Sale defined under Law
Section 54 of the Transfer of Property Act of 1882 states that sale of transfer is “the acquisition of property in exchange for a promised or paid price or a part-paid and promised price”. It is, basically, an absolute transfer in which all rights are transferred to the property that has been sold.
There are two ways to make a sale
- The sale of Tangible Immovable Assets exceeding Rs.100 is prohibited. In the case of a Reversion or other intangible property, the registration must be approved.
- For properties with a Tangible Immovable Value less than Rs.100 the delivery of possession can be used
Delivery of Tangible Immovable Property can be said to have been completed when the Seller handovers the property from him to the buyer.
A contract to sell immovable property means that the parties agree on the terms for the sale. It does NOT create any right or charge over such property.
To help you understand the complex issues surrounding property, and to solve them, it is best to consult a lawyer. MyAdvo enables you to seek legal advice wherever and whenever you want.
Elements of Sale
- The Parties
- The Transferor
- The Transferee
The seller who sells his property is called the transferor. The buyer who is selling the property is called the buyer. A contract for sale must be based solely on a written agreement between the buyer and seller.
The seller must also be competent to enter into the contract. The transferor of the property cannot be a minor or an unsound person.
- The Subject Matter: Immmovable property is the only acceptable subject matter for sale, as defined in Sec.54. The immovable property can either be tangible, or intangible. Tangible property can only be touched. Immovable property is property that cannot be touched.
- Price or Consideration: In order to make it a sale, you must have the consideration in MONEY. If it’s for the exchange of another item, it’s not a sale.
Modes to Sale Transfer
There two methods of sale transfer, namely
- Registered instrument
- Delivery of possession
Sellers’ Rights and Duties
The contract governs the rights and duties of the seller. section55 of the Transfer of Property Act will govern the rights of seller and buyer. The following details outline the rights of seller and buyer as a result of section 55 of Transfer of Property Act.
Seller’s Duties before Sale
- The seller has to notify the buyer of any material defects that the seller does not know about or cannot find in an ordinary course.
- If the buyer requests documents about the property, the seller is obliged to produce them.
- The seller is obliged to answer any questions, to the best of their knowledge, that the buyer may have regarding the property.
- Between the date that the contract of sale was executed and the delivery day of the property, the seller is obligated to take care of all title documents and property in his possession, as an owner of ordinary common prudence would.
- All fees, rent and dues incurred by government agencies must be paid by seller before the sale.
After the sale, duties of the seller
- After the sale is complete, the seller is obligated to give possession to buyer. On being required by the buyer or other person directed by him, the seller will give the property to the buyer.
- The seller will be deemed as having agreed to the buyer’s transfer of the interest to which he professes to be entitled and the power to do so.
- Seller must give to buyer all documents of title which relate to property, even if the buyer pays the entire purchase money.
Seller’s Rights before Sale
- Section 55 (4) (a), Seller can receive all rents and profit from the property.
Seller’s right after sale
- If any amount is not paid by the seller, the seller may levy charges or place a lien on the property. Section 56(4) (b), says that if the price remains unpaid the seller can refuse delivery to the buyer. The seller also has the right of taking back possession if the possession was given to him. But he is entitled to any unpaid purchase cash from or out of the property.
Rights, Duties, and Responsibilities of Buyer
Contracts determine the rights and obligations of buyers. section55 of the Transfer of Property Act will govern the rights of the seller and buyer. As per section55 of Transfer of Property Act, the buyer’s rights and obligations are as follows:
Duties for Buyers Before Sale
- The buyer must disclose information that materially increases property’s value, Section55(5) (a). This section states that “the buyer shall disclose to the sellers any fact as regards the nature, extent, or value of the seller’s property interest which the buyer is aware of, but of, which he has reason not to believe the vendor is unaware, and which materially improves the value such interest.”
- Section55(5) (b). – Buyers are obligated to pay the selling price
Duties for buyer after sale
- Section 55.5 (c), Where the property’s ownership has passed to the buyer, the buyer is responsible for any loss or injury to it.
- Section55(5)(d), The buyer has to pay outgoings like rents, government charges, or taxes.
Buyers right before sale
Section 55(6) (a), Buyers are entitled to the following (unless he refuses to accept delivery of property).
- A charge on property for the purchase of money correctly paid by him in anticipation. Not the delivery.
