Sale of Immovable Property | Property Law - CLAT PG PDF Download

Definition of Sale in Transfer of Property Act

A sale is the transfer of ownership in specific immovable property for a price paid, promised, or part-paid and part-promised. According to Section 54 of the Transfer of Property Act, a sale involves an absolute transfer of ownership in the property, with the seller retaining no rights over it after the completion of the sale. The consideration for the sale is referred to as the price.

Key Terms

• Transferor/Seller/Vendor: The person transferring the property.
• Transferee/Buyer/Vendee: The person purchasing the property.

Essential Elements of Sale

• Parties: In a sale, there are two parties: the seller and the buyer.
• Subject Matter: The subject matter of the sale is immovable property, which can be either tangible (e.g., land, house) or intangible (e.g., rights such as fishing or ferry rights).
• Price/Consideration: The consideration for the sale, known as the price, must be in money. Payment of the price is not always necessary for the completion of the sale.
• Transfer/Conveyance: Conveyance involves transferring all rights in the property from the seller to the buyer.

1. Parties to Sale

• Seller: The seller must be competent to contract and have the right to transfer the property.
• Buyer: The buyer must not be disqualified from being a transferee. Both parties should be of sound mind and major age, although a transfer to a minor is valid.

2. Subject Matter of Sale

• Tangible Property: Examples include land, houses, or things attached to the land.
• Intangible Property: Examples include rights like ferry or fishery rights, or rights to mortgage debt. The property must be in existence at the time of transfer and qualify as transferable under Section 6.

3. Price or Consideration

• Definition: In a sale, the consideration is called the price, which refers to money only.
• Payment: Payment of the price is not always necessary for the completion of the sale. The price may be paid fully or partially at the time of sale.
• Default: If the buyer fails to pay the remaining amount due, it does not invalidate the sale. The seller may seek a remedy through a suit for specific performance and has a charge over the property sold.

4. Transfer or Conveyance

• Definition: Conveyance refers to the transfer of all rights in the property from the seller to the buyer.
• Methods of Transfer:
  • For properties valued above 100, transfer is done through a registered instrument.
  • For properties valued below 100, transfer can be done through a registered instrument or delivery of the property.
• Legal Requirements: Registration under Section 17 of the Indian Registration Act, 1908, is mandatory for a valid sale. If the sale deed is not registered, it cannot pass legal title to the buyer, regardless of the parties' intentions.
• Validity of Sale: If the sale consideration is not paid but the instrument of sale is registered, the sale is still valid.

Liabilities & Rights of the Seller

Liabilities of the Seller Before Completion of the Sale

• Disclosure of Material Defects: The seller must disclose any material defects in the property or in the seller's title to the property. If the buyer discovers a material defect before the completion of the sale, they have the right to rescind the contract. If the defect is discovered after the sale is completed, the buyer may claim damages and seek to set aside the sale.
• Production of Title Deeds: The seller is obligated to produce the title deeds related to the property for the buyer's inspection. This allows the buyer to verify the title to the property before the sale is finalized.
• Answering Questions Regarding Title: The seller must answer any questions posed by the buyer regarding the title to the property. The buyer may waive this right of inquiry if they choose to do so.
• Execution of Conveyance: The seller is responsible for executing a conveyance instrument that transfers the property to the buyer. This instrument, known as a sale deed, is executed by the seller after receiving the agreed-upon price from the buyer.
• Care of the Property: The seller is obligated to take care of the property between the time of the contract and the delivery of the property to the buyer. During this period, the seller acts as a trustee of the property for the buyer.
• Payment of Outgoings: The seller must ensure that all public charges and rent related to the property are paid before delivering the property to the buyer. The property should be transferred free from any charges.

To Disclose Material Defects in the Property or in the Seller's Title Thereto [Section 55(1) (a)]

• The seller is obligated to disclose any material defects in the property or in the seller's title to the property. These defects may not be apparent to a prudent buyer, and could relate to the property itself or to restrictions on the land, such as easementary rights.
• If the buyer discovers a material defect before the completion of the sale, they have the right to rescind the contract. If the defect is discovered after the sale is completed, the buyer can claim damages and seek to have the sale set aside.

To Produce Title Deeds [Section 55 (1)

• The seller is responsible for producing the title deeds related to the property being sold for the buyer's inspection. This allows the buyer to verify the title to the property before the sale is finalized.

To Answer Questions as to Title [Section 55 (1) (b)]

• The seller is obligated to answer any questions posed by the buyer regarding the title to the property being sold. The buyer may choose to waive this right of inquiry.

To Execute Conveyance [Section 55 (1) (d)]

• The seller is responsible for executing a conveyance instrument that transfers the property to the buyer. This instrument, known as a sale deed, is executed by the seller after receiving the agreed-upon price from the buyer.

To Take Care of the Property [Section 55 (1) (e)] and

• The seller is obligated to take care of the property between the time of the contract and the delivery of the property to the buyer. During this period, the seller acts as a trustee of the property for the buyer.

To Pay Outings [Section 55 (1) (g)]

• The seller is responsible for transferring the property free from any charges. This means that before delivering the property to the buyer, the seller must pay all public charges and rent associated with the property.

