Laws Shaping Auction Properties for Investors
Have you heard of the SBI Mega e-Auction or any of the several other property auctions like it, where hundreds of thousands of units are regularly put up for auction? For example, the State Bank of India held an auction on, May 29th, of about one thousand pieces of real estate, both commercial and residential. Many other banks also regularly hold auctions. Real estate auctions have really grown commonplace these days, and purchasers love them especially for the steep savings they provide.
This article deals with Laws Shaping Auction Properties for Investors. It also explores the FAQs by investors and its answers.
Auction Property and Investors in India:
Property auctions, according to industry experts, have proven to be a very successful means for banks to lower the strain on their books and for potential purchasers to purchase a home at a reduced price. Buyers, however, have experienced a range of emotions, from joy over huge savings to regret over unprecedented liabilities.
Important Laws that Shape Auction Property in India:
In India, a combination of national and state-level laws governs real estate and auction properties. This is because, in accordance with Article 246 of the Indian Constitution, "Transfer of Property," other than agricultural land, is enumerated under the Concurrent List, or List-III of the Seventh Schedule, whereas "Land" is a subject matter under the State List, or List-II of the Indian Constitution, which enumerates subjects on which only States can legislate. The following laws deal with the sale and purchase of property: -
Transfer of Property Law, 1882: This fundamental law provides broad rules and guidelines for transactions involving sales, transfers, mortgages, leases, gifts of property, and part performance and lis pendens for both moveable and immovable property.
The Indian Easement Act, 1882: Administers the law of elementary rights to immovable property.
Indian Contract Act, 1872: Since the auction is a type of invitation to offer, the rules of Contract Act will be applicable. The aggrieved party can take recourse under this law to protect its legal rights.
The 2013 Land Acquisition, Rehabilitation, and Resettlement (Right to Fair Compensation and Transparency) Act: lays forth the requirements for equitable compensation and transparency in the purchase, restoration, and relocation of land. This Act regulates the compensation and restoration actions that the government must undertake when purchasing private assets for a company or particular public goals.
Act of 2016 on Real Estate Regulation and Development (RERA): This act came into force on May 1, 2016, and was enacted under the Concurrent list of the constitution. The need of the hour for enacting this law was that sellers of property were using a lot of malpractices. They used to lie about the title of the property or delay in transfer of possession or certain qualities were misappropriated. This act created a good level of accountability and transparency which was a necessity in property matters. The central and state governments were mandated to issue the required guidelines and rules for the enforcement of this act within 6 months.
Frequently Asked Questions by Investors:
Ques 1- What if the investors are worried about the payment? What are the prerequisites to be kept in mind?
Ans 1- A prospective investor of an auction property has to be well-versed with the terms of the payment arrangement. The payment procedures for properties that are auctioned differ from the regular payment schedules for other types of assets. Typically, the winning bidder gets the payment plan for stressed assets. The auction announcement itself makes mention of it.
Ques 2- When will the possession of the party be transferred to the potential investor?
Ans 2- When purchasing a property through a bank auction, a buyer must consider whether the bank has physical possession of the property or if the auction is conducted via symbolic ownership. If the buyer is merely in possession symbolically, they will have to wait for the bank to provide them physical ownership by going through a legal process.
Ques 3- What happens when there is no transfer of possession at all? What remedy does the investor have?
Ans 3- After completing the payment, the buyer may provide the bank with a formal notification or a legal notice requesting that the bank transfer ownership of the property after all outstanding issues have been resolved. If the bank withholds the transfer of ownership after the auctioned property is sold, it will be responsible for returning the whole sum paid, plus interest. Under clause 9 of The Security Interest (Enforcement) Rules, 2002, the bank is required to give the property to the buyer free of charge.
Ques 4- What if the auctioned property has any dues pending? Is there any way by which the investor can be made aware of the same?
Ans 4- In an auction, "as is where is," "as is what is," and "whatever there is" are typically the basis of existence. In order to determine what might be the possible additional liability if the property is bought, it is wise for the buyer to conduct due diligence directly from the government authorities for the statutory payments that might be attached to a property, such as property tax, municipal tax, and electricity dues.
Ques 5- What can the investor do if the owner of the property is not vacating the property?
Ans 5- According to the SARFFAESI Act Section 13(2), a borrower in default has 60 days to pay off all of his debts. If this doesn't happen, the borrower's secured assets may be seized by the secured creditor (bank) in accordance with section 13(4)(a), which also gives the bank the authority to sell, assign, or lease the assets to satisfy its debts.
In case of any query regarding Laws Shaping Auction Properties for Investors, feel free to connect with our legal experts Tulja Legal at?+91 96380-69905
About the Author
Anju S Nair
Legal Researcher | LLB, MA English| Corporate Lawyer | Business Enthusiast | Founder & CEO at iLawbook.