CLAT PG Exam > CLAT PG Notes > Property Law > Cheat Sheet: Sale of Immovable Property
Cheat Sheet: Sale of Immovable Property
1. Legal Framework and Governing Provisions
1.1 Statutory Provisions
| Statute | Key Provisions |
|---|---|
| Transfer of Property Act, 1882 | Section 54: Defines sale of immovable property; Section 55: Rights and liabilities of buyer and seller |
| Registration Act, 1908 | Section 17: Compulsory registration of documents; Section 49: Effect of non-registration |
| Indian Contract Act, 1872 | General principles of contract law applicable to sale agreements |
| Indian Stamp Act, 1899 | Proper stamping required for validity of sale deed |
2. Definition and Essential Elements
2.1 Definition of Sale (Section 54, TPA)
Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
2.2 Essential Elements
| Element | Description |
|---|---|
| Transfer of ownership | Ownership must pass from seller to buyer; mere agreement to sell is insufficient |
| Immovable property | Property attached to earth or permanently fastened to anything attached to earth |
| Price/Consideration | Must be money consideration; can be paid, promised, or part-paid and part-promised |
| Two parties | Seller (transferor) and buyer (transferee) with capacity to contract |
| Transfer of right | Transfer of right in tangible immovable property of value |
3. Sale vs. Agreement to Sell
| Sale | Agreement to Sell |
|---|---|
| Transfer of ownership is complete | Transfer of ownership is yet to take place in future |
| Creates jus in rem (right against the world) | Creates jus in personam (right against specific person) |
| Seller cannot sell to third party | Seller can sell to third party; remedy is damages |
| Risk passes to buyer | Risk remains with seller |
| Breach gives right to recover property | Breach gives right to damages only |
| Must be registered if value exceeds Rs. 100 | Optional registration |
4. Registration Requirements
4.1 Compulsory Registration (Section 54, TPA)
- Sale of immovable property of value Rs. 100 or more must be by registered instrument
- Sale deed must be attested by at least two witnesses
- Registration under Registration Act, 1908 is mandatory
- Non-registration does not affect agreement to sell, but sale remains incomplete
4.2 Effect of Non-Registration
| Consequence | Legal Effect |
|---|---|
| No transfer of title | Ownership does not pass; document treated as agreement to sell |
| Not admissible as evidence | Section 49, Registration Act: Cannot be received as evidence of any transaction |
| Specific performance | Buyer can seek specific performance; document acts as agreement to sell |
| Possession delivery | Delivery of possession does not cure defect of non-registration |
4.3 Exception (Section 54, Proviso)
Sale of immovable property below Rs. 100 can be made by delivery of possession without registered instrument.
5. Rights and Liabilities of Buyer (Section 55)
5.1 Rights of Buyer
| Right | Details |
|---|---|
| Obtain possession | Entitled to possession after payment of price |
| Title free from encumbrances | Right to receive property free from encumbrances not disclosed |
| Quiet enjoyment | Right to enjoy property without disturbance from seller or anyone claiming through seller |
| Proper documents | Right to receive all documents of title relating to property |
| Benefit of accretion | Entitled to accretion to property between contract and completion |
| Benefit of improvements | Entitled to benefit of improvements made by seller after contract |
5.2 Liabilities of Buyer
- Pay or tender price at time and place of completing sale
- Bear loss from destruction, injury or decrease in value from time seller delivers possession
- Pay all public charges, rent and taxes on property from date of completion of sale
- Pay expenses of registration if not provided otherwise in contract
6. Rights and Liabilities of Seller (Section 55)
6.1 Rights of Seller
| Right | Details |
|---|---|
| Receive price | Entitled to receive agreed price on completion of sale |
| Retain possession | Can retain possession until price is paid or tendered |
| Rents and profits | Entitled to rents and profits until completion of sale |
| Interest on delayed payment | Entitled to interest if buyer defaults in payment |
| Benefit of improvements by buyer | If sale is not completed due to buyer's default |
6.2 Liabilities of Seller
- Disclose all material defects in property and title known to seller but not to buyer
- Answer all inquiries about property and title made by buyer
- Execute proper conveyance deed and deliver possession on receipt of price
- Deliver all documents of title relating to property
- Pay rent, revenue and public charges on property up to date of completion of sale
- Bear loss from destruction, injury or decrease in value before delivery of possession
7. Doctrine of Caveat Emptor
7.1 Principle
"Let the buyer beware" - Buyer must examine property carefully; seller not liable for defects not disclosed.
