Module 6 of 6 — Sale Deeds and Property Conveyance

Post-Sale Defects and Remedies

Reading module · approx 13 min

Even the most careful due diligence cannot eliminate all risk. A buyer may discover, after the sale is registered, that the seller had an undisclosed title defect, breached a covenant, or misrepresented a material fact.

Types of post-sale defects

Title defects: a third party emerges with a superior claim; the seller's title turns out to have been defective
Undisclosed encumbrances
Physical defects: boundary disputes, encroachments, unauthorised construction
Regulatory defects: non-compliance with zoning, building regulations, environmental requirements
Rights of third parties: tenants, easement holders

Remedies against the seller

Rescission

In cases of fraud, misrepresentation, or fundamental failure of consideration, the buyer may seek rescission — reversal of the sale, return of the price, restitution of the property. Rescission is difficult where the buyer has significantly changed the property, resold it, or where restoring the status quo is impractical.

Damages for breach of covenant

The seller's covenants (quiet enjoyment, good title, against encumbrances, further assurance) are contractual promises. Breach entitles the buyer to damages measured by the loss suffered.

Indemnity claim

If the sale deed contains an express indemnity, the buyer can claim under it without needing to prove breach and causation in the same detail. Indemnities are typically limited in time and amount.

Specific performance

Where the seller has undertaken to do specific things (execute further documents, procure NOCs) and failed, the buyer can seek specific performance under the Specific Relief Act, 1963.

Remedies against third parties

Where the defect involves a third party's claim, the buyer may need to litigate against the third party. Common third-party claims: prior mortgagees; heirs claiming inheritance; tenants asserting continued tenancy; adverse possessors claiming title through long possession.

Bona fide purchaser doctrine A buyer who purchases (a) for consideration, (b) without notice of prior claims, and (c) with due diligence is protected against claims of prior beneficial owners in limited circumstances. This doctrine, drawn from equity, provides some protection against undisclosed prior claims. Its scope in Indian law is narrower than in English or American law and is not a substitute for adequate due diligence.

Limitation periods

Under the Limitation Act, 1963:

Suit for specific performance: 3 years from the date fixed for performance or refusal
Suit for possession based on ownership: 12 years
Suit for compensation for breach of contract: 3 years
Suit to declare a document void or voidable: 3 years

Title insurance

A relatively recent product in India, following RERA. A policy indemnifies the buyer against loss from title defects existing at the time of purchase, subject to policy terms. Becoming more common in high-value transactions and where diligence has identified specific risks. Does not substitute for due diligence.

Preventive lessons

Recurring lessons: comprehensive title search covering at least 30 years; verify original documents, not just copies; conduct a physical inspection with a competent surveyor; obtain a recent EC; get seller indemnities with reasonable financial backing; consider title insurance for significant transactions. The cost of thorough diligence is trivial compared to unwinding a defective purchase.