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Do Auctioned Properties Come with Pending Dues? How to Check.
Yes, auctioned properties can come with significant pending dues. This guide explains how to check for unpaid property taxes, society maintenance, and utility bills before you bid, to avoid inheriting a financial nightmare.
The Hidden Costs That Can Wreck Your Auction Deal
You won a property at a 20% discount, but soon discover it has five years of unpaid society maintenance charges running into lakhs. Suddenly, your bargain isn't a bargain anymore. This is a common trap for unwary auction buyers. The "as is where is" clause means you inherit the property, warts and all—including its debts.
Why Do Auction Properties Have Pending Dues?
A person who defaults on their home loan EMI is often also struggling to pay other bills. By the time the property comes up for auction, years of statutory and society dues may have accumulated.
Your Due Diligence Checklist for Pending Dues
Before you even think about bidding, you must investigate these potential hidden costs:
1. Society Maintenance Charges:
This is often the biggest hidden cost. Visit the society office of the apartment complex. Formally request a statement of outstanding dues for the specific flat. This should include maintenance charges, interest, and any other penalties. Get it in writing on the society's letterhead.
2. Property Tax:
Visit the local municipal corporation office. Provide the property details and ask for the property tax ledger. This will show if the taxes for previous years are paid and if there are any penalties or interest accumulated.
3. Electricity and Water Bills:
Contact the local electricity board and water supply department. With the meter number or consumer ID (which you can get during inspection), you can find out if there are any pending bills. Unpaid electricity bills can sometimes be very high.
Who is Liable to Pay These Dues?
Legally, the bank is only responsible for delivering the property free from its own mortgage charge. The responsibility for all other statutory and society dues generally falls on the new buyer. While you can legally pursue the old owner for these dues, it is a difficult and often fruitless process.
Therefore, you must assume that you will have to pay these dues yourself.
How to Factor Dues into Your Bid
The smart investor treats these pending dues as part of the property's acquisition cost.
Calculation Example:
- Market Value of Property: ₹60 Lakh
- Your Maximum Bid Price: ₹50 Lakh
- Pending Society Dues: ₹3 Lakh
- Pending Property Tax: ₹1 Lakh
- Your Adjusted Maximum Bid: ₹50 Lakh - ₹4 Lakh = ₹46 Lakh
Do not bid above this adjusted price, or you will erode your profit margin.
Leave No Stone Unturned
Due diligence on pending dues is as important as the legal title search. It requires legwork and persistence, but it's the only way to protect yourself from nasty surprises after the auction.