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TRANSFER OF PROPERTY ACT

The scheme of the act:Transfer By Act of Parties By operation of law Inter vivos Testamentary TOP Movable or Immovable
sale

TOP Immovable Exchanges Gifts

Mortgages Leases & charges

What is immovable property? Immovable property includes land, buildings, hereditary allowances, rights to ways, lights, fisheries, or any other benefits to arise out of land and things attached to earth but not standing timber, growing crops or grass.

Following are recognised by courts as being immovable property:(a) Right to way (b) Right to collect rent of immovable property (c) Right to collect dues from fairs held on a plot of land (d) Right to fishery (e) Office of a hereditary priest of a temple (f) Hindu widows life interest of the income of the husbands property (g) A mortgagors right to redeem the mortgage (h) Right to collect lac from trees (i) A factory Following are not immovable properties (a) A right of worship (b) Right of a purchaser to have the lands registered in his name (c) Royalty (d) A machinery which is not permanently attached to the earth (e) A decree for sale (f) A right to recover maintenance allowance (g) Government promissory notes (h) Standing timber (i) Growing crops (j) Grass

ATTACHED TO EARTH Attached to earth means anything:(a) Rooted in the earth as in the case of trees and shrubs (b) Imbedded in the earth as in the case of walls or buildings (c) Attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached ( doors, windows etc) ATTESTED Attested in relation to an instrument means attested by two or more witnesses each of whom has ---(a) seen the executant sign or affix his mark to the instrument (b) seen some other person sign the instrument in presence of and by the direction of the executant (c) received from the executant a personal acknowledgement of his signature or signature of such other person. NOTICE OF FACT A person is said to have a notice of a fact ----(a) when he actually know that fact (actual express notice)

(b) when but for --(i) wilful abstention from an enquiry or search which he ought to have made or (ii) gross negligence, he would have known it ( constructive or implied notice. TRANSFER OF PROPERTY DEFINED: Any act by which a living person ( including a company or association or body of individuals) conveys property in present or in future to --(a) One or more other living persons; or (b) Himself (c) Himself and one or more other living persons Living persons includes:(a) (b) (c) (d) incorporated companies registered and unregistered associations partnership firms individuals

What property cannot be transferred? 1. The chance of an heir apparent succeeding to an estate 2. The chance of a relation obtaining a legacy on the death of a kinsman ( called spes successionis i.e. hope of succession.

3. Any other mere possibility of a like nature Example:- A has a wife B, and a daughter C. In consideration of Rs. 500 paid to her by A, C executes a release of her right to share in inheritance. B resists the claim and sets up as a defence the release signed by C. Will B succeed? 4. A mere right of re-entry for breach of a condition subsequent cannot be transferred to any one, except the owner of the property 5. An easement apart from dominant heritage, cannot be transferred. 6. An interest in the property restricted in its enjoyment to the owner personally ( eg., religious offices, services tenures, an inalienable raj, etc.) can also not be transferred. 7. A right to future maintenance in whatsoever manner arising cannot be transferred 8. A mere right to sue is not capable of being transferred Examples : claims for :- mesne profits, for damages for breach of contract, suing an agent for accounts Problem:-A assigns to B his right to sue his tenant C for recovering arrears of rent due to him. If B files the sit, will he succeed against C ?

9. A public office, or the salary of a public officer whether before or after it has become payable cannot be transferred. 10. Stipends allowed to military, naval air force or civil pensioners of Government as well as political pensions cannot also be transferred. 11. No transfer can be made ----(a) which is opposed to nature of interest (b) For an unlawful object or consideration (c) To a person who is legally disqualified to be a transferee Whether writing is necessary?? 1) 2) 3) 4) 5) 6) 7) 8) 9) Sale of immovable property of the value of Rs.100 or more Sale of a reversion or other intangible thing Simple mortgage, irrespective of the amount secured All other mortgages for securing Rs. 100 or more Leases of immovable property Exchange Gift or immovable property Transfer of an actionable claim Notice of transfer of actionable claim

Essentials of a valid transfer of property:1) 2) 3) Transfer must be between two or more living persons The property transferred must be transferable Transfer must not be opposed to nature , for an unlawful object or consideration or to a person legally disqualified Transferor must be competant to contract Transfer must be in the mode prescribed by the act Transfer must not offend the rule against perpetuity If the transfer is conditional, the condition must not be illegal, impossible, immoral or opposed to public policy.

