Documents Required To Buy A Commercial Property

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Buying a property is not only a dream but also your investment for life. But it doesn’t take much for it to turn into a nightmare. You should first check if the property is Residential or Commercial property. If it’s a commercial property, then does it have all the approvals by the Statutory Authority, and the land or the plot should be a commercial recognised zone. If not than the commercial conversion is a must for that land. Check the original allotment letter and its originality. Get the title of the plot verified by the lawyer to check property lien, easements, covenants, conditions and restrictions (CC&Rs), agreements, resolutions and ordinances that may affect the property in question.

1. Sale Deed:

A Sale Deed is the core legal document that acts as proof of sale and transfer of ownership of the property from the seller to the buyer. A Sale Deed has to be mandatorily registered. It is important that before the Sale Deed is executed one should execute the sale agreement and should check for compliance of various terms and conditions as agreed upon between the buyer and the seller. Before executing the Sale Deed, the buyer should check whether the property has a clear title. He/she should also confirm if the property is subject to any encumbrance charges.

* A seller should settle all the statutory payments such as property tax, cess, water charges, society charges, electricity charges, maintenance charges etc., (subject to the agreement) before executing the Sale Deed.

2. Mother Deed:

Mother Deed, also known as the parent document, is an important legal document that traces the origin/antecedent ownership of the property from the start (if the property has had various owners). It is a document that helps in the further sale of the property, thereby establishing the new ownership. In case of absence of the original Mother Deed, certified copies should be obtained from the registering authorities. Mother Deed includes the change in ownership of the property, be it through sale, partition, gift or inheritance. It is very important that the Mother Deed records the references to previous ownership in a sequence and should be continuous and unbroken. In case of a missing sequence, one should refer to the records from the registering offices, revenue records or the recitals (preamble) in other documents. The sequence should be updated until the current owner.

3. Building approval plan:

A building plan is sanctioned by respective Corporation or Municipal Authority. A building owner has to get an approved plan from the jurisdictional Commissioner or an officer authorized by such Commissioner. However, the authorities sanction a building approval plan based on the zonal classification, road width, floor area ratio (FAR) and plot depth. A set of documents are required to be submitted by the owner in order to obtain a building approval plan. The documents include- Title Deed, property assessment extract, property PID number, city survey sketch (from the Department of Survey and Settlement and Land Records), up-to-date tax paid receipt, earlier sanctioned plans (if any), property drawings, copies of demand drafts, foundation certificate (if any) and a land use certificate issued by the competent authority (viz., Dy. Commissioner). It is mandatory that the building owner hires a registered architect who will draw a plan meeting the applicable bye laws. One can get a building approval plan within 4-5 working days if all the requirements are met.

4. Khata Certificate and Khata Extract:

Khata is derived from the word ‘account’. It is an account of a person owning a property. It typically consists of (a) Khata Certificate and (b) Khata Extract. A Khata Certificate is mandatorily required for the registration of a new property and the transfer of a property. Khata Extract is nothing but obtaining the property details from the assessment registrar. It is needed while property buying and acquiring trade license. The Khata is widely referred to as A Khata and B Khata (Revenue records extract). ‘A’ Khata has properties listed under the jurisdiction of Corporation or Municipality with legal property construction and ‘B’ Khata has properties under local jurisdiction with violated property constructions. One should avoid buying a B Khata property as it will be deemed as an illegal construction. Nevertheless B Khata may be converted to A Khata under certain schemes by paying penalty to the Government.

5. Encumbrance Certificate (EC):

Encumbrance means charges in the ownership or liabilities created on a property that is held against a home loan as security. An EC consists of all the registered transactions done on the property during the period for which the EC is sought. It is a certificate sought for a particular period evidencing the property purchase/sale, the presence of any transaction or mortgage. One should submit a copy of the Sale Deed to obtain an EC. The time taken to obtain an EC will be between 3-7 working days or more depending on the period sought.

6. Betterment charges receipt:

Betterment charges are also known as improvement fees/development charges that are to be paid to the Municipality or Corporation Authority before a Khata can be issued. The developers are entitled to pay a fixed amount as betterment charges to the municipal body. A receipt of the same should be obtained at the time of property buying.

7. Power of Attorney (POA):

A POA is a legal procedure used to give authority to another person by the property owner on his/her behalf. One can either give a Special Power of Attorney (SPA) or a General Power of Attorney (GPA) to transfer one’s rights over one’s property.

8. Latest tax paid receipt:

Receipts for property tax bills ensure that taxes for the property are paid up-to-date to the government/municipality. It is therefore important for the buyer to make enquiries with the government/municipal authorities to ensure that all the dues are cleared by the seller. The buyer should ask the seller for the latest original tax paid receipts and bills and check the details of the owner’s name, the tax payer’s name, and the date of payment on the receipt. If the owner does not have the tax receipt, the buyer can contact the municipal body along with the survey number of the property to confirm the ownership of the land. Nevertheless, the buyer should also ensure that other bills such as the water bill, electricity bill etc. are paid up-to-date.

9. Stamp Duty:

Stamp Duty is a tax, similar to sales tax and income tax collected by the government, and must be paid in full and on time. A stamp duty paid instrument/document is considered a proper and legal instrument/document. The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary.

10. Market value of the property and is Stamp Duty payable on the market value:

Market value means the price at which a property could be bought in the open market on the date of execution of such instrument. The Stamp Duty is payable on the agreement value of the property or the market value, whichever is higher.

Formalities to be completed:

The formalities and forms may vary from State to State depending on where the property is situated.
Every State has its set forms under the Registration Rules that are required to be filled and filed along with and at the time of Registration of Sale Deed/Transfer Deed.

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.

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