Important principles regulating the nature of interest / title and other aspects in an Immovable property

Apart from other important things, two things have always been precious to every human life, one, his personal liberty; and two, his properties, movables (including money) and immovables, which sustain his life. In the present write up we will look into the attributes of rights, interest and title in an immovable property.

Section 3(26) of General Clauses Act, 1897 defines immovable property as which includes land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth; and Section 3 of Transfer of property Act, 1882, defines “attached to the earth” as – (a) rooted in the earth, as in the case of trees and shrubs; (b) embedded in the earth, as in the case of walls or buildings; or (c) attached to what is so embedded for the permanent beneficial enjoyment of that to which it is attached. According to definition of immovable property provided under the Transfer of property Act, 1882, standing timber, growing crops or grass are not regarded as immovable property.

Registration of an immovable property is one of the most important attribute of an immovable property, as it is a notice to the world at large about persons possessing the nature of rights, title and interest including the encumbrances which are attached to an immovable property; and section 17 of Registration Act provides for compulsory registration of every transaction relating transfer of any right, title or interest in an immovable property, including gifts of immovable property, but excluding leases which are for less than a year, and further excluding such mortgages which are created by merely depositing of title deeds.

Under the law, broadly, three distinct legal actions lie in respect of an immovable property, namely – (a) When a cloud is raised over a person’s title and he does not have a possession, a Suit for declaration and possession, with or without a consequential injunction is the remedy; (b) Where a person claims title or interest, but he is out of possession, he has to sue for possession and consequential injunction, may be alongwith declaration to his title or interest; (c) Where there is merely an interference with a person’s lawful possession or where there is a threat of dispossession, or where there is a frustration or interference in the free and full enjoyment of the property, it is sufficient to sue for an injunction simpliciter.

The Sale of Immovable property: The obligations of Seller and the buyer of immovable property are set out in Section 55 of the Transfer of Property Act, 1882. Whether the concerned agreement is a “Sale deed” or is a “Contract for Sale”, is indicated u/s 54 of Transfer of Property Act, 1882. Section 6 of the Transfer of property Act enumerates what properties cannot be transferred.

Where the Agreement contemplates transfer of ownership, for an agreed price, the price being paid or promised to be paid, or partly paid and partly promised to be paid, followed by Registration of the Agreement, and followed by handing over the possession of the said property, the said Agreement is construed as “Sale deed”; and where under the Agreement, may be even oral, the parties have arrived to an understanding that the sale of such property would take place on terms settled between them, it is an contract for sale and such contract does not create any interest in or charge on such property, except the right to move the court of law for the specific performance of the said contract.

Section 55 of the Transfer of property Act contains some fundamental features of transfer of an immovable property under the agreement of “Sale deed”. It spells out the obligations and rights of buyers and sellers, before and after “Sale”. However, the parties may vary these obligations and waive their such rights by providing for in their contract.

Buyer’s Rights before completion of “Sale”: Section 55(6)(b) The buyer is having a charge on the property for the amount he has paid under the contract;

Buyers’ Liability before completion of “Sale”: Section 55(5):

(b) to pay the purchase money to the seller or to such person as he directs.

Seller’s Rights before completion of “Sale”: Section 55(4)(a): The seller is entitled to the rents and profits of the property till the ownership thereof passes to the buyer;

Seller’s Liability before completion of “Sale”: Section 55(1):

(a) to disclose to the buyer any material defect in the property or in the seller's title thereto;

(b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller's possession or power;

(c) to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto;

(d) on payment of the agreed price, execute a proper conveyance of the property;

(e) to take as much care of the property and all documents of title relating thereto which are in his possession' as an owner of ordinary prudence would take of such property and documents;

(g) to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due on such date, and, except where the property is sold subject to encumbrances, to discharge all encumbrances on the property then existing.

Buyer’s Rights after completion of “Sale”: Section 55(6)(a): The buyer is entitled where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits thereof.

Buyer’s Liability after completion of “Sale”: Section 55(5):

(d) to pay all public charges and rent which may become payable in respect of the property, the principal moneys due on any encumbrances subject to which the property is sold, and the interest thereon afterwards accruing due.

