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| F.A.Q Section :..: 10/6/2008 11:18:22 AM |
| Frequently Asked Questions... |
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1 « What is the policy on refund from Societies?
2 « Who bears the old costs and charges which have already accrued and become due?
3 « Are there any penalties on late payment, leading to the possibility of cancellation?
4 « Do installments by various Societies include development charges?
5 « How do we know if the quoted price for a file or plot is the "fair price"?
6 « What is the market practice for quoting prices of files?
7 « When buying DHA's files, the price also varies depending on the Mouza - which is a good Mouza?
8 « What about fake files? What can we do to minimize the incidence of buying fake files?
9 « What happens if the validity period of the open file has expired?
10 « Can open file be converted into a closed file any time?
11 « What are the risks associated with an Open File?
12 « Then, why have Open Files?
13 « What is the difference between co-operative housing societies and other societies?
14 « Can old National Identity cards still be used?
15 « What about commission on sale / purchase of files?
16 « What is Brokers' commission on sale / purchase transaction for plots?
17 « Which Broker should I contact for transactions in DHA?
18 « Is presence required of both Buyer and Seller to carry out sale / purchase transaction?
19 « How can we be sure whether a Society has acquired land or not? Or, whether the Society has the requisite government approvals or not? Are there any provisions in law through which we can check this?
20 « As a housing society, whether a co-operative society or an authority or a private commercial enterprise, what law governs the functioning of these ventures?
21 « What is the legal value of an "Agreement to Sell"?
22 « Under an "Agreement to Sell", if I have accepted a "Biyana", the market practice is that the Seller can renegade the Agreement by paying back double the Biyana. Is this covered by Legal provisions i.e. is this the legal right of the Seller? And, does the Seller always have to pay double the money back i.e. is this a provision of the Law?
23 « What happens to the General Power of Attorney when and if the person who has given the General Power of Attorney dies?
24 « In the case of Societies, is the ownership of land in the name of the private society or in an individual's name?
25 « Can I, as a joint owner of a property, enter into an Agreement to Sell on behalf of other the owners?
26 « What is a "token"? Does it has any legal strength?
27 « How is real estate ownership transferred from deceased parents to heirs?
| 1 « What is the policy on refund from Societies? |
Clearly, if market price is in excess of cost, nobody will seek a refund! Where the price has remained low, or where resale is problematic, Societies normally have a policy of deducing 10% / 20% as service charges and handing over the remaining amount to the applicant. Each Society may have a different policy and the respective Society should be consulted.
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| 2 « Who bears the old costs and charges which have already accrued and become due?
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The market practice is to quote price which is inclusive of all dues and charges which have become due to-date. This means that the quoted market price assumes that all such charges have already been paid for.
Therefore, in such cases, when a transaction is contemplated, there is procedure in place in all societies to get a "No Demand Certificate" which quantifies the amount of charges which may have become due. Any such amounts will get deducted from the sale price and the net amount paid to the seller - the differential will be paid directly to the society to facilitate the transfer procedure.
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| 3 « Are there any penalties on late payment, leading to the possibility of cancellation? |
Almost all societies impose surcharge at varying rates on late payment of installments. Bahria had imposed PKR. 500/- penalty per day in December '04 while NFC Phase II is currently not recovering any surcharge on late payments. Each society has its own norms and practices.
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| 4 « Do installments by various Societies include development charges? |
It depends. Normally, cooperative housing schemes take cost of land first, and subsequently recover development charges after "twon planning" for the Society has been finalized. Commercial housing schemes can follow the same trend, or may fix an installment plan which is inclusive of development charges. Details of each Society need to be carefully reviewed to understand whether the installments are inclusive of development charges or not.
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| 5 « How do we know if the quoted price for a file or plot is the "fair price"? |
It is difficult. A lot of reliance is placed on brokers to quote "fair price". Since Files are all standard i.e. location and special attributes are not known, price quoted in the market is quite transparent. On the other hand, price of plots varies largely with the location. Ensuring transparency in the price of plots is a lot more difficult.
