TRANSFER OF PROPERTY ACT

Q. Define Sale. What are the rights and duties of seller and
buyer?
ANSWER: Property can be transferred through different modes, that is
through sale, mortgage, lease, gift, exchange etc. Under the Transfer of Property
Act 1882, section 54 states that sale is defined as the transfer of ownership of a
property in exchange for a price paid or promised or partly paid or part
promised.
Section 54 further lays down the manner in which a sale of immovable property
should be effected. In case of tangible immovable property of value rupees
hundred and upwards or in case of reversion or any other intangible thing, a sale
can be made only by a registered instrument. When the tangible immovable
property is of value less than rupees hundred the sale can be made by a
registered instrument or by the delivery of the property. The delivery of a
tangible immovable property is said to have taken place when the seller places
the buyer or another person on the direction given by the buyer, in possession of
the property.
Essentials of valid sale:
1. The parties to the sale (seller and buyer) should be competent to transfer
The transferor of the immovable property executing the sale is known as the
seller. The person who receives the property sold to him for a consideration that
is the transferee is known as the buyer. The transferor or the seller must be
competent to contract and entitled to the transferable property. That is he must
not be a minor, he should be of sound mind and shall not be disqualified by law
to transfer the property. The transfer should either be made by the owner of the
property or a person authorized to dispose of the transferable property which is
not his own. In the case of Biswanath Sahu v. Tribeni Mohan, it was held that
Karta was authorized to dispose of the property of a joint Hindu family under
certain circumstances.
A transferee should be competent to receive the transfer and he shall not be
disqualified by law to receive the property transferred. For example, An officer
performing an official duty in connection with the sale of property cannot
purchase the same.
2. Subject matter of a sale
Section 54 only governs the sale of immovable property. Here immovable
property can be tangible or intangible. Tangible property is one that can be
touched ,such as land,house,a tree etc, while intangible property refer to
property that cannot be touched such as a right of way, right of fishery etc.
3. Price or consideration
Price is a consideration paid for the transfer of property. A transfer is not a sale
if no price is paid or promised or partly paid or promised. In the case of
Nalamathu Venkaiya v. B.S. Neelkanta, the court held that payment of
consideration is of the essence when a transfer of property is made through a
sale. The time of payment of consideration is not material. Consideration may
be promised or paid at a future date.
4. Mode of execution of sale
A property must be transferred by sale when it is executed by the transferor in
writing and is attested and registered. Once registration, attestation and a
document in writing called as the sale deed is executed the transfer of
immovable property in form of sale is completed and will be binding on both
the parties to the sale.
Difference between sale and contract of sale
1. The sale of immovable property is a transfer of property along with
ownership rights. Whereas a contract of sale is a mere agreement that a sale of a
property is to take place in future on the terms mutually agreed between the
parties. The ownership rights remain with the seller.
2. In a sale, the seller transfers the legal title of the property to the buyer.
Whereas in a contract of sale no interest or charge is created in favour of the
buyer.
3. A sale must be executed by a registered document where the immovable
property is of the value of rupees hundred or more or in case of reversion or in
case of any intangible property. Whereas a contract of sale does not require
registration.
Rights of the seller [Section 55 (4)]
1. Under section 55(4)(a) before the completion of the sale, the seller is entitled
to all the rents and profits before the ownership of the property passes to the
buyer: Till the ownership is passed from the buyer to the seller, the latter is
entitled to any income generated from the property, including rent collected
from tenants occupying the property. On the other hand, if the ownership of the
property passes to the buyer, but the seller still retains possession of the
property, then the seller is not allowed to collect interest on the purchase
money.
2. Payment of consideration
A seller is entitled to full consideration as stipulated in the contract of sale. If
the contract specifies that the payment must be made within a certain time
period, then the buyer must adhere to the said time limit. The buyer failing to
pay within the time limit specified in the contract would amount to a breach of
contract on his part.
In Nalamothu Venkaiya v. BS Neelakanta (2005), a contract of sale was
made, and it was stipulated that the payment must be made within a specified
time. The buyer gave an oral promise, however, he did not deposit any money
as an assurance. When the buyer sued for specific performance, the court held
that the oral promise did not hold weight, and the fact that he did not make a
deposit showed his lack of intention to fulfil the contract.
In a case where a seller has already transferred the ownership to a buyer, but the
latter has not paid the entire consideration, a charge can be placed on the
property. Even if the buyer transferred the property further, the charge would
still exist as long as the consideration remains unpaid. The seller can also avail
interest on the pending consideration from the date of transfer of possession.
The charge can be imposed only from the date the conveyance is executed.
An exception to this rule of charge – is oral sale and lease.
Liabilities/Duties of the seller [Section 55]
1.Disclosure of material defects in the property or title
The seller is bound to disclose any material defect in the property or the title of
which the buyer is not aware or with ordinary care cannot discover. A material
defect is a factor that can affect the decision of the buyer on whether to buy a
certain property or not, once he becomes aware of it.
For example, ‘X’ wants to sell his farmhouse to ‘Y’ but does not disclose the
fact that due to the property being considerably old, the entire farmhouse is in
urgent need of renovation and refurbishment, else there could be danger of
collapse. This is a material defect in the property, and ‘X’ as the seller who is
aware of the defect, has a responsibility to inform ‘Y.’ If “X’ fails to make the
disclosure, then ‘Y’ has the right to rescind the contract.
Another example, ‘Q’ wants to sell a flat to ‘Z’. However, the actual ownership
of the title of the flat in question is still in dispute. At the time of making the
contract of sale, ‘Q’ does not possess the authentic title to the property. This is a
material defect in the title. ‘Q’ is bound to inform ‘Z’ of the actual ownership of
the title.

2. To produce the title deeds for inspection

The seller is liable to produce all documents of title relating to the property to
the buyer for examination. If the buyer asks for it, then the seller has to supply
the title deed for inspection before the execution of the sale deed. The main
objective is to satisfy the buyer that there is no defect or problem with the title,
and it would not lead to any disadvantage if the buyer were to acquire it. The
delivery of the title is usually at the place of the seller/seller’s representative or
lawyer. However, the legislature can also make provisions with respect to the
place of delivery.

3. To answer relevant questions as to the title

The seller is further liable to answer all relevant questions put to him by the
buyer with respect to the property and its title, and give answers to the best of
his information.

4. The seller on receiving the purchase price from the buyer has to execute a
proper conveyance of the property at a proper time and place.

5. The seller is liable to take proper care of the property and all relating
documents as a man of ordinary prudence would take between the date of the
contract of sale and the delivery of the property.

6. Seller is also liable to pay all public charges, rents and interests due up to the
date of sale. He is also liable to discharge all encumbrances on the property
existing on the property.
7. After the completion of the sale, the seller is liable to give to the buyer the
possession of the property.

8. Seller is further liable to deliver to the buyer all documents of title relating to
the property after the receipt of the purchase money. However, when the seller
retains the part of a property he entitled to retain all documents. When the
property is sold in parts to different buyers, the buyer of the highest value is
entitled to retain the property documents.

9. The seller is deemed to contract with the buyer that the interest which the
seller professes to transfer to the buyer subsists and he has the power to transfer
the same. That is he is bound to give a covenant for the title of the property.