Legal terms in buying a property

Legal jargons can seriously deplete your interest in home buying. Before that catastrophe happens, here is a primer on important legal home buying terms to help you in your home buying experience.


Lease is an arrangement between a property owner and a tenant that stipulates the conditions under which s/he may posses the property for a specified period of time and rent. A deed (agreement) should be drawn and it should contain the duration of the lease, the time of commencement the amount of rent or premium if any, the time of payment and the covenants between the lessor and the lessee upon which the lease should be granted.


It means any lien or charge in the existing immovable property. An immovable property should have a clear and marketable title without any mortgage or a claim litigation etc. If there is such an encumbrance in the property then it shall affect the title of the buyer adversely.


Intimation of Disapproval is a letter issued by the BMC to the vendor or builder setting out terms and conditions to be complied before the construction. Once the IOD conditions are complied CC (commencement certificate) is issued by the corporation.


NOC or the No Objection Certificate is issued by the society when there is transfer to tenement. A society secretary issues an NOC only when the flat that is being sold is free of any charge or lien or any dues. The new model byelaws dispenses the need of NOC from the society, however it still remains a very important document in the disbursement of a home loan. If such a certificate is required by the transferor (seller) or transferee (buyer) s/he can demand the same from the society.

Non occupancy charges:

Non occupancy charges (NOC) are levied on a member of a society if s/he does not reside in the flat, but allows it to be used by an outsider (non relative) through subletting or leave and license or on care taker basis. NOC can be legally levied once the outsider occupies the flat from the member and that the member dos not stay in the flat herself/himself. NOC cannot be levied in excess of 10 percent of the service charges.


In simple terms disbursement means pay out. In case of home loans, when the bank pays you or the seller the loan money. It is called disbursement. The date of disbursement is the day on which the money is disbursed. Most terms housing finance corporations disburse money in installments, especially in case you are buying a resale that has been purchased on finance by the seller. Banks normally disburse the loan after all paperwork has been satisfactorily completed, and you have met all the qualifying criteria. This is the last stage of a home loan taking process.

Floor Space Index (FSI):

Floor space index is the ratio of combined gross floor area of the entire building to the total areas of the plot on which it stands. To arrive at an FSI, the total covered area on all floors should be divided by the plot area.


It is the legal proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property (immovable property) due to the owner’s failure to comply with an agreement between the lender and borrower called a mortgage or dead of trust.

Commonly the violation of the mortgage is a default in payment of a promissory note, secured by alien on the property. When the process is complete it is typically said that the lender has foreclosed 1st mortgage or lien.

Earnest Money:

Sometimes called an earnest payment token money or simply earnest money is a deposit towards a purchase made by a buyer to demonstrate that he is serious (earnest) about wanting to complete the purchase. When a buyer offers to buy residential real estate, s/he generally signs a contract and pays Rs 1,000 or whatever is agreed upon as earnest money. This means that the buyer has now booked the flat and the seller will now not show the flat to prospective buyers till the deal is finalized or cancelled.

If the seller accepts the offer, the earnest money is typically subtracted from the purchase price, or is kept in escrow until closing when it is applied to the buyer’s portion of the remaining costs. If the offer is rejected, the earnest money is usually returned. If the buyer retracts the offer, the earnest is forfeited.

NA Tax:

If the land under consideration is an agricultural land, and if one intends to develop it for residential / commercial / industrial use, then such agricultural land has to be converted to non-agricultural , NA, land. An NA order has to be obtained from the collector of the district where the property s located after the payment of NA tax.

  • ermadhav

    Regarding NOC from society, i have a query. I am selling my flat in Pune and the purchaser is taking the loan from SBI which is pre-approved type loan. We have already registered an agreement to sale and disbursement is kept on HOLD by bank for want of NOC from society in bank’s standard format. Society is not ready to issue such letter in any other format then their own format, whereas bank is not accepting society’s format. In this case we are stuck-up in deadlock position. Can anybody tell me how to go about it? and what are the legal clauses for such issues?