Legal documents required for purchase of property

Many people are not aware about what are the legal documents required for purchase of property or the important documents need to be obtained from the Seller / Builder. The said important documents regarding any property or legal documents required for purchase of property are called Title documents. Title Documents show ownership status of that house property.

If any of the title documents is having problem or missing from the set/chain of property documents, the whole transaction would be jeopardized. Hence to have a knowledge of title documents is very important while dealing in house property. In many cases, we either purchase the property from Builder or from its original owner (Resale Property). The property which we purchase from Builder is either having fully constructed (ready to move property) or under construction Property. Let’s understand the various legal documents required for purchase of property either a resale flat or flat from Builder.

Title documents required for flat purchase when you purchase an under construction or ready to move property from Builder

When you pay the token money against purchase consideration for the house property to be purchased from Builder. Builder issues a Receipt of that token money and gives an Offer Letter / Welcome Letter in respect of that purchase transaction. The Builder mentions area, location of the house property to be purchased and Payment Schedule of the transaction. The payment schedule involves the stages of payment to be done at various stages of construction and other charges like development charges, transfer charges, maintenance charges, electricity and gas meter charges etc.

With this Offer Letter and receipt, you can apply to Bank for Housing Loan alongwith your other personal and income documents. You can read my post regarding step by step guide while applying home loan, wherein I have mentioned the documents checklist for home loan to be submitted to Bank while approaching loan. After payment of margin money, you can go for registration of Agreement for Sale by payment of property stamp duty and registration fees. The title documents in respect of the property to be purchased from Builder are as under, in short Checklist for home loan:-

Agreement for Sale which is main title document required for purchase of flat which includes the transaction details like property details, purchase consideration, buyer and seller details, other terms and conditions of the transaction etc. executed by and between Builder and Buyer. The said document needs to be registered with the concerned Registrar Office of that area with payment of proper Stamp Duty and Registration Charges etc.

Receipts of payment consideration:

Many people are not aware that Receipts of payment made to the Builder are equally important as Agreement for Sale. Since in Mumbai, it is a practice to execute the Agreement for Sale, which is a conditional agreement wherein it has mentioned that the transaction shall be completed as and when buyer pays the payment according to the payment schedule. Hence, after payments of purchase consideration at various stages of construction, the Builders issue receipts.

Possession letter :

When Builder obtains Occupation Certificate from the Statutory Authority subsequently hand over the possession of the Flat by issuing a Possession Letter to the purchaser of Flat.

It is pertinent to mention here that in rest of India, Agreement for Sale /Memorandum of Understanding signs at the time of finalization of deal, however, the same are not registered. Whereas, after the deal is concluded and payment of whole consideration is paid, the Sale Deed shall be executed with property stamp duty and registered with Registrar. Sale deed shall be executed subsequent with Agreement for Sale after the sale is completed.

The Sale Deed and Payment Receipts need to be obtained in original from the Builder, since these are title documents/ legal documents required for purchase of property.

Besides these original title documents, the Bank also asks the following home loan documents to check the legality / non encumbrance status of that property:

1. Commencement Certificate: This certificate is issued by the Statutory Authority of that area to start construction of property in that area;
2. Building Sanction Plan/IOD: The Builder need to approve the Building Sanction Plan / Intimation of Disapproval from the Statutory Authority. The said document is a drawing of plan prepared by Builder’s Architect.
3. Development Agreement: Builder either purchases the land from the land owner to construct the Building or enters into an agreement with the land owner where a certain percentage of benefits will be decided by both the parties. When certain percentage decides by both the parties, the Builder constructs certain portion of property on behalf of land owner or shares certain Flats with him. In such type, Builder does not pay any consideration for the land of the property to landowner.
4. 19 NOCs: Before construction of Building, the Builder has to obtain 19 NOCs from the Statutory Authority/ies. These NOCs include Water Connection, Electricity Connection, Sewage, Airport Authority of India, Pollution Control etc. These are optional NOCs, the Bank usually does not ask for the said NOCs.
5. Occupation Certificate : This certificate is issued by local Statutory Authority certifying that the Building has been constructed as per Building Sanction Plan and now the Building is ready to occupy/Stay for the Flat owners.