7.2 Application in Sale of Immovable Property
| Aspect | Rule |
|---|---|
| Patent defects | Buyer must discover through inspection; seller not liable |
| Latent defects | Seller liable only if defect known to seller and not disclosed |
| Title defects | Seller must disclose defects in title known to him |
| Duty of disclosure | Seller must disclose material facts affecting value or enjoyment |
7.3 Exceptions to Caveat Emptor
- Fraud or misrepresentation by seller
- Seller conceals latent defects known to him
- Seller fails to disclose defects in title
- Property sold by description does not correspond to description
8. Transfer of Title and Related Principles
8.1 Nemo Dat Quod Non Habet
"No one can give what he does not have" - Seller cannot transfer better title than what he possesses.
8.2 Exceptions to Nemo Dat Rule
| Exception | Explanation |
|---|---|
| Estoppel (Section 43, TPA) | Transfer by person ostensibly owning property; transferee protected if acting in good faith |
| Feeding the grant (Section 43) | If transferor subsequently acquires title, it automatically vests in transferee |
| Sale by co-owner (Section 44, TPA) | Transfer of share by one co-owner without consent of others is valid |
| Lis pendens (Section 52, TPA) | Transfer during pendency of suit relating to property is void against party to suit |
| Benami transaction | Real owner can recover property from benami holder |
9. Conditions in Sale
9.1 Types of Conditions
| Type | Effect |
|---|---|
| Condition precedent | Must be fulfilled before sale takes effect; ownership does not pass until fulfilled |
| Condition subsequent | Operates to defeat transfer on breach of condition after transfer is complete |
| Void condition | Condition void if restraining alienation absolutely or for unlimited time |
| Valid condition | Reasonable restraint on alienation is valid (limited period or limited persons) |
9.2 Important Rules on Conditions
- Condition that property shall revert on happening of specified uncertain event is void (Section 10, TPA)
- Condition in restraint of marriage of any person other than female transferee is void (Section 13, TPA)
- Condition absolutely restraining alienation is void (Section 10, TPA)
- Condition against insolvency law is void (Section 11, TPA)
10. Part Performance (Section 53A, TPA)
10.1 Doctrine of Part Performance
Where transferee has taken possession and performed part of obligations under agreement, transferor or person claiming through him cannot disturb possession.
10.2 Essential Requirements
| Requirement | Details |
|---|---|
| Contract in writing | Agreement to transfer must be in writing and signed by transferor |
| Transfer for consideration | Agreement must be for consideration |
| Possession delivered | Transferee must have taken possession in part performance |
| Transferee performed obligations | Transferee performed or willing to perform his part of contract |
| Possession continued | Transferee continues in possession with transferor's knowledge |
10.3 Effect of Section 53A
- Creates equity in favor of transferee against transferor
- Transferor cannot disturb transferee's possession
- Does not create title or interest in property
- Provides shield, not sword (defensive protection only)
- Not applicable against third party purchasers for value without notice
11. Defects in Title and Remedies
11.1 Types of Defects
| Defect Type | Description |
|---|---|
| Defective title | Seller does not have good marketable title; title disputed or doubtful |
| Encumbrance | Mortgage, charge, lien, easement or other burden on property |
| Prior transfer | Property already transferred to another person |
| Pending litigation | Suit pending affecting property (lis pendens) |
11.2 Buyer's Remedies
- Rescission of contract: Buyer can rescind contract if seller cannot convey good title
- Specific performance: Buyer can seek specific performance with compensation for defect
- Damages: Claim damages for breach of contract
- Return of price: Recover purchase price paid with interest
- Lien on property: Buyer has lien for purchase money paid in case of defective title
12. Time of Performance and Delay
12.1 Time of Performance
| Situation | Rule |
|---|---|
| Time is essence | Failure to perform on stipulated date defeats contract; party can treat contract as rescinded |
| Time not essence | Delay does not defeat contract; reasonable time allowed for performance |
| Time made essence | Notice can be given making time of essence if originally not so |
12.2 Consequences of Delay
