Law relating to transfer of property

1. Instrument: Means a non-testamentary instrument

  1. Rooted in earth, as in case of trees and shrubs
  2. Imbedded in the earth, as in case of walls or building; or
  3. Attached to what is so embedded for the permanent beneficial enjoyment of that to which it is attached.

2. Absolute Interest: When a person owns property, he has an “absolute Interest” in the property. Ownership consists of a bundle of rights, the right to possession, right to enjoyment and right to do anything such as selling, mortgaging or making gift of the property.

3. Reversion and Remainder: A “reversion” is the residue of an original interest which is left after the grantor has granted the lessee a small estate: Example: Lease – after the lease is complete the property goes to lessor. A “remainder” is when the owner of the property grants a limited interest in favour of a person or persons and gives the remaining to others. Example: A the owner of a land transfers property to B for life and then to C absolutely, here the interest in favour of B is a limited interest.

4. Vested Interest: The word “Vested” is used in two different senses. 1. Vested in possession 2. Vested in interest. “Vested in possession” is when it is a right to present possession of property. “Vested in interest” is when it is not a right to present possession but a present right to future possession.

5. Contingent Interest: is an interest which takes effect after the condition is satisfied

6. Different between vested and a contingent interest:

Vested Interest / Contingent Interest
When the interest is vested the transfer is complete / It is depended upon the fulfillment of certain condition
Takes effect from the date of transfer / In order to become vested is conditioned by a contingency
A vested cannot be defeated by the death of the transferee before he obtain possession / Contingent interest may fail in case of the death of the transferee
If a transferee of the vested interest dies before actual enjoyment, it will devolve on this legal heirs / Cannot be inherited through it may be transferred coupled with limitation regarding fulfillment of condition

7. Moveable Property: The Transfer of property Act does not defines the term “Moveable Property” it has been defined by General Clause act, 1897 as “ property of every description except immoveable property”. The registration act defines “Moveable Property” to include property of every description excluding immoveable property but including standing timber, growing crops and grass”

8. Immoveable Property: this is also note defined; however it is defined in the negative sense as “The immoveable property does not include standing timber, growing crop or grass”. Things attached to the earth, Things embedded in the earth, attached to what is so.

9. Rules relating to transfer of Property, Section 5:means an act by which a living person conveys property in present or in future t one or more living persons, or to himself and one or more other living persons and “to transfer property” is to perform such an act.

  1. To effect a transfer, property must be in existence. The rule is that a transfer cannot be affected in any way not prescribed by the act.
  2. A transfer is inter vivos (i.e. Between living persons)
  3. A transfer by means of a will is not a transfer according to the act, because it is not a transfer between two living persons
  4. Section 5, also says that the transfer may be “In present or in future”

10. Section 6 (h): Provides that no transfer can be made in so far as it is opposed to the nature of the interest attached thereby or for an unlawful object or consideration or to a person disqualified to be a transferee.

11. Who can transfer the property, Section 7:

  1. Every person, who is competent to contract and entitled to transferable property, or authorized to dispose or property is competent to transfer such property.
  2. Transfer of property act to disqualify a person, who is a minor to be a transferee
  3. Mortgage can be validly executed in favour of a minor who has paid the consideration

12. Formalities of Transfer:

  1. Property can be transferred either orally or in writing
  2. Moveable property can be transferred by delivery of possession or by registration.
  3. Section 54 lays down the mode of transfer of immovable property.
  4. In the case of Tangible immovable propertyof a value less then INR 100/- such transfer may be made either by a registered instrument or by delivery of the property
  5. Reversion means the bundle of rights remaining with the lessor after the execution of ht lease of a immoveable property
  6. When a transfer is effect in writing, the person who signs the document profession to transfer the property is called the executant.
  7. Attestation, is an important formality in connection with the execution of transfer, “Attest” mean to testify a factor, to bear witness of a fact. Attestation in relation to a document signifies that fact of authentication of the signature of the executant of that document by the attestator by putting down his own signature. It is valid when 2 witnesses sign the instrument.
  8. Registration is an essential legal formality, to effect a valid transfer in certain cases. The advantage of registering a document is that any person who deals with the property would be bound by the rights that are created in earlier registered documents.
  9. Notice may be actual or constructive, if a person knows about a fact, he has an actual notice, in certain circumstances law treats a man who out to have known a fact even though he did not in fact know it. This is called constructive notice.

13. Restrain on transfers or rule against inalienability, Section 10: says that when property is transferred, the transferee should not be restrained (restricted) absolutely from alienating (push away, separate) the property. One may give property to another subject to a condition, but the condition should not be one which absolutely prevents the transferee from alienating the property.

  1. Absolute Restrain ( Invalid)
  2. Partial Restrain ( Valid)
  3. When Absolute restrain is valid?

14. Absolute Restrain: Suppose, A gives to B property worth only 2000 rupee and adds a condition that B should sell property for Rs. 50,000/- and not below that amount, this condition will become invalid. Similarly, A give a property to B worth Rs. 50,000/- and stipulates that B should sell it to C only for Rs. 1000/-.

