Property due diligence can be described as a thorough investigation carried out to confirm facts relating to a property's ownership history, in addition to obligations and encumbrances the property might be under.
It is essential to carry out adequate due diligence of a property before you make a purchase, so as to avoid unforeseen issues - legal or otherwise after the purchase has been complete.
How to Check Whether the Seller of a Property Can Make the Sale?
A seller can only make the sale of a property if she has the rights to transfer the property, and if she is considered legally capable of doing so.
In order to check the latter, the following conditions need to be verified:
- The seller is not a minor: According to the Hindu Minority and Guardianship Act, 1956, any property or share in property owned by a minor cannot be relinquished unless consent is taken from the relevant district court.
- The seller is considered of sound mind: According to the Mental Health Act, 1987, only a guardian, as appointed by court can carry out the sale of a property under ownership by someone considered to be of unsound mind.
Once the legal capacity of the seller has been established, it is then pertinent to check whether she has the rights to transfer the property. The following comprise of best practices in order to do so:
- The title chain is complete to the present owner: As general practice, the title chain of ownership to the seller is conducted going back a period of 30 years from the date the seller acquired the property
- Ensuring there are no provisions in the current deed that would restrict the owner to transfer the property (such as if the property is leasehold, or under lease rather than ownership)
- In case the property is owned by more than one person, an NOC, or a release deed from the other owners is mandatory
- If the property has been acquired through inheritance, death certificates of the previous owners, and legal proof of heirship must be verified
- In case the property is under the ownership of a company, then documents authorizing the sale of the property in line with Section 293 of the Companies Act, 1956 must be verified
- In case the sale is conducted through a Power of Attorney, it is essential to check whether the person who has executed the Power of Attorney is the rightful owner of the property
- If the seller of the property is an NRI (or Non Resident Indian), and the sale is being conducted through a Power of Attorney (PoA) executed in a foreign country, then it is essential to crosscheck whether the PoA has been notarized with the relevant authorities in India.
It should be noted that this list of practices is not exhaustive, but takes a general view. There might be areas specific to your property that require deeper investigation depending on the nature of the transaction.
At TEAL, we are building the next generation of property due diligence using big data analytics and machine learning. We provide reliable information about property ownership, registration status, disputes, tax compliance history and all other information that you will need to make a safe and secure property investment. To learn how TEAL can help you in your journey, get in touch with us.