid the tax. Sometimes the owner may not have the tax receipt with him, in such cases, contact the village office with the survey no. of the land and confirm the original owner of the land. If you are buying a house along with the property, then the house tax receipt should also be checked. Also ensure that the electricity and water bills are paid up-to-date and if there any is balance payment to be made, ensure that it is made by the seller.

Encumbrance Certificate: Some properties have an encumbrance, which is a right to the property by a third party. It limits land use but does not prevent transfer of title. Where there are encumbrances in the title to be conveyed, the contract must express the agreement of both parties. The most common encumbrances are

  • Unpaid taxes and assessments
  • Mortgages
  • Lease of the property
  • Judgments against the seller
  • Mechanics liens
  • A legal document giving notice that an action is pending in the courts
  • Encroachment of a structure
  • Easement
  • Deed restriction
  • Code or zoning violations

Before buying any land or house, it is important to confirm that the land does not have any legal dues. It is available as a certificate called encumbrance from the sub-registrar office where the deed has been registered, stating that the said land does not have any legal dues and complaints. The encumbrance certificate for the past thirteen years should be taken or for more clarification, you could demand 30 years encumbrance certificate to be checked. If you still have any more doubts, you can take a Possession Certificate of the ownership of the particular land, which is available from the village office.

Pledged land : Some people may have taken loan from the bank by pledging their land. Ensure that the seller has paid back all the amounts due. Don't get satisfied with the receipt of the payment made. A release certificate from the bank is necessary to release all the debts over the land legally. You could buy a land without the release certificate. But if you want to take a loan in future, the release certificate is a must.

Measuring the land : It is advisable to measure the land before registering the land in your name. Ensure that the measurements of the plot and its borders are accurate. You can do this with the help of a recognized surveyor. This will avoid lots of problems in the future. You could also take the Survey Sketch of the land from the Survey Department and compare for accuracy.

More than one owner : In some cases, the land will be owned by more than one person. So before registering, check if there is more than one owner, and if there is, get release certificate from the other people involved.

Sale consideration : The normal practice is to pay advance at the time of signing the agreement and pay the balance at the time of registration of the sale deed. Another payment will be contemplated on the receipt of No-Objection Certificate from the Appropriate Authority or after getting Income-Tax Clearance under Section 230(A) of the Income-Tax Act. Such clauses should be included clearly to avoid any misunderstanding and the resultant litigation.

Description of Property : There should be proper and clear description of the immovable property covered under the agreement of sale. The High Court has stated that if description of the property is not correctly given in any plaint concerning immovable property, then the Courts must reject the plaint. Unless clear description of the property is given, drafting of the decree is not possible and execution of the decree also will be difficult.

Buying land from NRI land owners : A person staying abroad can also sell his land in India by giving a Power of Attorney to a third person authorizing him with the right to sell the land on his behalf. But in such cases, the power of attorney should be witnessed and duly signed by an officer in the Indian embassy in his province. There is no legal support for power of attorney signed by a notary public.

Vacant Possession : It is not advisable to buy properties including flats without vacant possession. Personal verification will go a long way to avoid the pitfalls in the transaction.

Compliance with Statutory Obligations : If the sale value of the property exceeds Rs. 25 lakhs in Chennai, then the seller and the purchaser must forward copies of the agreement to the Appropriate Authority appointed under the Income-Tax Act, 1961 under chapter XX-C within 15 days along with Form 37-I prescribed Under the Act for their No-Objection Certificate.

Agreement / Sale Deed : Before drafting the Agreement/sale deed, the purchaser should ensure the correct identity of the seller as well of the property (by taking physical measurement of the property), and if vacant possession is committed, then purchaser should ensure taking of vacant possession, at the time of registration.
Once all the terms of the deal - financial/otherwise - are settled between the parties, it is better to give an advance and write an agreement. This ensures that the owner does retract on the costs committed to, or make a sale to someone else who offers more money. The agreement should be written in Rs 100 stamp paper. The agreement should state the actual cost, the advance amount, the time span within which the actual sale should take place and how to proceed in case of any default from either parties, to cover the loss. The agreement can be prepared by a lawyer and should be signed by both the parties and two witnesses. After signing the agreement if one of the parties makes a default, the other party can take legal action against him.

