Koch Property Guide

Property Buying and Selling Guide

Buying and Selling Property anywhere in the world can be a long and drawn out experience. At India, property transactions are particularly demanding task with possible hurdles all along the way such as title defects, complicated tenancy laws and so on. It is therefore important that the entire procedure be dealt with systematically to reduce the hassles that accompany it.

Seven important points to investigate before executing Sale Deed

• Title is free from defects
• There are no encumbrances on the property
• Property is not locked in litigation
• Inherited property has a probated will
• Utilities
• Property Tax
• NOCs

While determining the budget for the purchase of a property, there are several expenses besides the purchase price that must also be accounted for, such as

• Stamp duty
• Registration fees
• Legal fees
• Brokerage fees
• Transfer charges to Owners Association (in gated community property)
• Cost of improving the property
• Cost of furnishing the property
• House tax and land tax
• Maintenance charges of the Association

Once a property has been identified and a price agreed with the seller, the buyer should conduct a due diligence or a search of all the documents related to the property through a lawyer to ensure that there are no deficiencies with the property. The following points to be specially noted.

• Title - It is essential to know that if the seller does have perfect title which he can transfer to the buyer.
• The buyer should ask for all title documents (and copies of the same) right from the first owner of the property or, in the case of property that is extremely old, the documents thirty years prior to the date. The buyer should also ascertain the survey number, village and registration district of the property.
• It is essential to know if there are any encumbrances on the property, such as a mortgage, lien, or claim from a third party. Ask for the encumbrance certificate of the property which could be available from the local sub-registrar office.
• The buyer should check tax receipts for the past three years to determine whether the seller has paid the requisite land taxes and if there is a house, the building taxes. Ask for the possession certificate of the property from the local village office.
• It is also essential to ensure that the property is not the subject-matter of any litigation, as cases pending before the courts can take several years to be finally decided.

Agreement to Sell

Once the buyer is satisfied with the search of the property documents and has taken a decision to go forward with the property, then the seller will raise up a document known as an Agreement to sell. The Agreement to sell will contain the terms and conditions of the sale, and while there is no standard format for the same, it usually contains the following vital information:

• Description / location of the property
• The purchase price of the property
• The advance amount payable by the buyer - usually it would be in the range of 20% to 40% of the purchase price to be paid in advance.
• Date of closing - the date on which the purchase price is to be fully paid to the seller and the sale deed executed and registered by him.
• If it is a new construction, the date on which the buyer will be given possession of the property.
• Provisions to deal with breach by either party - For example, forfeiture of advance amount in case of buyer's default, or return of advance amount along with interest in case of seller's default.
• An arbitration clause or a clause specifying the court which would have jurisdiction in case of a dispute.
• Provisions for inspection or investigation of title, such as the time in which this is to be completed.

The Agreement to sell must be attested by the signatures of at least two witnesses and must be registered at the local sub registrar office.

Sale Deed

At the date of closing - the date on which the purchase price as per the Agreement to sell is fully paid to the seller, the seller will draw up a document known as a Sale Deed. This is the document by which the buyer will acquire ownership of and title to the property. The property is to be measured by a recognized surveyor before the drawing up of the Sale Deed. It is advisable to get all the prior documents to be checked by a lawyer so as to ensure that they are original.

Like the agreement to sell, the sale deed too is required to be attested by two witnesses and registered, and the PAN cards of the buyer and the seller will be required. Registration of the sale deed is carried out by lodging the original stamped document with the relevant local registering office. Registering of the sale deed is crucial as the title to the property does not pass to the buyer unless it is duly registered in accordance with the Registration Act.

The fees which are required to be paid with respect to sale deed are

• Stamp duty, is 5% to 7% of the value of the property as per the Sale deed, which is payable on the property under the Stamp Act of the state in which the property is located.
• Registration fees, 2% of the value of the property as per the Sale deed, which is payable to the registration office.

After the registration of the Sale deed, the buyer shall collect the registered documents between 15 to 30 days from registration office. Thereafter the buyer has to produce the original document at the relevant village office along with the mutation application in order to change the owners name in the village record from the old owner to the new owner. On completion of the mutation, the land tax receipt shall be issued in the new owner's name. If there is an existing house in the property, the ownership change is to be intimated to the relevant panchayath / municipal office.