A property may appear to be the perfect fit for a company. The location may suit the business, the price may seem reasonable and the seller may be ready to proceed.

The legal position may be less straightforward.

Problems with title, access, boundaries, approvals, occupation or foreign shareholding can delay a transaction or prevent the buyer from using the property as planned.

Before signing a binding agreement, a company should confirm that the seller can lawfully transfer the property, that the documents correspond to the land  and that the intended use is permitted.

Confirm That the Seller Has Good Title

The first step when buying land in Sri Lanka is to conduct a title due diligence. The buyer should review the relevant deeds, Land Registry records, survey plans and the title rather than relying only on the seller’s representations and/or assurances.

The due diligence should identify:

• Gaps in the chain of title;

• Missing deeds or conflicting property descriptions/schedules;

• Mortgages, leases or third-party rights;

• Pending disputes or claims by co-owners;

• Other encumbrances

Where the seller is a company, the buyer should confirm that the sale has been properly authorised and that the signatories can bind the company.

A registered deed should still be examined as part of the title due diligence. If the property falls under Sri Lanka’s title registration system, the title certificate and register should be checked. The traditional search of the Land Registry records is not applicable for this category of registered properties. 

Compare the Survey Plan with the Land

The documents should match the land the company expects to acquire. The survey plan should therefore be compared with the title deeds and the physical site.

Important points include:

• The extent, boundaries, and lot number;

• Road access and rights of way;

• Reservations, encroachments, or utility lines;

• Occupation by tenants, caretakers, or other persons;

• In the event of any amalgamation or subdivision of the land any prior approvals obtained from the relevant local authority

Access is especially important for commercial properties. A warehouse, hotel, factory or office may face difficulty to operate if required access becomes unavailable.

Where the boundaries are unclear or the plan is outdated, an updated survey may be required.

Check Whether the Intended Use Is Permitted

A company should not assume that land can be used for a particular purpose because it is vacant or already contains a building.

Depending on the location and project, the buyer may need to check:

• Zoning and permitted use;

• Subdivision, amalgamation or development approval;

• Approved building plans;

• Development permits and certificates of conformity;

• Street line or building line restrictions;

• Environmental or sector-specific clearances;

• Unpaid local authority rates

For property within a declared urban development area, approvals may be required for subdivision, construction, alteration or occupation for a specified use. Existing buildings should therefore be checked to confirm that they were approved and that their current use is permitted.

Review Foreign Ownership Restrictions

When buying land in Sri Lanka, the buyer’s ownership structure should be carefully checked before it commits to the purchase.

Under the Land (Restrictions on Alienation) Act, transfers are generally restricted where the buyer is:

• A foreign individual;

• A foreign company;

• A Sri Lankan-incorporated company with direct or indirect foreign shareholding of 50% or more

Statutory exemptions may apply in certain circumstances.

The law also permits qualifying transfers of condominium parcels to foreigners or majority foreign owned companies. One condition is that the full consideration must come into Sri Lanka from overseas through an inward foreign remittance before the deed of transfer is executed.

Local incorporation alone does not settle the issue. The buyer’s shareholding, group structure, funding route, beneficial ownership and proposed transaction should all be reviewed.

Carry Out Additional Checks for Condominiums

When buying an apartment, office unit or other condominium parcel, the review should extend beyond the unit itself.

The buyer should check:

• The registered condominium plan;

• Parking, access, and common-area rights;

• Management corporation rules;

• Service charges and outstanding payments;

• Restrictions on use;

• Mortgages or other interests affecting the unit

The proposed use should also be checked against the building approvals and management corporation rules.

Protect the Buyer Through the Contract

The sale and purchase agreement should reflect the results of due diligence. A company should be cautious about paying a substantial advance before the main legal issues have been checked and resolved.

The agreement should clearly address:

• The property, price, and payment stages;

• The completion date;

• Documents and approvals the seller must provide;

• Conditions that must be met before completion;

• Vacant possession;

• Warranties concerning title and disputes;

• The buyer’s remedies if the seller cannot complete the transfer

The company should also account for stamp duty, registration charges, legal fees, taxes, and financing costs.

Can the Property Support the Business Plan?

A property may be legally transferable but commercially unsuitable.

The final question is whether the land can support the purpose for which it is being purchased. Access, zoning, utilities, approvals, parking, environmental conditions and building compliance may affect whether the company can operate, develop, finance or later resell the property concerned.

When buying land in Sri Lanka, proper early due diligence gives the buyer an opportunity to resolve problems, renegotiate the terms or withdraw before a legal issue becomes a financial and operational burden.