Get familiar with legal terms
Funds and legal opinion may help in your real estate deals. But you need to be familiar with legal jargon.
You are ready to deal with the property of your choice. This can be a sale or purchase. The funds have been tied up. The funding institution has advised you to obtain a legal opinion.
An initial opinion from the lawyer will almost always contain a list of queries, documents and clarifications to be provided for enabling the lawyer to give a final opinion. You read the opinion. The language is unfamiliar and strange. You give a second reading. You are still flummoxed by the technical terms.
In order that you avoid frustrations and pressures and also help the lawyers in issuing the opinion, it would be desirable that you understand certain terminology. Here are a few terms and words which you may come across frequently while dealing with properties. Some of them are not strictly legal terms. I have, however, included these terms as well to enable a better understanding.
We can call this glossary, as the terms have to be understood in the context of usage in law, particularly property dealings. I have also appended... sorry, given explanations for better clarity. The list is not exhaustive. I have only taken some of the words, which are frequently used.
E.C. / encumbrance certificates
An encumbrance is the right of a third party in your property. The Office of the Registrar of Assurance concerned maintains a record of transactions relating to properties. The Encumbrance Certificate is an extract containing the statement of transactions relating to a particular property. It is issued for the period requested. Therefore, the transactions relate only to this period.
The entries in the Encumbrance Certificate or the absence of entries are of critical importance. Your lawyer will be able to advise you on this. The property you buy should be free of encumbrances; or if you are buying it subject to encumbrance, you should be aware of it.
The sellers are expected to provide information on encumbrances, if any and sale is to be effected free of all encumbrances.
The Encumbrance Certificate only reflects registered transactions pertaining to the property. There can be other encumbrances.
The Encumbrance Certificate can be applied for and obtained by any person. If it is issued in the name of the owner (that is, given to the applicant), this is not indicative of title by itself. Certain documents like, Agreement for Sale and Power of Attorney will not, normally, figure in the Encumbrance Certificate. The general practice is to obtain Encumbrance Certificates for a period of 13-15 years. The counting is to be done backwards from current date.
The expansion of F.S.I. is Floor Space Index. It denotes the maximum area that you can build as against the extent of land held by you. This is determined by the width of the road abutting the property. The F.S.I. is indicated in the Approved Building Plan. Normally, this is reckoned as 1.5.
That is, if you have, say, 1000 sq.ft. of land, you will be able to construct upto 1500 sq.ft. of building. This is again determined on the basis of super built up area as to take into consideration what is part of the building and what is not. This can differ depending on the type of building, road width and other factors and I have only given the normal F.S.I. for residential buildings abutting a 10 metres road.
When an Application is made to the Authorities for development of properties in the interest of general public, an area is demarcated to be retained as Open Space. This is generally indicated as O.S.R. or Open Space Reservation.
The Authority directs the owner or the developer to keep the space open and is generally used for putting up public path, recreational area or to be used as per the directions of the Authority. No building is to be constructed in this area.
In Tamil Nadu, this is essentially a document issued by the Tahsildar evidencing lawful possession of the property. It should be issued in the name of the owner. Sometimes, it is in the name of the person having a prior interest in the property. In your hands, this could also be known as "Extract from Permanent Land Register" or "Extract from Town Survey Land Register" depending on the location. In case the land is agricultural or where the survey is not completed, this has to be matched with other revenue records such as Chitta, Adangal and tax payment receipts. This usually contains a topo plan and has other vital details. It is not issued for undivided shares of land.
At times, the property you buy may be situated near the sea or a river or other water bodies. Notifications have been issued under the Environmental (Protection) Act, 1986 and the Rules framed thereunder declaring certain coastal stretches as Coastal Regulation Zone. Certain activities in these areas are prohibited. The stretches include coastal stretches of seas, bays, estuaries, creeks, rivers and backwaters. You may note that these areas are influenced by tides.
There are four categories of C.R.Z known as C.R.Z.1, C.R.Z. 2, C.R.Z.3 and C.R.Z.4 (applicable to places like Andaman and Nicobar, Lakshadweep and small islands). Without going into technicalities of these regulations, generally, if your area falls within 500 metres from the sea, you may take it that normal construction activity may not be permitted.
You also come across terms like O.M.R. (Old Mahabalipuram Road), B.T.S. (Built to Suit) properties, B.O.O. (Build, Own and Operate), L.O.I. (Letter of Intent), L.D. (Liquidated Damages) and I.T. Buildings (Buildings for business concerning Information Technology and I.T. enabled services).
We shall close here for now. . Keep these in the back of your mind when you consider your next property deal. .
(The author is Partner, RANK Associates, Advocates, Chennai)
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