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.
Marketable Title:
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.
Restrictions on title:
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.
Production and Scrutiny :
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.
Adhere to the norms:
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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