Sale of immovable property. Transfer of Property Act.

1. Transfer of Property
Topic 9.
Sale of immovable property

2. We are here …
1. Movable and immovable property
2. Attestation and notice
3. Actionable claim
4. Transfer of property
5. Restraints on transfer
6. Rule against perpetuities
7. Vested and contingent interest
8. Doctrine of election
9. Sale of immovable property

3. Overview
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Sec. 54 to Sec. 57
Definition of Sale
How sale is effected
Difference between sale and contract for sale.
Difference between sale and lease, mortgage
Rights and liabilities of a buyer (Sec. 55)
Rights and liabilities of a seller
Marshalling (Sec. 56)
Discharge of encumbrances on sale (S. 57)

4. Definition of sale (S. 54)
• Sale is a transfer of ownership in exchange for a
– 1. price paid
– 2. Or promised
– 3. Or part paid and part promised
• (quid pro quo – this for that / exchange)
• Eg-1. Raj transfers the ownership of his land to Simran.
Raj is paid Rs. 1 lakh by Simran in exchange. (1. price
paid)
• Eg-2. Sumeet transfers the ownership of his house to
Harry Potter. Harry Potter promises to pay Sumeet a
sum of Rs. 5 lakhs within 30 days (2. promised)
• Eg-3. Kumar wants to sell his building to Vishwas for Rs.
4 lakhs. Vishwas pays Rs. 2 lakhs and promises to pay
the rest (Rs. 2 lakhs) later. Kumar transfers the
ownership to Vishwas (3. part paid and part promised)

5. Essentials of valid sale
• The seller should be the owner of the property or should
have the authority to dispose the property.
• Owner for example: I cannot sell Taj Mahal to some
persons. To sell a property, first I should be the owner.
• Authority for example: The chief minister is not the
owner of Government property. But he has the authority
to sell certain properties.
• Buyer must be competent to be a transferee. Not be
disqualified under S. 6.
• Subject-matter should be transferable immovable
property (tangible or intangible)
• There must be a transfer of ownership
• Transfer must be in exchange for a price

6. Price – sine qua non
• Case: Ranjana Nagpal v. Devi Ram
• The price may be paid later, but a price
should be fixed (certainty) (recall the
Contract Law principle of ‘consideration’)
• Price can be paid at the time of execution
• Or a part can be paid immediately and a
part can be paid later.
• Or the buyer may promise to pay the
whole amount later.

7. Sale how effected
• Sale must be registered if
– Tangible immovable property of value Rs. 100 and
above
– A reversion or other intangible thing of any value
• If it is a tangible immovable property of value
less than Rs. 100, there must be either
– A registered conveyance or
– Delivery of property
• Delivery takes place when the seller places the
buyer in possession of the property

8. Sale how effected
• Generally, sale takes place through a valid
executed sale deed
– In writing
– Properly attested
– Registered
• In case of property of nominal value, sale is
completed by a simple delivery of possession or
by a registered document
• If there is no registration of the sale deed, no
property transfer happens

9. Contract for sale
• Same as agreement to sell / agreement for sale that was
studied during previous semester in Law of Contract.
• As explained several times, in a “contract for sale”,
actual transfer of property never happens.
• For the convenience of understanding, “contract for sale”
is similar to engagement and “sale” is like marriage.
Please do not write this explanation in exams.
• Though the title of the property is never transferred in
“contract for sale”, a few rights are accrued by the buyer.
The buyer can file for specific performance of contract.
However, the seller need not comply. The buyer will
have rights to get back his advance amount and any
losses if he has suffered due to the “contract for sale”.

10. Difference
Contract for sale
• Absolute interest in the
property is NOT
transferred from the
seller to buyer
• Property is not
transferred from the
seller to buyer
• Creates a right in
personam
• Title is not transferred
Sale
1. Absolute interest in the
property is transferred
from the seller to buyer
2. Property is transferred
from the seller to buyer
3. Creates a right in rem
4. Title is transferred

11. Distinction between sale and
lease / mortgage / exchange
• In sale, the title of the property is transferred to the buyer
for an agreed price
• In ‘exchange’, there is a transfer of property in exchange
for something that is not money. For example: Arvind
transfers the ownership of his land to Somnath. In
exchange, Somnath transfers the ownership of his house
to Arvind.
• In, a mortgage, only the “right to sell the property” in
event of non payment of loan is given to the mortgagee.
• In a lease, the lessee gets the right “only” to enjoy the
property for a certain period. The lessee in no
circumstance gets the right to alienate (dispose) the
property.

