Generally owning a house is a lifetime ambition, and one makes a purchase once in a lifetime.A
property is not only a kind of wealth for the purchaser but also for the future
generations as the value keeps appreciating.
If anyone offers
the property at a throwaway price, less than the market price, or forces to
hasten the process, one needs to be vigilant. Do not mind even if such a
property is not purchased, unless proper verification is done. You may buy
another property as per your requirements.Do not part with your hard earned
money and purchase a headache.There are certain important aspects to be looked
into while buying a property.
A sale of transfer
of ownership of property by one living person to another living person for a
mutually agreed price paid or promised or part paid or part promised. The
Contract Act, the Transfer of Property Act, the Registration Act, other various
acts and the local bodies rules govern it. It is transfer of all the rights,
title and interest with easements and privileges of the seller to the buyer for the latter’s enjoyment of the property as the absolute owner.The instrument of
sale perfected by execution and registration is called Deed of Sale. The word
‘convey’ is also understood as ‘sale’.
Hence, a deed of sale is also known as deed of conveyance.
A seller, a buyer
and the description of the property to be sold and consideration amount are the
most important ingredients in a sale. The other key points are that it must be
a transfer, such a transfer must be of full ownership and the sale
consideration would be the price paid or promised to be paid. The seller must
have a clear and marketable title to the property and must be competent enough
to convey the property and is not suffering from any disability. He must be a
person, major in age and of sound mind.
Title
of the property
The title to
property on sale must be free from all encumbrances, claims and court
proceedings.Encumbrance on a property will not make a marketable title.
Existence of encumbrance found after completion of sale obligates the vendor to
indemnify the purchaser.Indemnity clause should be carefully inserted in the
sale deed.
The documents of
the title is said to be defective if there is a pending court case, an
encumbrance not known to the buyer and he could not detect it even after
exercising proper care, like a demand on the property, easement right,
acquisition proceedings. As regards sale of a minor’s property, permission must
be obtained from the concerned court; as a minor cannot enter into a contract.
However, in case of sale to a minor, it is enough if a guardian represents him,
after obtaining court permission, under the The Guardians and Wards Act of
1890.
The execution of a
deed of sale and payment of the sale consideration are mutual. A Sale deed is
always executed for the consideration. This is the essence of contract for
sale. Payment can be made on a date mutually agreed, which may be a future date
after registration of the sale deed. However, payment by way of gold ornaments
or other valuables of equivalent amount may satisfy a seller but the law would
look at it as “barter” and not as sale. Therefore, the price payable for sale
of property shall be in terms of money only and not otherwise.
Compulsory
Registration
According
to the Transfer of Property Act, sale of a tangible immovable property of value
below Rs.100/-, can be effected either by a registered document or an
unregistered document or by delivery of possession. If, however, the value of
the immovable property exceeds Rs.100/-, registration before the concerned
registering authority is mandatory. In a situation where a sale of an immovable property of value exceeding Rs.100/- is made an unregistered deed and the possession
is delivered, the purchaser will not be able to enjoy legal ownership of the
property for the simple reason that the deed is not a registered document.
A sale deed
perfected by execution and registration will not make the sale valid. The
important elements of sale are consideration it must be mentioned in a sale
deed. For example, if the price of property was not determined, even though the
sale deed may be perfected by registration, it would be invalid in the eyes of
law. We have to state very clearly the mode of the payment. It is advisable to
make such a payment by a Pay Order or Demand Draft. Such a payment can be made
either before the Sub-Registrar or witnesses of sale deed. If you make the
payment before the Sub-Registrar he will endorse the same on the sale deed.
The Transfer of
Property Act recognizes only two types of transfers. One is through a registered instrument of sale, and the other through delivery of
possession. Though delivery of
possession is not a crucial factor, it is always better for the buyer to take
possession of the property on completion of sale. Normally, a sale becomes
effective on registration from the date of its execution. Execution means
signing of the deed of sale by the parties concerned and attested by witnesses.
However, mere registration of the document does not mean simultaneous transfer
of ownership of the property. Transfer of full ownership happens only after due
compliance of all the formalities and the payment of price.
Unless and until
the full sale price is paid and other legal formalities complied with, the sale
is ineffective, even though the deed of sale is registered before the concerned
registering authority. If the price is not paid in full by the date stipulated,
the seller is at liberty to cancel the registered deed of sale, through the
process of law.
