Consumers need to be fully aware of the legal intricacies
involved in sale/ purchase of residential property to avoid any
potential unfair deal
From a legal standpoint, the transaction of buying or selling a
property involves various steps. Generally, the first and foremost
consideration for the buyer is clear title of the seller to the
property, and for the seller it is the capacity of the buyer to pay
the sale consideration timely. Both of them should address their
concerns – the buyer should verify the title of the seller to
the property and that the property is free from any encumbrances
such as mortgage, charge, unpaid dues, etc at the time of the sale.
The seller may demand to see the loan approval letter (in case of
buyer opting for financing the property) as also payment of earnest
money by the buyer to confirm seriousness.
The earnest money, along with Agreement to Sell
("ATS"), serves the purpose of securing the transaction
between the seller and the buyer if the sale is to take place at a
date in near future. Long duration ATSs usually attract disputes
owing to expectations of the parties and fluctuations in property
market, and may be avoided for practical reasons. ATS is a binding
document, specifically enforceable in a court of law in terms of
the mutual promises of the parties recorded therein. The
requirement of stamping an ATS differs from state to state, so
please verify the same for the state where the property is
Once the seller and buyer agree to conclude the deal, a Sale
Deed ("SD") is executed, a document compulsorily
registrable with the jurisdictional Land and Assurances' office
upon payment of a fee, after deposit/payment of applicable stamp
duty. The SD should ideally contain all the relevant terms of the
sale, including details of the parties and the property, the sale
consideration and its payment, advance amount paid (under the
ATS/earnest money), handing over of the original documents and
possession of the property, indemnity provisions, etc. All the
parties need to be present at the time of registration with
original identification documents and photos.
There would be additional compliances when buying under
construction properties. Most builders allow endorsement of their
ATS with the first buyer(s) - now seller - in favour of subsequent
buyers subject to a transfer fee being paid to the builder. In such
cases, the SD is executed between the builder (as seller) and the
ultimate buyer once the property is constructed. The banks
ordinarily agree to finance such purchases as well.
'Bayana' or earnest money is a term used to denote the
token money given to the landlord to informally freeze negotiations
on a particular property evidencing seriousness of the parties
towards the deal. A 'bayana' receipt that records the usual
terms of an ATS, such as the total consideration, the time period
for payment of balance consideration, description of the property,
etc is enforceable as an ATS. A vague 'bayana' receipt,
without the above specified details may be difficult to enforce in
a court of law, towards the purchase of that specific property.
Nevertheless, it may evidence a payment to the seller and thus need
explanation by both parties.
The Supreme Court's verdict in October 2011 has
categorically observed that "immovable property can be
lawfully conveyed only by a registered deed of conveyance and a
power of attorney is not a recognised or valid mode of
transfer". Thereafter, certain state authorities (such as in
Delhi) have even issued directions prohibiting registration of
transfer of any property based on a power of attorney. Hence, it
may no longer be possible to effect or register transfer of any
immovable property through power of attorney.
Originally published in REALTY PLUS, August 2012.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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On March 10, 2015, the controversial amendments to the land acquisition law were finally passed by the Lok Sabha after facing severe criticism both from the opposition parties as well as from the government's own allies.
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