Due diligence in real estate

August 4, 2022

Introduction

Purchasing an immovable property is one of the biggest financial commitments that one can make and it would be a nightmare if one were to lose out due to a lack of due diligence.

Despite the fact that there are several laws in place to protect property purchasers, many have suffered massive losses as a result of purchasing property without conducting due diligence.

 

What is Due Diligence in real estate

Due diligence entails investigating or verifying facts about the physical and financial condition of the property as well as the area in which it is located.

To avoid financial pitfalls, it is prudent to conduct due diligence on a property that one wishes to purchase.

When purchasing an immovable property, and before signing an agreement of sale of an immovable property, it is important to engage a conveyancer/legal practitioner to carry out an investigation of the entire contract its terms.

Due diligence prior to purchasing the property helps to ensure that the property one is buying exists, it identifies the seller against the name on the property, and it also helps to ensure that there are no other real or personal rights registered against the property that could impede the transfer of the property.

 

Key issues to consider when One is purchasing an Immovable Property

  1.     The property

It is crucial to determine the registered title of the property.

It is important to establish whether an immovable property one wishes to purchase has a title deed attached to it or is under a cession or is state owned land or one controlled by the land developer or any other recognizable title before signing an agreement.

There can be a scenario where someone buys a house under the impression that it has title deeds, only to discover that the house is registered under a cession.

It’s important to make sure there are no other real or personal rights registered against the property that could prevent the transfer of property. Examples of those real or personal rights include leases, mortgage bonds, and caveats etc.

 

  1.     Property with title deeds

Where the property being purchased is said to be held under a title deed, a copy of the title deed must be produced by the seller.

One must verify the whether the seller is the actual owner of that property, verify the property description and further verify whether there are any rights registered against the property. Title Deeds are kept at the Registrar of Deeds.

One has to request a title deed and photocopy the Deed so that you peruse.

 

  1.     State owned land

If one is purchasing rural state land that is privately owned, the purchaser must make sure that there is a certificate of no present interest issued by the Minister of Lands.

A certificate of no present interest is a written statement by the Minister of Lands stating that the President has no intention to acquire the land in question for the time being.

 Purchasers run a number of dangers when purchasing properties without title deeds especially those being sold by land developers.

The validity of the land development project must be verified.

The purchaser must seek to see the original parent or holding deed to verify is the land developer is listed on it.

Further, a dispensation certificate, the development permit, and the subdivision permit have to be produced before one purchases such property.

Where the development is deemed to be finished, a certificate of compliance must be produced.

 

Identity of the seller

Verifying the information about the property’s seller is also crucial. It’s important to meet the person selling the property and to look over their identification paperwork.

The most crucial step is to match the seller’s name to the name on the title deed.

 

Where the seller is an individual

Where the seller is an individual there is need to match the images on the passport and national ID card to the seller’s face.

Particularly between the seller’s face and the identity card, there should be at least some degree of similarity.

 

Where the seller is a company or trust

After verifying that the company or trust owns the property one has to investigate if the person who is negotiating the agreement has been given the authority to sign any documents.

 

Where the person who is selling is an executor of the deceased estate

When a seller claims to be a deceased estate’s executor, one must conduct an investigation with the Master of the High Court.

If the estate is registered, it is crucial to examine the letters of administration to confirm that the individual claiming to be the executor of the estate actually holds that position.

It is important to remember that the property owned by the deceased cannot be transferred without the master’s permission.

 

Conclusion

In conclusion, it is important that before purchasing an immovable, one should engage conveyancers to do thorough research on his/her behalf as the process can be very cumbersome.

Conveyancers are experts who have a variety of skills that can help one determine if it is secure or wise to purchase an immovable property.

 

Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted for feedback at fungai@zenaslegalpractice.com and WhatsApp 0772 997 889. Plaxedes Tavirai is an intern and can be contacted on plaxedes@zenaslegalpractice.com

 

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