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
1. Title Document for Property Purchase
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.
For a deeper understanding of your rights as a property buyer and the legal frameworks protecting those rights, explore 'RERA - The Real Estate Regulation Development Act 2016.' This blog provides detailed insights into how RERA aims to enhance transparency and accountability in the real estate sector, ensuring you make a secure investment.
To further guide your property purchasing process, check out ‘Flat on Sale: A Step-by-Step Guide for Purchase.’ This blog walks you through each phase of buying a property, ensuring you’re fully informed and prepared every step of the way. From initial consideration to closing the deal, every aspect is covered to make your purchase smooth.
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 for Property Purchase
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 for Property Purchase
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 for Property Purchase
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 for Property Purchase
- 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.
While you are diligent about checking all necessary documents, it’s equally important to know how to prevent falling victim to real estate frauds. Our blog, ‘How Can You Avoid Real Estate Fraud?,’ offers essential tips to recognize and avoid scams in the property market. Knowing these can save you from potential huge financial losses and legal hassles. - 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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FAQs
You should check the Title Deed to confirm ownership, the Encumbrance Certificate to ensure the land is free of legal dues, the Sale Deed for the transfer of ownership, the Land Use Zoning document to confirm permissible land use, the Survey Document for boundaries, and a No Objection Certificate (NOC) from relevant authorities to ensure the land is dispute-free.
The legal steps include verifying the Title Deed, confirming the seller’s legal right to sell, drafting and signing a Sale Agreement, conducting due diligence on the property’s legal status, registering the Sale Deed with the sub-registrar, paying the Stamp Duty, and taking possession of the property.
Before buying a flat, ensure that the Title Deed is clear, check the Occupancy Certificate (OC) to confirm legal construction, review the Sale Agreement and Allotment Letter, verify that all dues, including taxes and maintenance fees, are cleared, and inspect the No Objection Certificate (NOC) from the housing society.
To verify flat documents, cross-check the Title Deed for ownership, obtain an Encumbrance Certificate from the registrar to ensure the property is lien-free, confirm the Sale Deed for legality, verify the Occupancy Certificate for compliance with regulations, and check the Allotment Letter and NOCs from relevant authorities.
The rule of buying a flat includes ensuring the property has a clear title, checking for an Occupancy Certificate issued by the local authority, reviewing the Sale Deed for any hidden clauses, ensuring all legal dues are paid, and verifying the property is not under any legal disputes by checking the Encumbrance Certificate.
