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Rights and Liabilities of Buyer in Transfer of Property Act

Rights and Liabilities of Buyer
Rights and Liabilities of Buyer


Rights and Liabilities/Duties of Buyer and Seller (Sec. 55)

In the absence of a contract to the contrary, the buyer and the seller of the immovable property are subject to certain liabilities and have the rights as are applicable to the property sold.

Thus, the provisions of Sec. 55, Transfer of Property Act (TPA) will apply only when there is no express contract to the contrary. The primary aim of laying down the rights and duties of the seller and the buyer in case of sale is to ensure fair dealings, and as far as possible, to minimise fraud and waste of the property.

Buyer's Rights [Sec. 55(6)]

  1. Before completion of sale (no transfer of ownership) [Sec. 55(6)(b)] - The buyer (unless he has improperly declined to accept delivery of the property) is entitled to-

  • A charge on the property (as against the seller and all persons claiming under him, to the extent of the seller’s interest in the property7) for the purchase-money properly paid by him in anticipation of the delivery.

  • Interest on such purchase-money

  • The earnest (if any), and costs (if any) awarded to him in a suit to compel specific performance of the contract or to obtain a decree for its rescission- in case he properly declines to accept delivery (‘Earnest’ is a part of the purchase money kept as a security when the transaction goes forward).

In many instances, sellers request and receive an advance amount from buyers before the completion of a sale, typically at the time of entering into an agreement to sell the property.

This prepaid purchase money establishes a statutory charge, which arises immediately upon payment and can be enforced by the buyer against the property, even against subsequent transferees without notice.

This rule is founded on principles of equity, justice, and good conscience. Interest on the purchase money is payable from the date of payment to the date of delivery of possession. However, this charge is not applicable if the sale is invalid, not genuine, or if the buyer defaults.

Regarding the buyer's rights under a contract for sale:

  • If the buyer has already paid the purchase money, they can acquire a charge on the property.

  • If the buyer has taken possession of the property agreed to be sold, their possession serves as notice to all subsequent transferees, who are bound by it.

  • The buyer can enforce the execution of the agreement to sell.

  • In case of a breach of contract, the buyer can file a suit for specific performance against the seller.

  • If the buyer can demonstrate that they would have made a fair profit through a resale of the property, they are entitled to such profit.

  1.  After completion of sale (transfer of ownership) [Sec. 55(6)(a)]

The buyer is entitled to-

  • the benefits of any improvement in, or, of increase in value of, the property, and

  • the rents and profits thereof

If the value of the property increases in between the time when the ownership in the property has passed but the price has not been paid by the buyer, the seller cannot demand a higher price than the one agreed before. The seller cannot participate in any benefit that purchaser derives from his purchase (Rani Kani v Murtaa AIR 1937 Oudh 159).

Buyer’s Liabilities/Duties [Sec. 55(5)], Transfer of Property Act (TPA)

The duties of a buyer are:

  • Disclose material facts, increasing the value of the property. 

  • To pay purchase money

  • 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

Before completion of sale [Sec. 55(5)(a)&(b)]

Before the completion of the sale, according to Section 55(5)(a) and (b) of Transfer of Property Act (TPA) :

  • The buyer is obligated to disclose to the seller any fact regarding the nature or extent of the seller's interest in the property, of which the buyer is aware but believes the seller is not, and which significantly enhances the value of that interest. Failure to make such disclosures constitutes fraud.

  • The buyer must pay or tender the purchase money to the seller or as directed by the seller. If the property is sold free from encumbrances, the buyer may withhold from the purchase money the amount of any existing encumbrances on the property at the date of the sale, and pay that amount to the entitled party.

Normally, the property should be sold free from encumbrances. If the buyer is assured that there are no encumbrances on the property, but later discovers charges due on it before payment, they have the right to retain part of the purchase money equivalent to the amount of any encumbrances existing at the date of the sale.

The seller is required to convey a valid title free from encumbrances in the property sold.

After completion of sale [Sec. 55(5)(c)&(d)]

After completion of the sale, as per Section 55(5)(c) and (d) of Transfer of Property Act (TPA) :

  • The buyer is obligated to bear any loss arising from the destruction, injury, or decrease in the value of the property, provided that the loss was not caused by the seller. It's important to note that the relevant time for the transfer of liability to bear such losses is the passing of ownership of the property, not the delivery of possession.

  • The buyer must also pay for public charges such as taxes to the municipality, rents payable for the property, the principal amount due on any encumbrances on the property sold, and any subsequent interest accruing on them.

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