LEGAL CHECKLIST BEFORE BUYING COMMERCIAL PROPERTY

By NyayKart Legal Team- Experts in RERA, Consumer disputes &  Property Law across India.

This Article written by Gauraksh Sharma, 4th year B.A.LL.B student from Dr. Akhilesh Das Gupta institute of professional studies (GGSIPU Affiliated).

Introduction

Project registration under the Real Estate (Regulation and Development) Act, 2016 is mandatory for applicable commercial projects. Investing in commercial property in India isn’t just about finding the right location or negotiating a good price. The real challenge sits in the legal details. If you miss something, you can end up battling hidden liabilities, ownership headaches and regulatory brick walls that eat into your returns.

Here’s a practical checklist, built on essential laws like the Real Estate (Regulation and Development) Act, 2016, the Transfer of Property Act, 1882 and the Registration Act, 1908. Whether you’re a startup, an NRI or a corporate buyer, this roadmap helps you avoid costly surprises.

Title Verification Essentials

First things first: nail down the title. A clean title is everything in commercial real estate. Start by digging through the ownership records, use the Root Deed (Mother Deed) or Sale Deed and trace the chain of ownership at least 30 years back. Look for cracks: forgeries, missing links or shady transfers.

Get the Encumbrance Certificate (EC) from the sub-registrar’s office usually for 12-30 years, depending on the state. This document reveals mortgages, liens, leases or any court orders that might tie up the property.

Check mutation records (Jamabandi or Record of Rights) on state revenue portals like Bhulekh or Bhoomi. These show if the seller actually owns the property they’re selling. If you’re eyeing a leased property, review all tenancy agreements especially under Section 108 of the Transfer of Property Act. Look for unpaid dues, tricky renewal clauses or eviction risks. Real-world issues aren’t rare, just look at NCLT cases involving failed developers. Bad titles can freeze deals and drain value.

Always get a lawyer on board. Pay for a formal Title Search Opinion Report (TSOR) this usually runs ₹10,000-50,000, depending on the property. A clear TSOR protects you from ownership disputes. 

Under Article 59 of the Limitation Act, 1963 a suit for cancellation of an instrument must be filed within three years from the date when the plaintiff first had knowledge of the facts entitling them to relief.

Reconsider the Deal If:

• Seller refuses to show original title deeds

• Encumbrance Certificate reflects active mortgage

• No Occupancy Certificate issued

• Developer facing NCLT insolvency

• Undervaluation pressure for stamp duty

  
  

Regulatory Compliance Checks

Registration under the Real Estate (Regulation and Development) Act, 2016 is mandatory for commercial projects exceeding 500 sq. meters of land area or more than 8 units and for ongoing projects without Completion Certificate at the time of enactment. Double-check the RERA number on your state’s portal (like UP-RERA, MahaRERA or Haryana RERA). Review the developer’s background, project stage and escrow details. If they’re not compliant, penalties are steep, think 10% of the project cost or even jail time. Big names like Unitech have paid the price.

Make sure you have every :

1. No Objection Certificate (NOC) in hand.

2. Fire safety clearance (Fire NOC) issued by the local State Fire Department or Municipal Authority.

3. Environmental clearance from the Pollution Control Board.

4. Electricity approvals from DISCOMs.

5. Water authority nods.

6. Airport height clearance for taller buildings.

   
   

Zoning certificates under city master plans (like Delhi Master Plan 2041 or Mumbai Development Plan) confirm the land’s commercial use; if it was once agricultural, you’ll need proper state approvals.

Check municipal approvals, Sanctioned Building Plan, Commencement Certificate (CC) and Occupancy or Completion Certificate (OC/CC). Is there any illegal construction? You risk demolition orders and that wipes out your investment.

Land Use & Conversion Verification

Verify the land use classification under the applicable Master Plan. If the land was originally agricultural, confirm Non-Agricultural (NA) Conversion and Change of Land Use (CLU) approvals from the competent authority. Commercial operations on improperly converted land can invite sealing or demolition orders.

Financial and Tax Scrutiny

• Ask for the latest property tax receipts (at least 3-5 years) and GST compliance records. If you skip this, you might inherit someone else’s tax mess. Stamp duty varies by state and ranges between 5% to 7%, with an additional 1% registration charge. Rates differ for commercial properties and may vary based on gender and buyer category. Some states offer breaks for women or first time buyers, so check for those.

  
  

• For buyers taking loans, the RBI asks for 20-30% down payments. NRIs can buy under FEMA’s automatic route but need RBI clearance to repatriate more than USD 1 million a year. If the seller claims to act under Power of Attorney (PoA), make sure it’s registered, irrevocable and has no hidden conditions.

  
  

• Audit all society maintenance dues, CAM charges and outstanding ESIC or PF payments in multi-tenant buildings. These outstandings may transfer with the property depending on municipal laws, society bye-laws and contractual terms. Always obtain a No-Dues Certificate before registration. To protect your investment, you must do your homework or by hiring experts without cutting corners.

  
  

• If the property value exceeds ₹50 lakhs, the buyer must deduct 1% TDS under Section 194-IA of the Income Tax Act, 1961 before making payment to the seller. Non-compliance may attract interest and penalties.

