Marketability of Title is the
condition precedent for sale of any immovable property. Under Section 55(1) (a)
of the Transfer of Property Act, the seller is bound to disclose any material
defect in the property or title and to produce all the documents of title to
answer the requisitions on title made by the purchaser. Under Section 55(2) of the aforesaid Act, the
Vendor is deemed to warranty the title or the right to sell.
The statutory covenant of title is
implied in every contract for sale of an immovable property, even if there is
no express clause embodying such a warranty. The term “Marketable Title” refers
to absolute right, title, interest and ownership of the Vendor to convey the
property without any hindrance.
In other words, the title is
considered to be marketable if the same is free from encumbrances, claims and
beyond reasonable doubts. Thus, if there is any encumbrance or claims and the
vendor does not discharge it, the title cannot be said to be marketable.
In fact, Section 55 (1)
of the Transfer of Property Act envisages that if the property is sold
subject to any encumbrances or claims, it should be so clearly stated and the
Vendor will be under obligation to discharge any such encumbrances existing at
the time of sale on the property.
On the other hand, if any encumbrance
is found to exist and the same is not revealed before completion of sale, then
the Vendor is bound to pay for the same or indemnify the purchaser in that
behalf.
The primary duty lies on the person intending
to sell the property to prove that title of the property is free from any
defects and any subsequent transfer will not make such transaction either void
or voidable.
For example, if the vendor owns a
property as Kartha of the Joint Hindu Family in which minor’s rights and
interests are involved, the Kartha is bound to prove the legal necessity for
sale or to obtain an order from the competent Court seeking permission to the
property on behalf of the minors.
Implied warranty of title on the part
of the Vendor, although absolute, will not however apply to cases where there
is a clear contract between the parties to the contrary.
Such a contract can be either express
or implied, but the contract must be such as would clearly negate the warranty
of title.
Thus, certain restrictions are
imposed on the purchaser’s right to examine the title in full, which is done
when the Vendor is not sure of making out a marketable title, particularly when
the Vendor is not in possession of the property.
Though, the restrictions may be
contrary to the provisions under Section 55 of the Transfer of Property Act,
the same will be binding on both the parties by virtue of mutual agreement and
understandings and even if defect in the title is found subsequently,
objections in this regard cannot be raised due to such restrictions.
Where the Vendor stipulated that the
property would be conveyed as he has received the same from his predecessor or
that the title of the Vendor has to be accepted without dispute or that it
should not be enquired into and the Purchaser is bound to accept the title of
the Vendor as it appears to be, such a stipulation would be contrary to the
contract and Section 55(1) (c) and (2) of the Transfer of property Act will not
apply. Further, such a condition will not relieve the Vendor from the
obligation of making out the best title though the purchaser would be bound by
such condition even if the title is proved to be defective.
However, in absence of such a
contract to the contrary, the Vendor is bound to remove all the defects even if
the purchaser was aware of the same. Again an express covenant does not, in
clear and unambiguous terms supersede the implied covenant.
Thus, by virtue of Section 55(2) of
the Transfer of Property Act, the purchaser can rest his claim on the implied
covenant of title contained therein.
Conditions restricting the title or
proof of title to which the purchaser is entitled must neither state nor
suggest things which, to the Vendor’s knowledge, are incorrect. The condition
will not be binding if it requires the purchaser to assume that what the vendor
knows to be false or it affirms that the state of title is not accurately known
to the vendor when, in fact, it is known.
In order to examine the title of the
Vendor, the purchaser has to examine all the relevant title deeds in the
possession or power of the Vendor. Under
Section 55(1) (b) of Transfer of Property Act, the Vendor is under an obligation
to produce not only those documents in his possession but also in his power to
produce.
Thus, if the Vendor has deposited the
title deeds with a mortgagee, the Vendor has to produce such documents for
inspection of the purchaser through mortgagee. However the Vendor is not under
an obligation to produce irrelevant documents not in his possession or power
but it is the discretion of the purchaser to inspect the same at his own cost.
It is only after production of all
the relevant title deeds, assistance of advocates having sufficient experience
in the scrutiny of the title documents will help the purchaser to conclude
whether the Vendor has got marketable title or not.
When the property market is favorable
to the Vendor, the Vendor, many times, dictates the terms and tries to foist a
title on the purchaser.
Under any contract of transfer,
fundamental principles of Transfer of Property Act must be strictly adhered by
the parties, without letting out either of the parties to escape from their
respective obligations, which will reduce litigations and ensure transfer of
marketable title from the vendor to the purchaser, free from encumbrances,
liens, claims, etc. When a faulty title is passed on to the purchaser, it is
bound to result in the spate of claims and litigations.
Purchasing the property involves
various steps such as scrutiny of title deeds, verification of documents,
executing the deed of Agreement to sell, making payment as agreed between the
Vendor and the Purchaser and transfer of ownership and title deeds in the name
of the Purchaser by executing Sale Deed.
It is not advisable to purchase a
property hastily by approaching the brokers and subsequently entangling oneself
into litigations in case of any defective title.
Ownership and right over the property
has to be passed on in compliance of the provisions as envisaged under law for
which services of Advocates having sufficient experience and knowledge in
property transactions is necessary to avoid litigations that are likely to
arise in future.
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