4) 5) 6) 7)

ILLEGAL RESTRICTIONS ON CERTAIN ALIENATIONS 1. Condition restraining alienation (s. 10) If any property is transferred subject to a condition or limitation which absolutely restrains the transferee from parting with or disposing of his interest in the property --- such condition or limitation is void except as stated. When Valid ? (a) in the case of a lease, where the condition is for the benefit of the lessor (b) A transfer to or for the benefit of a woman (not being a Hindu, Muhammadan or Buddhist) which provides that she would not have the power during her marriage to transfer the property. Examples 1.. A sells a piece of immovable property to B. One of the conditions of the sale is that should B wish to part with the property, he would sell it to A A devised his estate to his son with a proviso that if the son should desire to sell the estate or any part of it during the life time of his wife, she would have the option to purchase the same at Rs. 3000/- irrespective of the market price. Is the condition valid??

A, B, C and D effected a partition of joint family property and agreed that if any one of them should have no issue, he would have no power to sell his share but should leave it for the other sharers. A sold his share and died without issue, Can B, C, D sue to recover his share?? 2. Restriction on free enjoyment of property (s.11) Section 11 invalidates restrictions imposed on the free enjoyment of the interest created by transfer after it has become absolute Exception: If such direction has been made in respect of one piece of immovable property for the purpose of securing the beneficial enjoyment of another piece of such property, it is valid. Examples:1) A makes an absolute gift of a house to B, and directs that B shall not raise it higher, so as to obstruct the passage of light and air to As adjoining house. Is the direction valid? A grants a lease of his zamindari to B, reserving to himself all the minerals and a few plots of land in the middle of his zamindari for working the mines and storing minerals and directs B to allow passage to his miners to and from the reserved plots. Comment.

2)

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3. Condition making interest determinable on insolvency or attempted alienation (S.12) No conditions of transfer of property in case of insolvency are permitted Except: Lease, if such condition is for benefit of lessor Examples:1) A settles property in trust for himself until his death or bankruptcy and then on the occurrence of either of these events on his wife. A is then adjudged insolvent. Will his wife get the property? A transfers property to B subject to a condition that if B becomes insolvent, the property is to go to C. if B becomes insolvent, can C claim the property?

2)

4. Direction for accumulation of income Where the terms of transfer direct that income arising from property is to be accumulated during a period longer than:(a) the life of the transferor, or (b) a period of 18 years from the date of the transfer,

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such a direction is void to the extent to which the period which is so excess. Such direction is valid and allowed: (1) the payment of the debts of the transferor (2) the provisions of portions for children or remoter issue of the transferor (3) the preservation or maintenance of the property transferred (4) when property is transferred for the benefit of the public or for the advancement of religion, knowledge, commerce, health, safety, or any other object beneficial to mankind. Transfer for benefit of Unborn person. Transfer of property cannot be made directly in favour of unborn person The interest of the unborn person must be preceded by prior interest The unborn person must be in existence when the prior interest comes to an end He must have the interest at the latest when he attains majority The interest created for the benefit of such unborn person must comprise the whole of the remaining interest of the transferor in the property

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VESTED INTEREST
An interest is said to be vested when it is : Not subject to any condition precedent When it is to take effect immediately or on happening of an event. The happening of event is certain. Example:- A hindu widow adopts a son but there is an agreement postponing the sons estate during the lifetime of the widow, the interest created in favour of adopted son is vested interest Problem:- A transfers property to B in trust for C and directs B to give possession of the property to C, when he attains the age of 25. What interest does C take and when? CHARACTERSTICS OF VESTED INTEREST does not depend upon fulfillment of condition creates present and immediate right enjoyment of the right may be postponed to a future date A vested interest is not defeated by the death of the transferee before obtaining possession A vested interest is transferable as well as heritable.