  
  

Physical and Litigation Due Diligence

• Get your hands dirty with site inspections. That’s how you spot FSI gaps, parking issues like not hitting the minimum 2 ECS per 100 sqm the NBC requires or amenities that exist only on paper. Don’t just take anyone’s word for it. Order a structural audit that follows the National Building Code 2016, especially if you’re in a seismic zone. Bring in a registered value too, so you know the numbers line up with circle rates or DVO benchmarks.

  
  

• When it comes to legal trouble, don’t skip a deep dive. Using e-Courts, NCLT/DRT portals or Manupatra to dig up any ownership fights, specific performance suits or rent control messes, Delhi and Haryana Acts can be a real maze. A solid litigation report (expect to spend ₹5,000-15,000) will spotlight any IBC insolvency threats.

  
  

• If you’re working in a metro, double-check the Environmental Impact Assessment (Verify whether Environmental Clearance is required under the EIA Notification, 2006 depending on built-up area and project size.), Urban Land Ceiling clearances from before 1999 and, for resales, get those society share certificates and NOCs in hand. Don’t leave these boxes unchecked.

  
  

• Check whether the developer or property owner is facing insolvency proceedings before the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code, 2016. If insolvency proceedings are ongoing under the Insolvency and Bankruptcy Code, 2016, your transaction may be stayed or invalidated.

Practical Timeline, Costs and Best Practices

Category	Essential Documents	Verification Steps/Tools	Risks if Absent/Flawed
Title	Sale Deed, EC (30 yrs), Khata Cert	Sub-registrar portal, Title search	Fraud, undisclosed liens
Regulatory	RERA ID, Multi-NOCs, OC/CC	RERA app, Municipal e-filing	Demolition, project halts
Financial	Tax/GST Receipts, PoA, Loan Docs	CA certification, FEMA check	Dues inheritance, invalid transfer
Physical/Litigation	Plans/Layouts, Court Report, Valuation	Site survey, e-Courts	Defects, endless suits

Here’s how the timeline actually plays out:

Set aside 45 - 60 days for the entire due diligence and transaction structuring process. The first week is all about pulling together your documents. 

Spend days 8 through 21 sorting out verifications and getting your NOCs in order. From day 22 up to day 45, focus on gathering legal opinions and working out your Memorandum of Understanding (MoU). Due diligence isn’t free, expect to pay somewhere between 0.5% and 1.5% of the deal size. For a ₹2 crore property, that’s anywhere from ₹1 to ₹3 lakhs. Make things easier by using digital tools MP Passport for Encumbrance Certificates, RERA apps or PropStory for title tracing.

When you put together your MoU, make it conditional and back it with a token deposit of 5-10%. Consider routing advance payments through an escrow mechanism to safeguard funds until compliance milestones are met and clawback clauses so you’re covered if things go sideways. Once the sale deed is executed, Under Section 23 of the Registration Act, 1908 documents must be presented for registration within four months from the date of execution. Late registration possible with penalty under Section 25 of the Registration Act, 1908. For extra security, look at title insurance from providers like ICICI Lombard. The premium is relatively low, i.e., 0.1% - 0.5% of the property value, while providing coverage up to the full purchase price.

In a real-world instance, a Delhi investor nearly lost ₹5 crore in a Noida mall project but avoided loss by invoking refund rights under Section 18 of RERA.

Frequently Asked Questions (FAQs)

Q1.Does RERA apply to completed commercial buildings?

RERA applies to new and ongoing projects that did not receive a Completion Certificate at the time of enactment and meet the threshold criteria under the Act. Completed projects with valid OC prior to RERA may fall outside its scope, always verify the original RERA ID for sub-leasing or resale to avoid hidden developer defaults.

Q2.Which NOCs must I check before buying?

Fire safety, pollution control, electricity, water, zoning (Master Plan compliance) and airport height clearances ensure legal commercial operations.

Q3.Who pays past property taxes- the seller or buyer?

Seller clears dues up to closing (show 3-5 years’ receipts); unpaid taxes transfer post-registration, triggering municipal penalties.

Q4.Are there special rules for NRI commercial investments?

FEMA allows purchase via automatic route, but repatriation caps at USD 1M/year need CA-certified Form 15CA/CB; avoid agricultural land.

Q5.What’s the cost of thorough due diligence?

0.5-1.5% of property value (₹1-3 lakhs for ₹2 crore deal), covering title opinions, NOC checks and site audits which saves millions in losses.

Conclusion

A commercial property transaction is not just a financial investment - it is a layered legal transaction involving title risk, regulatory exposure, tax compliance and insolvency screening. A structured due diligence process costing 0.5%–1.5% of the transaction value can prevent years of litigation and crores in potential losses.

Bring a solid property attorney on board from day one. Budget for due diligence set aside 0.5-1.5% of the deal’s value and keep records at every step, especially in your MoU. This approach keeps you in line with RERA, FEMA and state laws and it sets you up for steady rental income (7-10% in big cities) and long-term growth. Use RERA portals and e-Courts to keep tabs on your investments. Protecting your deal today is what builds lasting commercial success.

How NyayKart Can Help

Facing possession delays? The NyayKart Legal Team provides end-to-end RERA support: drafting legal notices, filing complaints, representing before authorities and enforcing refund or compensation orders.

📞 Book a free consultation today to assess your case and protect your rights under RERA.