When should you hold on to title documents?
Law favours the seller as the rightful owner of the title documents to his freehold plot as long as he retains a part of the property constructed
It is common practice in India for owners of freehold residential plots to monetise their assets by entering into joint development or collaboration agreements with builders for construction and development of builder floors on their residential plots. Instead of a single residential unit or a bungalow on the plot, this arrangement results in multiple residential units on different floors complying with local building bye-laws and municipal laws. In such arrangements, generally, the original landowner retains one or more floors for his/her personal use and the other floors are either sold by the builder and/or the original landowner depending on the floor sharing arrangement between the builder and the landowner. A question that arises in such a situation is with respect to retention of original title documents.
Let’s examine the rights of a buyer and seller through an illustration. A particular plot of freehold land in a residential colony in Delhi was owned by A. The plot was purchased by A from X through a registered sale deed in the year 1975. X had purchased the plot from Y through a registered sale deed in the year 1973. Documents reflecting the title chain for the plot prior to the year 1973 were also in A’s custody.
After some years, the bungalow was becoming increasingly difficult to maintain and after his retirement A decided to raze it down and construct four residential units. After the project was completed, the first, second and third floor were sold by A.
A dispute arose when at the time of execution of the sale deed in favour of the first floor, the buyer of the unit sought to keep the sale deeds executed in 1973, 1975 and other documents establishing the title of A to the plot, on the premise that since he had paid the purchase money to the seller, A was bound to deliver all documents which were in his possession. However, A was unwilling to hand over all original title documents to the buyer.
The law in such a situation is very clear; when the whole of the purchase-money has been paid to the seller, the seller is obligated to deliver to the buyer all documents of title relating to the property which are in the seller’s possession or power. In situations where the seller retains any part of the property comprised in such documents, he is entitled to retain all such original title documents.
In the given case, since A retained one residential unit, he was not obligated to deliver the previous original title related documents of the property to the buyer(s) at first, second and third floor, which were in his possession. He was obligated to provide these documents to the buyer(s) for their perusal and scrutiny and provide cer- tified copies of the same to the buyer(s), if required. The legal provisions provide that if the buyer is purchasing only a part of the seller’s property (eg one floor in a multi-storey house) and the seller continues to retain a portion of such a property, it is the seller who is entitled to retain the chain of previous original title documents unless otherwise agreed between the parties.
However, if the seller does not retain any part of the property and different portions of the entire property are being sold to different buyers, the buyer who is purchasing the portion having greatest value is entitled to receive the chain of title documents of the entire property.