Conducting Property Due Diligence in Bangladesh To Ensure A Safe And Secure Investment

Property transactions in Bangladesh, whether for purchase or lease, involve significant legal, financial, and administrative processes. Due diligence is a crucial step that every prospective buyer or lessee should undertake to ensure the legitimacy and security of their investment. This process involves verifying the ownership, checking for legal encumbrances, and ensuring the property complies with all applicable laws and regulations. Below, we will outline the key aspects of property due diligence in Bangladesh and highlight the challenges that can arise.

Legal Framework for Property Transactions
In Bangladesh, property transactions are governed by several legal frameworks to ensure transparency and protect the rights of all parties involved. Some of the key laws that regulate property ownership and transactions include:

•  The Transfer of Property Act, 1882;
•  The Registration Act, 1908;
•  The State Acquisition and Tenancy Act, 1950; and
•  The Real Estate Development and Management Act, 2010.

Mode of transfer of Property and registration of property documents An immovable property in the form of a flat/apartment or a land may be transferred either via a sale/purchase, lease, Heba/Gift and inheritance. As per the Transfer of Property Act 1882, transfer of property refers to the conveyance of property, either in the present or at some point in the future, to one or more living individuals, to the transferor themselves, or to the transferor and one or more living individuals jointly. In order to transfer an immovable property, to any person via the above methods, the relevant property deeds need to be registered at the concerned Sub-Registry Office of the area where the property is located in accordance with The Registration Act, 1908.

It is imperative to note that when an individual is purchasing a property, conducting thorough due diligence is indispensable. This process involves investigating and verifying the legal, financial, and physical aspects of the property to ensure that there are no encumbrances, disputes, or other legal issues that could affect the ownership or the intended use of the property. 

Please note that the following documents/information need to be examined for ensuring a seamless transition of ownership

a. Title deed including all relevant deeds and Bia Deeds comprising of atleast 25 years
b. All Khatians records including CS Khatian, SA Khatian, RS Khatian and BS Khatian / City Jarip
c. Mutation Khatian
d. Duplicate Carbon Receipt/Khazna Receipt and Land Development tax
e. Seach at the relevant sub registry office for any encumbrances related to the property
f. All Parcha documents
g. Mouja Map
h. Cross-check whether the ownership details align with the Khatian and Bia Deed.
i. Confirm whether the mutation of the property is duly recorded
j. Power of Attorney, if any (to check the chain of ownership in the POA)
k. Approval from Rajdhani Unnayan Kartripakkha (RAJUK) or the relevant government authority
–.based on the property’s location
l. Check the payment status of Khajna and land development tax
m. Other documents, as applicable.

Key Components of Legal Due Diligence
Legal due diligence involves a thorough investigation of all relevant property records and legal documents.
The key components of legal due diligence include:

• Verification of Ownership: The chain of ownership of atleast 25 years must be verified. If the property was acquired through a sale, gift, inheritance, or will, all relevant deeds including Bia Deeds, mutation and khatiyan records must be reviewed to ensure the authenticity of the ownership.

• Verification for Government-Leased Property
Many properties, especially in Dhaka are leased from government bodies such RAJUK. In such cases, it is essential to check whether the lease terms have been complied with the applicable regulations of the government body and also verify whether the necessary permissions for property transfer have been obtained from the respective government body. This ensures that the property is legally transferable and that the lease agreement does not impose any restrictions that could affect the
transaction.

• Non encumbrance certificate: It is crucial to verify if there are any encumbrances on the property. :A non-encumbrance certificate needs to be obtained from the relevant Sub Registry Office in order to confirm that the property is free from encumbrances such as mortgages, liens, leases, easements and any ongoing litigation. This certificate shall confirm that the property has no outstanding
claims or liabilities attached to the property.

• Check Mutation Records: If the current owner’s name is absent from the latest Khatian/Porcha, it is mandatory to initiate the mutation process to update the ownership records, substituting the previous owner’s name with that of the current owner. Mutation of the Khatian is a necessary procedure when ownership is transferred. Without proper mutation and an updated land tax clearance,
ownership transfer is not legally permissible.

• Building Approval: In the case of purchasing a flat or apartment, it is essential to verify that the building has obtained all requisite approvals and permits from the relevant goverment authorities.  This includes confirming that the building plan and layout have been duly approved, and that an occupancy certificate has been issued.

Challenges in Property Due Diligence in Bangladesh
In Bangladesh, fraudulent transactions, slow bureaucratic procedures, and a lack of transparency pose challenges to property due diligence. Document forgeries are frequent, and backlogs and inadequate coordination cause delays in land registration and mutation. Furthermore, the lack of a centralized database for land records makes it more difficult to track ownership and raises the possibility of legal
problems. Additionally, the absence of a centralized land record database complicates ownership tracking and increases the risk of legal issues

Conclusion
In Bangladesh, conducting due diligence on properties is a crucial step for anyone purchasing or leasing land. An individual can reduce the risks and make a wise investment by carefully examining the property’s legal status, ownership history, and compliance with applicable laws of Bangladesh. To ensure a seamless transaction, it is vital to navigate the legal requirements and bureaucratic obstacles, even if the
process might be complicated and time-consuming.