Before entering into any transaction, determine the ownership of the property in question is key and critical.
The rights of owner with reference to the ownership of the property may be absolute or limited. Ownership is seen as absolute when possession, enjoyment and disposal rights are vested in the owner without any restriction otherwise it is said to be limited. In order to execute a valid transfer, it is mandatory for such absolute right to dispose to be vested in transferor. For example in certain pieces of commercial land, permission of the local authority is a pre-requisite.
In the even the holder of the property is a company, a search at the Registrar of Companies to ensure that the property is not part of any mortgage/charge or hypothecation is necessary. Further, the previous three years' audited balance sheet along with P&L account of the owner/developer for the last three years should be scrutinized in order to ensure that, the company shall not be declared as insolvent or be wound up making it liable to its secured/unsecured creditors under the provisions of the Insolvency and Bankruptcy Code ("IBC").
Searches at the offices of the Sub-Registrar of land records/ assurances is required to have a comprehensive and complete record of all registered documents. Typically, we recommend that for property purchases, the title deeds for the last 30 years are perused as per the provisions of the Indian Limitation Act, 1961 in order to ensure that, there are no claims affecting the property. Such a search will also reveal the charges created on the property.
In case of acquisition of land, a through diligence on the revenue records to extract Encumbrance Certificate, Khata/Patta Certificate and other records (which vary depending on the state) to ascertain and clarify the chain of title.
Based on land use, property may be divided into two categories i.e. agricultural and non-agricultural. Whilst undertaking title diligence it is necessary to identify the land use and determine whether it is agricultural land or non-agricultural land. If it is non- agricultural land then it should be further classified as residential or commercial, institutional, industrial based on the purpose for which diligence is being undertaken.
While perusing or undertaking diligence on ongoing developments or construction, additional steps may be needed to validate title. It must be verified to ensure that any construction being undertaken, is in adherence to the building plan and sanction plan passed by the appropriate municipal authorities.
In addition to this, builders are required to seek a number of permissions and approvals with regard to infrastructure and utility facilities like water, sewage, electricity, environment compliance etc. In case of 'ready to move-in' properties, one also needs to duly verify occupancy and completion certificates. Pursuant to the advent of the Real Estate (Regulation and Development) Act, 2016 ("RERA"), it is essential to ensure that, any property development project is registered under the RERA Authority within the State which would entail scrutinizing the RERA Registration Certificate.
