Section 55 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
A buyer of immovable property has duties as well as rights, and many buyers focus only on the second. As per the text of the Act consulted, section 55 sets out both sides of a sale. This article covers paragraphs (5) and (6), which deal with the buyer, and the closing paragraph on fraudulent omission. The seller's side, the opening words and paragraphs (1) to (4), is in our article on section 55, duties and rights of the seller.
In the absence of a contract to the contrary, the buyer must disclose a fact that materially increases the value of the seller's interest which he knows and believes the seller does not, pay or tender the price at the time and place of completion, and, once ownership has passed, bear loss not caused by the seller and pay public charges, rent and encumbrance money falling due afterwards. He is entitled to improvements, increase in value, rents and profits once ownership passes, and to a charge on the property for price properly paid in anticipation of delivery. An omission to make the required disclosures is fraudulent.
The starting point
Section 55 begins by saying that, "in the absence of a contract to the contrary", the buyer and seller are subject to the liabilities and have the rights in the rules that follow, "or such of them as are applicable to the property sold". So these are default rules. The sale agreement can change them, and a buyer should read the contract against them, with legal due diligence on the title and encumbrances. The form of the sale itself is in section 54; see our post on sale of immovable property under section 54.
Paragraph (5): the buyer is bound
| Clause | The buyer must |
|---|---|
| (a) | Disclose to the seller any fact about the nature or extent of the seller's interest of which the buyer is aware, but which he has reason to believe the seller is not aware of, and which materially increases the value of the interest |
| (b) | Pay or tender, at the time and place of completing the sale, the purchase-money to the seller or the person he directs |
| (c) | Where ownership has passed to the buyer, bear any loss from destruction, injury or decrease in value of the property not caused by the seller |
| (d) | Where ownership has passed, as between himself and the seller, pay all public charges and rent that become payable, the principal moneys due on any encumbrances subject to which the property is sold, and the interest afterwards accruing due |
(a) The buyer's duty to speak
This duty mirrors the seller's duty to disclose. The buyer must tell the seller something about the seller's own interest if three things are true: the buyer knows it, he has reason to believe the seller does not, and it materially increases the value of the interest.
Example. Gaurav Nair is buying a plot from an elderly owner, Mrs. Sushila Rao. Gaurav learns from a government notice that the land is going to be included in a development zone, which will materially raise its value. He has reason to believe Mrs. Rao does not know. Under clause (a), he must disclose it to her. Staying silent is treated as fraud under the closing paragraph.
(b) Payment and the clear-of-encumbrances proviso
The buyer must pay or tender the price at the time and place of completing the sale. A proviso says that where the property is sold clear of encumbrances, the buyer may retain out of the price the amount of any encumbrances existing at the date of sale, and must pay the amount retained to the persons entitled to it. This lets the buyer make sure the encumbrances are discharged, instead of paying the full price to the seller and hoping he clears them.
Example. Anil Verma buys a shop for Rs. 50,00,000, to be sold clear of encumbrances. The shop is under a loan of Rs. 10,00,000. At completion Anil keeps Rs. 10,00,000 from the price and pays it to the lender, and gives the balance to the seller. A clear schedule of encumbrances in the sale agreement avoids confusion at completion.
(c) Risk of loss after ownership passes
Where ownership has passed to the buyer, he bears any loss from destruction, injury or decrease in value of the property not caused by the seller. If the seller caused the loss, the clause does not put it on the buyer. The clause turns on when ownership passes; a buyer should arrange insurance from that point. For insurance money when a transferred property is insured against fire, see our article on sections 48 to 50.
(d) Outgoings after ownership passes
Where ownership has passed, as between buyer and seller, the buyer pays all public charges and rent that become payable, the principal money due on any encumbrances subject to which the property is sold, and interest afterwards accruing. The seller's duty for charges up to the date of sale is in paragraph (1)(g).
Paragraph (6): the buyer is entitled
| Clause | The buyer is entitled |
|---|---|
| (a) | Where ownership has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits |
| (b) | Unless he has improperly declined delivery, to a charge on the property, as against the seller and all persons claiming under him, to the extent of the seller's interest, for purchase-money properly paid in anticipation of delivery and interest on it. When he properly declines delivery, the charge also covers the earnest (if any) and the costs (if any) awarded to him of a suit to compel specific performance or to obtain rescission |
The copy consulted shows "[ *]" in clause (b), marking omitted words. The copy does not say what was omitted.
The buyer's charge in practice
Where a buyer pays part or all of the price before the property is delivered, the law gives him a charge on the property for that money, so he is not left with only a personal claim against the seller. The charge is "to the extent of the seller's interest", which means it cannot be larger than the seller's own interest. If the buyer improperly refuses delivery, he loses the charge. If he properly refuses, the charge also covers earnest and the costs awarded in a suit for specific performance or rescission. For how such suits are viewed, see our existing guide to specific performance of contracts.
Example. Dev Malhotra pays Rs. 20,00,000 as part of the price of a flat in anticipation of delivery. The seller cannot deliver because of a title problem. Dev properly declines delivery. He has a charge on the flat, as against the seller and those claiming under him, to the extent of the seller's interest, for the Rs. 20,00,000 and interest. If a court awarded him costs in a suit to compel performance or rescind the contract, the charge also covers those costs.
The closing paragraph
"An omission to make such disclosures as are mentioned in this section, paragraph (1), clause (a) and paragraph (5), clause (a), is fraudulent." So the buyer's failure to disclose under clause (5)(a) is treated as fraud, just as the seller's failure under (1)(a). For the contract-law idea of fraud, see our article on fraud under section 17 of the Indian Contract Act, 1872; check the current text of that Act.
Buyer's checklist
- Read the sale agreement against section 55; note where it changes the defaults.
- Insure the property from the date ownership passes.
- Keep proof of every part-payment made before delivery; it supports your charge.
Stamp duty and registration charges are outside this Act; see our State-wise posts.
Need help before you buy?
A buyer who understands these duties, and has the encumbrances and title checked before paying, is far better placed. Our team can examine the papers and the sale terms through legal due diligence.
Key takeaways
- Section 55 rules are defaults, applying so far as relevant and subject to a contrary contract.
- The buyer must disclose a fact materially increasing the value of the seller's interest which he knows and believes the seller does not know.
- He must pay or tender the price at completion, and where the property is sold clear of encumbrances he may retain the amount of existing encumbrances and pay it to those entitled.
- Once ownership has passed he bears loss not caused by the seller and pays later public charges, rent and encumbrance money.
- He has a charge for price properly paid in anticipation of delivery, and for earnest and awarded costs if he properly declines delivery.
- Later amendments and State changes should be checked.
Read next
- Section 55: duties and rights of the seller of immovable property
- Sections 56 and 57: marshalling by purchaser and sale discharged from encumbrances
- Sale Deed vs Agreement to Sell -- Key Differences
- Property Transfer Compliance Checklist
Disclaimer: Based on a publisher's print of the Transfer of Property Act, 1882 showing amendments up to the Transfer of Property (Amendment) Act, 2002 (3 of 2003), as consulted on 2 October 2026. State amendments, later amendments, stamp duty and registration charges are not covered and should be checked. This article is general information, not legal advice; check the official text before acting.