The Transfer of Property Act, 1882 governs the transfer of immovable property in India. In addition there are number of Purchase of an immovable property involves very huge other legislations which are expenditure and hence to be complied with for abundant care and caution Purchase of immovable properties, particularly by acquiring an Immovable have to be exercised to make corporates and business entities involve huge expenditure Property. Such an exercise the process fool proof. When and hence calls for exercise of prudence and caution. have become more and more an immovable property is Several dos and donts relating to purchase of immovable complex in view of the fact purchased the purchaser that acquisition of an should not only get the title properties are presented in a tabular format. Immovable Property has to of the property but also to be be seen in various divergent put in possession for a peaceful enjoyment. Therefore, utmost angles before plunging into sale. The following Check List care has to be taken when an immovable property is purchased captures such eventualities. by any one.
AN INTRODUCTORY NOTE
Remarks If any such link is not available, call for more details and seek explanations. Compliance must be borne in mind while purchasing such property.
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Ensure that the Vendor of the Property has acquired the subject property for a valuable consideration from the bonafide owner.
This means that the conveyance must have been executed by the Lawful Owner, only then the Vendor could have a bonafide title. If not available, at least ensure that the land is in the possession and enjoyment of the Vendor. Since the title deed is not available, the other documents stated should be obtained without any exception.
If the land has been allotted to the previous owner(s) by the Government, then verify the original allotment letter issued by the Government/the concerned GO. If the title deed is not available, then verify the possession certificate obtained by the owner from VAO/Patta issued by Revenue Authorities together with the tax assessments viz, Kisths/Property tax/Water and sewerage tax etc. If the subject property is a lake/burial ground/harvesting ground/temple land/government land/waste land, verify and obtain a copy of the Patta or other title document issued by the Government. Incase the property is ancestral property, verify and obtain copy of the following documents as applicable: (a) Legal heir ship certificate in original (b) Death certificate of original owner (c) Succession certificate issued by the appropriate Court (d) Copy of Will (e) Probate obtained from appropriate Court (f) Registered copy of Partition deed/Gift deed/ Settlement deed as may have been executed. If the subject property has been obtained by the Vendor by way of auction from Statutory Authorities verify and obtain copy of the certificate issued by such Authorities. Also verify the proceedings thereof.
It is better to avoid buying such pieces of land. If that is not possible, possession certificate/B-Memo /proof of payment of tax should be obtained.
Check and verify if the contents are ok. If there is a dispute between the legal heirs and the estate is huge, ask for a succession certificate issued by an Appropriate Court.
Peruse the probate issued by the Court. Peruse the same and ensure the correctness of the same. Call for the auction notice and proceedings of the meeting. The property may be purchased after getting satisfied about the correctness of the notice, proceedings etc.
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IV OBTAINING THE ENCUMBRANCE CERTIFICATE AND VERIFYING THE RECORDS OF THE REVENUE AUTHORITIES
Remarks There may be instances where the records are in the names of the previous Vendor(s). Therefore, steps are to be taken and accordingly, the current vendors name has to be incorporated. The EC should show a clear title to the Property. If not, the Vendor shall ensure to remove the encumbrances immediately or in a phased manner as agreed upon. Verify from the records of the Revenue Authorities that the subject property is in the name of the vendor from whom the property is proposed to be purchased Obtain an encumbrance certificate for the subject property for the past forty years or as required. Verify if there is any mortgages, lease, attachments or any pending litigation in relation to the subject property. (a) Go through the EC for any attachments/encumbrances (b) Make a search in the SRO concerned on overruling the existence of stay/injunction/direction issued by a competent Court with reference to the property. If encumbrances are reflected, then queries/clarifications must be raised and clarified. If the EC reflects a lease at the time of purchase, then ensure that the Lessees are vacated from the premises by the Vendor himself before taking possession of the property. (The Lease is to be perused to verify if the Lessee is entitled to be in the subject premises after sale/alienation) This is essential since some entries in the EC may show a wrong picture. Ask for a copy of the documents/search report to satisfy one self, regarding the veracity of the transactions entered into. This is necessary for atleast thirty years.
Compare and confirm that the changes in ownership of the subject property as inferred from the chain of title deeds are sequentially reflected in the encumbrance certificate If any links with respect to title deeds are missing, then verify the records of the Registrars office for such documents and obtain certified copies of the same to bridge the gap. Submit a copy of the chain of title deeds of the subject property along with the encumbrance certificate to a Government Pleader and obtain his opinion as to whether the title of the vendor of the property is clear and if the sale transaction may be proceeded with.
This is done out of abundant caution and the Government Advocate may come out with any details that he is possessing.
V CARRYING OUT A DUE DILIGENCE SEARCH FOR PENDING LITIGATIONS, MORTGAGES, CHARGES ETC.