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When unborn person acquires vested interest.

CONTINGENT INTEREST
When on a transfer of property, an interest therein is created in favour of a person to take effect: only on happening or not happening of a specified event. Event may be uncertain

Such person acquires contingent interest in the property. CHARACTERISTICS. A contingent interest is solely dependent upon fulfillment of condition In case of non fulfillment of condition, interest fails. If the transferee dies before obtaining possession, contingent interest fails. It is transferable. There is no present right of enjoyment. Mere promise for giving such right.

Example:A gift is made to A for life and afterwards to B if B returns from England. A transfers property to B for life and after his death, to C and D, equally to be

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divided between them or to the survivor of them. C dies during the life of B. D survives B. Whom shall the property pass to??

CONDITIONAL TRANSFERS.
A condition is a provision which makes the existence of a right dependent on the happening or non happening of a thing. Three types of conditions:1) Condition precedent--- is one which delays the vesting of a right until the happening of an event. 2) Condition subsequent(condition of defeasance) is one which destroys or divests the right upon the happening of an event. 3) A conditional limitation is a combination of condition precedent and a condition subsequent. Characteristics of condition precedent 1. A condition precedent is one which must happen before the estate can vest. 2. In the case of a condition precedent being or becoming impossible to be performed or being immoral or opposed to public policy, the transfer will be void. 3. A condition precedent is fulfilled if it is substantially complied with. Characteristics of condition subsequent.

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1. 2. 3. 4.

on the happening of condition, an existing estate will be defeated. The estate remains with the transferee till the condition is broken. In the case of an impossible or immoral condition subsequent, estate becomes absolute and condition is ignored. A condition subsequent must be strictly fulfilled.

Transfer on impossible, illegal or fraudulent conditions. An interest created on transfer of property and dependent upon a condition fails, if the fulfilment of the condition is : (a) Impossible (b) Forbidden by law (c) Of such a nature that if permitted would defeat the provisions of any law (d) Fraudulent or involves injury to a person or property of another (e) Such as court regards immoral or opposed to public policy. Transfer remains good while conditions are void under following cases:(a) condition restraining transferee from parting or disposing his interest (b) condition making the transferees interest determinable on insolvency

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(c) A direction for accumulation of interest exceeding the limits prescribed.

ELECTION
Where a person------- professes to transfer property which he has no right to transfer, and ---- as part of the same transaction, confers any benefit to the owner of the property, such owner must elect either to confirm the transfer or to dissent from it. If he dissents from it,---(1) he must relinquish the benefit so conferred; (2) the benefit so relinquished reverts to the transferor. Example:- The farm of Sultanpur is the property of C and worth Rs. 800. A by an instrument of gift professes to transfer it to B, giving by the same instrument Rs. 1000 to C. C elects to retain the farm. He forfeits the gift of Rs. 1000. In the same case, if A dies before the election, His representatives must out of the Rs.1000, pay Rs. 800 to B.

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What constitutes of election? 1. If a person accepts such benefit for two years, it is to be assumed that he has elected in favour of transfer. 2. He waives enquiry into circumstances. 3. Does not signify intention for a atleast one year

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SALE OF IMMOVABLE PROPERTY

SALE DEFINED (S.54) Sale is a transfer of ownership in exchange for a price paid or promised or part paid and part promised. Essentials of a Valid Sale 1. 2. 3. 4. 5. 6. 7. The seller must be a person competent to transfer The buyer must be a person competent to be a transferee The subject matter must be transferable immovable property There must be a transfer of ownership The transfer must be in exchange of price The price must be paid or promised, or partly paid and partly promised There must be a registered conveyance in case of--(i) tangible immovable property of the value of Rs. 100 and upwards ; or (ii) a reversion of property In the case or tangible immovable property of a value less than Rs.100, there must either be A registered conveyance or delivery of property CONTRACT OF SALE

8.

