The meaning of legal due diligence in a real estate transaction is an investigation of real estate property records and anything else deemed important to the sale, purchase, lease or mortgage of the property. Essentially, it refers to the reasonable measures which every person will adapt before executing an agreement in relation to the real estate/ immoveable property. This is for the function of making them conscious of the risks concerned in the transaction and lessening them in consonance with the parties’ necessities.
The process of property attainment and land due diligence is tremendously time consuming and complex, due to the participation of different regulatory authorities, State specific laws and judicial precedents. It is important to examine certain issues in relation to the real estate property such as ownership title, legality of development & construction, permitted use, easements and encumbrances which have the prospective to manipulate the essential attributes of the real estate property and its aptness to the transaction.The process of legal due diligence involves preparing a checklist in agreement with various state jurisdictions and legislations, scrutinizing litigations awaiting against the immovable property, encumbrances/ charges, easements and registrations/ authorizations with the knowledgeable government authorities. This due diligence exercise is to be emphatically conducted to obtain a crystal clear vision on the preceding title of ownerships of the real estate property with all permitted uses, encumbrances/ charges, compliance of statutory requirements, limitations vested in the property and modus operandi to prevail over obstructions, if any.
The Legal Due Diligence of a real estate property can be performed in two ways which are Full Search or Limited Search. Both of these methods provide an extensive and complete search of all components of a real estate property such as the chain of preceding title ownerships, encumbrances/ charges (mortgage or lien), statutory compliance or authorizations, easement rights, pending judicial proceedings, if any, and the course of action to bring resolution to such disputes.