Legal Documents Verification Process

Verifying legal documents before buying home is a nightmare. If you do the process properly you will make a great investment. Otherwise it will haunt you forever. In this article let us look at the critical legal document a buyer has to validate before making a decision.

Title Opinion:Title opinion means analyzing the original documents of property to arrive at whether the seller has all rights to sell the document. Title will be complicated when the project is constructed in a consolidated land parcel where different owners are there.Eg: Consider Residential Apartments in Bangalore, Project A with land area of 50 acres which is consolidated from 5 different land owners. Land title opinion for this project should be done by analyzing the original documents of the whole 50 acres, not just analyzing the land area in which the home is built. Though the home might be constructed on a piece of land, the home owner will get Undivided Share of land in the whole project. So it is important to analyze 50 acres land title.Title opinion includes encumbrance certificate, family tree building of all land parcels. In various cases few of descendants of original owner (who is also co owner as per hindu succession law) is missed in subsequent sale, and puts the legal validity of the whole project. So it is important to know the family tree of land owner from the very beginning of ownership of the land.

Encumbrance Certificate:Encumbrance certificate (EC) is issued by Registrar of Properties pertaining to a particular asset /property (land parcel, plot, apartment, villa, individual house etc) about the transaction made on the asset during the period you apply for.

If there was sale, mortgage, settlement, Will, Gift or other deeds on the particular property, the certificate will reflect the parties executed and beneficiaries, date of transaction, amount etc. Buyer will get full history of transactions happened on the property.

Buyer can get encumbrance certificate from the Registrar Office by paying fee. It can obtained Online or by visiting the office. It is advisable to get 32 years of EC or to get bare minimum 13 years of EC before buying a property.

Builder Buyer Agreement:Builder buyer agreement is entered at the time of builder is doing construction or about to start the construction. This agreement mentions the rights and obligations of both buyer and builder. Salient clauses of the agreement are as below;a. Measurement of land, size of home and amenitiesb. Construction deadlines and estimated Delivery timec. Specifications of materials to be used in construction and method and technology to be appliedd. Payment to be made by buyer stage wisee. Interest, penalty to be paid by both buyer and builder incase of non-payment of due on time and not completing project as per schedule respectivelyf. Refund policy and restrictions on selling home before completiong. Clearance of duties, taxes payable to governmenth. Additional charges for any modifications to be made in the constructionNormally builder, buyer agreement in whatever name it is called, is skewed towards the builder. It safeguards the skin of the builder. So buyer should be cautious in knowing all critical clauses in the agreement and discuss with the builder for necessary changes.

Sale Deed:Sale deed is the most important document in the process of home purchase, because this is not only your dream moment but any mistake in this will create long term impact till you sell your home. So give adequate time in drafting, validating each and every clause in the deed. The below are the critical clauses in the deed;1. Party to the deed: when there is joint development of residential project where land owner gives land and developer constructs the building, land owner gets few home units for his contribution. Ensure whether you are buying land owner share or builder share (it should be registered document to show the units belong to the builder or owner). If there is no registered document to show the units belong to the owner or builder let both of them be parties to the sale deed. This will reduce any question on ownership in future.2. Consideration paid: Clearly mention consideration paid in different installments in the deed to avoid any litigations in future.3. Indemnity on claims or losses from wrong title, not having approvals of the land and building.4. Rights and obligations of apartment owner

General Power of Attorney / Special Power of Attorney:General Power of Attorney (GPA) gives power to some person to execute certain actions on behalf of other person.Eg: Ram is living in US and wants to buy home. He wants Mohan to enter in agreement with builder on his behalf. So Ram can give GPA to Mohan to enter in to agreement, negotiate and whatever action calls for to complete the transaction. He will also maintain the home by giving it for rental or for his ownuse. Mohan will be the indirect owner of home till the GPA is revoked.Please note that GPAs which are not registered has no legal validity.Special Power of Attorney (SPA) gives power to some person only for certain action.Eg: Ram gives power to Mohan to rent his home. In this case Mohan can not sell home, because SPA does not give power to Mohan.Both GPA and SPA will mention rights and obligations of both parties as below;1. Negotiate with seller for better price2. Take advance either in full or in part of consideration3. Execute documents of sale in favour of purchaser4. To sign any other documents to service the buyer like transfer of Khata / patta to buyerIt is important to note that, GPA holder cannot claim rights of property once the owner of property dies.Eg: X has given GPA of land parcel to Y. After 2 years while project under construction X dies. Apartments of the project cannot be registered by Y using GPA, as GPA becomes invalid once X dies.

Bank Loan Agreement:In India today majority of home buyers go for bank loans to buy homes. Home loan not only gives financial power for them to buy home but also gives legal validation on title of land, approvals, and even validity on builder. It acts a second opinion on buying property. However bank loan agreement itself is complicated which one person needs to understand before signing the dotted lines. Salient clauses of bank loan agreement are;1. Interest rate: Check interest rate for home loan. If it is variable interest, how much is above bplr.2. Pre closure penalty: Normally various banks charge pre payment penalty. Negotiate with banker for not giving penalty for pre payment after 3 years. Also penalty varies from the quantum of amount you pre pay.3. Reset clause on interest rates: Banks have reset clause in their fixed rate, home loan agreements so that they can increase interest rates in case the market rates increase in future. This effectively makes fixed rate loans equivalent to floating rate ones. Beware of this clause and negotiate with the banker to remove this clause.4. Cross Default: This is another gray area where the borrower is deemed to have defaulted in the home loan repayment in case he defaults in servicing any other loan elsewhere. If default is not with the same bank, NPA in one bank should not be considered as NPA of other loan.

Rental Agreement:Rental agreement is entered between home owner and tenant. This is to safe guard interests of both the parties. Salient clauses of the agreement are;1. Date of occupation, date of rent deposit paid. When these two dates are different, clearly mention when due for rent will trigger.2. Deduction in rental deposit for maintenance. Clear mentioning of how much will be deducted based on period of stay will reduce difference of opinion while vacating the home.3. Repayment of rental deposit at the time of vacating home.4. Date of payment of rent every month.5. Deduction of tds every month when rent crosses the threshold limit.6. Notice period from both sides to vacate home7. Do’s and Don’ts of tenant while staying in the home

Legal documents will make your investment gold or waste. So spend enough time in validating the documents to ensure your investment is safe. Happy Home Buy!!

Source : Buy a property in Bangalore and Residential Apartments in Chennai at RealtyCompass.com

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