Transfer of Property Act, 1882 / Chapter III / Sale of immovable property

Section 55: Rights and Liabilities of Buyer and Seller

Section 55 of the Transfer of Property Act, 1882 establishes the default duties and rights of a seller and buyer in a sale of immovable property. These rules apply in the absence of a contract to the contrary and only so far as they are applicable to the property sold.

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Meaning and scope of Section 55

Under Section 54, a sale transfers ownership for a price paid or promised, wholly or partly. Section 55 regulates disclosure, title documents, conveyance, possession, charges, expenses, risks, income and protection of purchase money. An agreement for sale alone does not itself transfer ownership.

Duties of the seller: Section 55(1) to (3)

Section 55(1)(a)-(g): The seller must disclose material defects in the property or title that are known to the seller but not reasonably discoverable by the buyer; produce available title documents on request; answer relevant questions; execute a proper conveyance upon payment or tender; exercise ordinary prudence in safeguarding property and title documents until delivery; deliver possession as the nature of the property permits; and clear accrued public charges, rent, interest and encumbrances except where the property is sold subject to encumbrances.

Section 55(2): The seller impliedly assures that the interest professed to be transferred exists and that the seller has power to transfer it. A seller acting in a fiduciary capacity gives the narrower assurance prescribed by the proviso. The benefit passes with the transferee's interest.

Section 55(3): On full payment, the seller must deliver title documents in the seller's possession or power, subject to the statutory exceptions where part of the property is retained or several buyers acquire different lots. The holder must provide inspection and copies on reasonable request at the requesting party's cost and keep documents safe, subject to the statutory exception.

Rights of the seller: Section 55(4)

The seller is entitled to rents and profits until ownership passes. If ownership passes before the full price is paid, the seller has a statutory charge for the unpaid price and applicable interest against the buyer, a transferee without consideration or a transferee with notice of non-payment, as specified by the Act.

Duties of the buyer: Section 55(5)

The buyer must disclose a known fact about the seller's interest that the seller is believed not to know and which materially enhances its value; pay or tender the purchase price at completion, subject to the proviso on clearing encumbrances; and, after ownership passes, bear loss not caused by the seller and the specified subsequent public charges, rent and encumbrance liabilities.

Rights of the buyer: Section 55(6)

After ownership passes, the buyer receives the benefit of improvements, increases in value, rents and profits. The buyer also has a statutory charge securing qualifying purchase money paid in advance and interest; where delivery is properly refused, the charge also covers earnest money and costs awarded in the specified proceedings. These protections are subject to the wording and conditions of Section 55(6)(b).

Fraudulent non-disclosure

The final paragraph of Section 55 declares that failure to make the disclosures required under Sections 55(1)(a) and 55(5)(a) is fraudulent. This covers material non-disclosure by either party within the specified conditions, rather than every omission in a property transaction.

Illustration

If a seller knows about a material defect in title that a diligent buyer could not ordinarily discover, the seller must disclose it. Conversely, a buyer who knows of a fact materially increasing the value of the seller's interest, while having reason to believe the seller is unaware of it, must disclose that fact. The actual legal consequences depend on the agreement, evidence and applicable law.

Complete provisions of Section 55

The following reproduces the substantive clauses of Section 55, including its provisos and exceptions, for detailed reference.

55. In the absence of a contract to the contrary, the buyer and the seller of immovable property respectively are subject to the liabilities, and have the rights, mentioned in the rules next following, or such of them as are applicable to the property sold:

(1) The seller is bound-

(a) to disclose to the buyer any material defect in the property or in the seller's title thereto of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover;

(b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller's possession or power;

(c) to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto;

(d) on payment or tender of the amount due in respect of the price, to execute a proper conveyance of the property when the buyer tenders it to him for execution at a proper time and place;

(e) 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;

(f) to give, on being so required, the buyer, or such person as he directs, such possession of the property as its nature admits;

(g) to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all incumbrances on such property due on such date, and, except where the property is sold subject to incumbrances, to discharge all incumbrances on the property then existing.

(2) 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 power to transfer the same:

Provided that, where the sale is made by a person in a fiduciary character, he shall be deemed to contract with the buyer that the seller has done no act whereby the property is incumbered or whereby he is hindered from transferring it.

The benefit of the contract mentioned in this rule shall be annexed to, and shall go with, the interest of the transferee as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested.

(3) Where the whole of the purchase-money has been paid to the seller, he is also bound to deliver to the buyer all documents of title relating to the property which are in the seller's possession or power:

Provided that, (a) where the seller retains any part of the property comprised in such documents, he is entitled to retain them all, and (b) where the whole of such property is sold to different buyers, the buyer of the lot of greatest value is entitled to such documents. But in case (a) the seller, and in case (b) the buyer of the lot of greatest value, is bound, upon every reasonable request by the buyer or by any of the other buyers, as the case may be, and at the cost of the person making the request, to produce the said documents and furnish such true copies thereof or extracts therefrom as he may require; and in the meantime, the seller, or the buyer, of the lot of greatest value, as the case may be, shall keep the said documents safe, uncancelled and undefaced, unless prevented from so doing by fire or other inevitable accident.

(4) The seller is entitled-

(a) to the rents and profits of the property till the ownership thereof passes to the buyer;

(b) where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge upon the property in the hands of the buyer, any transferee without consideration or any transferee with notice of the non-payment, for the amount of the purchase-money, or any part thereof remaining unpaid, and for interest on such amount or part from the date on which possession has been delivered.

(5) The buyer is bound-

(a) to disclose to the seller any fact as to the nature or extent of the seller's interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware, and which materially increases the value of such interest;

(b) to pay or tender, at the time and place of completing the sale, the purchase-money to the seller or such person as he directs :

Provided that, where the property is sold free from incumbrances, the buyer may retain out of the purchase-money the amount of any incumbrances on the property existing at the date of the sale, and shall pay the amount so retained to the persons entitled thereto;

(c) where the ownership of the property has passed to the buyer, to bear any loss arising from the destruction, injury or decrease in value of the property not caused by the seller;

(d) where the ownership of the property has passed to the buyer, as between himself and the seller, to pay all public charges and rent which may become payable in respect of the property, the principal moneys due on any incumbrances subject to which the property is sold, and the interest thereon afterwards accruing due.

(6) The buyer is entitled-

(a) where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits thereof;

(b) unless he has improperly declined to accept delivery of the property, 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 property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission.

An omission to make such disclosures as are mentioned in this section, paragraph (1), clause (a) and paragraph (5), clause (a), is fraudulent.

Official statutory references

India Code: Transfer of Property Act, 1882 (official PDF). The rules of Section 55 must also be read with the applicable contract, registration and stamp requirements and relevant State amendments.