Seller’s Rights after completion of “Sale”: Section 55(4)(b) In cases where the ownership of the property has passed to the buyer and where the whole of the agreed price is not paid, the seller is entitled to a charge upon the property for the unpaid amount;

Seller’s Liability after completion of “Sale”: Section 55(1)(f) The seller is bound to give, on being so required, the buyer, or such person as he directs, possession of the property as its nature admits;

Section 55(2) The seller shall be deemed to contract with the buyer that the interest which the seller professes to transfer to the buyer subsists and that he has power to transfer the same.

Section 55(3) Where the whole of the purchase money has been paid to the seller, he is also bound to deliver to the buyer all documents of title relating to the property which are in the seller's possession or power.

An Agreement for transfer of property implies a contract not only to execute the deed of transfer but also to appear before the Registering Officer and to admit execution thereby facilitating the registration of the document wherever it is compulsory.

Multiple transfer of an immovable property: Where in cases, a person has over a period of time, transferred an immovable property, to more than one person, and such transfer of property cannot co-exist, by virtue of mandate of Section 48 of Transfer of property Act, 1882, each later created right shall, in the absence of a special contractor reservation binding the earlier transferees, is subject to the rights previously created.

Transfer of property pending suit relating thereto: Where in cases, any transfer of an immovable property is effected, the property in respect of which a Suit or proceeding is pending in any Court having authority, and in such Suit or proceedings, any right to immovable property is directly and specifically in question, the said transfer of property would be subject to the any decree or order which may be made in the said Suit or proceeding. [Section 52 of Transfer of Property Act, 1882]

Immovable property in the joint names: Where any immovable property exist in the joint name of two or more persons, and the dispute arises between those joint holders as to their respective share in the said immovable property, section 45 of Transfer of property Act, 1882 furnishes the answer to this dispute. The said section says that in cases where the money was paid for the purchase of said immovable property out of a common fund belonging to those joint holders, the joint holders are respectively entitled to interests in such immovable property identical, as nearly as may be, with the interests to which they were respectively entitled in their common fund, unless there exist any terms of the contract otherwise specifying the nature of interest of said joint holders;

And, where the money was paid for the purchase of said immovable property out of separate funds belonging to joint holders individually, they are respectively entitled to interests in such proportion they have contributed to the total purchase money paid, unless there exist any terms of the contract otherwise specifying the nature of interest of said joint holders;

And, in cases where there is no evidence as to the interests in the fund to which the joint holders were respectively entitled to, or as to the money which they respectively advanced, such joint holders shall be presumed to have share in equal proportion.

Now I would be briefly discussing the law on gifts of immovable property, fraudulent transfers, the concept of tenants-in-common and joint tenancy.

What is gift: Gift is the transfer of certain existing movable or immovable property, belonging to the person, which is made voluntarily and without any price. The person who gifts is called the donor, and the person to whom it is given is called the donee. The transaction of gift is said to be complete, when the said gift is formally accepted by the donee during the lifetime of the donor. If the donee dies before acceptance, the gift is invalid. [Section 122 of Transfer of Property Act, 1882] A gift comprising future property is void. [Section 124 of Transfer of Property Act, 1882]

Gifts which include obligations, “onerous gifts”: Where a gift is in the form of a single transfer to the same person of several things of which one is, and the others are not, burdened by an obligation, the donee can take nothing by the gift unless he accepts the gift fully, i.e. both the benefits and the obligations. And where a gift is in the form of two or more separate and independent transfers to the same person of several things, the donee is at liberty to accept one of them and refuse the others, although the acceptance may only be of the beneficial and the refusal is of the onerous. [Section 127 of Transfer of Property Act, 1882]

How gift of immovable property is to be effected: For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses. However, putting in possession is not a condition precedent to effect a valid gift. The donor may continue to be in the possession of the gifted property. [Section 123 of Transfer of Property Act, 1882]

How gift of movable property is to be effected: For the purpose of making a gift of movable property, the transfer may be effected either by a registered instrument signed or by delivery. Such delivery may be made in the same way as goods sold may be delivered. A gift of movable property may also be made in contemplation of death of the donor, and in such cases the requirements stated in Section 123 may not be complied with. [Sections 123 and 129 of Transfer of Property Act, 1882]

Whether gift can be suspended or revoked: A gift may be suspended or revoked where the donor and donee agrees that on the happening of any specified event, such event which does not depend on the will of the donor, a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as the case may be. Further, a gift may also be revoked in any of the cases in which, if the gift is in the nature of a contract between the donor and the donee, and in that case the contract of gift may declared to be cancelled. However, the gift cannot be suspended or revoked in cases of alleged want or failure of price. [Section 126 of Transfer of Property Act, 1882]