Possession
The
seller can hand over physical possession of a flat or independent house by
handing over the keys of the premises on the spot.As for vacant land the
seller may introduce the purchaser to the neighbours. The purchaser may also
put a sign Board that the property belongs to him and construct a compound
wall. There are certain properties, which cannot be sold. A property, which has
a successor; a property which is likely to be inherited by will, a property
having easement rights likely to be succeeded by a heir apparent.
Duties
of seller
The Transfer of
Property Act has laid down the duties, rights and obligations of a seller to a
buyer and vice versa. The seller is duty bound, among other things, to inform
the buyer of any material defect in the property and the title; to produce all
documents of title to property for buyer’s examination; to provide all relevant
information truthfully whenever sought for by the buyer; to take proper care of the property and the documents until the possession of the property is given to
the purchaser or his nominee on completion of sale; to execute the deed of
conveyance in favor of the purchaser and register it on receipt of the sale
price; to pay the taxes and other charges on the property till the date of
sale; to discharge encumbrances if any, to have charge over the property only
for the unpaid sale price.
The buyer, among
other things, is duty bound to disclose to the seller the material benefit which
the buyer is likely to reap and about which the seller has no idea; to promptly
pay the entire sale price on completion of sale; to pay all taxes and other
charges of the property after completion of sale; to receive all rents of the
property after completion of sale; to have charge on the money.Already paid to
the seller until the seller completes the sale; to hold back amounts paid on
the property on behalf of the seller. Subsequent to completion of sale if there
is any damage to the property not caused by the seller; then the buyer has to
bear it.
Importance
of Agreement of sell
In spite of all
these laws and rules, unfortunate and unexpected events happening cannot be
ruled out. Buyer and seller meet with different assumptions and expectations.Sometime, the true facts are hidden for monetary gain. Because of these,
problems arise, which sows the seeds of ill feeling among the seller and the
buyer. To avoid such unpleasant situations, it is essential that the parties
through their learned and experienced advocates scrutinize all aspects of the
transaction to their mutual satisfaction. After, finalizing the price,
identification of the specific property to be transferred and other terms and
conditions, an Agreement for sale, is signed by the parties, which has a vital
role to play in deciding the rights and liabilities of the parties. Before
entering into an Agreement for Sale, the parties some times prefer to make a
“receipt of token advance”.
Instead of a
Receipt, the party can enter into a Memorandum of Understanding.The MOU given
an account of the major terms of the agreement arrived between the parties on
matters like the price, property, and other terms. The purchaser thereafter
with the help of his advocate makes enquiries about the property and then
enters into a formal agreement with the seller.Agreement to Sell is a very
important document, based on which a deed of sale is prepared and executed. It
contains clear and specific clauses. It reflects in clear terms the full
understanding reached between the parties with regard to sale of a property.
Agreement to Sell
tells in recital brief how the seller got the property, the settlement of the
sale price, identification of the specific property under transfer, mode of
payment, the period within which the sale is to be completed; seller’s
commitment to produce various documents of title to prove his ownership; to
obtain statutory clearances to make way for the registration of the property in
favour of the purchaser or his nominee; to convey clear; unencumbered alienable
right, title and interest in the property free of all claims; to indemnify the
purchaser against loss or damage if suffered by reason of any kind of defect in
the right title and interest in the property and forfeiture clauses in case of
breach of contract by either party.
Registration of
Agreement to sell is not compulsory.It
is purely a record of understanding reached between the seller and the buyer in
respect of the sale of property. It is not the document through which transfer
of the deed of sale and perfected by registration for transferring of full
ownership of the property to the purchaser.
Sale Deed
The ultimate
document of sale is Sale Deed. The important elements in a Sale Deed are
description of the deed, date and place of execution, parties to the deed,
recitals, covenants, the interest that the purchaser takes in the property,
operative words, price consideration, reservations and exceptions, description of the property sold, completion of transaction, signing of the deed by the
parties, attestation after execution, possession of the property, registration
of the property and delivery of the deed.
After
the registration of the sale deed, the buyer should get the Khatha transferred
to his name in revenue records, so that taxes paid are receipted in his name.
If proper caution is exercised in tracing the title and other procedures are
followed, the purchaser will enjoy the benefit of the property through out his
life time and also pass on to his future generations.
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