By: Raj Mehta
What is Real Estate means?
Real Estate is real property that consists of land and improvements, which include buildings, fixtures, roads, structures, and utility systems. Property rights give a title of ownership to the land, improvements and natural resources such as minerals, plants, animals, water, etc.[1]
Real estate law is the area of law that governs buying, using and selling land. It’s the law that governs how people acquire property and what they can do with the property that they own. Real estate law is also called real property law. Real estate law is called real estate because it’s about real property. Real property is land as opposed to personal property which is objects. Fixtures that are permanently on the land like buildings or other large structures are also a part of real property.
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Types of Real Estate
There are several types of real estate. The main categories are:-
- Land
Land is the baseline for all types of real property. Land typically refers to undeveloped property and vacant land. Developers acquire land and combine it with other properties and rezone it so they can increase the density and increase the value of the property.
- Residential
Residential real estate consists of housing for individuals, families, or groups of people. This is the most common type of estate and is the asset class that most people are familiar with. Within residential, there are single-family homes, apartments, townhouses & other types of living arrangements.
- Commercial
Commercial property refers to land and buildings that are used by businesses to carry out their operations. Examples include shopping malls, individual stores, office buildings.
- Industrial
Industrial real estate refers to land and buildings that are used by industrial businesses for activities such as factories, research and development, construction.
What is Real Estate Contracts?
In the Real Estate sector, the contracts regulating the transfer and use of immovable property are generally in the nature of agreements for sale, sale deeds, development agreements, lease deeds and leave and license agreements. The impact of Force Majeure event is considered on some of the aforesaid contracts as under:
- Sale Deed:
- Acts as a evidence of sale and transfer of ownership of property in favor of the buyer
- Acts as the main document for further sale by the buyer
- Things to ensure as a buyer:
- Title of the seller
- Check whether there is any charge or encumbrance on the property
- Ensure that all clearances, approvals, and permissions to transfer or sell the property has been addressed
- All the pages of the deed to be signed
- Deed should be witnessed by at least two witnesses
- Finally, get it registered at the jurisdictional sub-registrar office.
- Details of the parties
- Lease Deed:
- If the term of lease is exceeding one year or reserving yearly rent has to be registered.
- This agreement binds both lessor and the lessee for the decided duration
- Things to ensure:
- The subject matter of lease must be immovable property
- Duration of lease should be fixed
- No interest passes to the lessee before execution
- Termination clauses can be included based on requirements
- Details of the parties
- Leave and License:
- There is no transfer of the interest of property as that of Lease
- Licensee acquires personal right to occupy the property
- Things to ensure:
- Duration of the rights
- Details of the parties involved
- Details of the property
- Terms of agreement
- Mortgage Deed:
- The funds lent against which the property is used as security is the mortgage money.
- The Agreement which instruments the transfer is mortgage Deed
- Things to ensure:
- Enforceability and validity depends on the type of mortgage
- Cross verify the agreed interest rate
- Tenure of the land should be checked up and mentioned
- Provision for payment of the amount due in the event of mortgagor failing to pay interest
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INDIA
Real state in India is governed infected by a combination of federal and state specific laws. This is largely because, in accordance with article 246 of the Constitution land is the subject matter of state list or less second of the seventh schedule of the Constitution of India, which covers subjects for which only state can legislate, while transfer of property other than the challan, registration of deeds and documents and contracts other than for agriculture land fall under the concurrent list or list third of the seventh schedule of the Constitution of India, which are subject for which both Centre and states can legislate. Additionally, since India is a country with diverse sects, Laws relating to aspects such as devolution inheritance et cetera draw a large influence from various customs and practices, in addition to codified laws. Over the years various judicial presidents and judgements have also adjudicated upon various aspects relating to real state which are either binding or have a strong relevance value, depending upon the form or court which adjudicated.
