Marketability of Title is
the condition, precedent to 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 the absolute
right, title, interest and ownership of the Vendor to convey the propertywithout any hindrance. In other words, the title is considered to be marketable,
if the same is free from encumbrances and claims, beyond reasonable doubts.
Thus, if there is any encumbrance or claim and the vendor does not discharge
it, the title cannot be said as marketable. In fact, Section 55(1)(g) of the
Transfer of Property Act envisages that if the property is sold subject to any
encumbrances or claims, it should be clearly stated and the Vendor shall 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, the Vendor is bound to
indemnify the purchaser in that behalf. Primary duty lies on the person
intending to sell the property to prove that the 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 Karta of
the Joint Hindu Family in which minor’s rights and interests are involved, the
Karta is bound to prove the legal necessity for sale or to obtain an order from
the competent Court seeking permission for sale of the property on behalf of
the minors.
Implied warranty of title on the part of the Vendor,
although absolute, will not however apply to the 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 negative 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 is found in the title subsequently, objections in this
regard cannot be raised due to such restrictions.
Where the Vendor stipulated that, the property would beconveyed as the same received from the predecessor or the title of the Vendor
has to be accepted without dispute or 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 contract to the contrary 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
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 the 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 such things which 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 to the purchaser through mortgagee. However, the Vendor is not under
obligation to produce irrelevant documents not in his possession or power but
it is the discretion of the purchaser to inspect the same at the cost of the
purchaser. It is only after production of all the relevant title deeds and
assistance from advocates having sufficient experience in scrutiny of the title
documents, the purchaser will be able to conclude whether the Vendor has got
marketable title or not.
When the property market is favorable
to the Vendor, the Vendor, many a 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 ofdocuments, examination of Agreement to sell, mode of payment as agreed between
the Vendor and the Purchaser and transfer of ownership and title will be
transferred in the name of the Purchaser by way of executing a Sale Deed. It is
not advisable to purchase a property hastily by approaching the brokers and
subsequently entangling yourselves into litigations in case of defective title.
Ownership and right over the property has to be passed in compliance of the
provisions envisaged under law for which service of the Advocates having
sufficient experience and knowledge about property transactions is necessary in
order to avoid litigations that may likely arise in future.
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