What you should keep in mind while buying a ready-to-move-in property

Check out important legal perspectives to consider when buying a ready-to-move-in residential/commercial property.

                                  Homebuyers manage to sometimes take a very informal procedure when they're looking to purchase property in a ready-to-move-in unit and often forget to look at the important legal perspectives while buying a residential or commercial property.

While purchasing a ready-to-move-in, firstly buyers must know the importance of ownership due diligence--the study of ownership rights of the vendor. Title research is an important step that every buyer must undertake before the purchase of residential property, especially when one is purchasing a property in a ready-to-move-in construction. Title research helps get the legal status of a property and related information on its ownership.

Most homebuyers think that title research just a little formality. But, title inquiry is a very detailed process and needs the keen eye of a lawyer.

We have listed down 10 legal perspectives to consider while buying a residential or commercial property especially when it comes to buying a property in a ready-to-move-in property. These perspectives are important as they allow buyers to be more aware and to help them understand that buying is not simply a transfer of title on payment of compensation.

Studying of document title:

Studying document title is commenced by a legal expert on behalf of the buyer to trace how the vendor has got the property. This study is important as it involves the verification of documents such as deeds i.e., sale, gift; certificates assigned by the society. If the property is obtained through legacy, then sequence laws governing the person owning the property are determined, right from the beginning.

Additionally, experts approach concerns relating to the property such as what are the difficulties created? Whether a property is mortgaged to a third party? If the vendor is the owner? Approaching these questions allows a starting point in terms of determining what are the main issues that can appear in a property deal.

Explorations in public registries: 

Information related to stable property is available in the public registers under the Indian Registration Act of 1908, as every document creating an interest in a stable property having a value of Rs 100 or more imperatively requires to be registered with the concerned office of the sub-registry.

For these are publicly available documents, as part of title due diligence, searches are offered in the concerned office of the sub-registrar to learn the documents accomplished and registered about a particular property. This would enable the purchaser to verify the chain of ownership from the first owner to the current owner of the property and whether any other documents are affecting the ownership rights of the owner.

Ownership of land:

Getting the tenure of the land is an important perspective especially in cities like Mumbai where several properties are constructed on land leased by the municipal corporation or by the collector. To explain, if a flat is located in a building constructed on land given on a leasehold basis from the collector, then the permission of the collector is required before the sale of the flat as also payment of transfer premium. This has a direct result on the cost and timing of the transaction.

Government notice:

Public notices are typically announced by an advocate on behalf of the purchaser, before the accomplishment of the sale deed, in the local newspapers where the property is located. The objective of issuance of a public notice is to inform the public at large that the end property is proposed to be sold and in the event, any person has any right or interest in the property then they have an opportunity to object to the sale. This is an important step in the title due-diligence method.

Building license:

Building permissions are given by several authorities that verify the building is built according to the approved plans. When a developer starts constructing a building, they need something called an Intimation of Disapproval (IOD) which means the plans to construct a building is approved.

Once the entire building is constructed as per the approved plan or with changes, then the municipal Corporation will then examine the premises and declare an occupation certificate for the building. Against issuance of the occupation certificate, a building is permitted to be kept by flat buyers. Since an occupation certificate confirms the construction of a building, it is very important to verify this permission before purchasing a flat in a building.

Outgoings:

These are the monthly or quarterly expenses that are payable in regard to a flat such as maintenance, electricity charges, etc. The documents for this should be examined to determine whether there are any outstanding dues payable to the society/condominium or the utility department. This is important as it assures that the purchaser is not saddled with any financial liabilities.

Value and taxation:

While purchasing a property, the following are a few costs that a purchaser will acquire:

Stamp duty – Stamp duty is a tax levied essentially by the state government on various types of documents showing legal transactions between the Parties.

Registration charges – These are costs payable to the Office of the Sub-Registrar at the time of registration of a document

Society/Condominium transfer charges– Society/condominium transfer charges are payable at the time of transfer of a flat/unit. Typically, such charges are distributed between the vendor and the purchaser equally, though, it is subject to agreement between the parties

Brokerage Fees– Brokerage Fees are generally in the range of 1-2%.

Transfer premium costs If the flat is located on a collector’s land, then additional transfer premium costs are payable.

A flat purchaser should keep in mind the above charges at the time of purchasing the property and plan his finances respectively.

In the perspective of taxation, the following concepts of deducting tax at cause is important:

Deducting tax from the purchase compensation: Payment of any sale consideration to a seller is subject to deduction of tax at the beginning. As per the existing regulations, the liability of deducting tax is on the purchaser, and hence, if the purchaser fails to deduct tax at source or deducts a lower amount than the one ordered under the Income Tax Act, then the Purchaser could be considered to be in default of the applicable provisions of the Income Tax Act, 1961.

Different prices of taxes applicable when you are decreasing tax: Tax rates differ according to the tax residency status of the Vendor. If an NRI is selling the property then the purchaser will have to deduct tax at a higher rate. On the other hand, if the seller is an Indian tax resident, then the rate of TDS is lower i.e. 0.75%.

Loans from Banks: Many times, property purchasers need bank loans to purchase a property. The bank before giving the loan has certain conditions of its own. The most important perspectives that banks focus on are legal clearance and receiving NOC from society or condominiums for creation of charges; the pay loan after the whole transaction and the receipt of all original documents.

Title examination is important when it comes to buying a flat or commercial property. Through this activity, property purchasers can get a complete understanding of what they are getting into through the purchase of a property. Since property things are much complex in India with multiple State and central laws governing immovable properties in India, flat purchasers should conduct a title inquiry through a legal expert in this area.