Particulars Remarks Carry out a due diligence search, with the help of an This will be useful, if any litigation is revealed, then appropriate established lawyer in the District Court/City Civil Court and steps may be taken to rectify the same. the concerned High Court to verify if there is any litigation pending in respect of the subject property. If the vendor is a Company, conduct a search at the office of the Registrar of Companies concerned, in which the Registered office of the Company is situated and verify if there are any pending charges on the subject property Check the High Court registry to find out and overrule any winding up proceedings pending against the vendor Company/insolvency proceedings against the vendor/any application pending by the Vendor to be adjudicated as an insolvent. This will reveal only the Charges, which have been duly registered.
VI CERTIFIED TRUE COPIES OF DOCUMENTS /APPROVALS TO BE OBTAINED FROM THE VENDOR OF THE PROPERTY
Particulars Memorandum and Articles of Association of the Company or other deed, which governs the activities of the organization Remarks If not, the documents are to be appropriately amended and compliance ensured.
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such as Trust Deed etc. The same is to be verified to confirm that it provides power to the Company to buy/sell immovable property Board Resolution in case of Companies or Board of Trustees resolution in case of Trusts, authorizing the sale of the subject property. If it is a Trust Property, approval of the High Court is essential for acquisition of public Trust property before entering into a formal sale deed. Approval of the official liquidator is essential if the Vendor is a Company in liquidation. If the vendor is a Public Limited Company, the Company is to be authorized by a resolution passed at the General Meeting of the Company and relevant forms are to be filed with the concerned RoC. The copies of the same are to be obtained and perused. A clearance certificate from the management of the Company for payment of labour and other statutory dues has to be obtained along with a deed of indemnity in favour of the Purchaser. If the Company has been referred to the BIFR, the scheme of reconstruction and also BIFR permission/approval for proceeding with the sale If the vendor Company is under liquidation, then Court order authorizing the Liquidator to sell the subject property If the Vendor is a NRI/OCB/FII, then ensure that the Property is well within the purview of the Reserve Bank of India norms, more specifically contained in the Circular, as may be prescribed from time to time.
This should also satisfy the requirements of the Memorandum and Articles of Association. If not, the process has to be scrupulously followed for getting the Leave of the Court to sell the property. It involves advertisements in newspapers calling for objections, if any and satisfying the Court on the need to sell the property, which is succeeded by a formal approval.
This will help to face the claims that may arise in future, from Statutory Authorities.
A certificate from the Statutory Auditors of the Company stating that they have verified the Board minutes of the Company and that there are no pending charges which are to be filed with the Registrar of Companies. A search report from the Practising Company Secretary could also be cross verified. Particulars Exact description of the subject property such as survey area, boundaries etc. This is to be verified and reconciled with the available records such as Patta, Title deeds etc. FMB Sketch of the area in which the subject property is situated. The subject property is to be traced in the FMB Sketch so obtained A qualified surveyors certificate for the subject property Confirmation/verification that the building in the subject property has been built in accordance with the development control rules of the Metropolitan and Town planning Authorities. If not, necessary regularization has been obtained and proof shown. The actual measurement has to be made to find out the real extent of the subject property in possession of the Vendor, so as to determine the exact sale consideration.
If not, wait and take the approval of the Liquidator to sell the property. The erstwhile FERA and now FEMA contains restrictions/ guidelines on the purchase/sale of immovable property by NRIs/OCBs/FIIs. Those restrictions are to be suitably adhered to. RBI has since relaxed some of them, as contained in Circular No. 7 dated 17th August 2005 regarding FDI in the construction sector. This will ensure compliance. If not, the property may run the risk of being purchased with encumbrances.
This is because, when the land is running to several acres/ hectares, part of the land may be withheld knowingly/ unknowingly. Therefore, to ensure that one gets what are pays for, a survey may be necessary.
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Ensure that the party signing the agreement is sufficiently authorised to do so, i.e he has a Power of Attorney, Board resolution or such other authorization in his favour. Obtain a certified true copy/copy of the aforesaid authorisation and keep them along with the original agreement to sell. If required under the law of the concerned State, pay appropriate stamp duty and register the agreement to sell within four months from executing the agreement
Some States require Agreement to Sell also to be registered. If so, the same have to be registered.
This will help to know the Authority at a later date. Registration of the Sale Deed is compulsory, only then it will have evidentiary value in a Court of Law. This will help in saving stamp duty when an appeal is successfully decided in favour of the Purchaser. The original registered title deed of the immovable property will however be made available only on disposal of the appeal. The sale deed on registration should be kept under safe custody. Adequate care has to be taken on its preservation; in the absence the property may command lesser value in the Market.
Necessary communication has to be sent to the existing This will help the Tenants and Lessees to be put on Notice on Tenants/Lessees informing the change in the ownership and the change in the ownership and title. title of the Property and asking them to remit the lease rentals in the new name. Also consider entering into an addendum with the Lessee for effecting the change in the title.