Introduction:
The transfer deed under property law of Immovable property is one of the most important legal acts in real estate transactions. Ownership of real estate is not just about transferring the keys; it also involves the legal transfer of the property itself from one party to another.
The means of this transfer is a Transfer deed. It ensures that while transferring the property, the rights along with it pass properly from one party to another. Understanding the nuances of this document is crucial for everyone, whether you are a first-time buyer, an investor, or an individual inheriting a property, to protect your assets.
In this blog, we’ll break down everything you need to know about the transfer deed under property law. In this section, the concept of a transfer deed will be explained, along with its types, the process involved in executing a transfer deed, and the associated expenses
What is a Transfer Deed?
A transfer Deed under property law is a written legal document used to transfer ownership of immovable property from a seller, also known as the transferor, to a buyer, also referred to as the transferee. It works as a functional document that changes the legal title of the property.
The Transfer of Property Act, 1882, and the Registration Act, 1908, are two legal bases of the concept of Transfer. According to these laws:
- A transfer of any immovable property of value more than Rs. 100 are required to be made by a registered written document.
- A transfer is not complete until this legal written document is registered as per the Registration Act, 1908, which makes it legally valid and enforceable.
Not all written documents transfer ownership by themselves; only executed, attested, and registered documents transfer ownership.
Read More: Property Transfer Act
Essential Elements of Transfer Deed Under Property law: –
- Description of Property: Specific location, size, and survey number.
- Parties Involved: Transferor and Transferee Details
- Consideration: The money promised and exchanged in the transaction.
- Covenants: Legally binding promises related to the property, for example, a promise that it is not subject to any encumbrances.
- Transfer Date: The Date on which the property ownership is officially transferred to the buyer/transferee
Types of Transfer Deed Under Property law
Transfer deeds come in various types, depending on the method and purpose of the transfer. The most common types include:
- Sale Deed: It is a legal document used to transfer ownership from a Transferor, also known as the Seller, to a Transferee, also referred to as the Buyer, in return for monetary consideration.
- Gift Deed: It is a legal document that transfers the ownership of the property from the transferor to the transferee without any monetary consideration. It must be one that is voluntarily executed in the form of a gift. Although it is without consideration, it still needs to be registered, and although no money is paid, stamp duty is still applicable on Gift Deeds.
- Relinquishment Deed: This type of transfer occurs when a property is owned by two or more persons, known as co-owners or joint property holders. In such a situation, one of the co-owners or joint property holder renounces or relinquishes all their rights in favor of the other.
- Exchange Deed: When two parties swap properties with each other. It is similar to a transfer of ownership by way of sale, but in place of monetary compensation, properties are exchanged between the parties.
Procedure Followed in Executing a Transfer Deed
The process of executing and registering a sale deed is very detailed, as this process requires accuracy. Even the smallest mistake may lead to you losing the right to your property.
- Verification Before Drafting a Deed: The property which is being transferred should be free from any encumbrance, and this should be checked before even drafting a deed, and for this, one must obtain an Encumbrance Certificate (EC) to make sure that there is no liability pending on the property.
- Drafting a Transfer Deed: A legal expert drafts a deed, and it may include all the essential elements of a Transfer deed as mentioned above.
- Valuation and Stamp Duty Charge: The value of the property must be determined based on the ‘Circle Rate’, which is the government’s minimum rate or the actual transaction value, whichever is higher. Stamp Duty is calculated as a percentage of this value, and this should be done before attesting the deed.
- Executing a Deed: The Deed, which is drafted, must be signed by both parties in the presence of two witnesses who must also attest the deed as evidence that the said deed was validly executed.
- Registration of a Deed: In the process of transferring a property through the transfer deed, this step is the most crucial one. Under the Registration Act, 1908 ( in India and Similar Jurisdictions) the valid transfer deed of immovable property of more than Rs 100/- is one which is registered in front of sub- registrar for this visit a Sub-Registrar’s office, provide identity proofs, photographs and all the other required documents and pay the registration fees, as soon as this is the done, the Deed becomes Valid and enforceable.
- Mutation of Property: Once the Deed is registered, the new owner of the property or the transferee must apply for ‘Mutation ‘ in the local municipal records. This will change the name of the owner on the property tax bills and utility records.
Read More: Transfer Deed
Associated Expenses
Buying a property can be expensive, but that’s just the beginning; there are many additional expenses associated with it, and these continue after the purchase. These associated expenses may vary by state and property type. Typical associated expenses include:
- Stamp Duty: It is one of the important and the largest expenses in a property transfer. It is a tax charged by the government on the agreement price of the property. The percentage differs from state to state or property type.
- Registration Fee: This is a fee charged by the Sub-Registrar at the time of registering the deed. This is charged for officially recording the deed in the government records. This fee is typically a small percentage of the property’s value; however, it may vary from state to state and depend on the type of property.
- Legal Fees: It is that fee which is paid to the legal expert or to the advocate who drafts or writes the deed, reviews it, and verifies the title or encumbrances. This depends on the value of the transaction.
- Miscellaneous Costs: These are all the other additional incidental expenses that arise during this whole process of executing a transfer deed, such as: Title search fees, photocopy or documentation fees, mutation fees, or any other such small expenses associated with this process only.
Evolving Legal Trends in Transfer Deeds
Recent Developments in law have brought Transfer Deeds into the centre stage
- The prohibition of ‘Power of Attorney’ Sales: In the past, people would transfer property through a General Power of Attorney (GPA) to avoid stamp duty or other associated expenses. However, the Apex Court of India has now ruled that transfers made through a GPA would not be valid and would not confer any valid or legal title. Now, a transfer or Sale Deed is mandatory to obtain a valid title to the property.
- Transparency and RERA: Now, due to RERA (Real Estate Regulation and Development Act), developers can’t postpone the delivery of the Transfer Deed, as this law imposes strict deadlines
Conclusion
The Transfer Deed is the cornerstone of property security. Thus, a physical structure is given the status of an investment by the Transfer Deed. Although the required amount, stamp duty, and registrar fees can be quite high, legitimacy is involved.
As we continue to live in a world that increasingly relies on technology, this process is becoming more transparent and efficient. But the advice is the same as it has always been. Whether it is signed in hard copy or digitally, a transfer deed is your best guarantee.