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 situated.
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.