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| 6 « What is the market practice for quoting prices of files? |
It varies. Market practice is specific to each Society and varies from one to another. In case of NFC Phase II, price is quoted as ON only while price for State Life Phase II is quoted as total price with specified # of installments paid. As an example, NFC will be quoted as PKR 940,000/- ON only - brokers know that since to-date 9 installments have been paid i.e. PKR 480,500/-, total cost to the buyer is PKR 1,420,500/-. On the other hand, in the case of State Life, market practice is to quote total price, say, PKR 1,800,000/- with four installments paid - which means that since four installments equal PKR 300,000/- and total price is PKR 1,800,000/-, the current ON is trading at PKR 1,500,000/-.
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| 7 « When buying DHA's files, the price also varies depending on the Mouza - which is a good Mouza? |
This is a difficult question to answer. There are different views in the market. The criteria of a good mouza is promoted by some Brokers on the basis that subsequent balloting of plots will be specific to the area in which land belongs. For example, Bengali is a mouza in Phase 7 of DHA - some brokers opinionate that location of plot will be specifically in the area where Bengali mouza is. On this basis, since Bengali mouza is close to the golf course in phase 6 (and therefore bordering Phase 7), this segment of the market believes that Bengali is a good mouza because plots will be located near the golf course. On the other hand, the other segment of market is of the view that DHA will make a general pool from which balloting will take place - accordingly, irrespective of the location of the mouza, location of the plot can be anywhere.
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| 8 « What about fake files? What can we do to minimize the incidence of buying fake files? |
In a normal sale / purchase transaction, where both the buyer and seller go to the society's office to sign in presence of the authorized representative of the society, the risk of buying a fake file are minimized. However, in the case of open files, this risk may be there. Some societies offer the facility that you may get a verification of the authenticity of the file before paying for it e.g. State Life Society endorses verification stamp on payment of PKR 500/- fee.
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| 9 « What happens if the validity period of the open file has expired? |
Expired Files can be re-opened for further prescribed periods on payment of fees to the society. At present, expired files are being re-opened without recourse to original buyers / applicant.
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| 10 « Can open file be converted into a closed file any time? |
Yes, any time during the validity of the open file period, you may fill in the buyer's name and submit documents to the society and the file will get transferred to your name without recourse to the original applicant.
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| 11 « What are the risks associated with an Open File? |
Open files are like "bearer cheques". The person is possession of the open file can approach the society and ask for the file to be transferred to his / her name. Physical custody of open file documents, therefore, is very important. It is also important to know that not all Societies allow Open Files.
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| 12 « Then, why have Open Files? |
Open File concept has been introduced by certain societies to boost popularity and trading in their scheme by not requiring buyer and seller to come to society each and every time that a transaction needs to be done. Also, file opening attracts certain charges which vary from society to society, and mean more income for societies.
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| 13 « What is the difference between co-operative housing societies and other societies? |
Co-operative housing societies are non-profit making societies which need to be registered and approved under The Co-operative Societies Act, 1925. Such Societies will always carry the word "Co-operative" as part of its complete name e.g. Sui Northern Officers' Co-operative Housing Society Limited. All other housing schemes are commercial schemes.
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| 14 « Can old National Identity cards still be used? |
Every Society has now made it mandatory for buyers and sellers to carry new National Identity Cards
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| 15 « What about commission on sale / purchase of files? |
There is no fixed market practice. The amount can be the standard 1% or a fixed amount per File. Again, it should be clarified and agreed upfront. We have also seen transactions where you can even ask the Broker to quote net price i.e. inclusive of commission costs.
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| 16 « What is Brokers' commission on sale / purchase transaction for plots? |
Although Brokers quote 2% as their standard commission on the value of transaction, the market norm is to pay 1% on the transaction value by both the buyer and seller. Even this is negotiable which should be mutually agreed prior to entering into a transaction.
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| 17 « Which Broker should I contact for transactions in DHA? |
DHA has an approved list of Property Brokers who are authorized to enter DHA's premises and to carry out transactions. DHA's website www.dhalahore.org has a list of such authorized brokers.
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| 18 « Is presence required of both Buyer and Seller to carry out sale / purchase transaction? |
Yes, all Societies require physical in-person presence of both the buyer and seller at the same time. There may be exceptions e.g. through General Power of Attorney or where Open Files are being transacted. We have separately mentioned the Transfer Procedures for each Society and the same can be found along with the other information for that Society.
