Month: December 2020

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.

Learn more about Real Estate Laws with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

Types of Real Estate

There are several types of real estate. The main categories are:-

1. 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.

2. 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.

3. 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.

4. 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:

1. 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

1. 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

1. 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

1. 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

Learn more about Real Estate Laws with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

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

1. 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.
2. 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.
3. 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.
4. 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.
5. 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. 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/

Learn more about Real Estate Laws with Enhelion’s Online Law course certified by Scriboard Advocates and Legal Consultants! 

By: Yamini Daga

INTRODUCTION

Ever since now litigation has been the most used kind of system for the resolution of the disputes. Though nowadays quite many ways are available through which we can seek the resolution of the disputes like Arbitration, Mediation, Litigation, etc. Then also it is difficult for people to decide that which kind of method they want to opt in. Through time all these methods are emerging in their own fields and ways though litigation are believed to be the oldest form and most opted way. As through litigation people go to the court to seek justice and follow the same age old process.

The Arbitration is also one of a kind of dispute resolution process where the parties privately resolve their dispute as when the party faces a dispute in their agreement they seek the help of the arbitrator. Arbitrator is considered as a third party who listen to both the sides of the party and in return try to resolve their dispute by giving their decision in the form of arbitral award. This is the method where party try to resolve their disputes outside of the courtroom which seems less complex then the proper litigation process as less paperwork is required and experienced person are appointed as an Arbitrator.

Mediation is also a part of the dispute resolution process though in India there are no particular laws related to the mediation at present, but it is still opted by many parties though the decision given by a mediator is not binding in nature unlike the arbitral award which has the same binding authority like the decree passed in the court. In the process of mediation, there is a third party who helps in resolving the dispute by guiding them into the right direction through an informal meeting among the parties to the agreement.

And among all of the above mentioned few methods, arbitration has gained more preference over the age old court systems and the informal meetings with the mediator among the financial sector because of the globalization. As of nowadays people don’t have enough time to go to the court to seek remedy or justice they seek a process which is less complex and which is less time consuming. Thus the emergence of Arbitration is rising in the financial sector too.

ADVANTAGES THAT LED TO WIDENING OF ARBITRATION IN FINANCIAL SECTOR:

Firstly, the procedure of arbitration nowadays require the element of confidentiality. Like whatever is being going on the meetings are not supposed to be seen into the limelight unlike happening in the courtrooms. As there are many mergers & acquisitions cases are coming forward because of the globalization. It is a delicate situation as the sensitive information of the companies can be leaked and be used the competitors to gain an upper hand in the market and use that against the parties of arbitration. Therefore arbitration is a process where the third person who is the decision maker or the arbitrator are bound to maintain the secrecy about the case as they are part of contract to maintain the confidentiality about the parties or about the case.

Secondly, the kind of expertise which is being needed by the arbitrator generally is being lacked by the courts. The Institutional Arbitration have a well-qualified arbitrators with the specific knowledge regarding the subject matter, which in return makes it easier for the parties to seek the justice or solution to their argument.

Additionally, the proceedings of arbitration are generally custom made which provides the level of convenience to the parties by suiting the requirements laid down by the parties and applicability of the arbitral award is easier as compared to the decree or judgment of any court.

CUSTOM MADE SOLUTIONS[1]:

As we know, Arbitration is a process which is custom made as in the way it gives option to the parties to decide that how, when, where and in which manner they want to proceed further in the process of arbitration. It provides freedom to parties to decide their method unlike the age old court systems.

• Parties are free to decide the seat of arbitration, like parties can decide that at which place they would like to hold the meetings and where the whole procedure should take place can be completely decided by the parties. Basically the place of arbitration is decided at the convenience of the parties.
• Parties are free to determine the way of procedure or procedural rules, the procedural rules are to be decided by the parties in the agreement and if they fails to conclude at a mutual decision than the procedure is being set by the arbitrator themselves.
• Parties are free to determine the language for arbitration, the language in which they want to hold their proceedings during the process of arbitration.
• Parties are free to select their arbitrators, parties are free to choose an arbitral institution of their choice like by whom they want their case to be taken care of and the qualifications required by the arbitrator chosen by the parties can also be specified by the party.

