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A Comprehensive Guide to Real Estate Contracts for New Investors
Property buying selling

A Comprehensive Guide to Real Estate 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 ad variety of real estate contracts, makes it difficult for investors in the real estate market to understand the implications of the same. 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.

Why are Real Estate Contracts Essential?

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

• 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.
• 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 lawyers in Kolkata, who can draft such contracts.

Beyond the Basics: Key Elements of Real Estate 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:

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

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.

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.

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

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.

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.

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.

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. Purchase 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:

    1. a)  Names of the Parties

    2. b)  Property description

    3. c)  Consideration

    4. d)  State in which the property shall be delivered

    5. e)  Payment instalments/timeline

    6. f)  Any representations and warranties, typically by the seller.

    You can connect with property lawyers, including property lawyers in Kolkata, for the drafting of a purchase agreement.

  2. Real Estate 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-party.

  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:

    1. a)  Names of the Parties

    2. b)  Rental Amount

    3. c)  Rental Schedule

    4. d)  Rights and obligations of the lessor and the lessee

    5. e)  Termination of the lease

    6. f)  Lock-in period, typically in commercial leases

    7. g)  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.

For more details visit here: https://legalkart.com/document-drafting/agreeements-&-contracts/loan-agreement

Memorandum of Understanding (MOU) for Sale of Property in India: An overview
Property buying selling

Memorandum of Understanding (MOU) for Sale of Property in India: An overview

Memorandum of Understanding (MOU) is a legal document that outlines the terms and conditions of a transaction between two parties. It is an agreement that lays out the basic framework of the sale of property, including the obligations and responsibilities of both parties. In India, the MOU is commonly used in real estate transactions to provide clarity and structure to the property sale process. In this blog, we will discuss the key elements of a Memorandum of Understanding for the sale of property in India.

  1. Property details The first and most important element of a Memorandum of Understanding is the property details. This includes the property's location, area, and boundaries. The MOU should also include the property's registration number and other relevant details such as the title deed, survey number, and land use category.

  2. Sale price and payment terms The MOU should clearly outline the sale price of the property and the payment terms. This includes the payment schedule, payment method, and any penalties or interest for late payment. The payment terms should be agreed upon by both parties and should be included in the MOU to avoid any confusion or disputes later on.

Read more: Flat Registration - Procedure, Charges and Required Documents

  1. Possession and handover The MOU should outline the possession and handover details, including the date of possession and any conditions for handover. This includes any documentation or legal formalities required for the transfer of ownership of the property. The MOU should also specify the responsibilities of both parties regarding the condition of the property at the time of handover.

  2. Legal and regulatory compliance The MOU should include a clause stating that the sale of the property will comply with all legal and regulatory requirements. This includes obtaining any necessary approvals, licenses, or permits required for the sale of the property. The MOU should also specify which party is responsible for obtaining these approvals and any associated costs.

  3. Dispute resolution In case of any dispute, the MOU should outline the dispute resolution process. This includes the mechanism for resolving disputes, such as mediation or arbitration, and any costs associated with the resolution process. The MOU should also specify the jurisdiction for any legal proceedings that may arise.

   Read More: How much TDS is deducted on sale of Property

  1. Confidentiality and non-disclosure The MOU should include a clause stating that the details of the transaction are confidential and cannot be disclosed to any third party without the written consent of both parties. This is to ensure that any sensitive information related to the property sale is not leaked or used against either party.

  2. Termination The MOU should also include a termination clause specifying the circumstances under which the agreement can be terminated. This includes any conditions for termination, such as non-payment or failure to comply with legal or regulatory requirements. The MOU should also specify the consequences of termination, including any penalties or forfeitures.

  3. Signatures Finally, the MOU should be signed by both parties to indicate their agreement to the terms and conditions outlined in the document. The signatures should be witnessed by an authorized person, and the MOU should also include the date of signing

Read also: Stamp duty and registration charges are mandatory: Buyers should take utmost care on this front

 

Conclusion: 

In simple words, a Memorandum of Understanding (MOU) is a vital step when selling a property in India. It's like a roadmap that lays out the main points of the property sale, including what each party needs to do. This includes things like a description of the property, the agreed sale price and how it's to be paid, when and how the property will be handed over, following all legal rules, how to handle disagreements, keeping information private, and how to end the agreement if necessary. Also, both the buyer and the seller should sign the MOU.

Before you put pen to paper, make sure you thoroughly read and understand the MOU to avoid any problems or misunderstandings later. By making sure the MOU covers everything it needs to, both the buyer and the seller can be assured that their rights are being taken care of and the sale conditions are fair and straightforward. 

