Homes and gardens

For absolute title to a property

FOR SAFETY: A careful scrutiny of the documents is required in property dealings.  

When you have decided on your dream home, apart from attending to the dreary paper and legal work, you are overwhelmed with a sense of joy and apprehension. There is no dearth of well-wishers flooding you with advice while relating to their experiences of dabbling in real estate.

Before plunging headlong into the transaction, it is well worth your time to ponder on certain important aspects, to secure your rights as a buyer. After having completed the due diligence and obtained clearances required, including sanction and disbursement of your home loan, the next step for completing the transaction and obtaining absolute ownership of your dream house is the execution and registration of the sale deed from the seller in your favour. The sale deed is the primary document of ownership, giving you absolute title to the property. To secure your rights as a buyer, it is necessary to know the following aspects relating to the sale deed:

What is a sale deed?

A sale deed or a deed of conveyance is the document evidencing the transfer of ownership of immovable property from the seller to the buyer. As per Section 54 of the Transfer of Property Act, 1882 (“TP Act”), the following are the important constructs of a sale deed:

(a) Seller – the owner of the property and is entitled to convey the title;

(b) Buyer – the purchaser of the property and will acquire title upon completion of the transaction;

(c) Property – which is the subject matter of the transaction. It is necessary to give a proper and correct description of the property in the sale deed, which corresponds with the previous title documents and the municipal records;

(d) Consideration – the amount paid or promised to be paid in future; or partly paid and partly promised to be paid by the buyer to the seller for effecting conveyance of the property.

Where the consideration is promised to be paid in future, either in full or in part, the parties are recommended to execute and register a supplementary deed, upon receipt of full payment by the seller; and

(e) Transfer of ownership of the property from the seller to the buyer.

It is imperative that the parties, i.e., seller and buyer are competent to enter into the contract

(a) they are not minor in age; (b) are of sound mind; and (c) are not prohibited under any law, otherwise, to enter into the contract.

Important terms of a sale deed

As a buyer, you should read the terms of the sale deed carefully to ensure that not only valid title is passed on, but also that the seller is providing adequate representations and covenants to protect the interest of the buyer, which can be enforced against the seller in case of a breach, such as:

* (a) The seller being the absolute owner of the property and being entitled to convey the same in favour of the buyer, without any hindrance or third party rights;

* (b) The legal capacity of the seller to transfer the property and to execute and register the conveyance deed;

* (c) The property being free from encumbrance, lien or disputes of any nature;

* (d) Handover of all original title documents of the property to the buyer, along with vacant physical possession of the property;

* (e) The seller having paid all dues, including property tax, income tax, payments towards utilities and such other amounts, in relation to the property;

* (f) Undertaking on the part of the seller to do such further acts and deeds as may be necessary for vesting of clear and marketable title to the property in favour of the buyer. This clause is necessary for enabling the buyer to seek transfer of the Khata and other utilities attached to the property, such as electricity and water supply, to his name;

* (g) Undertaking of the seller to transfer membership of the owners’ association, in case of transfer of an apartment unit; and

* (h) Indemnity from the seller to the buyer in case of breach of any of the terms and conditions or representations set out in the sale deed. Indemnity is a separate contract and can be enforced by the buyer against the seller, if any of the representations or terms and conditions set out in the sale deed are breached, including instances where the title of the property is called into question by any third party.

The seller may be asked to defend such claims at his cost and make good the title to the property or to compensate the buyer against any loss.

What is the process for completing the conveyance?

The final step is the execution and registration of the sale deed from the seller in favour of the buyer.

The buyer is required to pay the necessary stamp duty, either under the Indian Stamp Act, 1899 or the respective State legislations, wherever applicable, for conveyance of the property. The rate of stamp duty may vary from State to State and within each State depending on the location of the property.

The buyer shall also be required to register the document at the office of the jurisdictional Sub-Registrar of Assurances, upon payment of the necessary registration fee as prescribed under the Registration Act, 1908 (“Registration Act”).

The Registration Act and TP Act mandate that the document effecting conveyance of an immovable property shall be compulsorily registered, without which the buyer will not be entitled to claim title to the property.

Power Of Attorney

If the seller or buyer are unable to be personally present for the execution and registration of a sale deed, a power of attorney may be issued to any person, authorising him to execute and register the sale deed on behalf of the party. As a purchaser, you should ensure that the power of attorney is appropriately stamped and registered and validly executed, particularly, when the same is issued by the seller.

Upon registration, the transaction will reflect in the encumbrance records at the office of the Sub-Registrar and any person conducting searches at the office will be put to notice that the property is registered in your name as the buyer.

The buyer should ensure that the original sale deed, along with all other original documents of title in the custody of the seller, are handed over to him/her, for ensuring the vesting of absolute, clear and marketable title to the property.

(The author is Associate Partner, Khaitan & Co LLP)

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Printable version | Nov 24, 2020 3:37:15 AM |

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