The buyer of a property must verify that the property s/he wants to purchase will not run into legal issues later on or that the seller of that property is indeed its rightful owner. In order to do so, s/he must conduct what is called ‘due diligence’ of that property.
Importance of title due diligence
Conducting property due diligence involves taking the steps listed below.
- Carrying out title verification or title search of that property. ‘Title verification’ is often used interchangeably with property due diligence, but it is a part of the larger process of due diligence. It is the process of checking if the title deeds of the property are in the name of the seller at the time of sale. ‘Title deeds’ refer to those documents which clarify the ownership of a property. They include documents such as sale deeds, transfer deeds and gift deeds. A title verification should trace and verify the title documents of a property for the last 30 years.
- Verifying the legal capacity of the seller. This means that the buyer must ensure that the seller is not of unsound mind or that s/he is not a minor at the time of sale.
- The property is free from encumbrances. ‘Encumbrance’ refers to the status of the property as having been mortgaged. The buyer of a property which has an encumbrance will have to pay the dues on the outstanding loan on that property if she ends up buying it.
- The property tax on it has been paid. If the seller has not paid the property tax on that property at the time of sale, the buyer will end up paying the property tax dues on it after its purchase. As a result, s/he must look at the seller’s property tax slips before purchasing it.
- The property does not have legal liabilities on it. There are multiple examples of how a property can run into legal disputes. For instance, the property may have been a residential property built on agricultural land by the seller without having obtained the requisite Change of Land Use (CLU) permission for it.
It is also possible that the seller may not have undertaken the mutation of her/his property before selling it. In such a scenario, other parties can stake claims to it even after its sale. ‘Mutation’ of a property refers to the process of updating the revenue records of the municipal authorities on the change in the ownership of that property, so that they can charge property tax on it from the rightful owner. The seller should have mutated it before the sale and the buyer must mutate it after purchasing it. Properties which have not been mutated attract a penalty.
Time taken to carry out document verification of a property
The time taken to conduct this exercise depends on the ‘lookback’ period for which the title-related documents are being verified. The lookback period ranges from 15 to 30 years, although it is advised that the lookback period should be 30 years.
If all the title documents are in place, the entire process of verification can be completed within 24 to 48 hours.
Whom to consult?
While the buyer of a property can carry out a title verification on his/her own, it is advised that s/he consult a due diligence expert to do so. Real estate lawyers and law firms offer consultation services for carrying out due diligence at varying prices.
We at Terra Economics and Analytics Lab (TEAL) also help clients instantly access property information in the Mumbai Metropolitan Region using big data analytics and machine learning. To learn how TEAL can help you in your journey, visit https://www.tealindia.in.
Documents to check while undertaking due diligence in Mumbai
- Mother deed/sale deed- A ‘mother deed’ is a sale deed executed between the seller of the property and the previous owner of the property. It records the transaction history  and specifications  of that property. If the mother deed of the property is not available, the buyer must trace the transfer of the property for the last 15-30 years by going through independent conveyance deeds belonging to all the previous owners of that property. The buyer can do an e-search of conveyance deeds on the igrmaharashtra website run by the Department of Registration and Stamps of the Government of Maharashtra, or approach the Sub-Registrar’s Office (SRO) where the property was registered by the seller and get a physical copy of the deed.
- Up to date Encumbrance Certificate (EC)- An EC clarifies if the property being transacted has any encumbrances. .
- Occupancy Certificate (OC)- An OC is a proof issued by the local authorities that the property is fit for occupation and constructed in compliance with the local laws.
- Completion Certificate (CC)- A CC states that the property has been constructed according to the approved building plan and that it meets the necessary infrastructure-related requirements.
- No Objection Certificate (NOC) from building association- An NOC is issued by the building association/housing society the property is a part of, to the present owner. It states a ‘no objection’ to the ownership transfer of the property from the seller to the buyer.
- Layout plan approval- A layout plan is the architecture plan of a property which shows its utility runs and equipment layout. It is approved by the municipality or development authority. If the owner of the property is not able to furnish its layout plan, the municipal authority has the power to demolish it.
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 The mother deed sequentially mentions all the owners of the property from the first, original owner to the present owner and the mode of all the transfers. Thus, it clarifies whether the property was gifted or sold to the new owner by the previous owner or whether it is a part of a larger property which was partitioned.
 The mother deed also contains details like the location of the property being transacted, details of the properties surrounding it and the consideration paid by the present owner (the seller in the present transaction) to the previous owner of the property.
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, visit tealindia.in