- There is interest on this purchase money.
- He will be awarded the earnest and cost in a suit to compel certain performance of the contract, or to obtain a decree resolving its recession if he wrongly declines to accept delivery.
Buyer’s right after Sale
- Section 55 (6) (a), Buyer can receive any benefit from any appreciation of the property, its increase in value and the rents or profits thereof.
Types or Ownership and the Allied Transfer
- Freehold ownership means that the property and possession belong to the owner.
- In leasehold property, the owner gives up the right to the property and its possession after a certain period. This is known as the Lessor or the Lessee. On expiry or termination of the lease, ownership and possession automatically pass to the Lessor.
- Power of Attorney lets the property owner appoint another person who will deal with it, usually to sell the property. But the owner still retains the ownership and possession.
There are steps involved in selling a property
- Selling your property and choosing an agent. Agents will advertise, show and complete the legal requirements. Prepare a plan that will help you list, show, and sell your property.
- Determine the selling prices and include any additional property features. Based on current market conditions and trends in the area, property’s size, age, location, and features will all need to be assessed.
- A contract with your agent. This legally binding document will list any commissions, the estimated selling price, duration, advertising costs and other details.
- Prepare the vendor’s statement regarding your property. These will contain all details required by prospective buyers.
- Advertising is about showing your property. It involves taking pictures of your property, creating floor plans, and writing online ads.
- Sale and negotiation. agent will auction your property and/or mediate between buyers and seller to reach an acceptable price. The buyer will then have to pay a down payment.
- Subject to contract. Both buyers and sellers’ lawyers and banks will discuss the details of their sale to ensure that both sides meet all financial requirements. After settlement, the parties will sign a formal agreement.
Documents related to a Property Sale
The letter from the concerned society or authority that grants allotment of property to seller is the first document you should have.
An attornment is when the title to immovable assets is transferred from one lessee to another. In these situations, the existing lessor will usually send a note of attornment (notifying the lessee about such sale) and ask him to pay all future lease payments directly the new lessor. In some cases, a contract of attornment can be signed between the lessee, new lessor, or existing lessor.
To sell a property, the seller will need to have the original conveyance and sale documents . If seller has lodged the original deed at the Registrar for registration, seller will need to submit a copy of the conveyance/sale deed and a photocopy receipt from the Subregistrar.
As it establishes the ownership of property, the sale deed can be very important. It is necessary to prove that the property has been subject to previous agreements.
Seller will need to provide a copy and certificate of occupation from the competent authority. The sanctioned map shows the extent of the property, its build-up area, as well as the open space. This is an outline plan of the property approved by the appropriate authorities.
The seller selling property such as a house must obtain permission from a competent authority, development authority or society. The buyer can ask for original stamped receipts that show payments to the developer/builder made by the past and current sellers.
It is not possible to ignore the importance of society documents. If the seller is looking to sell the flat that the seller has, they should be able to show the copy of their share certificate from the apartment society. The share certificate proves that seller is a member of the society. Seller will also need to provide proof from the society that seller has paid all outstanding payments. For the transfer of ownership, the seller must complete and sign the society’s membership transfer form.
In property transactions, the buyer uses an encumbrance document to verify free title. A buyer should verify that the land or property is free of legal dues before purchasing an apartment, a house, or land.
Encumbrance can be defined as a charge attached to a property. An encumbrance is when a property can be purchased using borrowed money. As security against any debt or obligation, the mortgage is placed on the property.
A “no obligation certificate”, which is essential for any property transaction (sale or purchase) is very important. This certificate may also be used for mortgaging a property, or to obtain a planning permit. The Certificate confirms that the property in question has not been previously mortgaged. If the property is already mortgaged it could be transferred to a new buyer.
It is submitted to the Tehsildar in Form 22, along with a copy or proof of residency.
Once all documentation has been approved, both parties can then sign an agreement and confirm their terms and conditions. The parties can then execute the sale deed on the basis of their agreement to sell. Sale Agreement is signed on non-judicial stamped paper by the seller and buyer.
The sale agreement, which is legally binding and can be used as evidence, is one of the most powerful documents involved in a transaction. The document in which the sale agreement is drafted is the agreement between the buyer or seller. An agreement to sale precedes any document that is used as evidence for the transfer of property through sale. It specifies in detail the conditions under care the seller and buyer plan to sell the property.