What are the rights of the transferee under suspended or revoked gift: Where in a case the property which was gifted, was lawfully suspended or revoked by the donor of the property, and is yet transferred by the donee, in that situation, the rights of transferees under the said transaction of transfer is not frustrated, provided two conditions are satisfied – (a) if the transfer is for valuable consideration and (b) the transferee has no notice of such suspension or revocation of the gift. [Section 126 of Transfer of Property Act, 1882]

What is the extent of liability of beneficiary under a gift: Where a gift consists of the donor's whole property, the donee is personally liable for all the debts due by and liabilities of the donor at the time of the gift, to the extent of the value of the property comprised therein in the gift; including the liability as provided in onerous gifts stated hereinabove. [Sections 127, 128 of Transfer of Property Act, 1882].

Very Important: All aforesaid provisions of law of gift are subject to any rule of Mohammedan law in respect of gift.

“Tenant in Common” and “Joint Tenancy”: It is very important to understand the concept of “Tenant in Common” and “Joint Tenancy”. These concepts, however, has nothing to do with “Tenancy”. They suggest the nature of ownership of the property which is held by an individual. In India, the law of “Tenants in Common” is followed, whereas in England “Joint Tenancy” is followed.

Tenants in common implies, where any property is jointly held by two or more persons, every such person is absolute owner of the property, in equal share, unless there is an express or implied contract to suggest their individual percentage of holding.

Joint tenancy is a situation where if any property is jointly held by two or more persons, every such person is not the absolute owner of the property in equal share, unless there is an express or implied contract to suggest their individual percentage of holding.

Like for example, if a property is owned by two persons A and B jointly, than, unless there is any contract to suggest otherwise, both A and B will have 50% share in the property; and in the event of death of A, in cases of “Tenants in common”, the 50% share of A will go to the heirs of A, and B will continue to have his 50%; whereas in case of “Joint tenancy”, if A dies, B becomes the 100% owner of the property, that is to say, the share of A devolves upon B. Similarly, in case of "Tenants in Common" both A and B are entitled to dispose of their 50% share by way of Will.

The principle, that you can transfer only what you have: A transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property, and in the legal incidents thereof, unless a different intention is expressed or necessarily implied from the terms of the contract. Such incidents include, where the property is land, the easements annexed thereto, the rents and profits thereof accruing after the transfer, and all things attached to the earth; and, where the property is machinery attached to the earth, the movable parts thereof; and, where the property is a house, the easements annexed thereto, the rent thereof accruing after the transfer, and the locks, keys, bars, doors, windows, and all other things provided for permanent use therewith. [Section 8 of Transfer of Property Act, 1882]

Deemed knowledge of transfer of property / ownership of an immovable property / possession of immovable property: Section 3 of the Transfer of property Act, 1882, contains the fundamental principle in respect of transactions of any immovable property. It says that a person is said to have “notice” of certain facts, when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made, or gross negligence, he would have known it. The explanation appended to the said section really laid down the classic principles.

The first principle is that when a transaction relating to an immovable property is duly effected by an registered instrument, then any person interested to acquire any share or interest in the said immovable property, is considered in law, that the said person has due notice of the existence of the registered instrument which was effected pursuant to the said immovable property, and the said person is duly bound by the encumbrances or charge, if any were so created, in respect of that immovable property.

The second principle is that any person interested to acquire any share or interest in any immovable property, it would be deemed that, that the said person has due notice of the title, if any, of such person who is for the time being in actual possession of the concerned immovable property.

Fraudulent Transfers: Where any immovable property is transferred with intent to defeat or delay the creditors of the transferor, the said transfer of property may be challenged by filing a Suit for declaration to that effect; and the said Suit shall be deemed to be instituted on behalf of, or for the benefit of, all the creditors. However, this proposition is subject to cases where the transferee acquires the rights in good faith and by paying valuable price.

Where in a case, a transfer of immovable property is effected without any price, and the said property is again transferred for valuable price with intent to cheat the subsequent buyer, the subsequent buyer may challenge the first transfer to be declared as void and illegal. [Section 53 of Transfer of Property Act, 1882] Sections 421, 422, 423 and 424 of Indian Penal Code, 1860, also regards such fraudulent transfers as punishable offence.

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