Transferring a property. Whether you are buying a property from someone or selling it to someone, the common thing that happens in the transaction is the transfer of property ownership from one party to another. Hence, it is also imperative for us to know the process and costs involved.
What is transfer of property?
In simple words, the transfer of property rights happens:
- either via buy or sell transaction between two parties or
- wilful assignment of rights on a property by the owner to the person(s) of his or choice
Let us now understand how can the existing owner transfer rights of his or her property to someone else.
Before the title of the property is transferred from the existing owner to a new owner, a legal document called as the Memorandum of Understanding (MoU) needs to be signed between existing owner of property and the new owner. MoU generally includes the following details:
- details of the existing owner of property
- details of new owner of property
- time period in which the property will be transferred from existing to new owner
- amount to be paid by new owner to existing owner, if any
What are the various types of Property Transfers?
Essentially a property can be transferred by its existing owner(s) to the new owner(s) in the following manner:
- By Relinquishment Deed
This is a legal document that is signed by the existing owner of the property when he or she wilfully transfers his or her share in the property to a new owner. This happens mostly in joint ownership property cases and is a legally binding document. It is mandatory to register a relinquishment deed and pay stamp duty, taxes and registration fee of the relinquishment deed to the state government. However, the amount may vary from one state to another.
This is a type of document signed by the existing owner of a property where he or she wilfully transfers all the rights of the property and its associated benefits to the new owner(s). As per law, it is not mandatory to register a transfer deed or will. However, this document must be executed in the presence of two witnesses. This makes the process of property transfer by will or transfer deed the cheapest mode. But it is advisable to get the will or transfer deed registered to avoid issues of succession that may arise in the future.
This is a type of legal document where the existing owner of property transfers the rights of his or her own property by way of gift. Generally, the new owners are his legal heirs. There is no exchange of money involved in the process. However, it is mandatory to get a gift deed registered with the local/district sub-registrar’s office. The state government(s) charges a stamp duty for the registry of gift deeds that ranges between 1 percent to 7 percent of the property value and also depends on the state in which the property is located. Additionally, a registration fee also needs to be paid to the state government which usually ranges between 0.5 percent to 1 percent of the property value.
This is one type of legal document where the existing owner transfers the title of his or her property by way of a sale to the new owner. The transaction involves exchange of money between the existing owner and the new owner. It is also mandatory to register a sale deed in district sub-registrar’s office. Stamp duty, registration fee and taxes as applicable by law are paid by the new owner. However, these charges may vary from one state to the another. We have described in details about this in our other posts.
Note: Transfer of property is governed by provisions of the Transfer of Property Act 1882. For transferring the property, a person must be of 18 years or above in age. Additionally, the person should be a legal owner of the property that he or she wants to transfer and must possess registered documents to prove his or her ownership.
Any person who is 18 years of age is competent to transfer the property, provided he is the legal owner of the property with registered documents stating the same.
Why there is a need of a property lawyer?
Transfer of a property tends to be a complicated legal process and it is always advisable to take the help of a competent property lawyer or consultant.
- who is aware of all the modalities involved in the transfer process – documentation, taxes, fees and charges, registration process, and so on
- drafts the sale deed, transfer deed, gift deed, will or relinquishment deed, as the case may be
- helps you in getting the appointment from the sub-registrar’s office for registry
- assists you in executing the transfer process smoothly and within the permissible legal boundaries of the state where property is located
Involving a property lawyer in the property transfer process is a practical thing to do as the owner will get clarifications to queries, if any, in an unbiased manner and thus making the entire process smooth and stress free.
If you are planning to transfer property, you must do the right thing, right now – consult a property lawyer. Getting a right advice will ultimately make a huge difference!