For doing business in India it is necessary to have knowledge about Real Estate scenario for the simple reason that at the initial stage it is necessary to give address of the registered office while incorporating a Company. Similarly, it is pre-requisite to have premises for the purpose of office and/or manufacturing unit depending upon the type of business.
There are mainly two options to procure premises. One is to procure on Lease or Leave & Licence and the other is to purchase the premises. Irrespective of whether the entrepreneur purchases the premises or procures on Lease / Leave & Licence, Licence; it is necessary to ensure that the seller or Lessor/ Licensor have clear marketable title to the business premises. For this purpose, one must conduct due diligence of the premises.
Depending upon the nature of the premises and the area in which the premises are located a check list of the documents should be drawn and same should be vetted by a law firm so as to ensure that the owner has acquired marketable title. A standard checklist, which of course, will have to be modified depending upon several factors as mentioned above, is annexed hereto as Annexure-A.
Having conducted due diligence the terms should be negotiated which may comprise of period of lease/leave & license, license fee/ rent, security deposit, lock-in period (if any), renewal, termination, etc. It is advisable that a Letter of Intent (LOI) or Memorandum of Understanding (MOU) on the broad terms should be drawn up and signed by both the parties. Whereafter, Where after the final terms should be negotiated and Lease Deed / Leave & Licence Licence Agreement should be registered with the concerned Registrar of Properties after payment of prescribed stamp duty, in accordance with Stamp Act of the respective State. In order to avoid any future complication it is necessary that such documents should be vetted by a competent law firm. Similarly if the proposed business entity desires to purchase the property for office, factory or other commercial unit, it would be necessary to see that proper due diligence is carried out before entering into any transaction and proper Sale Deed is made conveying the title to the purchaser.
Such document should also be registered on payment of proper stamp duty. It is also necessary that after execution of the Sale Deed name of the purchaser is entered in the register / records maintained by the Registrar and a copy of the extract of relevant property card / mutation register or any other relevant record which are statutorily required to be maintained by the Government should be procured. Many times those who desire to purchase / procure real estate on lease / leave & License get the documentation done by the a broker without getting it properly vetted through a law firm which creates complications at a later stage such as while releasing the premises or seeking refund of security deposit from the Landlord. Proper vetting of documentation is therefore absolutely essential particularly, if the company is engaged in specialized activities such as IT / ITE, etc. and is located either in Software Technology Park of India (STPI) or IT Park or Special Economic Zone (SEZ).
The Real Estate (Regulation and Development) Act, 2016 (RERA), intends to protect the interests of home buyers and enhance transparency in the real estate sector. We take care how it will affect the stakeholders – from home buyers and builders, to brokers – and the provisions and penalties prescribed under the Act.