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Rights and Liabilities of Seller under Transfer of Property Act


Rights and Liabilities of Seller
Rights and Liabilities of Seller

Content:-


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.


Seller’s Rights [Sec. 55(4)]


  1. Before completion of sale [Sec. 55(4)(a)]

The seller is entitled to rents and profits till ownership passes to buyer.


  1. After completion of sale [Sec. 55(4)(b)]

The seller is entitled to a charge upon the property in the hands of 


(i) the buyer, or 


(ii) any transferee without consideration, or 


(iii) any transferee with notice of non-payment, for the amount of the unpaid purchase money. The seller is entitled to such a charge, only when the whole or part of the purchase-money is unpaid, and the ownership of the property has passed to the buyer. The seller is also entitled to interest on such amount or part (from the date on which the possession has been delivered). 



Seller’s Liabilities/Duties [Sec. 55(l)-(3)]


Law imposes seven duties on the seller, which, in short, are: 

  • Disclosure of material defects relating to property.


  • Allowing the buyer to examine documents relating to property on request


  • To answer the related queries or questions of the buyer. 


  • Execute a proper conveyance in favour of the buyer. 


  • To take care of property and related documents in between the date of contract to sell and actual execution of sale deed. 


  • To give possession to the buyer


  • To pay rent or public charges due on the property till the date of the sale.

Before completion of sale [Sec. 55(1)(a)-(e)&(g)]


Before completion of the sale, as per Section 55(1)(a)-(e) and (g):


  • The seller is obligated to disclose any material defect in the property or in the seller’s title thereto, of which the seller is aware but the buyer is not, and which the buyer could not have discovered with ordinary care. Failure to disclose such defects amounts to fraud. However, if the buyer either knows about the defect or could have known about it with reasonable diligence, the seller is not liable. The defect must be fundamental enough that it would significantly impact the buyer's decision to purchase the property.


  • The seller must provide all documents of title relating to the property upon the buyer's request for examination.


  • The seller must answer all relevant questions regarding the property to the best of his knowledge.


  • Upon payment or tender of the price, the seller must execute a proper conveyance of the property at a proper time and place.


  • Between the contract date and delivery of the property, the seller must take reasonable care of the property and all related documents, similar to a trustee's responsibility.


  • The seller is responsible for paying all public charges and rent accrued up to the date of the sale, as well as interest on any encumbrances on the property due on that date.


  • If the sale deed declares the property to be sold free from encumbrances, the buyer assumes ownership free from such burdens. If the buyer pays any encumbrances that should have been paid by the seller, the seller is liable to repay them, regardless of whether the buyer was aware of the encumbrance or not, unless otherwise agreed.



After completion of sale [Sec. 55(l)(f), Sec. 55(2)&(3)


As per Section 55(1)(f), the seller is obligated to provide possession of the property to the buyer or to a person nominated by the buyer. This possession should be in accordance with the nature of the property.


Typically, possession is transferred when the property is conveyed through the execution of the sale deed. The buyer's right to possession and the seller's right to receive the purchase money can be enforced together in a single legal action.


The type of possession granted depends on the property's current occupancy status. If the seller occupies the property, they must vacate it and hand over vacant possession to the buyer.


However, if the property is occupied by a tenant or subject to a usufructuary mortgage, the buyer is entitled to symbolic possession rather than personal occupation.


When the entire purchase price has been paid, the seller must also provide all title documents related to the property in their possession or control. If the seller retains part of the property, they can retain all related documents.


If different parts of the property are sold to different buyers, the buyer of the most valuable portion is entitled to the documents.


The seller or the buyer of the most valuable portion must keep the documents safe, unaltered, and available for inspection upon the buyer's request, unless prevented by unavoidable circumstances like fire.


The seller implicitly assures the buyer regarding the title to the property being transferred. This includes confirming that the seller possesses the stated interest in the property and has the authority to transfer it.


If the seller acts in a fiduciary capacity, they also implicitly assure the buyer that the property is not encumbered and that there are no impediments to its transfer.


The clause above, known as the 'Covenant for Title,' establishes a fundamental presumption that benefits all purchasers of immovable property. This implied guarantee is absolute and unconditional, and any breach of this guarantee after the conveyance holds the seller liable for damages to the buyer and subsequent transferees.


The seller is obligated to provide a "marketable title," which implies a warranty of title, and any breach of this warranty entitles the buyer to seek compensation from the seller for resulting losses.


This covenant for title ensures protection against any lawful eviction arising from a superior title and assures an absolute warranty of the title being transferred and the seller's authority to deal with it.


Case laws

Courts have clarified that the buyer is not obligated to investigate the seller's title, and the mere knowledge or suspicion of defects in the vendor's title does not negate the operation of an express or implied covenant (Ram Swarup v Fattu AIR 1960 All 367). Thus, it supersedes the strict doctrine of caveat emptor ("let the buyer beware") once the buyer accepts the conveyance.


The covenant for title is inherent to the transferee's interest and is considered a covenant running with the land. Consequently, any person holding the interest can benefit from this covenant. In the case of Rogers v Hosegood (1900 2 Ch. 388), it was established that such a covenant runs with the land and can be enforced by an assignee of the covenantee.


The right to take legal action arises upon the execution of the conveyance, not upon the discovery of title defects. However, this right can be forfeited by fraud, notice, waiver, or by an explicit contract to the contrary.


The implied covenant may be excluded either by a contract stipulating otherwise or by demonstrating that the buyer, aware of the circumstances, accepted the title provided by the seller. In such a scenario, the buyer cannot complain if the title turns out to be defective.



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