- If time is essence and buyer delays: Seller can rescind contract and forfeit earnest money
- If time is essence and seller delays: Buyer can rescind and recover deposit with interest
- If time not essence: Delayed party liable to pay interest and compensation
- Unreasonable delay may disentitle party to specific performance
13. Sale Subject to Mortgage
13.1 Types of Sale with Mortgage
| Type | Effect |
|---|---|
| Subject to mortgage | Buyer takes property with burden of mortgage; buyer not personally liable |
| Assuming mortgage | Buyer agrees to pay mortgage debt; buyer becomes personally liable |
| Free from encumbrance | Seller must discharge mortgage before transfer; buyer gets clear title |
13.2 Rights of Parties
- Sale subject to mortgage: Buyer can redeem mortgage; not personally liable for debt
- Assuming mortgage: Buyer personally liable; mortgagee can sue buyer directly
- Seller remains liable to mortgagee unless novation or release obtained
- Buyer entitled to notice of mortgage and amount due
14. Important Case Law Principles
14.1 Key Judicial Principles
- Marketable title: Title free from reasonable doubt; title that prudent buyer would accept
- Good title: Seller must show clear chain of title for statutory period (30 years)
- Notice doctrine: Buyer with notice of defect cannot claim to be bona fide purchaser
- Constructive notice: Registration of document gives constructive notice to world
- Possession: Delivery of possession with sale deed strengthens title
- Benami transaction: Prohibition of Benami Property Transactions Act, 1988 applies
14.2 Burden of Proof
| Issue | Burden of Proof |
|---|---|
| Validity of sale | Seller must prove good title and valid transfer |
| Fraud or misrepresentation | Buyer must prove fraud or misrepresentation by seller |
| Part performance | Buyer must prove all ingredients of Section 53A |
| Payment of consideration | Buyer must prove payment of purchase price |
15. Remedies for Breach
15.1 Remedies Available
| Remedy | Availability |
|---|---|
| Specific performance | Suit under Specific Relief Act, 1963; discretionary remedy; granted for immovable property sale |
| Damages | Compensation for loss suffered due to breach; alternative to specific performance |
| Rescission | Cancellation of contract; restoration of parties to original position; return of consideration |
| Forfeiture of earnest money | Seller can forfeit earnest money if buyer defaults |
| Suit for recovery of price | If sale completed but buyer fails to pay price |
15.2 Bars to Specific Performance
- Compensation in money is adequate relief
- Contract is determinable in nature
- Performance involves continuous duty extending beyond control of court
- Contract is unfair or unconscionable
- Party seeking relief has not performed essential terms
- Unreasonable delay or laches by plaintiff
16. Stamp Duty and Taxation
16.1 Stamp Duty
| Aspect | Details |
|---|---|
| Requirement | Sale deed must be properly stamped as per Indian Stamp Act and State Stamp Acts |
| Computation | Stamp duty calculated on market value or consideration, whichever is higher |
| Effect of under-stamping | Document not admissible in evidence; can be impounded; penalty payable |
| Time limit | Stamping must be done before or at time of execution |
16.2 Tax Implications
- Capital gains tax: Seller liable to pay capital gains tax on profit from sale
- TDS on property: Buyer must deduct TDS at 1% if consideration exceeds Rs. 50 lakhs
- Registration charges: Payable at time of registration as per state rules
17. Special Situations
17.1 Sale by Co-owners
- Each co-owner can transfer his undivided share without consent of others (Section 44, TPA)
- Transferee becomes co-owner with other co-owners
- Partition suit can be filed for division of property
- Pre-emption rights may apply in certain cases
17.2 Sale by Agent or Power of Attorney
| Requirement | Details |
|---|---|
| Valid power of attorney | Must be properly executed, stamped and registered |
| Scope of authority | Agent must have specific authority to sell; general authority insufficient |
| Principal's title | Agent can only transfer what principal owns |
| Ratification | Unauthorized sale can be ratified by principal |
17.3 Sale During Pendency of Suit (Section 52, TPA)
- Transfer during pendency of suit affecting property is void against parties to suit
- Applies when property is directly and specifically in question
- Lis pendens notice: Buyer takes subject to result of pending litigation
- Operative from date of filing suit till final decree
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