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| 19 « How can we be sure whether a Society has acquired land or not? Or, whether the Society has the requisite government approvals or not? Are there any provisions in law through which we can check this? |
There are various modes to determine status of land. However, one of the safest is the checking of records of rights of the land purportedly owned/claimed by the society. It is also advisable to check the total area proposed to be developed viz. a viz. the number of plots offered. In addition one can have a fair idea of the acquired land by visiting the area proposed to be developed by the society.The approvals etc. are always mentioned in shape of some approval number. This can be further checked from the records of the authority that has issued the approval number, which will also clarify any restricting/qualifications attached to any such approval.
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| 20 « As a housing society, whether a co-operative society or an authority or a private commercial enterprise, what law governs the functioning of these ventures? |
The law governing co-operative societies is the Co-Operative Societies Act, 1925 however presently companies incorporated under the Companies Ordinance, 1984 are also carrying out the business of land development. The Security & Exchange Commission of Pakistan (SECP) has a supervisory and regulatory authority over all such companies to ensure that various requirements of law are been complied with. The record of such companies can be checked/inspected in SECP.
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| 21 « What is the legal value of an "Agreement to Sell"? |
The buyer in whose favour the seller has entered into an agreement to sell can file a suit for specific performance of that agreement, pursuant to which the court may after examining facts and circumstances of that particular case, pass an injunction order restraining further sale of that property. However there is a consistent view that for any such relief, the Plaintiff should deposit the balance consideration in court. If the Plaintiff (buyer) successfully establishes before the court through evidence that on the dates agreed in the agreement to sell, he was ready and will to pay the balance consideration and get the transaction through but on account of some acts/omission attributable to the Defendant (seller) the transaction was not completed than a decree is passed in the Plaintiff's (buyers) favour. Inverse is the case when a seller proves that the buyer was not ready and willing rather he was ready and willing and certain acts/omissions of the buyer caused the non completion of the transaction.
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| 22 « Under an "Agreement to Sell", if I have accepted a "Biyana", the market practice is that the Seller can renegade the Agreement by paying back double the Biyana. Is this covered by Legal provisions i.e. is this the legal right of the Seller? And, does the Seller always have to pay double the money back i.e. is this a provision of the Law? |
This depends upon the mutual agreement of the parties. The double biyana is not a license for the seller to wriggle out. Obviously the offer to pay double biyana is only made in cases where the seller has committed some default or wants to renege from his promise, in such a case the contract becomes voidable at the option of the buyer i.e. he may receive double biyana and cancel the contract or he may sue the seller for specific performance of the agreement.
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| 23 « What happens to the General Power of Attorney when and if the person who has given the General Power of Attorney dies? |
Normally all power of attorneys cease to hold its effect after the death of the principal. However under section 202 of the contract act, if this can be proved that the attorney has some interest in the property on the basis of which the said power of attorney was executed, then its effect continues.
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| 24 « In the case of Societies, is the ownership of land in the name of the private society or in an individual's name? |
The land is in the name of the society which issues an allotment letter to the allottees however in cases of the private developer/company, after the total payment is made, the title is then transferred to the person allottee.
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| 25 « Can I, as a joint owner of a property, enter into an Agreement to Sell on behalf of other the owners? |
A joint owner of any undivided property is by legal fiction the owner of each and every inch of that property to the extent of his share. Hence in case a joint owner of any undivided property wants to enter into an agreement to sell, he cannot bind the other co-owner(s) unless they execute a power of attorney in his favour or they (other co-owners) become signatory/executants to the agreement to sell.
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| 26 « What is a "token"? Does it has any legal strength? |
Token is only an agreement to agree meaning thereby that the buyer only pays a very small amount and it is agreed that the parties will subsequently enter into and agreement to sell and nothing more. Hence there does not exist a specifically enforceable. It should be clear that a token only provides for a time to "enter into a formal agreement to sell". Hence in case the seller backs out from token, the other party can only recover the amount of token paid or if agreed, the double amount thereof.
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| 27 « How is real estate ownership transferred from deceased parents to heirs? |
There is a requirement of a declaratory decree in favour of the surviving legal heirs of the deceased from the civil court having territorial jurisdiction in the matter, thereafter while implementing the decree, the records are accordingly updated.
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