Buying a house is an important event in one’s life and if it’s the first one then it is attached with an emotional achievement and satisfaction. Though buying a house causes an enormous dent in one’s savings and exposes homebuyers to financial risks.
Typically, a sale agreement is entered into between the buyer and the seller to effect the purchase. This sale agreement becomes a valid instrument of transfer after it is registered. A registered sale agreement is also called a sale deed. It is important that one knows the legal requirements involved in a Sale Deed or the contract which will legally make you the homeowner. We bring to you a list of legal requirements which you should go through before you finalize the purchase of your house.
There are certain components that you should check before you are ready to sign the Sale Deed. These are:
Capacity to enter into the contract: Only those persons who have attained the age of 18 years and above, who are mentally sound and are not disqualified under any other law from entering into contracts, can sign the sale deed. For instance, your son or daughter who is not yet 18 years of age cannot sign the contract.
Who owns the House?/Legal Ownership: The Seller from whom you are buying the house, should have legal ownership over the property. This means that he should be the absolute owner of the property and not merely have an interest in the property. For example, a tenant cannot sell the house as he is not the absolute owner of the property. Ask for documents of legal ownership from the seller and preferably show them to a lawyer to check if the seller actually has title over the property.
Is the Seller genuine?/Identity of the seller: You should also verify the identity of the seller prior to buying a house. You can ask him to furnish any government-mandated identity proof documents, in order to check if you are buying the house from a genuine seller. This is generally relevant in resale transactions.
Disputed Property: You should check whether the property you are buying is subject to any dispute or not, before signing the sale deed. A title search report which is typically prepared by a lawyer will help you know, if the property is subject to any court dispute or not.
Defects in the Property: You should check the property for any possible defects. The law mandates the seller to inform the buyer of any material defect in the property which the buyer cannot find out by ordinary care and diligence.
Regulatory requirements: If you are buying your house from a builder, check if he has the occupancy certificate (this certificate deems the property fit for occupancy), if the property is registered under RERA and that the property is not mortgaged or has any other liability attached to it. This can be done by conducting legal due diligence over the property with the help of a lawyer.
Tax Verification: A house is typically subject to the payment of property tax. You should ideally ask the seller to furnish you with past tax receipts to assess whether there is no outstanding tax liability. If there is unpaid tax, then you should insist that the seller pays them before the title is transferred to you.
Registration: You should get the sale agreement signed by you and the seller registered at the Office of the Local Registrar. Proper stamp duty must be paid, otherwise the sale deed will be termed defective.
An agreement is a consensus of mutually agreed terms and conditions. However, the first step towards drafting an effective agreement is to ensure that it is placed within the correct legal framework. Competence of parties, checking if the seller has legal ownership over the property, registering the sale deed, etc. are some important things one needs to know before signing the sale agreement for a House.
RERA (Real Estate Regulation Act) was passed in 2016 in order to bring in transparency in the real estate sector. The RERA Act has created a kind of uniformity in the real estate sector. As per the Act, the builders must provide the flats to the buyers on a fixed date; they must provide the owners with information about the progress of construction, and follow the rules as laid down by the Act. The RERA Act, when passed, was made buyer-friendly rather than builder friendly.
Possession date is an important clause in the agreement made between a builder and a home buyer. Possession date is a date when the builder promises to complete the construction work of the building, obtain permissions from the local authorities, and hands over the keys of the flat to the rightful owner. It is a date by which the builder must give the possession of the flat to the owner. The possession date is normally a few months or years from the date of signing the agreement. The builder must provide the possession on time or else face the penalty as prescribed in the Real Estate Regulation Act.
The Real Estate Regulation Act is an act that was passed to protect the rights and savings of homebuyers from the builders. Section 18 of the Real Estate Regulation Act states that, if a builder fails to hand over possession of the flat as per the date mentioned in the Agreement of Sale, the homebuyer has two options-:
He can terminate the agreement and seek a refund from the builder, wherein the builder is liable to pay the entire amount paid by the homebuyer with the rate of interest. The percent of the rate of interest differs from state to state
The person can agree to continue with the project. However, the concerned person must be paid interest for every month of delay.
If the builder has delayed in giving the possession of flats to the flat owner and also refuses to pay the interest, then the aggrieved person can approach the court and initiate legal proceedings against the person under Section 31 of the Real Estate Regulation Act.
The format of filing complaints is different for different states. Although the basic structure remains the same, the aggrieved person must provide the RERA registration number, basic details of the project, description as to how the RERA act has been violated by the builder, compensation if any, and other relevant documents such as Agreement for Sale, payment proofs to the RERA. One copy must also be provided to the builder. Thereafter the RERA will provide a date for the hearing.
While hearing, the Adjudicating officer must follow the Principles of Natural Justice, i.e., he must hear both the sides and ask questions, if any, to the parties and thereafter decide the matter. The good part of RERA is that there is no Adjournment culture as Section 71 of the Act prescribes a time limit of 60 days within which the matter must be decided.
The party against whom the decision is not in favor of an appeal against the judgment before the Real Estate Appellate Tribunal within 60 days from the date when the order was passed by the Adjudicating Officer.
The RERA Act is regarded as Buyer friendly, it is a major step towards the protection of the homebuyer’s rights. Previously the aggrieved buyers would file complaints against the builder, but it would take years to come to a decision. With the enactment of the RERA Act, the aggrieved person can receive justice speedily on account of delay in receiving the possession of the flat.
