Illegal sale of property in India

There are different ways in which a property can be sold in India. These range from the common practice of executing a sale deed to executing a gift deed, relinquishment deed, etc. Other methods include the illegal sale of property, which, although not a legitimate practice, is still prevalent. Being aware of how properties in India are sold illegally can help people avoid becoming victims, as the stakes associated with property transactions are high. In this guide, we provide details about the illegal sale of property in India to help people stay alert and protect themselves from such practices.

What is illegal sale of property?

An illegal sale of property occurs when a property is sold without the original owner’s approval.

What is a legal sale of property?

According to Section 54 of the Transfer of Property Act, an immovable property is considered sold when its ownership is transferred in exchange for an agreed-upon amount of money. It’s important to note that for a sale of immovable property valued above Rs 100, a registered document is mandatory. On the other hand, properties worth less than Rs 100 can be sold without paying stamp duty and registration fees.

Steps involved in the legal sale of property:

• A property sale is legal when the seller has the legal right to possess and transfer ownership of the property to the buyer. The seller must be mentally sound, not a minor, and legally permitted to proceed with the sale of the property.
• The seller can transfer the property directly to the buyer or appoint another person with the legal rights to handle the process on their behalf. This is done by issuing power of attorney to the person who will be initiating the deal on behalf of the buyer.
• Similar to the seller, the buyer must also be legally permitted to receive the transferred property.
• Once the buyer agrees on the price, pays the agreed amount, and executes the property deal by paying stamp duty and registration charges at the sub-registrar’s office, the property is legally sold.

Why does illegal sale of property happen?

Illegal sale of property happens because of

• Presence of fake documents created by fraudsters.
• Many people are unaware about the steps to follow while buying a property and end up skipping the most important step of due diligence.
• While some people do check the documents, this is not done at an extensive level. The buyer may check the documents himself without getting professional help that may lead to him skipping some crucial loopholes that can pose a problem going forward.

Steps involved in illegal sale of property

• The transferor transfers the immovable property.
• The transfer is done without consideration.
• Transfer of property is done to defraud the transferee.

What are the ways in which a property is illegally sold?

Mentioned are ways in which a property is illegally sold.

• Forgery: This is a common method of executing an illegal property sale, where individuals forge property documents and get themselves registered as the rightful owner. This is often seen with properties that have been left unattended for a long period, particularly by owners who have moved elsewhere. Fraudsters target such properties, create fake paperwork and claim ownership on the property.
• Misuse of Power of attorney: This is one of the most common ways in which a property is sold illegally. By executing a power of attorney (PoA), a person gives another person the legal right to present himself and perform specific tasks related to property buying and selling on his behalf. This instrument is used mostly by NRIs who find it difficult to visit India regularly to execute the transaction. However, the PoA is also misused many times and this misuse finally leads to its illegal transfer of property and sale of property.

Example: For instance there have been instances in the past where to save tax on realty transactions, the buyer and seller used power of attorney. Like all realty transactions, first an agreement of sale will be signed between buyer and seller that will detail the scope of the real estate transaction. Next, the seller will execute an irrevocable power of attorney, where the buyer will be given full control of the property. This PoA gives the buyer all the rights as that of the seller without the property being legally in his name. The final step is that the seller will transfer the property in the buyer’s name through a will that will show that the buyer has inherited the property instead of buying it. This will save taxes for both buyer and seller that they may otherwise need to pay if the property transaction would be done the legal way.

•     Impersonation: In this method, a fraud actually takes on the identity of the real property owner by using forged documents. Fraudsters target properties that have been left unattended for a long time, create fake documents of it that will support ownership of the property. They then sell the property to an unsuspecting buyer and abscond with the money.
•     Under influence: When a property owner is forced to sell his property without his will.
•     Property sale by disqualified person: A person who is not allowed or qualified to sell the property tries to sell it. For instance, a tenant staying in a rented apartment, tries to sell the landlord’s property.

What to do if your property is claimed illegally?

Mentioned are remedies that one can explore if their property has been illegally sold.

• Evidence

Collect all the evidence that substantiates that the property sale has been done illegally.

• Police complaint

Under the Indian Penal Code (IPC), one can file a police complaint against cheating in any police station.

• Approach sub-registrar office

One can approach the SRO to invalidate the transfer of conveyance deed citing impersonation. The SRO can check the various documents submitted and identify the fraud.

• Civil court case

The victim can file a civil court case asking the court for an injunction that prevents the fraud from selling the property. The owner can also submit legal documents to the court, based on which he can ask for investigation that proves that the other party claiming to be the owner is fraud. In case of joint proprietorship, one can file a civil court case asking for property partition.

Mentioned are legal provisions that can be explored if your property is illegally taken over.

Section 5 of the Specific Relief Act, 1963: Under this, a person owing the specific immovable property has permission to recover it through legal action.

Section 6 of the Specific Relief Act, 1963: Under this, a person who has been cheated of immovable property without consent can file a court case for recovery of the property within six months of dispossession.

Section 145 of the Code of Criminal Procedure (CrPC): Under this, an executive magistrate is empowered to solve disputes with respect to land or water and facilitate preventive action.

Preventing illegal sale of property

• Title deeds play a key role in ownership verification. Before proceeding with a property purchase, one should check the title deed of the property very carefully. In fact, this should be double-checked by a lawyer as this will give an indication of disputes related to the property or any problems with ownership of the property. Fraudsters usually impersonate and forge documents that show that the property documents are original and if due diligence is done at the right time, this can be caught.
• Due diligence:  A home buyer should invest heavily on getting due diligence done before investing in a property. One should check all documents related to the property to check for encumbrances or other legal problems. These should be done right at the beginning to avoid problems related to illegal property dealings that may pose a financial problem at a later stage.

Can you sell an illegal property in India?

No. It is against the law to sell an illegal property in India. In case you have been a victim of buying an illegal property and now want to sell it, it is not an easy task. To start with one has to prepare for steps to legalise the ownership of the property. This can be done by either mutual consent or by following professional advice.

Housing.com POV

Illegal sale of property has a deep impact on the real estate sector and is cause of concern for both property owners/sellers and buyers. These transactions that lead to disputes and financial loss at the periphery lead to distrust in the segment and market instability. In the past, there have been instances of investors scared to invest in the segment in the fear of financial fraud happening to them. However, with increased awareness, the presence of regulatory authority and availability of legal assistance, these cases of illegal fraud are seeing a downslide, which is positive for the real estate segment.

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