The photocopies of the above legal documents required for purchase of property to be submitted to the Bank.

Documents to check before buying a resale flat or home loan for resale flat

Resale Flat means when we purchase any Flat from 1 st, 2 ndor 3 rdOwner of that Flat. When we pay token money to the owner of that property, he signs Memorandum of Understanding with you, wherein the said transaction details are mentioned. When you pay token, you can ask for photocopies of following legal documents required for purchase of property to be submitted to Bank for legal verification of Bank or for self-verification through any lawyer :-

1. Copies of chain of documents means Agreement between Builder and 1stOwner, Agreement between 1stto 2ndOwner and so on etc.
2. Copy of Share Certificate;
3. Copies of Maintenance Bill, Electricity Bill and Property Tax Receipt etc. These documents need to be in the name of owner;
4. Copies of Receipts obtained from the Builder by the 1stowner. In very rare cases, you get these receipts.
5. Copy of Commencement Certificate: This certificate is issued by the Statutory Authority of that area to start construction of property in that area;
6. Copy of Building Sanction Plan/IOD: The Builder need to approve the Building Sanction Plan / Intimation of Disapproval from the Statutory Authority. The said document is a drawing of plan prepared by Builder’s Architect.
7. Copy of Occupation Certificate: This certificate is issued by local Statutory Authority certifying that the Building has been constructed as per Building Sanction Plan and now the Building is ready to occupy/Stay for the Flat owners.
8. Copy of Society Registration Certificate;

When you conclude the transaction by paying the remaining amount or loan amount to the owner, you can ask for following original title documents/ legal documents required for purchase of property to prove your ownership:-

Original Chain of documents

All chain of Sale Deedsexecuted between Builder and 1 stOwner, 1 stOwner and 2 ndOwner and so on etc. Any of the missing document from the chain of documents means the new purchaser will not get right title for the property. Such documents are not acceptable to the Bank. Further, such property will be difficult to resale further.

Before obtaining the chain of documents verify the registration and stamp duty receipts of every documents, check sequence of owners, area and the description of property. Further, ask for original receipts given by builder to 1 stowner. Very few owners keep these receipts.

Original Sale deed between the purchaser and recent Property owner:

The Sale Deed executed by and between recently owner and purchase duly registered with Registrar with proper stamp duty.

Original Share Certificate of that Flat:

Once the building completed, the Builder handovers the conveyance and ownership of that Building to the Society (formed by Flat Owners). The society then issues the Share Certificate to each Flat Owner certifying their respective share in the property;

NOC from Society:

When you purchase the property through Loan, the Bank asks for NOC from Society certifying the Society and Flat are free from encumbrances.

The Society also confirms that the purchaser has purchased the flat from the seller and Bank’s charge on the flat is marked lien in the society records. Society will not allow the flat owner to sell the flat without the permission of Bank.

It is pertinent to mention here that before purchasing a property, everyone should obtain a Non-Encumbrance Certificate from local statutory authority or Title Search Report from Lawyer where Non-encumbrance certificate is not available. The said certificate/ report certifies that your property is free from encumbrances, legally valid and the new purchaser will get the good title. When you purchase a property through Loan, Banks due their legal check/title search through their panel lawyer. Hence many people prefer to buy the property through loan to make ourselves tension free regarding legal status of property. Besides the above documents, you can also ask for following documents while purchasing land, however, the same is not mandatory:

1. RTC Extracts;
2. Khata Certificate and extracts;
3. Mutation Registration Extracts;

In Maharashtra and Gujarat, while purchasing a land besides sale deed, the entry should be made in 7/12 extract of land at the respective Tahsildar Records.

Originally published at https://loans-review.com on December 8, 2020.