Securing Your Transaction

Buying a property overseas can be a beneficial investment, and an exciting experience. However this joy can be ruined if the transaction was not based on the criterion of safety. Safety is a significant issue that must be verified before any step of a transaction takes place. Hence was the need for the due diligence verification to take place in prior to any practical step such as paying a reservation deposit…etc.

 

Due diligence is the process where the developer's deeds and pertinent documents are checked, in order to decide whether the investment is at risk or not.

 

Due diligence verification process aims to check the following documents, for both existence and purpose:

 

1- Title of Deed: Title of deed is the legal proof of the developer's ownership to the land plot subject-matter of the development where the desired property is located. Title of deed in Egypt can be either a usual title of deed, or unusual title of deed:
A- Usual Title of Deed: Usual title of deed is the familiar form of acquiring ownership, and it takes one of two forms:
Form (1): A contract, or a series of legal, authenticated, and valid contracts, rooting from the state and ending at the current developer who is the Seller in the real estate sale contract issued to a purchaser. The contract must show clearly the parties, the boundaries of the land-plot, the purchase price, and all the other relevant details.

Form (2): Assignation Resolution, where the state issues a resolution assigning a certain defined land plot to a certain developer, with a grace period wherein the developer must complete the development according to the terms agreed in the abovementioned resolution and the building license. The assignation resolution is the normal type of title of deed in certain areas of Egypt. It is mandatory while checking the assignation resolution to ensure that the grace period is not expired, or that it is not impossible for the developer to accomplish the task within the time remaining.

B- Unusual Title of Deed: In some cases, ownership can be acquired via means else than the abovementioned, which is known in the Egyptian real estate law as "Prescription as a reason for firmness and permanence of ownership."


The Egyptian law has stated that prescription, which means the non interrupted continuation of possessing a certain land plot by a certain individual / entity for a certain period of time, is a reason to grant the latter the ownership of the land plot subject-matter of the possession. Prescription must be confirmed by a final court verdict known as "Ownership Fixedness."


2- Building License: After the developer obtains the title of deed, and on the process of establishing a residential complex / development in Egypt, a building license must be issued by the state represented in one of its official organizations, granting the developer the right to build on the land plot, defining the purpose of building, the grace period, and also the percent of land permitted to construct. Consequently there are four major reasons to check the building license:
A- Existence: Checking that there is a building license in the first place, which proves that the land plot is not an agricultural land or something else than the construction purpose.
B- Purpose: That the purpose of building is, or inclusive of, constructing residential units. This ensures that the land plot is not assigned for another purpose such as entertainment, hospital…etc.
C- Grace Period: Verifying that the developer is not constructing the development post the expiry date of the grace period.
D- Percentage of Construction Area: This can be a tricky part, since it needs an engineering experience to confirm that the developer is not exceeding the permitted land to build on.


3- Commercial Register: This is the official record of the developer's company. It must be checked for a lot of reasons; for instance to be checked for whether the company is expired or not, and also to confirm the party / parties who have the right to sign on behalf of the company against others. A certain person can be he chairman of a company, yet it may be stated in the commercial register that signature must be in conjunction with another board member's signature. In this latter case the signature of the chairman on the sale contract solely fails to suffice for the legal criteria required to validate a sale contract.


4- Tax ID: Tax ID check is important to verify that the developer's company is recognised against the tax authorities and that the developer is subjected to tax regulations.

 

It has also to be mentioned that in the event the developer has settled the land plot's purchase price to the government via instalments, governmental receipts must be shown in order to prove that the developer is settling the instalments regularly.

 

There is an ethical obligation on every developer to show the due diligence documents to the purchaser's solicitor when requested. Scanned copies can suffice, since they show clearly the state's stamp, and also the governmental number for each treatment. The latter number can be verified by the government in case of suspicion, yet the governmental verification usually takes longer time and can result in a delay of the due diligence check, and consequently the buying process.


 

Recommended Services