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A contract of sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties. If it does not, of itself, create any interest in, or charge on, such property. Differences between sale and contract of sale.

RIGHTS AND LIABILITIES BUYERS RIGHTS

(A) BEFORE COMPLETION OF SALE. The buyer ( unless he has improperly declined to accept delivery of the property) is entitled to 1) 2) 3) 4) 5) A charge on the property for the purchase money properly paid by him in anticipation of the delivery Interest on such purchase money. The costs awarded to him in a suit to compel specific performance of contract. He may enforce execution of the the agreement to sell If he has obtained possession of the property agreed to be sold, his possession will operate as notice to subsequent transferees.

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6)

If he succeeds in showing that by a re- sale of the property he would have made a fair profit he will be entitled to such profits.

AFTER COMPLETION OF SALE 1) 2) 3) The benefits of any improvement Increase in value of property The rents and profits thereof.

Buyers Liabilites
BEFORE COMPLETION OF SALE 1) 2) To disclose to seller any material fact of sellers interest in property To pay or tender the purchase money to seller or such person as he directs for encumbrance free property.

AFTER COMPLETION OF SALE 1) To bear any loss arising from destruction, injury or decrease in value of property 2) To pay public charges, rents and taxes in respect to the property.

SELLERS RIGHTS
BEFORE COMPLETION OF SALE

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The seller is entitled to rents and profits till ownership passes to buyer. AFTER COMPLETION OF SALE The seller is entitled to charge upon property in hands of buyer or transferee for amount of the unpaid purchase money.

SELLERS LIABILITIES
BEFORE COMPLETION OF SALE 1) To disclose to buyer any material defect in (I) property or (ii) the sellers title. 2) To produce to the buyer on his request for examination, all documents of title relating to property. 3) To answer all the relevant questions put to him by the buyer with respect of property and his title thereto. 4) On payment or tender of price, to execute a proper conveyance of the property 5) Between the date of the contract of sale and delivery of the property to take care of property and documents of property. 6) To pay all the public charges and rent accrued due in respect of the property upto sale date. AFTER COMPLETION

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1)

2)

3)

4)

5)

The seller is bound to give to the buyer or such person as he directs the possession of the property. When whole of the purchase money has been paid to seller, he is bound to deliver to the buyer all the documents of title of property Where the seller retains any part of the property comprised of such documents, he is entitled to retain all documents Where whole of such property is sold to different buyers, the buyer of the greatest value is entitled to such documents. To make a covenant for title.

PROBLEMS 1) A sells an enclosed field to B. Before accepting the conveyance, B discovers that the public have a right of way across the field of which there is no visible indication on the land. What are the rights of B? 2) A sells property to B. After accepting the conveyance, B discovers, that under a decree for partition a portion of the property had been allotted to C. What are rights of B?

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MORTGAGE OF IMMOVABLE PROPERTY

Mortgage defined. A mortgage is the transfer of an interest in specific immovable property for the purpose of securing---(a) the payment of money advanced or to be advanced by way of loan, (b) an existing or future debt or (c) the performance of an engagement which may give rise to a pecuniary liability. KINDS OF MORTGAGES 1. SIMPLE MORTGAGE When--(a) possession of the mortgaged property is not given to the mortgagee and (b) the mortgagor (i) binds himself personally to pay the mortgage money; and (ii) agrees that if he does not so pay, the mortgagee will have a right to cause the mortgaged property to be sold (by the court) and the proceeds of such sale to be applied in payment of the money.

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INGREDIENTS 1) 2) A personal obligation on the part of mortgagor to pay the debt An express or implied power given to mortgagee to cause the property to be sold through the intervention of the court. No transfer of ownership.

