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 theafore said 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 property without 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 be conveyed 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 deedsin 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 of documents, 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. Ownershipand 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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