Commercial Real Estate

There are three basic vehicles commonly used to secure real property pledged in commercial real estate financings in Nova Scotia. The first and most common vehicle is a real property mortgage. A sum of money is borrowed (the “debt”) and arrangements for repayment are secured by a real property mortgage on lands owned by the borrower. Collateral security is usually arranged and can consist of assignments of rent, assignments of lease; chattel mortgages on personal property, (now for the most part replaced by general security agreements made pursuant to the Personal Property Security Act), assignments of contract, assignments of building, engineering and architectural contracts if the debt is incurred to finance the construction of a building, and guarantees, usually given by the principal shareholders of a corporate borrower, or any combination of the foregoing. The mortgage security vehicle is most appropriate for financing office buildings, apartment buildings and shopping malls. The debt is intended to be amortized over a specific number of years and fully retired at the end of the amortization term. It is not unusual, however, to increase the mortgage loan during the amortization period, and in such an event it is customary to release the original security and replace it with new documentation securing, in effect, what becomes a new loan. A mortgage is not usually an appropriate vehicle to secure a revolving line of credit.

Documents pertaining to Land

Following are some of the essential documents that one would have to look at pertaining to the land:
Chain of conveyance/sale/partition/gift deed or will, by which land was acquired Urban Land Ceiling & Regulation Act (ULC) Clearance Certificate, if applicable 7/12 extract (Property card extract), Index II issued by sub-registrar Title Certificate / search report by an advocate for the last 30 years Non agricultural permission (N.A) 37 I clearance under section 269 UL (3) of the Income Tax Act, 1961 Income Tax clearance of the seller under section 230 A of the Income Tax Act, 1961

Conveyance / Sale deed is a document by which the title of a property is conveyed by the seller to the purchaser. Conveyance is the act of transferring ownership of a property from a seller to the buyer.
ULC [Urban Land (Ceiling & Regulation) Act] - The ULC Act is a social legislation vide which the Government has set a limit on the maximum permissible vacant land holding by a single entity in an urban agglomeration. Depending on the location and zone classification, this maximum limit varies from 500 sq. Mts. to 1500 sq. Mts. This excess vacant land is liable for acquisition by the respective State Government. Any vacant land holding beyond this limit would require an exemption under various sections from the ULC authorities, which is governed by the Urban Development (U.D) department. The land may be exempted if the concerned authorities are convinced that by the acquisition of this vacant land there would be undue hardship caused to the owner or if the owner manages to convince the concerned authorities that this vacant land needs to be held in public interest. Other than these reasons, there may be various other reasons, which the authorities may consider to provide exemption to this land.When such vacant land is sought to be developed for housing schemes, the schemes have to be developed as per the norms and guidelines lie down by the concerned authorities and need to be necessarily sold to beneficiaries who fall under certain specified sections/categories mentioned in the permission.
7/12 extract is a document, which shows the names of the owners of the property. It contains details such as the Survey numbers, area, date from which the current owner's names were registered as owners. The 7/12 extract is issued by the Tehsildar or the concerned land authorities. Along with this the corresponding record of rights in Form no.6 for last 30 years needs to be obtained
Index II - Index II is a document issued by the office of the Sub- Registrar of Assurances. It mainly mentions the names of the sellers & purchasers of a property for which the document is registered.
Search report & Title certificate - A Title certificate is issued by an advocate after conducting a search of the title of the property, which is intended to be purchased. The title certificate would state if the property is unencumbered and has a clear marketable title. This search report and title certificate can be obtained from one's own advocate or if the search has already been conducted by the current owner then one can have his/her advocate inspect these reports to ascertain the title of the property. This search on the title of the property is taken for a period of the last 30 years. It is mandatory for the developer to annex a copy of these reports in the "Agreement for Sale" with the intended purchaser of the flat. These documents would state whether the title to the property is clear, marketable and free from encumbrance. In other words, it would state whether or not there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely.
Non Agricultural (N.A) permission -- If the land under consideration is agricultural land and if one intends to develop the said land for residential/commercial/industrial use, then such agricultural land has to be converted to non-agricultural land and an N.A order has to be obtained from the Collector of the District where the property is located. Along with this, one needs to take the latest receipts evidencing the payment of N.A. tax. In cases where the conversion from agricultural use to N A use is not done within the stipulated period then, there should be an order from the concerned authority extending the period.

Legal Documents - That should be taken care of

WARRANTY DEED

A warranty deed is a conveyance of title plus some warranties or guarantees. The usual guarantees or warranties by the seller are: good title, freedom from encumbrance other than as excepted, and possession to the buyer as against all others.These guarantees are not adequate protection since they are no better than the present and future financial responsibility of the seller. A warranty from a financially responsible seller is comforting and desirable. It is not a substitute for a title examination. Title defects have a way of lying dormant for years and perplexing a buyer long after he has paid for the land and after the seller is dead.

THE TITLE TO REAL ESTATE

A real estate title is a right to partial or whole ownership to land and improvements upon the land. If you can prove your title against all the world, and if it is for whole ownership, it is a good title. If, in addition, the evidence or proof of ownership is contained in proper public records, it is a good record title. Ordinarily only a good record title is marketable.When purchasing a home, you should request a "marketable" whole title. Your lawyer, after proper investigation, can tell you whether the seller is able to convey such a title to you. No one can advise you without a proper investigation.