3)

MORTGAGE BY CONDITIONAL SALE When the mortgagor ostensibly sells the mortgaged property on the condition that--(a) on default of the payment of the mortgage money on a certain date, --- the sale is to become absolute. (b) On such payment being made,--- the sale is to become void (c) On such payment being made, --- the buyer is to transfer the property to the seller. No delivery of possession is given in it. PROBLEM:- Separate documents of sale deed and deed of reconveyance are executed between parties in the same transaction and in respect of the same property. The owner wishes to redeem the property and contents that transaction is in nature of conditional sale. Will he succeed.

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MORTGAGORS RIGHTS
REDEMPTION 1. Right of redemption At any time after the principal money has become due, and on payment or tender of the mortgage money, the mortgagor has a right to get back his property and demand --(a) the return of the mortgage instrument, together will all the title deeds; (b) delivery of possession of the mortgaged property (c) a re-transfer of the property (at Mortgagors cost) or an acknowledgement in writing of the extinction of mortgagees right. Clog on redemption Any condition in the mortgage deed, which obstructs the right of redemption, will be considered as a clog on redemption and will be null and void. Example:- A mortgaged his land to B for five years, with a provision that rents and profits would be set off against interest. The deed further provided that if the mortgage was not redeemed within 20 years, the mortgageeshould treat the land as sold to him absolutely.

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The clog of equity of redemption rights may be on the following forms:(1) The mortgagor may be totally prevented from redeeming the mortgage. (2) The terms of mortgage might give a collateral benefit to mortgagee (3) Impose a collateral burden on the mortgagor even after the discharge of the debt. Right to redeem a part of the mortgaged property a mortgage is one and indivisible General rule mortgage debt being indivisible and mortgaged property being held entirely as security can be redeemed entirely only. Exceptions 1. Where the terms of a mortgage provide for partial redemption. 2. Where co-mortgagors have distinct and separate interests 3. Where the mortgagee recognises a partition of the mortgaged property 4. When mortgagee himself acquires a portion of the mortgaged property. Right to redeem separately or simultaneously

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A mortgagor may have executed two or more mortgages in favour of the same mortgagee. He is entitled to redeem any one of such mortgages separately Or any two or more of such mortgages together. Sec. 61 has consolidation. abolished doctrine of

Who can sue for redemption? (i) Any person ( other than the mortgagee) having --(a) any interest in, or (b) charge upon, --- the property mortgaged, or --- the right to redeem the same. (ii) Any surety for the payment of the mortgaged debt, or any part thereof. (iii) Any creditor of the mortgagor who has, in a suit for the administration of his estate, obtained a decree for sale of the mortgaged property. Right of subrogation

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Subrogation is a roman term meaning Substitution It is the right of a person to stand in the place of creditor. When a mortgagee transfers his mortgage debt, his assignee becomes vested with all his rights. Subrogator must pay of the entire amount of the prior mortgage.

RIGHT TO TRANSFER TO THIRD PARTY INSTEAD OF RE-TRANSFERENCE RIGHT TO INSPECTION AND PRODUCTION OF DOCUMENTS RIGHT OF ACCESSION Natural Eg, agriculture Artificial Eg. Erection of Building

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LIABILITIES OF THE MORTGAGOR

1. Covenant for title. 2. Covenant for defence of title 3. Covenant for payment of public charges. 4. Covenant for payment of rent. 5. Covenant for payment of prior encumbrances.

RIGHTS OF THE MORTGAGEE

1. Right of foreclosure A suit to obtain a decree that a mortgagor shall be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure. Who cannot foreclose or sell (i) A simple mortgagee cannot foreclose. (ii) A usufructuary mortgagee cannot foreclose or sell (iii) A mortgagee by conditional sale cannot sell (iv) A mortgagee of works of public utility cannot foreclose or sell. (v) An English mortgagee cannot foreclose. (vi) A person interested in part only of mortgage money cannot institute a suit relating to a corresponding part of the

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mortgaged property, unless the mortgagees have, with the consent of the mortgagor, severed their interests under a mortgage. 2. Right to sue for mortgage money When? (a) Where the mortgagor binds himself to repay the same. (b) Where by any cause other than the wrongful act of the mortgagor or mortgagee, the mortgaged property is destroyed. (c) Where the mortgagee is deprived of the whole or party of his security by the wrongful act or default of mortgagor. (d) Where the mortgagee is entitled to possession of mortgaged property and the mortgagor fails to deliver the same to him. Right to sell without the intervention of court. When? 1. where the mortgage is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Muhammedan, or Buddhist.

