A Comprehensive Guide to property Contracts for New Investors
Property

A Comprehensive Guide to property Contracts for New Investors

Real estate is the new buzzword in the Indian economy. With the ever-expanding real estate market, the interest of investors in the real estate market is also going up. The legal and regulatory landscape surrounding real estate is always difficult to navigate. The complexity and variety of real estate contracts, make it difficult for investors in the real estate market to understand the implications of them. Imagine a real estate contract as a meticulously crafted roadmap, charting the course of a property transaction. It serves as a legally binding agreement between two or more parties, outlining the specific terms and conditions governing the exchange, purchase, or any other real estate transaction. In this post, we discuss, the different types of real estate contracts that new investors may explore.

 

  1. Why are property contracts essential?

Beyond simply serving as a record of the agreed-upon terms, real estate contracts play a vital role in 

several ways:

a) Protection: They act as a shield, protecting both the buyer and seller from potential misunderstandings or disagreements. The real estate contracts, clearly define each party's rights and responsibilities, minimizing the risk of disputes arising later.

b) Clarity: By establishing a detailed roadmap, the real estate contracts eliminate ambiguity and ensure everyone involved is on the same page. This clarity, minimizes confusion and fosters a smooth transaction.

c) Enforcement: Should any party fail to fulfil the obligations outlined in the real estate contracts, the document serves as legal evidence, allowing the other party to seek legal recourse.

You can approach property lawyers to draft real estate contracts. There are many good property lawyer in kolkata, who can draft such contracts.

 

  1. Beyond the Basics: Key Elements of Property Contracts

Just like any legal document, real estate contracts have several essential components that ensure their validity and enforceability. Here's a breakdown of the key elements:

 

a) Parties Involved: The real estate contracts mention the seller and purchaser along with their full names and contact information.

b) Property Description: This section, provides a detailed description of the property being sold, including its address, legal description, square footage, and any unique features or fixtures included in the sale.

c) Purchase Price and Payment Terms: The real estate contracts, specify the agreed-upon purchase price of the property and outline the payment terms, including the initial deposit amount, down payment schedule, and closing costs allocation.

    i) Closing Date: This section, refers to the date of transfer of ownership of the title of the property.

  ii) Contingencies: These are clauses, outlining specific conditions that must be met before the sale can 

      be finalized. Common contingencies include securing financing, completing a satisfactory home inspection, or obtaining homeowner's insurance.

d) Disclosures: Sellers are legally obligated to disclose any known material defects or issues with the property. These disclosures, are typically documented within the real estate contracts.

e) Signatures: Both the buyer(s) and seller(s) must sign the real estate contracts, along with any other relevant parties, to signify their agreement to the outlined terms and conditions.

If you contact a property lawyer, they will be able to include all the pertinent clauses in a real estate contract. There are many property lawyers in Kolkata, who can assist you with drafting of real estate contracts.

 

  1. Four Types of Real Estate Contracts

As you venture deeper into the world of real estate, you'll encounter various types of contracts, each 

tailored to specific situations:

1. Sale Agreement: This is the most common type of real estate contract, typically used for the traditional purchase of a property from a seller by a buyer. A typical purchase agreement includes the following:

  • Names of the Parties
  • Property description
  • Consideration
  • State in which the property shall be delivered
  • Payment instalments/timeline
  • Any representations and warranties, typically by the seller. 

You can connect with property lawyers, for the drafting of a perfect Sale agreement.

2. Property Assignment Contract: This contract, frequently utilized in wholesale real estate transactions. It allows a property owner to sell the rights to purchase their property to an investor, who can then sell those rights to another buyer for a fee. It just gives the investor the right to buy the property, without actually buying the property. The investor can then resell these rights to a third-pa

3. Lease Agreement: This agreement, governs rental properties, both residential and commercial. It outlines the rights and responsibilities of both the landlord and tenant, detailing the rental amount, security deposit, lease duration, and maintenance responsibilities. Its essential components are:

  • Names of the Parties
  • Rental Amount
  • Rental Schedule
  • Rights and obligations of the lessor and the lessee
  • Termination of the lease
  • Lock-in period, typically in commercial leases
  • Lease renewal

In India, residential leases are typically done for a term of 11 months. Property lawyers including property lawyers in Kolkata can help you structure your lease agreement, in the best possible manner.

