What checks and documents should be checked before buying flat

657 votes

Clear title to a property is one of the most important factors to be considered before purchase. There are various means to investigate the title such as:

(i) by studying the documents of title to ensure that the owner has proper ownership to the property. The documents of title should be studied very carefully as any shortfall may lead to a defective title.

(ii) taking inspection of the original title deeds.

(iii) taking search of the land records and the records of the Sub-Registrar.

(iv) taking search of the records of the society where the property is in a society.

(v) issuing public notice in newspapers calling for claims in respect of the property.

Sanctioned plans and commencement certificate by the concerned authority should be inspected, especially for buildings under construction.

If the building is not built in accordance with sanctioned plans, the completion certificate will not be granted. For buildings that are complete, occupation certificate/completion certificate should be verified.

Power of Attorney

Many a times property is sold through a person holding power of attorney (POA) on behalf of the owner. This POA should be closely scrutinised to ensure that it is properly executed.

The Bombay Stamp Act, 1958 was amended a few years ago whereby heavy stamp duty is attracted on a POA in case the POA for sale of immovable property is executed to a person not closely related to the executant. Thus in most cases a POA is executed to a close relative as defined under the Act.

This aspect should also be considered. For example, if the land is leasehold and the residue tenure of lease is short and if there is no provision for renewal on old rent, additional ground rent may be payable by the purchaser on renewal of the lease. It is also possible that there may be no renewal clause at all.

NOC and Dues

Although no-objection of a society is not required for sale as per the new model bye-laws, it is preferable to obtain such a no-objection as well as a no dues letter from the society if the premises are in a society.

In case the building is not conveyed to the society by the builder, then no-objection of the builder should be obtained. It should be verified that the seller has paid all his dues such as property tax, service-tax, VAT and other outgoings to the society or the builder, as the case may be.

This aspect should also be considered. For example, if the land is leasehold and the residue tenure of lease is short and if there is no provision for renewal on old rent, additional ground rent may be payable by the purchaser on renewal of the lease. It is also possible that there may be no renewal clause at all.

NOC and Dues

Although no-objection of a society is not required for sale as per the new model bye-laws, it is preferable to obtain such a noobjection as well as a no dues letter from the society if the premises are in a society.

In case the building is not conveyed to the society by the builder, then noobjection of the builder should be obtained. It should be verified that the seller has paid all his dues such as property tax, service-tax, VAT and other outgoings to the society or the builder, as the case may be.

One may investigate whether there are any proceedings against the seller under section 281 of the Income-tax Act, 1961. Further if the seller is a nonresident of India, TDS may be deductible from the consideration paid unless certificate for non-deduction or lower deduction is obtained from the concerned Income-tax officer.

Permitted user and Restrictions

This aspect should be verified as well. For example, one should see whether the property is residential or commercial as per the Development Control Regulations. Other factors such as heritage rules, set-back for road widening may apply to certain buildings, which should also be considered.

Documentation

Proper documentation should be put in place for purchase of the property. The sale document should be properly stamped and registered and the original title deeds should be taken by the purchaser from the seller.

The burden on the buyer is set to increase with the recent hike in the Ready Reckoner (RR) rates. The Maharashtra government is on its way to increase the ready reckoner rates for properties between 5% and 30%, depending on the size and location in Mumbai and the rest of Maharashtra.

The Ready Reckoner is used to calculate the market value of flats for stamp duty and registration charges, which are major sources of revenue for the government after sales tax and value-added tax.

According to Adv. Vinod Sampat, this will also impact property transactions making them costlier. He says, "Redevelopment projects will be more affected and this will also impact capital gains tax for developers. The developer will pass the burden of the price hike to the buyer.

The stamp duty and registration charges are also calculated on the basis of these rates. As a result, the buyer will have to shell out more when he makes a property purchase." In the current situation, where the market activity is sluggish, this move is bound to affect sentiment.

Advocate Siddhant Sharma LawRato

900 votes

Check if it is financed by some nationalize bank, because if it is finance by some nationalize bank then the risk is less. Check the background of the builder company and see if other projects of the builder are completed on time and delivered. You can also do the title search of the plot land on which the building is getting constructed. Also ask the builders office regarding mandatory approvals and permissions regarding the building construction given by competent authorities or by BMC.

LawRato LawRato