This article is written by Anirudh Hariani, Hariani & Co.
Real estate law practice is a niche area of law practice, that most law students aren’t even aware of, which involves nuance, skill, diligence and creativity. Conveyance of property is one of the oldest legal art forms. Real estate law involves not only transactions but also practice in court – a large number of matters heard by superior courts are real estate disputes. While real estate practice is intrinsically fun, a young lawyer planning a career in real estate law needs to be aware of the basic day to day challenges she or he will face from the get go:
- ‘Title’ is a mess!
The very first step in a real estate transaction is to understand the flow of title (in loose terms, ownership) to the property. For this, we go through, with a fine-toothed comb, all the documents transferring title for at least the last 40 years.
The reason for this comes from Article 61 of Schedule I to the Limitation Act, 1963 which limits the period for a mortgagor to redeem or recover possession of immovable property mortgaged to 30 years from the date the right to redeem or recover accrues. Normally, in a Deed of Mortgage, the time prescribed for redemption is 3-5 years, therefore a period of 35-40 years usually suffices to obtain a safe opinion of the title to a property.
The title documents can be complicated and incomplete. Worse still, they can be lost or mutilated! The purchaser’s lawyer ought to be especially concerned if the original documents are missing as they may have been mortgaged or given as security to someone. In such cases, a revenue search in the government records can help, but this too is sometimes unreliable – government records are a jumble.
- Negotiation is a game of chess
Negotiation in a real estate transaction can involve sitting across the table from the counterparty for days in a row to negotiate a single document. It’s tedious, but hey, real estate is so expensive, it’s worth fighting over! And there’s real strategy involved.
In new projects, the developer may not negotiate beyond a point with an individual purchaser of a flat, as he represents only a drop in the ocean of his total sales. However, if the purchaser is buying in bulk, or buying land – the developer or seller will be happy to negotiate with the purchaser. On the other hand, in the real estate flat resale market, it is more of a buyer’s market. There are fewer potential brides for a single groom. So, there is more scope for negotiation.
- It’s raining suits!
No, not the Armani kind. Real estate is heavily litigated due to the high stakes involved. In real estate litigation, the interim stage is the most important. If a plaintiff succeeds in convincing a court that there is a prima facie case in his favour, and he obtains a stay, the property in question can be locked up for the next decade!
- Document formalities
Documents transferring title to property from one person to another need to be registered in India. They are also required to bear stamp duty. In Maharashtra, stamp duty equivalent to 5% of the transaction value is required to be paid on the instrument of transfer of immoveable property. That’s huge!
A young real estate lawyer may come across cases where prior title documents are not properly stamped or registered. In such cases, broadly, those documents cannot be admitted as evidence in a dispute. Some documents need to be attested by witnesses, otherwise they are incomplete in law. Therefore, one needs to be careful while executing or verifying real estate documents, lest one is left with a paper which has no better use than to contain bhel.
- Red tape
For builders, there is a never ending amount of red tape under various regulation and laws that they need to sift their way through. In Mumbai, for example, prior to commencement of construction, an Intimation of Disapproval and a Commencement Certificate is required. Several other approvals need to be obtained for construction depending on variables. A developer can’t give the purchaser of a flat possession unless he has obtained an Occupation Certificate for the building, otherwise the building may be condemned to be demolished, as in the famous Campa Cola case.
So, real estate due diligence can be tedious and frustrating, but once you get past these basic hurdles, real estate practice is actually quite satisfying, remunerative and exciting.
In order to boost and develop the real estate law practice in Maharashtra and to bring the best practices to the forefront, Hariani & Co., as part of its Silver Jubilee Celebrations, is organizing an Advanced 5 Lecture series on “Real Estate Laws”, in August 2015. The Lecture Series, supported by iPleaders and Government Law College, is to be held at Indian Merchants’ Chamber, Churchgate and will provide a hands-on, practical and exclusive peep into real estate law practice, and will be especially useful for young lawyers, real estate professionals, and final year law students. Watch this space for more details.
Disclaimer: This article is for informational purposes only, and not intended to be an advertisement or solicitation. This article is not a substitute for professional advice. Hariani & Co. disclaim all responsibility and accept no liability for consequences of any person acting or refraining from acting on the basis of any information contained herein.
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