 GUIDELINES THAT LED TO THE GROWTH OF ARBITRATION IN THE FINANCIAL SECTOR[2]

1. THE ISDA ARBITRATION GUIDE

The International Swaps & Derivatives Association (ISDA) in the year of 2013 September issued a guide relating to how one can use arbitration in ISDA Master Agreement. Earlier it included sample clause in the agreement, later on an expanded range of model clauses were introduced around the year 2018 for huge number of usage of institutional arbitration all over the world.

1. P.R.I.M.E. FINANCE RULES

When courts were not able to deal with the nexus disputes arose from the financial sector thus this resulted in the creation of international finance center which is known as P.R.I.M.E. Finance. This deals with the cases related to ADR and in return provides resolution by medium if mediation, arbitration and other disputes resolving services. They have their own rules and clauses which was released with this center on 16^th January 2012, situated at Hague. The reason behind opening this center was to fulfill the need of arbitration process required in the financial sectors. All the provisions made under this has only one aim that was to encourage the use of arbitration or law in the financial markets also and to provide justice to people who suffered or went through the wrongdoing or scam of others in this area.

• THE ICC COMMISSION REPORT

This report was prepared after conversing with at least more than or about 50 financial institutions around the globe and banking counsels or sectors with various policies, awards from minimum about 13 arbitral institutions were also being examined while preparing this particular report.

This report speaks about arbitration that is being performed in the regulatory method, in international finances matters, the disputes between the banking sectors, disputes relating to trade finances, etc. and quite huge growth sectors of arbitration were also recognized in this report.

This report turns out to be were helpful in determining the rise of financial institutional arbitrations among the world by classifying the types of disputes and by recognizing the strength of arbitration process too.

1. RECENT PROCEDURES

Previously the main purpose behind referring to the national courts over the process of arbitration was to assure speedy resolution of disputes via the judgment given in the format of summary elsewhere, in the process of arbitration the arbitrators are bound by their duty that they have to provide equal, fair and full opportunities to the respective parties of the agreement to set out their cases.

Nonetheless this thought process has been changed now, the institutional arbitration centers around the globe like the Singapore International Arbitration Center (SIAC), the Hong Kong International Arbitration Center (HKIAC), the International Chamber of Commerce (ICC) and many other institutions now provide the summary disposal of the disputes just like old court system which makes the process of arbitration more applicable option.

RECOGNIZED LIMITATIONS OF ARBITRATION

Though the process of arbitration is gaining its pace and being more frequently used method for resolving dispute in the financial market or sector, there are still some justifications that why sometimes this method of arbitration can be avoided. Like in few cases like the criminal cases arbitration is not possible as because these issues are not arbitrable in nature, as the third person can resolve the dispute where the parties to the agreement enter into an argument not where a person committed a crime and being guilty of murder or anything as those cases needed proper justice with the relevant punishments prescribed under the law.

The reason why people opt arbitration may be because of the myth that arbitration process are cost effective process. The Ad-hoc method of arbitration is precisely cheaper and affordable but it lacks experience and some required qualifications too that are being needed by the parties but the institutional arbitration is an expensive method.  As in the financial matters the parties sometimes doesn’t belong to same country which means a matter of cross border agreements are usually being held by the institutional arbitration centers, and it does cost a huge amount of money as the expenditure of procedure and transportation is expensive in nature. The arbitrator might also belong to a different country than any of the party to the agreement which make way for delay in the coordination between the parties to the agreement and the appointed arbitrator which ends up resulting in slow remedies.

CONCLUSION

As the P.R.I.M.E. Finance Rules, the ICC report and other initiatives are being encouraged and set as a means for resolution of disputes by the process of arbitration is being more frequently being recognized by the financial institutions or sectors.

The process of arbitration is most favorable as compared to the other methods of ADR and the age old system of litigation. Though there are many advantages and disadvantages of the process of arbitration but it will still be the most favorable option to be considered for resolving the disputes in the financial sector and the demand for arbitration will grow higher only in the near future too.

[1] Allen & Overy, The rise and rise of Arbitration in Banking and Finance Disputes, (2018, 9^th February), http://www.allenovery.com/en-gb/global/news-and-insights/publications/the-rise-and-rise-of-arbitration-in-banking-and-finance-disputes

[2] Shreya Shrivastava and Sachin Bhatnagar, The Rise of Arbitration in the Financial Sector, (April 11,2020), https://lawcorner.in/the-rise-of-arbitration-in-the-financial-sector/