Sale of Immovable Property

Sale of Immovable Property

What is sale?

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.

How is sale effected?

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. [i]

Essentials of a valid sale

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,[ii] 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 official liquidator cannot purchase the property he is dealing with. A minor can be a mortgagee provided there is no covenant for him to perform or a minor can be a purchaser when the sale does not impose any obligation upon him and lastly a minor can also be a donee of a gift provided the gift is onerous.[iii]

The subject matter of the transfer must be a transferable immovable property

When a property is transferred with an intention to sell the property to the buyer for a consideration, the transfer of property includes the delivery of the property along with the ownership rights of that property. The immovable property can be tangible or intangible. Under section 6 a property of any kind may be transferred except the following-

1. A transfer of spes succession

2. The right of re-entry

3. Easement

4. Restricted interest which could be right to future maintenance

5. A right to sue

6. Public office

7. Pension or stipends allowed to the military, air force, naval and civil pensioners of the government

8. A transfer for an unlawful purpose or consideration

9. Statutory prohibitions on transfer of interest [iv]

The Official Assignee Of Madras vs Sampath[v] the court held that when a mortgage is executed by a heir is void eventhough the heir subsequently acquires the property as spes succession. Hence a transfer of property subject to spes succession is void. 

The consideration for the sale must be paid, promised, part paid or part promised

Price is a consideration paid for the transfer of property. Therefore price is money but not necessarily money immediately paid in notes and coins, it includes money which might be already due or payable at a future date. A transfer is not a sale if no price is paid or promised or partly paid or promised. The transaction under sale without consideration will not amount to gift unless evidence is adduced for it nor can it be an exchange if the transferor does not transfer ownership of the property. A sale can be executed orally, there is no mandatory requirement of being transferred through a written document.[vi] In the case of Nalamathu Venkaiya v. B.S. Neelkanta,[vii]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.

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. When a property is of a lower value the sale can be completed by delivery of the property. Due to minimal value, the formality of registration and attestation is not mandatory, however, in a sale a property of a value less than rupees hundred the formalities required are optional. [viii] Hence a sale under the Act only pertains to immovable property and not movable property. 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. [ix]

Rights of the buyer [Section 55(6)]

1. Under section 55 (6)(b) before the completion of the sale the buyer is entitled to the charge on the property for the consideration paid by him in anticipation of the delivery. He is further entitled to interest on the purchase money and also to the earnest cost awarded to him in a suit to compel specific performance of the contract or to obtain a decree for its rescission in case he properly declines to accept the decree. The buyer’s charge is a statutory charge and not contractual.[x] The agreement should be genuine to obtain a charge on the property.[xi] Such a charge is enforceable not only against the seller but against all the people that are claiming under it. [xii]

2. Under section 55 (6)(a) after the completion of the sale, the buyer is entitled to the benefit of any improvement or increase in the value of the property. He is also entitled to the rents and profits resulting from the property.

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.

2. However, after the completion of the sale, the seller is entitled to charge upon the property when the whole or a part of the purchase money is unpaid and the ownership of the property has passed to the buyer under section 55(4)(b).

Liabilities of the buyer [Section 55 (5)]

1. The buyer is bound to disclose to the seller any fact as to the nature or extent of the seller’s interest in the property of which the buyer is aware and the seller is not aware and which materially increases the value of such interest. However, the omission to make such disclosure amounts to fraud.

2. The buyer is entitled to pay the purchase money to the seller or anyone else as he directs.

3. After the completion of the sale, the buyer is liable for the loss arising from destruction, injury or decrease in the value of the property.

4. The buyer is liable to pay public charges and rents arising from the property. He is also liable to pay any principal money due to any encumbrances subject to which the property is sold and the interest resulting thereon.

Liabilities of the seller [Section 55]

1. 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.

2. The seller is liable to produce all documents of title relating to the property to the buyer for examination.

3. 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.[xiii]

In the case of Nathu Khan v. Burtonath Singh,[xiv] the court held that under section 55(1)(g) if a sale deed contains a declaration stating the property is free from any encumbrances, when the property is subject to a mortgage charge, the buyer will be compelled to discharge the mortgage debt to protect his property from the charge holders, which is purchased by him. However, the seller will be liable to pay the money paid by the buyer in lieu of the charge. 

Conclusion

Hence a sale of an immovable property between competent parties is executed by a registered instrument for a consideration in the form of money which is paid, part paid, promised or partly promised. There as several rights and liabilities of the buyer and the seller resulting from the sale of immovable property as highlighted in this article.

Frequently Asked Questions

Is a sale of movable property governed underthe Transfer of Property Act 1882?

Only the sale of immovable property is governed under the Act. Immovable property can be tangible property or intangible property.

What are the requisites of sale?

There are four essentials which need to be fulfilled to execute a valid sale, which are-

  • The parties to the sale, that is the buyer and seller should be competent to execute the sale.
  • The subject matter of sale should be an immovable property
  • Consideration must be given by the buyer to the seller for the property. Money should be paid or part paid, promised or part promised.
  • A written document called a sale deed is to be executed and it should be registered and attested.

Edited by Sakshi Agarwal

Approved & Published – Sakshi Raje

Reference

[i] Transfer of Property Act 1882, section 54

[ii] AIR 2003 Ori 189.

[iii] Essentials of Valid sale, Shodhgangahttps://shodhganga.inflibnet.ac.in/bitstream/10603/39900/7/07_chapter%203.pdf

[iv] Transfer of Property Act, section 6

[v]AIR 1933 Mad. 795

[vi] Ibid.

[vii] AIR 2005 AndhPra 535 

[viii]Arjuna Reddy v. Arjuna C Thanga, (2006) 7 SCC 756.

[ix]MayankShekhar , sale of immovable property, Legal Bites, September 16, 2016

https://www.legalbites.in/sale-immovable-property/

[x]P.Muthusamy vs K.Arumugam  AIR 2016

[xi]T.N. Hardas Vs. BabulalAIR 1973 SC 1363

[xii]Mulla’s Commentary on Transfer of Property Act, 8th Ed. (P.411)

[xiii]Transfer Of Property Act 1882

[xiv]AIR 1922 PC 176

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I am Dhruvi Dharia from University of Mumbai Law Academy (UMLA), pursuing B.B.A.-LL.B.(Hons.) I have a penchant for studying Corporate laws like Companies Act, Securities Law, Insolvency and Bankruptcy Code, mergers and acquisitions etc. and strong inclination towards numbers. I am also a budding Company Secretary and one level away from becoming one. I aspire to become a Corporate Lawyer in the future. I have always enjoyed reading and working on various legal matters whenever given a chance to. I constantly try to better myself by reading various Acts, articles, interviews of eminent lawyers and professionals and researching on various topics. I like reading on various contemporary legal issues and articles and I sometimes attempt writing on the same. Apart from academics in my free time I like drawing, painting and travelling to new destinations.