LAW RELATING TO PURCHASE OF A HOUSE

Buying a house requires a huge investment and hence a flat purchaser needs to be very prudent in ensuring that his hard earned life savings are adequately protected and the house purchased by him is free from all encumbrances. In the State of Maharashtra, the construction activities of the Builders and Developers are regulated by the Maharashtra Ownership Flats Act, 1963 (the “Act”) and Rules, as amended from time to time, framed thereunder. Set out below are some general rules / precautions which must be followed while purchasing a house either from a promoter/ developer or through a second sale. However, these steps are only guidelines for examination of the prima facie title to the property and are not exhaustive and may differ from case to case, depending on the complexities involved in the transaction and therefore expert advise must be sought prior to purchasing a house. Once the house is identified and the commercial terms are agreed upon, following safeguards must be kept in mind. In case of sale directly by a promoter/ developer, the following documents should be verified: The title deeds in the name of the land owner and revenue records of the plots on which the building is constructed or is under construction i.e. 7/12 and/or property card which must bear the name of the land owner with whom the developer has entered into agreement for development. The title of the property should be clear, marketable and free from encumbrances. All dues on the property should have been paid. The Agreement for development between the owner of the plot and the promoter/developer. It should be ascertained that the promoter/developer has sufficient rights and power to develop the property and the documents assigning the development rights is stamped and registered with the office of sub-registrar of assurances. In case of development agreement verify whether the development rights include right to sell the flats and convey the property to the society once it is formed. The promoter/developer must also furnish an Irrevocable Power of Attorney executed by the owner of the property in his name. This is to ensure that in future the owner of the property cannot dispute the right of the promoter/developer to sell the house. The promoter/developer must produce the following documents which shall be part of the Agreement of Sale: Approved plans/specification Commencement certificate I.O.D. Title Certificate Occupation Certificate, when received Building Completion Certificate, when received The flat sale agreement (the “Agreement”) should be in the standard format prescribed under the Act and must be executed by promoter/developer upon receipt of any payment exceeding 20% of the sale price of the flat. The Carpet area of the flats should be clearly and unambiguously defined alongwith the nature, extent and description of all “Amenities” and common facilities must be clearly mentioned in the Agreement. At the time of taking possession check if you have received all these Amenities and also measure the flat area (built up / carpet are) as stated in the Agreement. You must also check that the construction is carried out according to the sanctioned plans and specification granted by the Concerned Authorities. The promoter/developer must ensure good quality materials and proper workmanship. With respect to the payments made to the promoter/developer, the payments must be made according to the progress of the work, under the provisions of the Act. The promoter/developer should not enhance the price of flats on any account whatsoever once the Agreement is executed except for additional government levies/taxes/court orders. The Agreement is required to be stamped and registered. The Stamp Duty is payable on the higher of the market value of the property or on consideration paid under the Agreement. The Agreement must be adjudicated before stamping. Presently the rate of stamp duty payable is 5%. The stamp duty has to be paid before signing or executing the Agreement. The Agreement must be registered with the Sub-registrar of Assurances on whose jurisdiction the property is located. The Registration should be completed within four months from the date of execution of the Agreement. The present registration fee is 1% of the market value of the property or the consideration whichever is higher subject to a maximum limit of Rs. 30,000/-. In case the flat is being purchased in resale and not directly from a promoter/developer, the additional precautions would be to ensure that the seller has made full payment to the developer including all outgoings and has stamped and duly registered his/her agreement of purchase. Also ensure that the flat being purchased is free from all mortgages and loans. In case the flat is in a co-operative housing society, ask for a NOC and no dues certificate from the society and check whether all taxes, maintenance charges and electricity bills are duly paid up-to-date.

LAW RELATING TO LEAVE AND LICENSE In the State of Maharashtra, it is very common for a landlord to grant a leave and license to a person for using the premises for a certain period.  A license is not defined under the Maharashtra Rent Control Act, 1999. The same is defined under Section 52 (Chapter VI) of the Indian Easement Act, 1882. The definition of license reads as follows: "Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license." A mere license does not create any estate or interest in the property to which it relates; it only makes an act lawful which without it would be unlawful. Thus the status of a licensee is essentially different from that of a trespasser or a tenant. In fact, the possession of a licensee is not a juridical possession but only an occupation with the permission of the licenser. While the actual occupation remains with the licensee, the control or possession of the property is with the licensor through his licensee  Under Section 55 (1) of the Maharashtra Rent Control Act, 1999, any agreement for Leave and License or letting of any premises entered into between the landlord and the tenant or the licensee as the case may be should be in writing and should be registered under the Registration Act, 1908. Section 55 (2) imposes the responsibility of getting such agreement registered on the landlord. It further provides that in the absence of a written registered agreement, contention of the tenant about the terms and conditions on which the premises have been given either on leave and license or even let out shall prevail. An agreement for Leave and License is required to be stamped under Article 36A of Schedule-I of the Bombay Stamp Act.  Applications for recovery of possession, for premises given on leave and license after 1.10.1987, shall be filed under Section 24 of the Maharashtra Rent Control Act. In case of disputes not falling under the definition of license or falling within jurisdiction of Small Causes Court, where the subject matter of dispute or dispute is more than Rs.50,000/-  the suit should be filed at the City Civil Court, Mumbai and if it is more than Rs. 50,000/- the suit should be filed at the Mumbai High Court. Application for recovery of possession in case of leave and license premises one has to apply before competent authority appointed by Maharashtra State Mumbai office of which is at Bandra MHADA office. Further of the suit for possession has to be filed by or against the landlord/tenant then one has to approach small causes court.