12. Next
• Buyer’s rights and liabilities
– Rights
• Before sale
• After sale
– Liabilities
• Before sale
• After sale

13. Buyer’s rights - Sec. 55(6)
• Before completion of sale
– A charge on the property for the purchase money properly paid
by him in anticipation of the delivery
– Interest on such purchase money
– Earnest and costs awarded to him in a suit to compel specific
performance of the contract
• Eg: Madhuri pays Rs. 1 lakh to Huma as advance for
buying a land from Huma. The sale deed is not yet
executed. Huma decides to sell the land to Arshad.
Madhuri has a charge over the property to the tune of
Rs. 1 lakh + interests and costs if any.
• These are the rights before the execution of sale deed.
Usually, a “contract for sale” is executed before the sale
deed.

14. Buyer’s rights – Sec. 55(6)(a)
• After completion of sale
• Buyer is entitled to
– Benefits of any improvement in, or, of increase in value of, the
property and
– The rents and profits therof.
• Eg: Shahid decides to buy a land from Sonakshi for Rs.
50,000. Overnight, there is an increase in real estate
rates and the land is now valued at Rs. 75,000. Now, in
the change market rates, Sonakshi cannot demand a
higher price for her land. The benefit of the price rise
goes to the buyer.
• Leading case: Rani Kaniz v. Murtaza AIR 1937 Oudh 159

15. Buyer’s liabilities – Sec. 55(5)
Duties of a buyer:
• Before sale
– Disclose material fact, increasing the value of the
property
– To pay purchase money or promise to
• After sale
– Bear loss or destruction of property if any after
ownership passes to him
– To pay charges and rent due on the property after
ownership passes to him

16. Seller’s liabilities / duties
– S. 55(1)-(3)
1. Disclosure of material defects relating to property
2. Allowing the buyer to examine documents relating to the
property on request
3. To answer the related queries or questions of buyer
4. Execute a proper conveyance in favour of buyer
5. To take care of property and related documents in
between the date of ‘contract to sell’ and actual
execution of sale deed.
6. To give possession to the buyer
7. To pay rent or public charges due on the property till the
date of the sale
(these points need to be expanded)

17. Cases
• Meghi v. Tyeballi – Mistake with respect to
a fact material to the property makes an
agreement void
• Shaikh Buddan Sah v. Nigamma
• Ahmedabad Municipality v. Haji Abdul
Gafur Haji Hussenbhai
• Rogers v. Hosegood
• Mumtazunnissa v. Bhagirath

18. Marshalling (S. 56)
• Eg: Sunny mortgages his
properties at Jayanagar and
Cox town to Bobby and
borrows Rs. 50,000. Sunny
sells away the property in
Jayanagar to Abhay. Now
Abhay is the owner of
Jayanagar property. Bobby
brings an action to recover the
money from Abhay’s
Jayanagar property. Now,
Abhay has the right whereby
he need not pay the amount.
As per Sec. 56, Sunny’s
property in Cox town has to
be sold and the proceeds
should be used to pay back
that loan of Rs. 50,000.

19. Marshalling
• The concept of marshalling can be best understood by
way of examples. The more a teacher tries to explain
marshalling in writing, the more a student may get
confused. The concept should be explained orally / live
where a student can clarify his/her doubts then and
there.
• You are advised to read the examples / illustrations
given in the text books and understand the concept by
making illustrations
• Marshalling is also a principle that was born out of
equity. Now some of you may be able to understand why
the rule is this way. It is only in the interest of equity, the
buyer is given this kind of advantage.

20. When marshalling rule applies
• Two or more properties should be
mortgaged to a single person.
• At least one of the property must have
been sold to a third person.
• There should be no contract to the
contrary of this rule.

21. Discharge of encumbrances on
sale S. 57
• Black’s Law Dictionary: A claim or liability
that is attached to property or some other
right and that may lessen its value, such
as a lien or mortgage; any property right
that is not an ownership interest. An
encumbrance cannot defeat the transfer of
possession, but it remains after the
property or right is transferred.

22. Encumbrances
• There are various fees / taxes to be paid by the
owners of land to authorities or to persons. For
example: municipal tax / land revenue.
• Sometimes the property is mortgaged and
certain interest has to be paid by the owner of
the land.
• Such ‘liabilities’ over the land are called as
‘encumbrances’. More details are here:
http://www.thehindu.com/features/homes-and-garden

23. Encumbrances
• Encumbrances affect the calculation of fair
value for a property.
• To avoid this, either the buyer or seller can
apply to the court and deposit certain
amount of money or government
securities that would discharge the
property from encumbrance.

24. There may be some errors in the slides.
Cross check with the standard text books
in case of doubts / confusion.
- Gagan