15. Partial Retrain: If there are condition which restrain the transferee not to alienate the property outside the family, it has been held by the courts that they are partial restraints.

16. When Absolute Restrain is valid:

  1. In case of Lease, lessor can impose conditions on Lessee, such conditions are valid.
  2. Exception is made in respect of a woman who is not a Hindu, Buddhist or Muslim. In such a case, a condition to the effect that she shall not have power during her marriage to transfer the property is valid.

17. Transfer for benefit of unborn person, Section 13: Lays down that where on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of transfer, subject to the prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect unless it extends to the who of the remaining interest of the transferor of the property.

  1. It should be preceded by a life estate in favour of a living person
  2. It should comprise the whole of the remaining interest of the transferor so that there can be no further interest in favour of others.

18. Conditional Transfer: When an interest is created on the transfer of property but is made to depend on the fulfillment of a condition by the transferee, the transfer is know as a conditional transfer. The condition must not be impossible to fulfill. Example: A agrees to sell his land to B, on a condition that B walk a hundred miles in an hour. The lease is void.

19. Doctrine of Election, Section 35:A property is given to you in the same deed of give you are asked to transfer something belonging to you to another person. If you want to take the property you should transfer your property to someone else, otherwise you cannot take the property which is transferred to you by someone. Election is defined as “the choosing between two rights where there is a clear intention that both were not intended to be enjoy”

20. Transfer by ostensible (Alleged) owner/ Doctrine of holding out, Section 41: where, with the consent, expressed or implied, of the persons interested in the immoveable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorized to make it, provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith. The Following conditions are necessary for the application of section 41:

  1. The transferor is the ostensible owner
  2. He is so by the consent, express or implied, of the real owner
  3. The transfer is for consideration, and
  4. The transferee has acted in good faith taking reasonable care to ascertain that the transferor had power to transfer.

21. Doctrine of feeding the grant by estoppel:Where, a person or erroneously represents that he is authorized to transfer certain immoveable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsist (exist). Nothing in this section shall weaken the right of transferee in good faith for consideration without notice of the existence of the said option. Essential in order to invoke this section, the transferee should prove:

  1. There was representation, fraudulent or erroneous;
  2. It was to the effect that transferor is entitled to transfer the immoveable property
  3. The transferor is found to have subsequently acquired the interest which he professed to transfer
  4. The transfer of property was for consideration
  5. The transferee has not cancelled the contract
  6. The transferee acted in good faith for consideration and without notice of the rights under the prior transfer.

22. Doctrine of Fraudulent transfer:When a person transfers his property so that his creditors shall not have anything out of the property, the transfer is called a fraudulent transfer.

23. Doctrine of Part-performance, Section 53 A: A contract for the sale of land has been entered into between A and B. The transferee has paid the price entering into possession and is willing to carry out his contractual obligation. As registration has not been effected A, the transferor, seeks to evict B from the land. Can he do so? No, B will not be allowed to suffer simply because the formality of registration has not been through. The legislature grants some relief to such a transferee under Section 53 A.

  1. There must be a contract to transfer immoveable property
  2. It must be for consideration
  3. The contract should be in writing and signed by transferor him or on his behalf
  4. The terms necessary to constitute the transfer must be ascertainable with reasonable certainty from the contract itself.
  5. The transferee should be taken the possession of the property in part performance of the contract
  6. The transferee must have fulfilled or ready to fulfill his part of the obligation under the contract.

24. Properties which cannot be transferred: The following properties cannot be transferred.

  1. The chance of a relation obtaining a legacy on the death of a kinsman or any other mere possibility
  2. A mere right of re-entry for breach of a condition subsequent cannot be transferred
  3. An easement cannot be transferred apart from the dominant heritage
  4. An interest is property restricted in its enjoyment to the owner personally cannot be transferred.
  5. A right to future maintenance in whatsoever manner arising, secured or determined
  6. A mere right to sue cannot be transferred
  7. A public office cannot be transferred
  8. Stipends allowed to military, navel, air force and civil pensioners of the government and political pensions cannot be transferred.

25. Chance of an heir apparent of “Spes successionis”when a person is the owner of the property, the property is in existence and it is in his possession. This he may transfer, but if the property is neither in existence nor is the person the owner of the property then it cannot be transferred.

26. Right to re-entry:The right which the lessor has against the lessee for breach of an express condition which provides that on its breach the lessor may re-enter is called the right to re-entry. Example: If A leases his property to B and adds a condition that if B sub-lets the leased land, A will have the right to re-enter i.e. the lease will terminate if the lessee breaks the condition by subletting to a third person.

