These are booming times indeed. Indians like you and me are planning to either buy a house for ourselves or are planning to sell an old house and move into a new one.
But do you know what your duties and responsibilities as a buyer/ seller are?
If you don't, then you are at the right place.
What is a sale?
A sale is one of the modes/ ways by which ownership of a property is transferred by one party to another for a price. The price can be either:
(a) Paid or promised to be paid
(b) Part-paid and part-promised to be paid.
This can be explained with the help of an example. Let's suppose X enters into an agreement with Y to transfer her/ his flat in Y's name for a consideration of Rs 10,00,000.
If Y pays the entire Rs 10,00,000 at the time of entering the agreement, the consideration is said to be paid.
If Y enters into the agreement and promises to pay the Rs 10,00,000 only when he has possession of the flat, the consideration is said to be promised to be paid.
If Y pays Rs 1,00,000 at the time of entering into the agreement and promises to pay the balance Rs 9,00,000 only on possession being given to her/ him, the consideration is said to be part-paid and part-promised to be paid.
In short, the word sale would mean complete transfer of all rights to the buyer of the property.
There are two parties to a contract of sale -- the buyer and the seller.
What property can be transferred/ sold?
Under a contract of sale, both movable and immovable property can be transferred. We are restricting this discussion only to the sale of immovable property.
Movable property
Movable property means all property except immovable property. For example, furniture, fixtures, goods like your mobile, laptop, etc.
Immovable property
Immovable property includes land, benefits that arise out of the land and things attached to the earth or permanently fastened to anything attached to the earth.
The various immovable properties that can be transferred/ sold include:
~ Land
~ Flat
~ Godown
~ Office
~ Show room
~ Flat, godown, office or showroom in a co-operative society
Who is a buyer?
Any person who buys or agrees to buy property for a consideration paid or promised to be paid or part-paid and part-promised to be paid is the buyer. It is one of the essentials of a valid sale that the buyer must not be disqualified under any law in force even for the time being in force from acting as a buyer.
Any of the following persons can be a buyer:
1. Individual
2. Company
3. Partnership firm
4. Proprietary firm
5. Co-operative housing society
Who is a seller?
A seller is any person who sells or agrees to sell property for a consideration paid or promised to be paid or part-paid or part-promised to be paid. A seller should be competent to enter into a contract and make the sale. S/ he must be legally entitled and must have the right to transfer the property to the buyer.
Any of the following persons can be a seller:
1. Individual
2. Builder/ Promoter
3. Company
4. Partnership firm
5. Proprietary firm
6. Co-operative housing society
Rights of a seller (including those referred to in points 1-6 above)
Before completion of the sale -- ie, before ownership has passed to the buyer:
The seller is entitled to all the rent arising out of the property till the ownership passes to the buyer.
After completion of the sale -- ie, after ownership has passed to the buyer:
The seller has a claim on the property for the unpaid consideration (the money that is still not paid as per the agreement), when the property is in the hands of:
1. The buyer (this means the buyer cannot sell the property to a third party before clearing his unpaid dues to the person s/ he bought the house from).
2. Any person to whom the buyer has transferred the property without consideration (receiving money).
3. Any person to whom the buyer has transferred the property and who is aware of the non-payment of the consideration (balance amount).
Duties and liabilities of a seller
Before completion of the sale:
1. To disclose all material defects in the property or in her/ his title to the property.
2. To present, on the buyer's request, all the title deeds to the property in her/ his (ie the seller's) possession or in her/ his power.
3. On being paid all the amounts due, absolutely transfer the property to the buyer by entering into a final agreement with her/ him.
4. To take such care of the property and the title deeds of the property as an owner of ordinary prudence would take in the period between the date of contract of sale and the date of delivery of the property.
5. To co-operate with the buyer in completing the sale.
After completion of the sale:
1. To give possession of the property to the buyer.
2. When the whole purchase price is paid, the seller must deliver all the documents relating to the property to the buyer.
Various properties bought under a single agreement
1. Suppose a person purchases a number of properties as part of a single docment. Now if s/ he transfers the same to different buyers under separate agreements, then the purchaser of the greatest value is entitled to retain the (original) agreement / document.
Example: X is the owner of a flat and a shop in Cauveri Co-operative Housing Society Ltd. S/he had purchased both the properties under a single sale deed.
The flat is valued at Rs 15,00,000 and the shop is valued at Rs 12,00,000.
Y purchased the Flat for Rs 15,00,000 and Z purchased the shop for Rs 12,00,000.
Since the price paid by Y is more than the price paid by Z, Y is entitled to retain the original sale deed through which X had acquired the flat and the shop.
2. When a person under a single agreement/ document purchases various properties and only few of the properties are then transferred to different buyers under separate agreements/ documents, then the seller is entitled to retain the (original) agreement/ document.
Example: In the above example, if Y had only purchased the flat for Rs 15,00,00, X would be entitled to retain the original sale deed.
Registration and stamp duty
Any instrument whose subject matter is any right, title or interest of the value of Rs 100 or upwards needs to be compulsorily registered as per the provisions of the Registration Act, 1908.
The above instruments also need to be stamped as per the provisions of the relevant Stamp Act.
Other modes of transferring property
Other than sale, immovable property can also be transferred in the following ways:
1. Mortgage
2. Lease
3. Exchange
4. Gift
Ankoosh Mehta is an advocate and solicitor with the Dikshit Maneklal & Company, Mumbai.