Liabilities of Seller after Completion

To Give Possession [Section 55 (2) (O)]

• The seller is obligated to hand over possession of the property upon successful completion of the sale.
• However, if the buyer fails to pay the remaining consideration, the unpaid seller has the right to withhold the transfer of possession.
• If possession has already passed to the buyer, the unpaid seller can sue for the price money.

To Covenant for Title Impliedly [Section 55(2)]

• The sale deed or instrument of sale serves as conclusive proof that the seller is the owner of the property and has the authority to transfer it.
• The covenant runs with the land and is enforceable by subsequent purchasers.
• In case of a breach of warranty of title affecting the buyer's peaceful possession, the buyer can file a suit to defend their title.

To Deliver Title Deeds on Receipt of Price [Section 55 (30)]

• The seller is responsible for passing on the title deeds related to the property being sold.
• The seller must also surrender any documents in their possession related to the property.

Rights of Seller Before and After Completion of Sale

Rights of Seller Before Completion of Sale

• The seller retains ownership of the property until ownership is passed to the buyer.
• The seller has the right to claim rents and profits from the property.
• Mere contract of sale does not create any interest of the buyer in the property.

Rights of Seller After Completion of Sale

• If the sale is completed by conveyance but the price or any part of it is unpaid, the seller acquires a charge on the property for the unpaid price, known as seller's lien.
• If the seller has already delivered possession of the property to the buyer before payment, they can recover possession on the ground of non-payment of the price.
• The seller's remedy is to enforce the charge against the property, which is non-possessory.
• The charge can be excluded by express contract or waived by an express or implied contract.
• The charge can be enforced under section 100 of the Transfer of Property Act by the sale of the property.
• It is the seller's duty to discharge all encumbrances existing on the property on the date of sale.
• If a property is sold subject to encumbrance, the seller's liabilities are limited to the date of sale.
• After the sale, the buyer is responsible for discharging the encumbrance.

Buyer's Liabilities Before Completion of Sale

To Disclose Facts Materially Increasing the Value of the Property [Section 55]

• The buyer is obligated to disclose to the seller any fact that pertains to the nature or extent of the seller's interest in the property.
• The buyer's duty to disclose arises only if:
• i) The buyer knows or has reason to believe that the seller is unaware of the nature and extent of their interest.
• ii) If the fact materially increases the value of the property.
• In the case of Summers v. Griffith, an elderly woman was induced to sell her property at a fraction of its value due to the buyer's concealment of her ability to make a good title. The court ruled that such concealment did not constitute fraud.
• The buyer is not required to disclose a latent advantage of the property that the seller is unaware of.

To Pay the Price [Section 55 (5) (b)]

• Generally, the buyer's duty to pay the price and the seller's duty to execute the conveyance are to be performed concurrently.
• However, an exception is made for buyers who purchase property free from encumbrances and discover that an encumbrance has not been paid off.
• In such cases, the buyer may retain a sum sufficient to pay off the encumbrance from the purchase money.
• If the buyer has to pay an amount greater than the price, they may recover the difference by a separate suit against the seller.
• This principle was reaffirmed in Mehtab Singh v. Collector of Saharanpur.
• In the case of K.S. Vidyanandan v. Vairavan, the Supreme Court held that even when time is not of the essence of the contract, the plaintiff must perform their part of the contract within a reasonable time.
• The determination of reasonable time should consider all surrounding circumstances, including the express terms of the contract and the nature of the property.
• In the Constitution Bench of the Supreme Court in Chand Rani v. Kamal Rani, it was held that in the sale of immovable property, there is no presumption regarding time being of the essence of the contract. Even if it is not of the essence, the court may infer that performance is to be done within a reasonable time based on the express terms of the contract, the nature of the property, and surrounding circumstances.

Buyer's Liabilities After Completion

To Bear Loss to the Property

• Upon completion of the sale, ownership generally transfers to the buyer.
• If any loss occurs to the property after the completion of the sale due to accidental destruction or deterioration, the buyer bears the loss.

To Pay the Outgoings [Section 55 (1) (g)]

• After the sale, it is the buyer's duty to pay charges and taxes related to the property that accrue after the date of sale.
• The seller's right to pay such charges and taxes is limited to the date of sale.

Buyer's Rights Before Completion of Sale

Buyer's Lien

• The buyer has a charge on the amount paid in advance towards the purchase money if the seller fails to complete the sale.
• The buyer's lien on the property depends on whether the default is on the part of the seller or the buyer.
• The buyer's lien entitles them to a charge on the prepaid money along with interest.
• If the buyer improperly declines to take delivery of the property, they lose this charge.
• If the contract is called off due to the buyer's default, the advance money paid to the seller is forfeited.
• If the contract is called off due to the seller's default, the buyer is entitled to a refund of the advance given.

Buyer's Rights After Completion of Sale

Improvements & Profits

• After the completion of the sale, the buyer has the right to make improvements to the property.
• If the value of the property increases after such improvements, the buyer is entitled to enjoy the benefits in the form of rents and profits.

Difference between Sale and Contract for Sale