“Due diligence protects a potential buyer in his choice”
The term “due diligence” refers to the procedure that is most often initiated by the buyer of real estate or business. During the procedure, the buyer requests information, documents and guarantees regarding the property itself and its seller. Even though such a preliminary investigation may be underestimated at the beginning of negotiations, it is crucial for a future transaction, helps to approach it wisely, to avoid unpleasant surprises that can be followed by costly litigation in court.
The boundaries of the procedure are very large-scale and cover a number of points. These include the legal status of the property, the financial position of the seller, any utility bills due, the tax aspect of the transaction, the seller’s rights to dispose of the property, and the potential need for the buyer to obtain permits and approvals from the government or any other government agency.
On the importance of the due diligence process
Before purchasing a property, a potential buyer should exercise due diligence and exercise caution in order to avoid all sorts of complications in the future. When selecting real estate, it is necessary to order an independent assessment, find an object in the land registry and find out whether the property is pledged, whether it is subject to any mortgage lending or encumbrances. In addition, it is necessary to find out data about the seller himself, to find out – regarding tax obligations, the risk of bankruptcy, etc.If the property belongs to the old fund, then such an object can be put up for sale or rented by legal tenants.
It is also recommended to go to the city planning office to check the development prospects of the property, whether they are affected by any planning scheme and building density. In the case of a house or apartment still under construction, the buyer must provide a copy of the town planning permit and building permit or, if the property is without a separate title deed, request a copy of the above document, a division permit and a copy of the architectural plans. In addition, they must find out whether the property is subject to VAT.
If the property is pledged or subject to a memorandum or any other prohibition, the seller must prove to the buyer before the sale that he is able to take the necessary measures so that the property is free on the date of transfer. The signing of the contract must take place after due diligence, and only after the transfer of ownership must payment be made.
Placing a contract of sale in the land registry is insufficient and does not protect the buyer, who may find himself in a difficult situation if the seller fails to fulfill his obligations and transfer the property. However, it is essential that the sales contract be entered there immediately, as any delay could create problems such as registration of encumbrances.
When planning to purchase property from a person who is not the registered owner but instead is a potential buyer under a sales contract, it is important to consider a few things. A potential buyer must find confirmation that the person selling the property has really entered into a contract of sale with him and the buyer does not owe any money from his side. The original seller must provide proof of payment of capital gains tax, if any. If the requirements are met and a certificate of tax exemption is obtained, the sale may be made under an assignment agreement, which must bear the certified signatures of the transferor and assignee. All of the above emphasizes the importance of professional advice before buying a property.
Source: cyprus-mail.com editor estateofcyprus.com Photo cyprus-mail.com