Section 40 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.
Can a restriction on how land is used, or a contract right tied to the land, bind the person who later buys it? Section 40 of the Transfer of Property Act, 1882 says when it can. As per the text of the Act consulted, it binds a buyer who has notice, or who receives the land as a gift, but not a paying buyer without notice.
Section 40 covers two situations. First, a third person has, for the more beneficial enjoyment of his own immovable property, a right to restrain the enjoyment of another's property in a particular manner, independent of any interest or easement in that property. Second, a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immovable property, but not amounting to an interest or easement. In both cases the right or obligation may be enforced against a transferee with notice or a gratuitous transferee, but not against a transferee for consideration and without notice.
The two situations
The section is printed with a heading, "Burden of obligation imposing restriction on use of land", and then runs in two limbs. Buyers and lenders can check for such restrictions through legal due diligence before paying.
| Limb | Who has the right | What the right is |
|---|---|---|
| First | A third person | A right, for the more beneficial enjoyment of his own immovable property, to restrain the enjoyment in a particular manner of the other's property, independently of any interest in that property or of any easement on it |
| Second | A third person | The benefit of an obligation arising out of contract and annexed to the ownership of immovable property, but not amounting to an interest therein or an easement thereon |
Printing slips to note. In the copy consulted, the second limb begins with the word "Or" followed by a second marginal heading ("Or of obligation annexed to ownership but not amounting to interest or easement") inside the text. And near the end, "not against such property in his hands" reads like "nor against such property". Both are printing features and the sense of the section is clear.
First limb: a restriction for the benefit of neighbouring land
This is the idea behind a building restriction. The owner of one plot has a right to stop the owner of another plot from using it in a certain way, because it makes his own plot more beneficial to enjoy. It does not depend on his holding any interest in the other plot and it is not an easement. For easements as such, see our guide to easements under the Transfer of Property Act.
Example. Sunita Kapoor sells the back half of her plot to Rajan and keeps the front half with her house. The sale deed says Rajan will not build a factory on the back half. The restriction is meant to give better enjoyment of Sunita's front half. Section 11, second paragraph, saves the transferor's right to enforce such a direction; see our article on sections 10 to 12. Section 40 then deals with what happens when Rajan sells the back half on to someone else. A later buyer of the back half, or a lender, should check such restrictions before paying.
Second limb: a contract obligation annexed to ownership
Here a third person is entitled to the benefit of an obligation that arises out of a contract and is annexed to the ownership of the property, though it is not itself an interest in the property or an easement.
The Act's illustration
A contracts to sell Sultanpur to B. While the contract is still in force, he sells Sultanpur to C, who has notice of the contract. B may enforce the contract against C to the same extent as against A.
Present-day example. Ravi Joshi signs a written agreement to sell his shop to Meera Pillai. While the agreement is in force, Ravi sells the same shop to Naveen Gupta, who knows about the agreement. Meera can enforce the agreement against Naveen to the same extent as against Ravi. If Naveen had paid for the shop and had no notice, Meera could not enforce the agreement against him or against the shop in his hands. Our existing post on specific performance of contracts is relevant to how such contracts are enforced.
Who is bound and who is not
The last paragraph sets the line between buyers.
| Later holder of the land | Can the right or obligation be enforced against him or the land? |
|---|---|
| A transferee with notice of the right or obligation | Yes |
| A gratuitous transferee (the land comes without payment) | Yes |
| A transferee for consideration and without notice | No, neither against him nor against the property in his hands |
Why notice matters. Section 3 defines notice as actual knowledge, or knowledge that would have been gained but for wilful abstention from an enquiry or search that ought to have been made, or gross negligence. It also deems notice of a registered instrument under conditions, and of the title of a person in actual possession. Our article on section 3, notice sets this out. A buyer who has paid but did not check the registered papers or ask about the neighbours' rights may still be treated as having notice.
What this means in practice
For a buyer.
- Ask for all earlier sale deeds and agreements affecting the land. Restrictions often sit in them.
- Search the registered records. Registered instruments can give notice from the date of registration, under the conditions in section 3.
- Inspect the property and ask neighbours about restrictions or agreements.
- Do not assume that paying the full price is enough; the protection is for a paying buyer without notice.
For a seller who wants a restriction to last.
- Write the restriction into the deed in clear words, naming both plots.
- Register the deed where registration is required, so that later buyers are taken to have notice.
- Keep a copy of the deed and evidence of notice to later buyers.
For a person holding an agreement to buy. Keep the agreement safe, and tell the seller and any other buyer that you hold it, so that nobody can later say they had no notice.
Our article on section 41, transfer by ostensible owner deals with another protection for a buyer who acts in good faith. For registration of agreements, see the live post on registration of an agreement to sell; check the current registration law and your State's rules.
Need help checking restrictions before you buy?
A restriction or an old agreement can follow the land into your hands if you have notice. Our team can check the deeds and records for you through legal due diligence.
Key takeaways
- Section 40 covers a third person's right to restrain the use of another's land for the better enjoyment of his own, and the benefit of a contract obligation annexed to the ownership of land.
- Both may be enforced against a transferee with notice and a gratuitous transferee.
- Neither may be enforced against a transferee for consideration and without notice, nor against the property in his hands.
- The Act's illustration shows an earlier buyer enforcing his contract against a later buyer who had notice.
- Notice is defined in section 3 and includes constructive notice.
- Later amendments and State changes should be checked.
Read next
- Sections 38 and 39: transfer by limited owner and right to maintenance
- Section 41: transfer by ostensible owner
- Section 3: notice, actual, constructive and notice to agent
- Easements and TPA -- Right of Way and Light
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.