How to check documents before property purchase

In all property transactions, it is essential to subject all related documents to rigorous scrutiny and verification by a qualified expert in order to ensure that the property has a clear and marketable title, says Kishor Pate, CMD, Amit Enterprises Housing Ltd.

For the purchase or lease of real estate for self-occupation as a home or commercial premises, or as an investment, various factors need to be considered beyond the price and location. 

In the case of properties in new projects by reputed developers, there is no reason to be too stressed about this. However, it can and often does become necessary while purchasing a resale property. One of the most important aspects to verify is the title of such property.

The title verification process should actually begin even before an actual check of documents. For instance, if a person or entity offers a property at a rate which is below the going market value, it is definitely a signal for caution. Owners of property with complicated or defective titles will attempt to pressurize interested parties to buy the asset at short notice by offering a very low price as enticement.

In all property transactions, it is essential to subject all related documents to rigorous scrutiny and verification by a qualified expert in order to ensure that the property has a clear and marketable title. To begin with, a prospective investor needs to establish whether the property on offer is leasehold or freehold, and whether it is fully or jointly owned. Next, the documents creating interest in the property – namely the title papers – must be reviewed.

Depending on the nature of the property or proposed transaction, these include the sale deed, lease deed, conveyance, development agreement and the documents establishing the chronological chain or ownership. The primary intention behind this search is to establish how the owner acquired the property and what kind of rights he or she has over it.

Other documents to be checked are the property card (if available), the 7/12 extract and the Index II. Further, a prospective investor needs to establish whether all the above documents are properly registered in government records, along with any encumbrances such as mortgage or pending litigation.

How A Title Search Is Conducted

An advocate issues a Title Certificate after conducting a search on the title of the property that is intended for purchase. This search will encompass the chain of sale/conveyance agreement, property card, 7/12 extract, Index II and records in the sub registrar’s office. The title certificate states that the property is unencumbered and has a clear, marketable title.

Also to be included in a thorough title search are aspects indicating ‘right of adverse possession’, which means that any person physically holding the property without dispute from the true owner can claim the right of ownership. All this considered, it is advisable to conduct a 30-year title search, or at least a 12-year search.

Public Notice

Though it is not mandatory, there are sometimes reasons for doubt about a resale property or a piece of land with a long history of ownership. In such cases, the intending purchaser or his advocate often issues public notices in newspaper. The practice is to issue two public notices – one in English and the other in the local language of the state – stating that the purchaser or his client has agreed to purchase or negotiate for the purchase of a property from a named vendor. This invites counter-claims in the form of mortgage, charge, lease, lien, easement, gift, trust, etc. against the property to be notified to the buyer or his advocate within a specified time (normally 14 days) with supporting documents.

However, it must be noted that merely giving public notice and not receiving claims from any persons will not bind those who may be real claimant if they were not aware of the public notice. In case of dispute, such public notice will support the buyer’s contention that he is a bona fide purchaser for value without notice of such claim.

Delay in delivery pushes people go for resale property

 

"About 74 percent home buyers across India are negotiating for a ready-to-move property," real estate market news portal Track2Realty's survey titled 'Home Buyer's Satisfaction Index' said.

Mumbai: Owing to delays in project completion, most of the people prefer to go for resale property, which gives them instant access to property and also locational advantages with all amenities in place, a study reveals.


The survey says out of the remaining 26 percent, who opted for new launches for price discounts, as many as 82 percent were now repenting their decision, mainly due to delays in the project completion.

The survey was conducted in Delhi, Mumbai, Kolkata, Bangalore, Kochi, Ahmedabad, Chennai and Patna.

About 68 percent of buyers prefer ready-to-move property because they could avail of tax benefits only after getting the possession of the house, it says.

"Saving tax on the EMIs is one of the big reasons why eight out of 10 plan their house buying," it points out.

Around 92 percent of the respondents agreed that buying under-construction property makes them suffer double blow of paying rent and EMI and not getting any tax benefit.

Nearly 52 percent were ready to pay slightly more for a ready-to-move property because they wanted to make sure who their neighbours would be and the overall community profile.

Delay in the delivery was cited as a major reason by almost 92 percent buyers for reluctance to book a new launch.

How to buy a resale property?

Buying a home is anybody’s dream and those who achieve this without much hassle, are the luckiest lot. While buying new or old property, there are certain procedures should be followed to ascertain the genuineness of the documents supplied by the seller. Unlike new property, where we can, to certain extent, go by the reputation of the builders or developers, buying old properties involve more risks and depends entirely on the buyers’ knowledge to check the veracity of facts written in the documents. 

There are a million things to look into when one chooses to go for resale property. In Tamil there is a pro-verb saying “both buying or building a home and marrying off one’s daughter, are the daunting tasks on earth.’  

There are three things one should look into when decide to buy a second-hand property – selecting a good advocate who has good reputation of checking property papers, checking the structural strength of the building by engaging a structural engineer and before finalizing the deal, one should make a building survey to understand the cost of repair or renovation work and cost involved.

Choosing a lawyer

It is always better to go by the popularity or through referral while choosing an advocate. “I have to check a property - a land on the outskirts - as I was not sure about the genuineness of it. I wanted to consult an advocate. As I did not know any one, I asked my colleague who has recently purchased a 10-year-old flat and consulted a lawyer to check the papers. He, not only gave proper advice, also educated me what to check while buying a non-approved land from promoters,” said Ramkey, an IT engineer from Chennai.  

Resale real estate market is full of cases where a single property is sold to multiple buyers at the same time. For this it is advisable to run a check on the property title before enter into an agreement. Hiring of reputed or genuine property lawyer who could check records of the past 12 years verifying the authenticity of the seller is a prudent move. 

The charges for checking the property papers run between Rs. 5,000 to Rs. 15,000. The lawyer should give their observation in writing and also help complete other paperwork related to property registration and stamp duty.

Repair or renovation cost

Generally flat or home as old as five years will not have much repair work as compared to the one which is ten years ole. However, rarely one would find a resale property that does not need some amount of renovation work as buyers always feel that the property should be make according to their taste and style. There could be a leaky roof, or pealing paint that needs to be fixed. At times, the buyer may need to renovate the entire house, from scratch. So deciding the cost factor before going in for the deal would be ideal. This will avoid last minute tension and heart-burn.

Engage structural engineer

It’s a belief that old buildings are always strong compared to the new buildings. But one should make sure that the flat he is purchasing is built on a strong foundation and free from any structural defects. Resale properties may look strong from outside, only a technical expert like a structural engineer would be able to confirm its stability. 

Keep in mind that getting a good report card from the structural engineer is important, especially if you are taking a loan to fund the property purchase, this will help the bank to sanction the loan faster.  Usually, the lender ensures that it recovers this cost somewhere or the other via your loan. If one plans to buy the property with own funds, he or she will have to pay for this survey cost out of their own pocket.

Checking for dues

Checking for dues, if any, is a small but important checking process. Check all documents are on the seller’s name and that he has paid all the bills. These could be electricity charges, water tax, property tax, society charges, parking space charges and the like. If the previous owner hasn’t paid any of these bills, the buyers have no option but to settle the same once the house is sold and name change happened.

Other costs

Some residents’ associations charge a hefty sum to transfer the ownership of a property. So do include this cost as well. The real estate agent who helped you to locate the property will need to be paid once the entire transaction has gone through. One should enquire the market rate of commission before settling the account. This could be a percentage of the buying price of the property.