A contract is typically a written agreement wherein the parties fix the terms and conditions of their relationship and transactions. Termination of a contract is very important as it provides parties with an exit option. Under the Indian Contract Act 1872, a contract can be terminated by the parties involved by giving legitimate reasons like frustration, repudiatory breach, termination by prior agreement, rescission, or on completion.
Such termination may occur by the mutual consent of the parties or by law. However, if a contract is breached or terminated without mutual consent, then the party other than the one breaching it can seek certain legal remedies on account of such termination.
It is important that a contract includes all these remedies in writing. It is advisable to approach a lawyer and assess which remedies to termination of the contract, maybe the most beneficial.
Indemnity is a term that you may have heard or read often while going through commercial contracts. Do you know what does indemnity mean? Indemnity is defined as compensation which one contractual party gives to the other for the loss suffered. However, it is not this simple, and there are many contractual issues involved. We shall discuss and explain the issues associated with indemnity.
It is a promise to hold a person harmless from the consequences of his act. It can be express or implied. Companies, while entering into a contract, happen to mention an indemnity clause so as to manage risk arising out of acts by another party effectively. It is viewed as a form of security against a financial loss. The contracting party who promises/gives the indemnity is called the indemnifier while the contracting party to whom indemnity is given is called the indemnity holder. The definition of Indemnity in Indian Law is narrower compared to the English Law. While the latter definition includes within its scope losses arising from any cause (fire, ravages of the sea, etc.), the Indian definition only allows for a promise to indemnify losses arising out of actions directly attributable to the promisor or by any other person. Basically, loss must be on account of human agency.
An indemnity is typically required under certain events. These include intellectual property rights infringement, loss to property, losses to third parties, etc. Even if one has indemnified a product for a particular amount, a valid claim can only be made for the exact amount of loss made and not the entire amount. Also, it is a settled law position that a party can be indemnified before suffering actual loss provided that such loss is imminent.
Damages are described as compensation for legal injury. The following are differences between Damages and Indemnity :
There is a tendency to simply use previous indemnity clauses without tailoring it to the requirements of the contract at hand. This diminishes its effectiveness. Certain key points to keep in mind while drafting the Indemnity Clause are:
Thus, Indemnity clauses seek compensation for actual or potential damages arising out of certain set events. They are usually subject to intense negotiations on account of the liabilities they impose. Such clauses should be drafted with care and should be tailored as per the requirements of the contracting circumstances. Otherwise, they are likely to be rendered useless when a dispute arises.
A non-compete clause is a provision in an employment contract whereby the employee agrees to the fact that he would not enter into any competition with the employer during the term of his employment or even after the employment period is over. Typically, a fixed period of time is agreed upon for restrictions that extend beyond the term of employment. Non-compete clauses are common in IT Departments, Media, Financial Industry, Corporate World.
The non-compete clause in an employment contract is governed by certain provisions of the Indian Contract Act, 1872. Section 27, of the Contracts Act, makes agreements that are in restraint of trade void.
A vast number of judicial decisions have emerged on the question of enforceability of non-compete clauses. These decisions are divergent, and hence, no clear answer to the enforceability of non-competes has emerged till now. We have discussed some of these case laws below:
For fixed-term employment contracts, the restriction can be enforced under specific conditions. If an employee has resigned before the expiry of the term, then the restriction can be enforced for the rest. Non-competes may also be enforced against senior-level employees under certain conditions. If there is suspicion that a senior- level employee possesses proprietary information about the company, such an employee may be prohibited from joining a competing company by enforcing a non-compete clause.
Thus, a non-compete clause in an employment contract is not completely unenforceable and may be enforced in some circumstances. However, it should be drafted carefully and properly.
A non-compete agreement is different from a non-disclosure agreement. In a non-compete clause, an employee promises to not enter into any kind of competition with the employer after leaving the job. Whereas a non-disclosure agreement restricts an employee from revealing any confidential information of his previous employer to the current employer or anyone else in the future. While the enforceability of non-compete clauses is still not a settled issue, non-disclosure agreements may be enforced under the law.
In India, any clause which restricts an employee from practicing any professional activity through a contract or an agreement is considered void under the law. The topic of whether a non-compete clause is harsh and extreme and whether it includes consultant is a debatable topic that will continue. However, whether such a clause imposed on an employee is harsh or not depends upon the circumstances of the situation, and the final call can be taken by the courts.
A fixed-term employment contract is a contract wherein a company or an organization hires a person for a specific period on a contractual basis. Generally, such a contract is of one year; however, it depends on the need and discretion of the company or organization. Under this contract, the payment is fixed prior and cannot be changed or altered before the expiry of the term.
Fixed-term employees have a right to the same amount of wages and working conditions as permanent employees. At the expiry of the fixed-term employment contract, the employer needs not provide any notice. However, if the employee continues to work even after the expiry of the fixed-term employment contract, then there is an implied agreement between the employer and the employee.
The only difference between a fixed-term contract and a permanent contract is the period of time. An employee hired on a fixed-term employment contract is hired for a fixed period of time and cannot be removed except on account of some misconduct. Some of the key elements that need to be included in an employment contract are-:
A fixed-term employment contract should be drafted in such a way so as to avoid any liabilities after its expiration. There should be no words that convey that the contract will be automatically renewed or that a more permanent role would be given to the employee. It is advisable to engage a lawyer while drawing up such a contract.