What is the legal procedure to sell a property?

Many property owners sell properties to earn a profit in favourable market conditions or for other personal reasons. Selling a property involves more than just finding a buyer. The decision to sell a house must be backed by careful consideration and planning, especially the legal procedures, agreement preparation and other crucial steps. For example, a lack of adequate documents, such as an encumbrance certificate, could deter potential buyers from considering a property due to the risk of legal disputes. In this guide, we will discuss the legal procedures involved during a property sale.

Preparation for property sale

Preparing a home for sale also involves decluttering and staging to attract potential buyers. At this stage, the owner may undertake necessary repairs and make upgrades to increase the property’s value. However, property owners should understand the legal aspects, as discussed below.

Property valuation

In the initial stage of the home selling process, sellers must begin with property valuation to determine the right price for high returns. Sellers can hire professional property valuation services to find the fair market value of their property.

Documentation

When purchasing a property, buyers typically ask for the following documents that establish the right ownership of the property. In the absence of these documents, it would be difficult to convince buyers, and the selling process might get delayed.

• Title deed: A title deed is a legal document containing details of property ownership. A clear title denotes that the property is free from any legal issues or claims.
• Sale deed: A sale deed is a key legal document for transferring property ownership. It contains details, such as property location, dimensions, terms of the sale, amenities, price to be paid and signatures of both parties.
• Encumbrance certificate: This is another legal document, issued by the sub-registrar’s office, certifying that the property is free from any financial or legal liabilities. An encumbrance certificate proves that the seller has full ownership rights, title and interest in the property.
• Building plan: A building plan should be obtained from the local authority. It has the approved layout and design of the property, including the location, dimensions and construction materials.
• Property tax receipts: Property owners should gather their latest property tax receipts to prove that they do not have outstanding tax dues.
• Utility bill payment receipts: Similarly, electricity and water bill payment receipts must be saved.
• Patta: This document is issued by the local authority (revenue department) and proves the ownership of the land on which the property is built.
• Completion certificate: The completion certificate proves that the construction was completed as per the approved plans. It is issued by the local development authority or municipal authority.
• Occupancy certificate: An occupancy certificate, issued by a competent authority, establishes that the property is suitable for occupancy.
• Succession certificate: A succession certificate establishes that the seller is the legal heir to the inherited property. It is issued by a court to the successor of a deceased person who has not prepared a will.
• Khata certificate: A khata certificate, issued by the municipal authority or local government, certifies that the property has been registered in the seller’s name and that all the taxes and other charges have been paid.

Obtaining No Objection Certificates (NOCs) and clearance from local authorities

• NOC from housing society: If the house is in a housing society, then the property owner may be required to obtain an NOC from the society. The document will state that the housing society does not have any objection to the sale and transfer of ownership.
• Bank approvals: Sellers need to obtain approval from their lender to sell the property if they have an outstanding home loan on the property. This is necessary because the bank has a lien on the property and lender’s permission is necessary.
• Clearances from municipal authorities: Sellers must seek required clearances from the local municipal corporation, complying with municipal regulations, before going for the sale transaction.
• Environmental clearances: In case the property is located near environmentally sensitive areas, it is important to seek environmental clearances as per the environmental regulations.

Legal considerations

Resolving legal disputes: Property owners must ensure legal issues are addressed before the sale. Sellers should be aware that potential property disputes could arise during the sale process if these issues are not resolved on time.

Compliance with regulations: Moreover, sellers need to comply with the local regulations governing property transactions to prevent any legal complications. They can seek help from legal professionals who specialise in real estate.

Verification of documents: Sellers can approach a notary, who is an official with legal authority, to verify the authenticity of the documents before the transaction.

Tax considerations

A property seller should understand the tax implications of owning a property. These include:

• Capital gains tax: The property owner is liable to pay tax on the profits gained from the property sale.
• Tax deducted at source (TDS): The buyer is required to deduct tax at the applicable rate and deposit the TDS with the tax authorities.
• Goods and services tax (GST): Different types of GST are applicable based on factors such as property type and whether it is under construction or ready-to-move-in property. Thus, sellers need to know the GST implications when selling their properties.

Execution of sale deed

The sub-registrar of the area is responsible for the verification and registration of the sale deed. This ensures that the property transaction is legally valid. The sale deed should be registered, and the stamp duty and registration charges should be paid to the state government as per the applicable rates. After the registration, the property ownership is officially transferred to the buyer and all the parties must have a copy of the registered sale deed.

Finalising the property deal

The property deal must be finalised by completing pending financial transactions related to the sale. Sellers must check if the buyer has made the required payments. The deal is closed with the seller handing over the possession to the new buyer on a specified date, based on the terms and conditions agreed upon.

Responsibilities after a property sale

• Update property records: At this stage, sellers should inform the local authorities, such as the municipal corporation, property tax department, etc., regarding the change in property ownership and updating of property records.
• Inform utility service providers: Notify the utility service providers, such as water, gas and electricity providers. This ensures a smooth transition of services to the new property owner.
• Save necessary documents: Keep a record of all sale-related documents for future reference, including the sale deed, NOCs and tax-related documents.

Verification of buyers and real estate agents

In recent years, there have been many cases of fraudsters targeting property sellers by posing as buyers and duping them off large sums of money. Thus, property owners should safeguard themselves by verifying the identity of the buyers before finalising any deal. They should be aware of the common scams in the market and take necessary precautions. Further, potential sellers must thoroughly read all documents before signing them. Similarly, when dealing with real estate agents and brokers, sellers should verify their credibility to avoid any hassles.

Housing.com News Viewpoint

Selling a property involves several stages and sellers should be aware of their responsibilities at each stage. The process usually starts with determining the right price for the property and home staging to attract potential buyers. However, the most crucial stage involves legal aspects such as arranging necessary documents, obtaining required approvals, adhering to taxation and local regulations, etc. Navigating this stage could be challenging for sellers, especially first-timers. Hence, approaching an experienced lawyer is advisable.

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