Sale deed is an essential formality in the transfer of immovable property in India and requires registration. The Registration Act, 1908 makes it mandatory for certain kinds of documents like sale deeds, gift deeds and mortgage deeds to be registered. However, there are situations when property exchange takes place via the use of unregistered sale instruments.
This raises the question: Is an unregistered sale deed valid under Indian law?
Validity of a Sale Agreement without Registration
The Transfer of Property Act, 1882, states that a sale of immovable property valued at Rs. 100 or more must be made by a registered instrument. Section 54 of the Act states that “a contract for the sale of immovable property is a contract. It is for a sale of such property on terms agreed between the parties.”
However, the Act also mentions that “such a contract does not, of itself, create any interest in or charge on such property.” This suggests that the sale agreement can be made and entered into without registration. But, it does not give the buyer the title of the property. The buyer only gets a right to the ability to gain possession of the property but does not own it.
Legality of Unregistered Sale Deed
1. Enforceability: An unregistered sale deed cannot be produced as a document in a court of law because of Section 49 of the Registration Act. This means that in the event of a controversy between the parties, the unregistered sale deed cannot be relied on as evidence of the transaction.
2. Possession without ownership: Despite signing over a sale deed that is not registered, the buyer does not gain legal possession of the property.
3. Specific performance: Specific performance is an equitable relief, that would force the seller to perform his or her part in the contract of sale.
4. Stamp duty evasion: The sale of properties may be tried without paying the stamp duty by some corrupt parties by filing an unregistered sale deed.
Consequences of Unregistered Sale Deed
1. Lack of ownership transfer: The buyer does not get legal rights to the premises until a sale deed has been officially registered. This is true even if the buyer has possessory rights to enter and control the property.
2. Inability to mortgage or sell: The buyer cannot mortgage or sell the property without a registered sale deed. Banks and buyers will not accept an unregistered deed.
3. Difficulty in obtaining loans: Banks don’t grant credit for property purchases. The buyers can’t guarantee the buyer’s legal title.
4. Legal disputes: If the parties to the contract disagree, the unregistered sale deed cannot be used as evidence in court.
5. Penalties: Parties to an unregistered sale deed face annoyed taxpayers. They failed to follow the Registration Act.
Alternatives to Unregistered Sale Deed
1. Registered sale deed: The safest way to transfer property to the buyer is through the Sale Deed. It must be registered. This attracts stamp duty and registration fees as well as legal formalities.
2. Power of attorney: Another form of evidence is a registered power of attorney. It gives the buyer the right to have, use, and sell the property. Thus, a power of attorney does not operate as a sale deed and it may be restricted in some ways.
3. Equitable mortgage: The system can be created when the property’s title deeds are deposited with a bank as loan security. This creates a charge on the property but does not pass the title of the same.
What if I already have an unregistered sale deed?
1. Seek legal advice: Consult the real estate lawyer. They can help you understand the likely results of the unregistered sale deed for the buyer/seller.
2. Register the sale deed: If possible, continue with the sale deed registration. Pay the stamp duty and fees. This will give the legal title of the property to the buyer. It will also solve any problems with the unregistered deed.
3. Seek specific performance: In the above circumstance where the seller does not register the sale deed then the buyer can sue for specific relief in a court of law. This is a legal order for the seller. It tells them to go through with the sale if the buyer paid the agreed price and the sale agreement was valid.
4. Terminate the agreement: In case the process under the sale agreement is not feasible or adjusting or the parties desire to exit the unregistered sale deed, the same can be mutually dissolved. This may include the repayment of the amount given by the buyer and bringing back of the goods to the seller.
How to fix it?
1. Consult with a real estate lawyer.
2. Decide if it is feasible to continue with the registration of the sale deed.
3. Collect any evidence that supports the property transaction including the sale agreement, the receipt of payment, and other documents.
4. Get a current valuation report from the certified valuer
5. The stamp duty and registration fee are paid at a set denomination.
6. Go to the next step of the registration of the sale deed at the local Sub-Registrar office.
7. After registering the sale deed, get a copy from the Sub-Registrar/Vendor.
Conclusion:
Thus, we can appreciate that the unregistered sale deed may seem convenient for selling the property. However, it is not legally enforceable in India. The sale deed should be registered. This prevents title disputes or future trouble when parties sell their property.
FAQs
An unregistered deed does not confer the title of the property to the buyer in the legal sense. The seller’s and the buyer’s relationship should be revisited. The seller remains the true owner of the goods. The buyer only benefits from the right to receive them.
The buyer can prove the existence of the unregistered deed through other means, such as:
1. Possession of the property based on the unregistered deed
2. Receipts of consideration paid to the seller
3. Witnesses to the transaction
4. Correspondence between the parties related to the sale agreement