A major milestone in most people’s lives is their own property purchase. While people save their lives belongings to purchase real estate, a miscalculation in any step can lead to a disastrous fraud. This article lists 10 such important documents that one needs to keep in mind before any property purchase.
Table of Contents
10 Documents for property purchase
1. Title Document
Title document is one of the most important property documents. As per property law, one can only give another a title that they have. A title not owned by one cannot be given to another person by them. Before purchasing a property from someone, one needs to figure where they received the title of that property from. A property can be received by someone in 3 ways as follows:
- by purchase through another person with a Sale Deed
- as a gift in your father’s will with a Gift Deed
- by purchase through a Municipal Corporation with a Conveyance Deed
Hence, the purchaser must check if the seller got the property through a sale deed, or a gift deed in which case it is registered or not, or under any current dispute or not, or a conveyance deed where all taxes have been properly paid.
One should purchase a property only after verifying the title document of the seller. One should definitely not purchase a property through a Power of Attorney document alone. As it may lead to unforeseen litigation in the future.
However, if the purpose of property purchase is only for investment and not for residing then it is best not to purchase a residential property. Since residential property has a maximum rental yield of 2-3%. Instead one should purchase a Grade A commercial property with maximum rental yield of 8-9%.
2. Channel document
Channel document is essentially checking the channel of transfer of property for the seller. Hence, the purchaser will have to check if the seller got the property in question through a deed, a power of attorney or a stamp paper, and whether it was legal or not. Since this would involve checking multiple legal records, it is suggested to hire a local lawyer to study the same. It is also recommended that when purchasing a property, the purchaser details the channel document mentioning how the seller got the property and the seller before him got the property. This extra step can act as a good precaution from any future litigation.
3. Encumbrance certificate
Every registry office has all the details of all the properties. The purchaser needs to visit the registry office and fill out application form 22, for searches, inspections and grant of copies. Once the form is filled out with the property in question and the fee is paid, it is the registrar’s duty to respond within 15-30 days. The registrar will inform whether the property is legal, all its taxes have been paid and there is no outstanding loan on it. This sums up the Encumbrance Certificate. It is also possible to apply for it online on the said city’s registrar’s website.
However, if a loan has been taken on the property without informing the registry office then that will not be on record. This is the only limitation of the encumbrance certificate.
4. Occupancy certificate
Occupancy certificate (OC) is only received when purchasing a flat and not for houses. An Occupancy Certificate certifies that the builder, from whom seller is purchasing the flat, has completed all compliance regarding the building at the Municipal Corporation. Additionally, the Corporation has given their permission to now have occupants in the building.
5. Allotment letter
After receiving the occupancy certificate, the builder also has to get an allotment letter to allow residents into the building. This works two ways – one allotment letter is issued from the municipal corporation to the builder. A second from the builder to the flat purchaser, ensuring that all compliance have been fulfilled for the property in question. When purchasing a flat from another buyer, one needs to ask for the allotment letter as well.
6. Tax receipt
The development authorities in every city take an urban development tax from builders for development of the city. Although this tax receipt is not mentioned under any documents; the purchaser must ask the seller of property for this tax receipt from the development authorities separately. This is also an annual tax that needs to be paid by the developer or property owner. Moreover, this tax is applicable on both commercial and residential properties. Payment of this tax also ensures that the property owner has the title deed.
7. Car allotment letter
When purchasing property in a society, the purchaser needs to take a car allotment letter from the seller. This ensures that the owner of the flat in the society will get an allotted car parking space.
8. No objection certificate
When purchasing flats in a society, where there are committees that ask for a monthly maintenance fee for the society. The seller needs to produce a no objection certificate to the purchaser ensuring that there are no dues in maintenance fee from his end.
9. Mutation letter
When passing down any property within generations in a family, one needs to get it recorded in the registry office. If any mutations in property are not properly recorded with the government, then it can lead to litigation later on.
10. Conversion certificate
There are two types of land – agricultural land and non-agricultural or commercial land. Some part of the agricultural land is reserved for cattle grazing. All purchase and sell activities are banned on this. On agricultural land reserved for agriculture, one cannot build any commercial or residential properties. When purchasing any land, one needs to make sure that the conversion certificate is in place as well.
Bonus tips
- When dealing with properties which have been empty for a long time, or purchaser has been only dealing with the broker and can’t locate the owner, it’s more likely that the sale is happening illegally through third parties.
- When dealing in properties it is necessary to notice the body language and behaviour of the seller. If the seller is in a hurry to sell or is asking for a high token amount, then it can be a fishy situation.
Watch more details on property purchase in the video below.
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