Due Diligence in Real Estate | EIPL Infra
When you plan to invest in real estate or anywhere else, you have to perform a few exercises to avoid harm or a major loss to yourself which might happen due to the deal. You need to go through an investigation to confirm a few facts or details of the property under consideration. This is due diligence which saves you from financial loss.
1. What is Due Diligence
Due Diligence in real estate means that you do some research about the property you are interested in and get to know a few facts and details about it. It is a research to find out if the said property has any pitfalls which can bring financial loss to you. The legal due diligence ensures that the seller has all the rights to sell that property and it is free from any encumbrances on the title.
2. Key Elements to Check for Due Diligence
The following are the key elements that need to be verified for due diligence.
2.1. Legal Capacity Of The Present Owner
The seller or the predecessor title holder should not be a minor or a person with unsound mind. If the seller has an unsound mind then only a person appointed as a guardian by a competent court under the Mental Health Act, 1987, can sell that property on behalf of the owner. In case the present owner is a minor, then the property can neither be purchased nor taken on lease without the permission of the competent authorities. The current owner's right over the property should also be clear. In case of having joint owners for a property, an NOC has to be obtained from the co-owners. If the property is from a Hindu Undivided Family, then you will have to check the family tree and verify facts accordingly. If the property belongs to a partnership firm, society or trust, you have to check the copy of the partnership deed.
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