3.

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2.

Where the government is the mortgagee and a power of sale without the intervention of court is expressly conferred by the mortgage deed. 3. Where the power of sale without intervention of court is expressly conferred by the mortgage deed. Such power can be exercised only : 1. When the principal money (or a part thereof) has remained unpaid for three months after service of notice in writing requiring payment 2. When interest not less than Rs.500 in amount is in arrears and remains unpaid for 3 months. 4. Right to appointment of a receiver. (a) Appointment how made (b) Removal of the receiver (c) Position of the receiver (d) His powers (e) His remuneration ( not exceeding 5 %)

Money in his hands, how applied?

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(i)

(ii)

(iii) (iv) (v) (vi)

in discharge of all rents, taxes, land revenue and out going whatever, affecting the property; in payment of all annual sums and interest on all principal sums, having priority to the mortgage; in payment of his commission and of the premium on insurance property payable the cost of executing proper repairs; in payment of the interest falling due under the mortgage; in discharge of the principal money.

The residue, if any is to be paid to any person otherwise entitled to the mortgaged property. 5. Right to accession. Problem :- M mortgages his plot of land in Chembur to N. Afterwards, M raises a skyscraper on the same plot. Is N entitled to the skyscraper for the purposes of his security. 6. Right to renewal of mortgaged lease.

7. Right to spend money:

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When? (1) for the preservation of the mortgaged property from destruction, forfeiture or sale; (2) for supporting the mortgagors title to the property; (3) for making his own title thereto good against the mortgagor; (4) for renewal of the leasehold mortgaged to him, where property is a renewable leasehold. Charges for insurance of mortgaged property. 8. Right to proceeds of revenue compensation on acquisition. 9. Right of mesne mortgagees sale or

LIABILITIES OF THE MORTGAGEE

1. to manage the property as a person of ordinary prudence would manage it if it were his own; to use his best endeavours to collect the rent and profits thereof; in absence of a contract to the contrary, - to pay Government revenue and other charges of public nature and all rent, out of income of the property.

2. 3.

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4. 5. 6.

7.

8.

To make such necessary repairs as the income of the property permits; Not to commit any act which is destructive or permanently injurious to property Where the insured property is destroyed, to instate the property with the money obtained from insurance policy. To keep clear, full and accurate accounts of all sums received and spent by him as a mortgagee and to give them to mortgagor To account for the receipts from the property, when the mortgagor tenders and deposits the due amount.

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LEASES OF IMMOVABLE PROPERTY

Definition; A lease of immovable property is a transfer of a right to enjoy such property for a certain time, or in perpetuity, in consideration of (i) a price paid or promised (ii) money (iii) a share of crops (iv) service (v) any other thing of value to be rendered periodically or on specified occasions Characteristics 1. The lessor must be competent to contract and he must have title or authority. 2. The lessee must also be competent to contract at the date of execution of lease. A lease to minor is invalid. 3. The subject matter of the lease must be immovable property. 4. There must be a transfer of a right to enjoy such property. 5. Lease must be made for a certain time or in perpetuity 6. Consideration would be as defined above.

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7. 8.

The lessee must accept the transfer. I must be in the mode indicated by s.107.

Leases how made? 1. from year to year, or for any term exceeding one year, or reserving a yearly rent --- only by a registered instrument. 2. In any other case ---- either by a registered instrument or by oral agreement accompanied by delivery of possession Duration and termination leases. Type Is deemed to be a lease from Year to year terminable by lessor or lessee by Six months notice Expiring with the end of--A year of the tenancy

Agriculture or
manufacture

Any other Month purposes month

to Fifteen A month of days notice the tenancy

Rights and liabilities of lessor and lessee will be given as a separate handout for self study