Registration : The land can be registered in the office of a sub-registrar, after preparing the title deed including all the relevant information. You could get the title deed written by a government licensed Document writer. Even lawyers can prepare the deed, but the document can only be computer printed or typed, not handwritten. Handwritten documents can be prepared by only those who hold the scribe license.
A draft should be prepared before actually writing the document in stamp paper. Make sure all the details mentioned are accurate. If there is incorrectness in the document after registering, a secondary document with the correct details has to be registered and depending on the incorrectness, the registration expenses will be repeated.
Make sure that the deed is registered within the time limit mentioned in the agreement. Original title deed, previous deeds, Property/House Tax receipts, Torence Plan (optional) etc plus two witnesses are needed for registering the property. Torence plan is a detailed plan of the property prepared by a licensed Surveyor which will have accurate details of the measurements including width, length, borders etc. This plan is needed only in some specific areas. For land costing more than five lakhs, the seller should submit either his Pan card or Form Number 16 during registration.
The expenses involved during registration include Stamp Duty, Registration Fees, Document Writer’s/ Lawyer’s fees etc. The stamp duty will depend on the cost of the property and varies from Municipality to Corporation to Panchayat. In Panchayat, the stamp duty will be 4% of the cost of the land whereas in Municipality it is 5% and in Corporation 6%. Two percent will be charged as the registration fees. Document Writer’s fee also depends on the cost of the property and varies with individuals. There is a percentage prescribed by the government as Document Writer’s fee and they cannot charge more than the prescribed limit.
After registration, the registered document will be received after 2-3 weeks, from the registrar office.

Changing the title in Village office : The whole legal procedure of buying the property will be complete only if the new owner’s name is added in the village office records (Patta). An application can be made along with the copy of the registered deed to the Village office to get this done.

To sum up :

  • Scrutinize all original documents. The title to the property may be single or joint ownership basis. In the event of any difficulty, a certified copy can always be obtained from the local sub-registrar's office on payment of a nominal fee.
  • Refer the documents to a lawyer who may certify that clear title can be passed on to the buyer.
  • Obtain 'No Encumbrance Certificate' for the past 30 years to ensure that no mortgage has been outstanding on the property to be purchased. This will also enable the buyer to ensure that the title belongs to the rightful owner who wants to sell it.
  • Obtain required clearance under the Urban Land-Ceiling and Regulation Act and IT Act wherever applicable.
  • In the event of sale by a third party viz. Real-estate promoter, check whether he is the absolute owner or holds a registered power of attorney to sell the property. It is better to buy from an established developer with an unblemished record.
  • Seek the assistance of a reputed consultant to assess if the price quoted is the correct market value.
  • There needs to be a clear agreement on the price to be paid and payment terms. Payment should invariably include a clause on payment of last installment, on possession and registration.
  • Sale deed or Agreement to sell must be executed by the seller and buyer. This should include full details and origin to the title to the property, proper identification to the property by neighboring survey numbers, payments terms and payments made so far and cheque/draft references. Also make sure that the buyer-builder agreements are equitable and do not contain clauses that violate your rights and interests.
  • Buyers should ensure that their right is not negated in the sale deed through undertaking additional construction in violation of the Apartment Ownership Act if the municipal bye-laws permit it at a future date.
  • The stamp duty varies from State to State in India. Ensure that the prevailing stamp duty is remitted. It is levied on the land value of the apartment and in some cases it is on the total value of land and building.
  • The seller on completion of the project should execute the transfer of title to the buyer by getting it registered with the local sub-registrar of properties under whose jurisdiction the property is located.
  • While buyer's presence is not necessary he can authorize his representative to execute the document, the seller (this need not be the real estate promoter) must be present and transfer the title by signing the transfer deeds and all appropriate documents.
  • The Sale Deed prepared earlier is only an initial contract. Before registration, the Final Sale Deed is prepared on stamp papers of appropriate value which will be the prevailing rate of stamp duty in the respective States. This set of documents should be executed by the seller.
  • Note that under Section 230A of the Income Tax Act, 1961 all Sale Deeds in case of immovable property valued at more than 25 lakhs should be cleared by the Income Tax Officer. Only then, the Registrar will register the property.
  • Irrespective of the value shown in the documents, the Sub-Registrar will determine the market value of the property and the stamp duty.
  • In case of purchase of an apartment, proportionate share of the land on which the apartment is built, is registered.
  • The price indicated by the promoter should be firm. If the promoter desires for escalation, it should be done in accordance with procedure followed by Government undertakings and this should form part of the Agreement.
  • The Agreement should accompany plans, drawings and specification of each item of work.
  • The Agreement should specify the completion date and the terms of compensation in the event of delay in delivering possession of the apartment.

 

 

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