The main laws which regulate real estate in India are:
- The Transfer of Property Act, 1882
- RERA (Real Estate Regulatory Authority) Act, 2016
- The Registration Act, 1908
- Stamp duty has to be paid as per state requirements
- For Non-Resident Indians (NRIs) FEMA( Foreign Exchange Management Act, 1999) also apply
- Investors have to abide by local laws and bylaws
- Clearance as per environmental laws have to be taken before starting with any project for construction of immovable property
- The specific relief Act, 1963
- Other labour laws including for regulating minimum wages and safety insurance provisions
- Land Acquisition Act, 2013
Impact of Real Estate Laws &Contracts in India
- Timely delivery of flats: Developers often make false promises about the completion date of the project, but hardly ever deliver. As per the bill, strict regulations will be enforced on builders to ensure that construction runs on time and flats are delivered on schedule to the buyer.
- Furnishing of accurate project details: In the construction stage, builders promote their projects defining the various amenities and features that will be part of the project. But not everything goes as per plan, with several features missing. As per this bill, there can’t be any changes to a plan. And if a builder is found guilty of this, he/she will be penalized 10% of the project’s costs or face jail time of up to three years.
- Specifying carpet area: Generally, builders sell flats on the basis of built-in area, which includes a common passage area, stairs and other spaces which are 20-30% more than the actual flat’s area. But, not all buyers are aware of the concept of carpet area. With this bill it will become mandatory to declare the actual carpet area.
- All clearances are mandatory before beginning a project: Builders often attract buyers with huge discounts and pre-launch offers. And, the buyer, enticed by the offers, does not bother about the clearance. But, due to delays in getting clearance, the buyer does not get the flat on time. This bill ensures that developers get all the clearances before selling flats.
- Each project should have a separate bank account: Developers raise funds through pre-launch offers and use them to purchase some other land or invest it in other projects. This bill will make it compulsory that a separate bank account be maintained for each project. Each transaction will have to be recorded, and diversion to another project will not be entertained.
- 6. After sales service: As per an interesting clause in the bill, if the buyer finds any structural deficiency in the development of the building, the buyer can contact the builder for after sales service. But, the buyer should approach the builder within a year of purchase to rectify such defects without further charges.[2]
USA
Real estate laws & Contracts
Each state within the United States follows a mix of statutory and common-law. There are three levels of law in US:-federal, state and local. Under a common law changes in law come by way of case law and a new legislation, each of which is given equal weight. Rules on parent evidence and requirements that agreement in writing to be in force where is from state to state. Courts will generally rely on the express terms of document unless the intent of the parties is unclear. Courts in the US may consider the conduct of the parties in if the terms of the document are in question is ambiguous. In general, contracts for the sale or transfer of real state should be in writing.
Real estate transactions are governed by a wide body of federal statutes and a combination of state statutes and common law. The requirements established by state law often differ significantly from one state to the next. Real estate brokers are employed as the agent of the seller in order to obtain a buyer for their property. The contract between the broker and seller is called a listing agreement. The agreement may be an open agreement whereby the broker earns a commission only if he or she finds a buyer. It is commonly required in real estate contracts that the title to the property sold be marketable. This requires that the seller have proof of title to all the property he or she is selling and that third parties not have undisclosed interests in the title. A title insurance company or an attorney is often employed by the buyer to investigate whether the title is, indeed, marketable. Title insurance companies also insure the buyer against losses caused by the title being invalid.
In order to pass title, a deed with a proper description of the land must be executed and delivered. Some states require that the deed be officially recorded to establish ownership of the property and/or provide notice of its transfer to subsequent purchasers. The most common method of financing real estate transactions is through a mortgage.
Impact of Real Estate Laws & Contracts in USA:-
- Clarity in business relationships, agreements, and rights of parties
- Avoiding potential contract disputes and litigation
- Preventing misinterpretation of communications and agreements
- Protecting intellectual property, real property, and asset values
- Better management of commercial relationships
- Built-in agreements about resolving disputes through arbitration, mediation, or a court in a particular jurisdiction
- Documentation to allow comprehensive representation and review by an experienced business law attorney[3]
[1] https://corporatefinanceinstitute.com
[2] Online ISSN 2395-602X|VOLUME 3 | ISSUE 8| 2017 IJSRST
[3] https://www.themyerslg.com/contract-benefits/
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