Applicable property tax rates and payment process in Kolkata
Property buying selling

Applicable property tax rates and payment process in Kolkata

In our endeavour to create awareness amongst property or home buyers, we have regularly shared details, in a simplified manner, about complex subjects such as the property tax. It is highly recommended that you read our previous posts to clarify any doubts related to property tax.

In this post, we are sharing the details of property tax as levied by Kolkata Municipal Corporation (KMC) and process of payment that property and home buyers can follow to paying the property tax dues.

In simple terms, property tax is defined as the mandatory charge levied by the local state government on annual basis. This type of tax is paid by the owner of property to the designated municipal corporation of the district in which the property is located. The tax collected by municipal authorities is used for the purpose of carrying out developmental work like maintenance of parks and roads. The tax also is used for providing civic services including drainage and sewerage management, electrification of roads, etc.

It was in December 2016, the state government of West Bengal passed the bill empowering the Kolkata Municipal Corporation (KMC) for simplifying the assessment and collection of property tax. As per the bill, KMC was given powers to assess the owner’s property tax liability for issuing notices to property owners for making timely payments of the mandatory tax. KMC was also authorised to penalise the defaulting and errant home owners as per the provisions of the law.

 

How is the property tax calculated by the KMC?

The KMC follows the Unit Area Assessment (UAA) method to calculate the property tax liability of each property located in Kolkata. The property tax calculation and payment system has been automated and the owners also have the flexibility of calculating the property tax liability for a particular year on their own.

As per the specified guidelines, Kolkata city is divided into 293 blocks and 7 categories based on type of infrastructure and market value of the property. The general formula used by KMC for calculating the annual property tax liability is as below:

  • Property Tax = Base Unit Area X Covered space or Land area X Location Factor X Usage Factor X Age Factor X Structure Factor X Occupancy Factor X Tax Rate (including the Howrah Bridge Tax, if applicable)

 

Type of Property

Tax Rate (In %)

Properties in Underdeveloped Slums

6

Properties in Developed Slums

8

Government Properties

10

Properties of Value more than Rs. 30,000/-

15

Other Properties

20

 

Note: The formula mentioned above appears complex and hence it is advisable to consult a qualified property tax professional for proper tax calculation and filing. Any error(s) committed by the owner of property while calculating self-assessment property tax is viewed as an attempt of tax evasion by the government authorities and may attracts penalties as per the provisions specified in the taxation law.

 

What is process of making property tax payment to KMC?

There are two modes of property tax payment that are allowed by KMC for properties that are located in Kolkata – Offline Tax Payment mode and Online Tax Payment mode. Let us have a quick look at both of them.

  1. Online Tax Payment Mode

Owners that are savvy with the online payment process can take the following steps to calculate and pay the property tax to KMC on their website:

  • Visit KMC official website – https://www.kmcgov.in/KMCPortal/jsp/KMCPortalHome1.jsp
  • On the left menu, look for Online Services option
  • Then go to Assessment Collection option
  • A new page will open, on which you need to select Make Online Payment
  • Once you click on Make Online Payment, you will get 3 options:
    • Current Demand
    • Outstanding Demand (Letter of Intimation, also called as LOI)
    • Fresh Supplementary
  • Select the correct option and a new page opens that will ask you to provide property tax related details like assessee number, contact number and email id.
  • Once you put these details, you will be taken to the payment gateway, where you can make payment using debit card, credit card or net banking.
  • On successful payment processing, online property tax payment receipt is generated. It is advisable to save the receipt carefully for future reference.

 

  1. Offline Tax Payment Mode

Owners who are not technology savvy and prefer making payments of tax via cheque or demand draft or cash, can use this method of payment. Following steps can be taken for payment of property tax:

  • Visit the local municipal corporation office
  • Take the tax payment form from the designated counter
  • Fill up the form completely and correctly
  • Submit the duly filled form to the processing clerk or representative
  • Handover the payment instrument along with the form – cheque or demand draft or cash
  • Collect the tax payment receipt as issued by the processing clerk or representative

Why it is important to take help from a qualified property tax expert?

For a common individual, calculating the property tax can be a very complicated and tedious task. Any error made in the self-assessment calculation by the owner will increase the risk of getting penalty notices once the error is detected by the municipal corporation. The reason is simple – any incorrect tax amount paid by the owner tantamount to tax evasion in the eyes of the taxation authorities. Hence, it becomes only pragmatic involve a competent property tax consultant for doing this difficult task for you as the owner. The property tax consultant will not only correctly calculate the tax liability but will also file the tax in compliance with the law.

As they say, it is always better that an expert handles the job and do it well. In case you are facing difficulties calculating your property tax liability then you may consult a competent property lawyer right away on the LegalKart platform.

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