conduct due diligence

How to Conduct Due Diligence?

Conduct Due Dilgence Before Buying Property

Legal Due Diligence is an important step in any real estate transactions. This process involves a thorough assessment of the real estate property records and everything else corresponding the transaction process. The objective of conducting due diligence of property is to make the investor aware of risks involved (if any) in the transaction and to minimise them as far as possible. This is basically your homework before investing in a property which should be done by an experienced property lawyer.

Classification of Property Searching

The legal property due diligence for any real estate transaction can be done in two possible methods, one being Full Search and the other being Limited Search. Both procedures guarantee a thorough understanding of all the components related to the property such as title of ownership, encumbrances or charges (lien or mortgage), statutory authorisations, pending legal process, easement rights, and the assessment of the time to resolve these legal issues. The only difference between these two methods is the timeline. While a Full Search usually takes 30 to 99 years (as per requirements) from the date of the transaction, the Limited Search takes only 15 years into account. A Limited Search is generally performed when the property in question is taken on a lease. However, to conduct due diligence of property, you must consult an experienced property lawyer who has experience in conducting such search reports.

Points to Ensure Through Due Diligence of Property:

While conducting due diligence of property procedure an expert property lawyer will perform title verification of the present and other preceding owners, any charges or encumbrance and legislations which may impact the transaction of the property. To accomplish this goal, the following points are needed to be thoroughly examined:

  1. Verification of ownership title deed to understand the devolution of property. Whether it’s a gift deed, lease deed or sale deed, or even if property has been transferred via Will, it is important to understand and verify how ownership has been derived.
  2. In West Bengal and Kolkata, a property lawyer can help in understanding the authority through which the seller has obtained the right to transfer the property. This can be seen through documents such as mutation certificate, khatian and khajna receipts (property tax receipts), land classification, and other such documents.
  3. One should also be aware of any encumbrance upon the property by verifying the land records from the Registrar’s office and also seek a non-encumbrance certificate to ensure there are no charges upon the property. If a bank loan is needed, the bank themselves will also conduct their own due diligence.
  4. According to some State rules, if the property owner is SC, ST or any other backward communities, it can only be transferred to the similar caste and tribes.
  5. If the property is provided by the Indian government and it’s on lease for agricultural purposes, it can further be sub leased strictly for agricultural purposes only. In the due diligence for such properties it is important to mention that the sub lease holder will not use it for any other commercial or residential purposes.
  6. It is important to verify if the property is legally valid according to the State laws in that particular jurisdiction. In case of an agricultural land, the concerned State should issue the Change of Land Use.
  7. It is important to inspect and verify all the necessary legal documents related to the land, construction and transfer of the particular property. The documents must be government authorised paperworks such as industrial approvals, property tax receipts, insurance policies, environment compliance etc.
  8. It is important to ensure that the concerned property is not under any acquisition process because transactions of government acquired properties in India are treated as void and it is illegal to enforce transactions of any such properties.
  9. To avoid any dispute, the buyer can publish a notice endorsing his bonafide title ownership in local newspapers.

Purchasing a property is no joke as there are several important legal procedures involved to safeguard the buyer from legal issues that may occur. That’s why, it is important to conduct due diligence while buying a property and only an experienced property lawyer can help you with this. To get more information on the importance of the due diligence of property process in West Bengal, contact here with your queries.

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