Read previous article in Home Buying Guide series: The Ultimate Guide to Carrying Out Property Site Visits
With thorough property comparison and site visits done, you can finally pick a project and floor plan which you want to go ahead with. But before you pay any token or booking amount for a flat, it is important to get legal review done from an experienced property lawyer. This guide will tell you everything about legal review of a real estate project.
What is a legal review of a property?
Legal review is a detailed and careful examination of property title and all other property documents like land ownership, development sanction plan, environmental clearance, Fire NOC, CC, OC etc. Complete list of property documents and compliances was shared in our guide series earlier. A property lawyer is an expert in verifying these documents and is best suited for commenting on credibility of a project.
Why legal review?
- Legal review helps highlight gaps in project’s paper work and required clearances. This helps a buyer make an informed decision about investing or not investing in a project.
- You make a significant investment while booking a flat/apartment. Consequently risk involved is huge if property has botched up documents. Can affect resale process and cost of the resale badly.
- With multiple property documents which a project should have as part of required clearances – it is difficult to verify them without a professional lawyer.
- In many states (such as Karnataka and Maharashtra) these documents are issued in regional languages(Kannada and Marathi respectively) and it can be difficult to understand content if you do not know the local language.
- It is easy to get carried away by false assurances by the builder about project having all the approvals and certificates. Better to investigate upfront than regretting later.
- Other buyers who have invested in the same project may not have done due diligence as required. Don’t blindly invest on the basis of someone else’s confidence in project. Important to once get your own legal review done.
- Quick resale in real estate market is difficult, so once invested you cannot dispose off your investment easily. This becomes more difficult if project has some issues as a buyer may get everything scrutinized before buying your flat. Better do this scrutiny upfront when you are buying to save time and money later and to facilitate a speedy resale.
- Construction Plan: This is the most common violation which can happen from builder’s end. Campa Cola Compound Case in Worli, Mumbai is a well known example where construction beyond 5 floors was not approved and the builder raised 17 floors.
- If sufficient clearances are not met, once builder moves out of a project and a Housing Society is created, the onus for getting clearances falls on to the members of registered Housing Society. Housing Societies in many cases then have to collect funds from residents to pay penalty/bribe to civic bodies for getting required compliance and NOC certificates
- An investment in a thoroughly reviewed project gives you mental peace and satisfaction about your investment
Examples of dubious paper work in a property
- Deviation in construction from original sanctioned plan: Campa Cola Case is a notorious example
- Project land is disputed and not free from encumbrances. If going forward, it turns out that the land belongs to some other party, demolition notices for existing structure can be issued by civic bodies
- If CC/OC approvals from civic bodies is missing, Khata transfer(from builder’s name to end buyer’s name) can have a problem and your apartment will cease to have legal recognition and protection
- Discrepancy in sanction approval given by Fire Department for high rise projects: Sometimes Fire Dept. gives fire clearance for X floors but Y floors(usually more than X) are constructed by builder in brazen violation of clearances
- Check existence of burial grounds in vicinity of a project – As per Vastu and for obvious reasons it is not good to have a crematorium nearby a project. Builders try hard to conceal this information as it directly affect sales.
- As per National Green Tribunal(NGT) order in May ’16, constructions within a specific distance from lakes and rajakaluves are banned in Bangalore. 50 metres from the primary rajakaluve, 35 metres from the secondary rajakaluve and 25 metres from the tertiary rajakaluve are banned. Many projects in Bangalore were marked red by BDA/BBMP after this order.
- If you are buying a site in a Co-operative Housing Society(CHS), the CHS is required to be registered under RERA and charge 18% GST on transfer fee paid to the society by new owner. RERA registration should be verified before investing in CHS.
How legal review can be carried out?
- Verify the list of designated banks for a project. If the list has a PSU, it has some degree of credibility as PSU banks carry a more rigorous paper work verification before approving a project for home loans than private banks. However, please note that approval from a PSU should not be solely relied on. Many PSUs like SBI actively disburse loans for projects during under construction phase and move the legal status to unverified once the project is completed. Post project completion there are other clearances required like: Completion Certificate & Occupancy Certificate which are to be verified. Banks carry out Supplementary Legal Opinion (SLOP) for old projects for the same reason.
- Check Khata extracts of the property to verify ownership details
- Consult a property lawyer – hire a good property lawyer for carrying out a thorough review of all the property documents. A website where you can connect with property lawyers: https://lawrato.com/
- Property lawyers can give you a mixed opinion in many cases about credibility of projects, check real estate public forums to inquire more about project from other home buyers who might have carried out legal review as well and can give you more insights
- You can file online RTI to get more insight about a project’s approvals from government/civic bodies. Through RTI you can get copy of occupancy certificate, commencement certificate, khata extracts and building approval documents.
In conclusion, while legal review is strongly encouraged for any real estate project for saving you from financial loss, it is also important to note that only few projects have all the paper work and compliances up to date. This is partly because of slow government machinery and partly because of negligence from builders. It is imperative that buyers make an informed decision before moving forward.
Read next article in Home Buying Guide series: The Ultimate Guide to Negotiating the Best Price in Real Estate
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