What to Know before Closing on Your New Home
01 February 2023
While purchasing a new home is exciting and momentous, it involves navigating a legal maze requiring careful consideration and attention to detail. From signing of contracts with developers to negotiating terms and conditions with lenders for availment of home finance, there are various legal considerations to be taken into account to ensure a smooth and successful sale transaction.
- Conducting Title Search Investigation: The legal process of purchasing a new home would be remiss without a thorough title search investigation exercise into the property for sale. This involves independent investigation so as to ascertain devolution of title in relation to the property's ownership history including liens or encumbrances on the relevant property being sold. The purchasers’ advocates are engaged to conduct a thorough search of all available records available at the jurisdictional government registration offices and civil courts for verifying any adverse entries and ascertaining whether there are any registered deeds or instruments which might purport to transfer right, title or interest in the schedule property or create an encumbrance or charge in relation to the same. This assures the buyer and helps him/ her ensure that they are purchasing property that is free and clear of any legal issues potentially affecting their ownership, while identifying any potential issues that may need to be resolved before the sale can be finalized.
- Execution of Agreement for Sale/ Memorandum of Understanding: Once the title search findings are in the affirmative, the purchaser gets ready to sign a contract with the selling party. This contract, also known as a ‘Agreement for Sale/ Memorandum of Understanding’, outlines important terms and conditions of the sale including payment of sale consideration, closing date, specific performance, grounds of termination and any contingencies that must be met before the sale can be finalized. It is important to carefully review this contract in its entirety before its execution, as it is a legally binding document governing the terms of the sale of the property being purchased.
- Home Loan Finance/ Construction Finance: The financing contingency is a key element of the sale-purchase process, outlining the terms and conditions of the buyer's financing in the contract. This typically includes information about the type of financing being used in the transaction, such as mortgage or cash, and any other conditions precedent to receive financing approval. For example, the buyer may need to provide proof of income or a credit report before the financing can be approved and if the financing contingency is not met, the buyer may have the option to terminate the contract and receive their earnest money deposit back.
- Execution of Sale Deed/ Deed of Conveyance: In addition to the Agreement for Sale/ Memorandum of Understanding, the buyer and seller will also sign and execute a Sale Deed/ Deed of Conveyance re-affirming the transfer of rights, title and interests of the property from the seller to the buyer. This Sale Deed/ Deed of Conveyance outlines the final terms of the sale which includes the purchase price, closing costs, or any other fees or charges associated with the sale. The deed must be recorded in the Office of the Registrar where the property is located in order to be legally effective and enforceable.
- Mutation and Admission as New Member in Society: Post completion of registration formalities of Sale Deed/ Deed of Conveyance, the purchaser shall submit application for mutation of the purchased property in his/ her name reflecting the updated revenue recorded ownership of such property. Thereafter, the purchaser may also place request for admission as new members in society/ apartment ownership association and complete necessary formalities in relation to the same (wherever applicable).
In summary, purchasing a new home involves a series of complex legal steps requiring diligence and careful consideration by the buying party. The points highlighted above are but a few aspects that must be taken into account in order to ensure a smooth and successful transaction. It is important to work with a skilled real estate attorney to help navigate this process and protect your interests.
M/s Augustus Law’s real estate team handles assignments ranging from conducting of title search due diligence exercise to transaction structuring, drafting and negotiating a wide variety of contracts such as conveyance deeds, gift deeds, power of attorneys, joint development agreement, leases & licenses, construction, operations & management contracts, wills, creation of trusts, etc. Should you have any queries or require any clarifications, please feel free to contact Arindam Mrinal Pal, Partner [E-Mail: firstname.lastname@example.org], Shaun Vaz, Associate [E-Mail: email@example.com] and Mohnish Solanki, Associate [E-Mail: firstname.lastname@example.org]