Legal Procedure to Sell a Property in India

If you own a property that you are planning to sell, then you need to familiarise yourself with some important sections of The Transfer of Property Act, 1882. Further, you should have certain documents lined up ready with you before you even start the procedure for selling the house.

Let’s look at a few important terms and sections of the Transfer of Property Act, 1882 that you must know to sell a property in India.

The Transfer of Property Act, 1882

Sale – Definition

According to section 54 of the Transfer of Property Act, 1882, the sale of transfer refers to “the ownership in exchange for a price paid or promised or part-paid and part-promised. Basically, in a sale, there exists an absolute transfer of all rights in the property sold”.

Sale can be made in Two Ways

• Where the value of Tangible Immovable Property is Rs.100 or more than that or in the case of a reversion or other intangible thing, the sale can only be made through Registered Instrument.
• Where the value of Tangible Immovable Property is less than Rs.100, sales can be made through the Delivery of Possession

Delivery of Tangible Immovable Property

Delivery of Tangible Immovable Property is said to be completed when the Seller handovers the possession of a property to the buyer or such person as he directs.

The contract for the sale of immovable property

A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.

To resolve the property related issues and understand the complexity of the matter, it’s always better to consult a lawyer who can guide you on the process elaborately.

Two Parties to Sale

Transferor: Transferor is “Someone who transfers his property to another”

Transferee: Transferee is “A person who is transferred” or ” A person to whom title or ownership is conveyed”.

Rights and Duties of Seller

The rights and duties of a seller are subject to the contract. In the absence of any contract to the contrary, the rights and duties of sellers and buyers are governed by section 55, Transfer of Property Act. The rights and duties of seller and buyer under the provisions of section 55 of the Transfer of Property Act are as under:

Duties of Seller Before Sale

• The seller is bound to disclose all the material defects to the buyer of the property which the buyer is not aware of and cannot find in the ordinary course of action.
• The seller is bound to produce all documents relating to the property to the buyer if he asks for those documents which are in the possession or power of the seller.
• The seller is bound to give an answer to all the questions to the best of his knowledge which is put before him by the buyer with respect to the property.
• The seller is bound between the date of the contract of sale and the delivery of the property, to take as much care of the property and all documents of title relating thereto, which are in his possession as an owner of ordinary prudence would take of such property and documents.
• The seller is bound to pay all the charges and rent, dues or government fees up to the date of sale.

Duties of Seller After the Sale

• After completion of the sale, it is the seller’s duty to give possession to the buyer. The seller is bound to give, on being so required, the buyer or such person as he directs, such possession of the property
• The seller shall be deemed to contract with the buyer that the interest which the seller professes to transfer to the buyer subsists and that he has the power to transfer the same.
• Where the whole of the purchase money has been paid by the buyer, the seller is bound to deliver to the buyer all documents of title relating to the property which are in the seller’s possession or power.

Seller’s Rights before Sale 

• Section 55 (4) (a) – Seller has the right to receive all the rents and profits out of the property.

Seller’s Right after Sale

• The seller has the right to Lien or charges on the property if any amount is unpaid by the seller. According to Section 55(4) (b) if the price remains unpaid, the seller cannot refuse delivery of possession for or can claim back the possession if already given to the buyer, but he (seller) is given a right to recover unpaid purchase money from and out of the property.

Automate your practice with our legal practice management software – Sign Up Now!

Steps involved in the Sale of a Property

• Deciding to sell and choosing an agent. The agent will be in charge of advertising, showing and completing the legal requirements of selling the property. Make a plan for listing, showing and selling your property.
• Determining the selling price and property inclusions comes next. For a proper valuation of the property, a seller can either self-assess his property or resort to an external source such as a real estate agent, to determine the market value of the property in question. Property’s location, size, age, and features will be assessed, according to the current market and area trends.
• Agreement with your agent. This legally binding contract will detail any commissions, the estimated sale price, duration of the agreement, advertising costs, process.
• Prepare the Vendor’s Statement for your property and the Contract of Sale through your solicitor or conveyancer. These will include all of the details prospective purchasers need.
• Advertising and showing your property. This generally involves photographing your property, drawing up floor plans and writing your online ads. The seller can advertise his property on various mediums such as the internet, classifieds, pamphlets, word-of-mouth or through a broker. Once the buyer has been identified, it is advisable to do a background check on the buyer with special reference to his financial capability and reliability.
• Sale and negotiation. The agent will auction your property or mediate between sellers and buyers to reach a mutually acceptable price. The buyer will then pay a deposit.
• Obtaining permissions: The seller must obtain No Objection Certificates (NOCs) from various authorities (Society, Income Tax Authority, Municipal Corporation, etc) as required.
• Under contract. Both seller and buyer’s lawyers and banks will work out the details of the sale to ensure both parties meet all legal and financial requirements followed by the settlement day.

Documents Required for Selling a Property

Now, we come to the most vital stage of documentation. Of late, there has been an increase in the number of property-related disputes that are a direct outcome of insufficient or improper documentation. It is therefore pertinent that both the buyer and the seller give due consideration to the documentation of the deal. These documents will be scrutinized by potential buyers. The buyers often insist on checking the original documents even before finalizing the deal.

Following are the documents you need while selling a property;

Letter of allotment

The letter that confers allotment of the property to you from the relevant society or authority is a primary document you need to have in order.

Sale deed

The original conveyance or sale deed from the previous owners of the property is required when you are selling a property. In case you have lodged the original deed for registration with the Registrar, you need to provide a copy of the conveyance deed or sale deed along with a photocopy of the receipt from the Sub-registrar where the documents have been lodged for registration.

The sale deed is important as it traces the ownership of the property. It is necessary to prove the chain of previous agreements with past owners.

Sanctioned plan

You also need to have a copy of the approved building plan and occupation certificate issued by the competent authority.

Society documents

When you are selling your house, you must obtain the permission to transfer the property from a competent authority – development authority or society. The buyer is entitled to ask for the original stamped receipts of payments made to the builder or developer by the previous and present sellers.

Encumbrance certificate

The encumbrance certificate is used in property transactions to indicate the free title. When buying an apartment, land or house, the buyer wants to make sure that the land or property does not have any legal dues.

Sale Agreement

Once the documentation is cleared, both parties can then enter into an agreement to sell and confirm the terms and conditions. Subsequently, they can execute the sale deed based on the agreement to sell. The sale agreement is signed and executed by the seller and buyer on a non-judicial stamp paper. The sale agreement is one of the most powerful documents in the transaction as it has legal value and can be produced as evidence.

Conclusion

While the aforesaid are the broad guidelines for selling a property in India, it is advisable to seek expert advice on the subject before entering into a sale.