This is a generic blog where I share the criticality of ensuring certain clauses are incorporated, while drafting standard property documents for your land acquisition and cottage construction stages, but are mostly missed/overlooked.

There are three important documents in your land acquisition and home construction phases:

• ATS: Agreement to Sell 
• Sale Deed
• Owner Contractor/Builder Agreement to construct

While all of us are aware of the above documents, it is also advisable to be cognizant of the importance of ensuring that certain clauses are incorporated in each, something I have seen most investors tend to overlook and thus risk the safety & sustainability of their investments.

ATS: Agreement to Sell:

An agreement to Sell (ATS) is a contract signed when you finalize your land/property transaction with the seller. It captures the terms agreed upon between the two parties primarily but not limited to the financial details of the agreed sale price in entirety, terms of payment, date and period of concluding the sale transaction thru a registered sale deed.

The ATS is a legally binding contract against which the buyer pays the seller a token, along with confirming the payment terms & timelines and the seller acknowledges the receipt of the token as a confirmation to the sales price and the agreed deliverable milestones, as agreed between the two parties.

It’s therefore critical for the buyer to ensure the following are stated clearly in the ATS:

• It is on a stamp paper registered on records in the state/jurisdiction of the transaction.
• It is with the actual seller/s of the land/property. This is critical to ensure – the title lineage and validity should be verified thru the current sale deed & the khatauni.
• All deliverables agreed by the seller/s to be completed before concluding the sales registration should be stated very clearly along with timelines of each for eg. if any development on the land is to be completed or legal/statutory documents/certification are to be obtained.
• Non-compliance/conformity on either side should be defined clearly and consequential exit clauses concerning these should be unconditionally binding in the contract.
• All legal & statutory documents including maps/drawings/permissions/certifications should be attached to the ATS, preferably with a Patwari certificate for the land/property boundaries and area.
• The ATS should be witnessed as per legally defined norms
• The ATS should be notarized and the original retained by the buyer

Sale Deed:

The sale deed is a transfer of ownership binding contract where the seller agrees to transfer the absolute ownership & title of the defined piece of land/property to the buyer against the specified monetary consideration which is received by him. He relinquishes all his/his legal heirs and nominees’ rights on the said land/ property and also declares that the land/property is free from any encumbrances as of the date of registering the sale deed.

Land records are in the process of being digitized in Kumaon RURAL – It is therefore of prime importance that the sale deed captures the following with utmost clarity:

• Details of all seller/s are verified from the govt, records are specified and each is a signatory to this either directly or through a registered legal Power of Attorney.
• The complete sale/transaction history documentation is verified and the title transfer chain is captured seamlessly in the sale deed along with attested records of each.
• The land/property coordinates are certified by the local authority (patwari) and the same is attached to the document.
• The boundaries along with neighboring land/properties coordinates and specifications of roads surrounding the property should be in the sale deed document.
• The approved master layout along with the contour mapping of the property should be in the document.
• If it is a residential layout, 118 permission should be attached.
• The sale proceeds along with complete details of the payment instruments should be specified.
• In the case of the built-up area on the land/property the complete structure, drawings, completion certificates, and asset list should be attached along with pictures
• No dues to government agencies.
• Background verification clearance report from a reputed third party.

Owner – Contractor/Builder Agreement to Construct:

This is an agreement to award the contract of constructing your cottage to the gated community builder or a third-party contractor. While the commercial model of these contracts can be many and I will not cover the merits & demerits of each of those in this blog, a standard Agreement to Construct (ATC) captures the scope, stages, agreed specifications of material, costs, and deliverables in detail. 

This is a fairly exhaustive and intricate contract and should be drafted specifically for each site, avoiding the usage of a standard one, as one size doesn’t fit all.

It is all the more critical here in Kumaon because one is entering into an ATC with individual/small-sized contractors and in most cases the owners are based remotely, hence to have an airtight ATC is of prime importance to ensure quality deliverables in time, first time right.

Also, Incorporating the following clauses should be ensured by the Owner in the ATC:

• Limitation of Liability (LoL) – Limiting the owners from any liability arising due to the construction of the building by the contractor, owing to his non-compliance/negligence.
• Indemnification: Indemnifying the owners from direct/third party claims/damages arising from the contractors’ actions/in-actions during execution of the contract and for a specified period post handover
• Performance Warranty – Ensuring the constructed cottage and all deliverables handed over by the contractor perform as per defined quality/criteria for a specified post-hand-over period.
• Stage-wise Completion & Inspections schedule – It is critical to articulate a comprehensive stage-wise milestone completion schedule, with a third-party audit and certification mandatory, this should be the qualifier for invoice acceptance of that stage and processing payments. Agreed penalties for delays/shortfalls should be linked to this schedule. The make checker concept is a very strong tool for owners based remotely, to ensure efficiencies.
• Termination – This clause should be clearly defined to capture not only all scenarios of termination but to also ensure the owner’s rights and investment is protected and liabilities covered in case of termination arising from any of the defined scenarios leading from it.

Having come across and also advised prospective home investors here in Kumaon on the merits of professional drafting for all documentation, it would be a pleasure to engage with anyone who post reading this understands the value and the ROI of this critical process while embarking on his/her home acquisition/construction journey in this DevBhoomi.

Mohit ”Tiger” Oberoi

Managing Director

RealEye

(Tiger@therealeye.com)