27. Transfer of easement:An easement is a right enjoyed by the owner of land over the land of another such as, right of way, right of light, right of support, right to a flow of air or water. Section 4 of Easements Act defines an easement as a right which the owner or occupier of certain land possesses as such for the beneficial enjoyment of the land, to do and continue to do something or to prevent and to continue to prevent something being done or upon or in respect of certain other not his own land. An easement includes a right to enjoy a profit out of the land of another.

28. Restricted Interest or personal interest: An interest restricted in enjoyment to the owner personally is by its very nature not transferable unless the restriction is void under section 10.

29. Right to future Maintenance: This is a personal right in the property which the law says that it cannot be transferred. The right of Hindu widow to maintenance is a personal right which cannot be transferred. Under the law the arrears of past maintenance can be transferred, but not the right to future maintenance.

30. Mere right to sue and actionable item: A “mere right to sue” apart from the interest from which such right accrues cannot be assigned. The ‘right to sue” is a person right annexed to the ownership of property and cannot be severed, from it. It is based on the principle of public policy to prevent multiplicity of suits; the object is mainly to prevent the abuse resulting from trafficking in litigation.

31. Rule Against perpetuity, Section 14: of the act provides that no transfer of property can operate to create an interest which is to take effect after the life time of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration for that period, and to whom, if he attains full age, the interest created is to belong.Example: a transfer be made to A for life and then to B for life and then to C for life and so on, provides that A, B and C are all living persons at the date of the transfer. But if the ultimate beneficiary is someone who is not in existence at the date of the transfer, the whole residue of the estate should be transferred to him.If, he is born before the termination of the last prior estate, he takes a vested interest at birth and takes possession on the termination of the last prior estate, but if he is not born till the termination of the last prior estate, the transfer to him fails.

32. Effect of transfer on failure of prior interest:Where by reason of any rule or the rules contained in Section 13 and 14, interest created for the benefit of a person or class of persons fails to regard to such person or the whole of such class, any interest created in the same transaction and intended to take effect or upon failure of such prior interest also fail.Example: Property is transferred to A for life then to his unborn son B for life and then to C, who is living at the date of transfer, absolutely. Here B is given only a life interest. So that transfer to B is invalid under section 13.

33. Accumulation of Income, Section 17:does not allow accumulation of income from the land for an unlimited period without the income-being enjoyed by owner of the property. The law allows accumulation of income for a certain period only. The period of accumulation is valid is :

  1. The life of the transferor, or
  2. Eighteen years form the date of transfer

Any direction to accumulate the income beyond the period mentioned above is void except where it is for:

  1. The payment of debt of the transferor or any other person taking any interest under the transferor
  2. Portions of children of any other person taking any interest in the property under the transfer, and
  3. For the preservation and maintenance of the property transferred.

34. Doctrine of LIS PENDENS, Section 52:Lis means dispute, Lis pendens means a pending suit, action, petition or the like. Section 52 of the T.P Act incorporates the doctrine of Lis Pendens. It states that during the pendency of a suit in a court of law, property which is subject to litigation cannot be transferred. Section 52 lays down the Indian rule of Lis Pendens being the legislative expression of the Maxim – “ut lite pendent nihil innovetur” during litigation nothing new should be introduced. In order to constitute a Lis Pendens, the following elements must be present:

  1. There must be a suit or proceeding in a court of competent jurisdiction
  2. The suit or proceeding must not be collusive (secret agreement for an illegal purpose)
  3. The litigation must be one in which right to immoveable property is directly and specifically in question
  4. There must be transfer of or otherwise dealing with the property in dispute in any part of the litigation
  5. Such transfer must effect the rights of the other party that may ultimately accrue under the terms of the decree or order.

35. Provisions relating to specific transfers:The Act expressly provides for special type of transfer such as sale, exchange, gift, mortgage and Lease.

  1. Sale, Section 54: of the T.P. Act “sale” has been defined as a transfer of ownership in exchange for a price paid or promised or part paid and part-promised.
  1. Exchange, Sections 118 to 112: of the T.P Act, 1882 deal with “Exchanges” when two persons mutually transfer of ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an “exchange”
  1. Gift, Section 122 to 128: of the T.P. Act, 1882 deal with “Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration by one person called the donor, to another called the done and accepted by or on behalf of the done. Such acceptance must be made during the life time of the donor and while he is still capable of giving, if the done dies before acceptance, the gift is void.
  1. Leases, Section 105: a “lease” of immoveable property is a transfer of a right to enjoy property. Since it is a transfer to enjoy and use the property, possession is always given to the transferee. The lease of immoveable property must be made for a certain period.
  1. Actionable Claims, Section 130 to 137:is defined in Section 3 of the transfer of property Act as follows: A claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.Actionable claims are claims, to unsecured debts.
  1. Mortgages, Section 58 to 104:Mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt or the performance of engagement which may give rise to pecuniary liability.

Essentials of Mortgage: