This document provides guidance on conducting due diligence when purchasing real estate. It outlines key steps like reviewing purchase agreements, evaluating development compliance, identifying encumbrances, checking for litigation, assessing easement rights, issuing public notices, and conducting site visits. Thorough due diligence is important to understand all legal, financial, and technical aspects of the purchase and reduce risks. It helps buyers make informed decisions and safeguard their investments.
2. KeyAspects ofDue Diligence
ReviewingtheAgreementto Sell
Evaluating Development Compliance
Identifying Encumbrances
Checking forLitigation
Assessing Easement Rights
Issuing a Public Notice
Conducting SiteVisits
3. This guide provides a comprehensive overview of buyer
due diligence for real estate transactions, exploring the
legal, financial and technical factors to consider.The
Real Estate Regulatory Authority (RERA) has increased
transparency, but it's important to be aware of
transactions that may not be regulated by it. Proper due
diligence is essential to reduce risk and make informed
decisions.
4. KeyAspects ofDue Diligence
Buyer's due diligence is an important step in purchase of
property. It is necessary to verify RERA registration
status for properties applicable to it. For non-RERA
transactions, buyers must ensure loanability of the
property and include provisions in the Agreement to Sell
to guarantee refund in case loan applications are
rejected. It is also important to verify ownership
documents thoroughly by engaging independent
valuers, surveyors or advocates.This includes
investigating Master Documents of the property's
historical records and conducting a title search for any
encumbrances or defects in title.
5. ReviewingtheAgreementto Sell
Scrutinizing the Agreement to Sell:
Exhaustively review the Agreement to Sell prior to
affixing your signature. Undertake a meticulous scrutiny
of the terms and conditions outlined in the agreement,
including contingent provisions. It is imperative to
acknowledge that verbal agreements hold no legal
standing, and therefore, all agreements must be
explicitly documented.
6. Evaluating Development
Compliance
Adherence to Development Compliance:
Thoroughly assess the property's compliance with
approved licenses and plans to ensure conformity with
applicable laws and regulations. Unauthorized
alterations or additions to the property, which deviate
from the sanctioned plans, could lead to defects in the
conveyance process. Consequently, a careful evaluation
of the development plan and regularization of any
deviations is essential to mitigate legal risks.
7. Identifying Encumbrances
Unearthing Hidden Encumbrances:
Safeguard against undisclosed encumbrances, such as
loans, liens, or mortgages burdening the property.
Buyers should procure separate declarations or
indemnities from the seller to indemnify against any
potential risks.As a precautionary measure, withholding
a portion of the consideration amount for a specified
duration can provide additional protection.
8. Checking forLitigation
Comprehensive Litigation Search:
Conduct an exhaustive search to identify any
undisclosed litigation that may encumber the property.
This exercise is particularly crucial in cases of land deals
and properties with unclear ownership chains. It is
advisable for both buyers and sellers to collaborate on
this comprehensive search to ensure a comprehensive
evaluation of the property's legal status.
9. Assessing Easement Rights
Examine paperwork and contact local government to
check for easement rights, right to passage, or other
restrictions that could affect the property's value,
marketability, and development plans.A thorough
investigation and engaging with authorities is necessary
to uncover any issues that could hinder future plans.
10. Issuing a Public Notice
Publication of Public Notice:
Consider issuing a public notice announcing the intent
to purchase the property, thereby encouraging potential
claimants to come forward. Collaborate with the seller
during the negotiation process and undertake this step
jointly to foster transparency and ensure all interested
parties are duly notified.
11. Conducting SiteVisits
Real estate buyers must conduct comprehensive due
diligence to protect their investments from legal issues.
This includes research, document verification, physical
site visits and local area investigations, and legal
assessments. Doing so provides crucial insights and
safeguards long-term success in real estate ventures.
12. Conclusion
In conclusion, conducting due diligence is a crucial step
when buying real estate. It helps buyers avoid legal
issues and ensures long-term success in their ventures.
By conducting research, verifying documents, visiting
the site, investigating the local area, and assessing the
legal aspects, buyers can make informed & profitable
decisions.