4. Power of Attorney: This unique contract, is used when the property owner (principal) is unable to sign the contract themselves due to reasons like illness, disability, or absence. They appoint another trusted individual (attorney-in-fact) to act on their behalf and sign the contract. A power of attorney needs to specify the purpose for which it is being issued. It needs to be registered to be valid.

The Empowered Investor: Seeking Professional Guidance

Navigating the complexities of these legal documents can be challenging, especially for new investors. Seeking professional guidance from a qualified property lawyer is highly recommended. They can:

  • Review and interpret the real estate contracts: A property lawyer can ensure the contracts are fair and protect your interests, identifying any potential issues or ambiguities.
  • Negotiate terms: They can assist you in negotiating favourable terms within the real estate contracts that align with your investment goals.
  • Explain legalities: A property lawyer can provide clear explanations of complex legal concepts and ensure you understand the full implications of signing real estate contracts.

By equipping yourself with knowledge and seeking professional guidance, you can approach real estate contracts with confidence, ensuring a smooth and successful investment journey. Remember, consulting a property lawyer can be an invaluable resource throughout your real estate endeavours. Property lawyers, especially, property lawyers in Kolkata can assist you in navigating the world of real estate contracts.

 

Frequently Asked Questions about Property Contracts

 

Sale Deed

Q1: What is a Sale Deed?

A Sale Deed is a legal document that evidences the sale and transfer of ownership of property from the seller to the buyer.

Q2: When does a Sale Deed become effective?

A Sale Deed becomes effective once it is signed by both parties and registered at the local sub-registrar office, along with the payment of necessary stamp duty and taxes.

 

Power of Attorney (PoA)

Q3: What is a Power of Attorney in the context of property?

A Power of Attorney for property is a legal document that grants one person (the agent) the authority to act on behalf of another person (the principal) in property transactions.

Q4: Can a Power of Attorney be used to sell property?

Yes, a specific type of PoA, known as Special Power of Attorney, can be used to sell property, granting the agent the authority to perform all acts necessary for completing the sale on behalf of the principal.

 

Lease Deed

Q5: What is a Lease Deed?

A Lease Deed is a contract between the property owner (lessor) and the tenant (lessee) that outlines the terms and conditions of renting the property, including the lease duration, rent amount, and maintenance responsibilities.

 

Q6: Is registration of a Lease Deed mandatory?

Yes, if the lease term is more than 11 months, registration of the Lease Deed is mandatory in most Indian states, requiring payment of stamp duty and registration fees.

 

Agreement to Sale

Q7: What is an Agreement to Sale?

An Agreement to Sale is a contract wherein the seller agrees to sell and the buyer agrees to buy the property under certain terms and conditions specified, leading up to the execution of a Sale Deed.

Q8: Does an Agreement to Sale transfer property ownership?

No, an Agreement to Sale does not transfer ownership of the property; it only creates a contractual obligation to transfer the ownership through a Sale Deed in the future.

Q9: Is an Agreement to Sale legally binding?

Yes, an Agreement to Sale is a legally binding contract, and either party can seek legal recourse if the terms are not fulfilled.

 

General

Q10: What are stamp duty and registration fees?

Stamp duty is a tax paid to the government on the execution of certain documents, while registration fees are paid for the service of registering the document. Both are applicable for documents like Sale Deeds and Lease Deeds, varying by state.

Q11: Can I back out of a property contract after signing?

Backing out of a property contract like an Agreement to Sale may have legal consequences, including the forfeiture of the earnest money deposit or compensation claims by the other party, depending on the contract terms.

Q12: How important is it to have a legal expert review property contracts?

It is highly recommended to have a legal expert review any property contract before signing to ensure that the terms are clear, fair, and in your best interest, and that the contract complies with all legal requirements.

 

 

Buying a House? Have You done your Legal Checks?
Property

Buying a House? Have You done your Legal Checks?

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. 

 

 

Legal checks before purchasing a property

 

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. 

 

 

Conclusion

 

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.  

Delay in providing possession of flats and RERA's role in the same
Property

Delay in providing possession of flats and RERA's role in the same

What is RERA?

 

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.  

 


What is Possession Date?

 

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.  

 


What measures are available to the Homebuyers for the delay in possession of the home:


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

                                                                                 

                                                                                       OR
 

The person can agree to continue with the project. However, the concerned person must be paid interest for every month of delay.

 


Legal Provisions under the Real Estate Regulation Act

 

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. 

 


Appeal to the Judgement   

 

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. 

 

 

Conclusion

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.