What is Transfer of Property Act? Laws of Immovable Property

The Transfer of Property Act was introduced in the year 1882, which stands as one of the most important acts of legislation governing property transaction in India. It lays down the legal provisions for the transfer of immovable property between living persons. 

This also provides rights, duties, and liabilities among the parties involved in such a transfer. Whether it is a sale, lease, mortgage, exchange, or gift within the ambit of the Act, legal, transparent, and enforceable property ownership transfer occurs.

The very essential component includes knowing what is meant by transfer of properties, the scope of the Act, and its very important provisions, which all the property owners, buyers, advocates, and investors need to know while dealing with real estate in India.

Introduction to the Transfer of Property Act, 1882

The Transfer of Property Act was passed with the goal to codify and standardize the laws relating to the transfer of property in India. Until its introduction, property transfers were mainly governed by customary laws and judicial precedents that brought confusion and disputes.

The Act came into operation on 1 July 1882 and is applicable all over India unless expressly barred. It governs inter-vivos transfers, meaning those made by living persons to other living persons, as opposed to transfers made upon death by way of inheritance or succession.

The Act, even in the core sense, directly clarifies, among other things:

• How property can be transferred
  
• Who is competent to transfer property
  
• What rights and obligations arise from such transfers

See also: What Is Mutation of Property and Why Is It Important?

Define Transfer of Property Under the Act

Section 5 of the Act provides a simple definition of what a transfer of property is. It states that a transfer of property is an act by which a living person conveys property, in whole or in part, to one or more other living persons.

Essentials of the definition are: 

• Existence of a living transferor

• Existence of a living transferee

• Transfer of property right

This definition explains the basis on which the transfer of property is understood under Indian law.

See also: What Is a Settlement Deed and How Does It Work in Property?

Scope of the Transfer of Property Act

This is essentially an act governing the transfer of immovable property rights in India. The statutes, however, do not bar the application of a few provisions related to movable property. The exceptions are:

• Wills cannot transfer property (or are directed by the Indian Succession Act).

• Transfer by succession. 

• Partition of joint family property can be the other exception. 

While transfers apply to voluntary transfers made during the lifetime of the parties, care is taken that it encompasses transactions that conform to legal standards, are valid, and enforceable by law.

Section 7 of Transfer of Property Act: Competency to Transfer

Section 7 of the Transfer of Property Act states who must be legally competent to transfer property to another person. A person must:

• As a requirement under the Indian Contract Act of 1872, be competent to contract

• Entitled to transferable property, or authorized to dispose of it.

This means that minors, persons of unsound mind or individuals without legal title cannot validly transfer property. It safeguards transferees by making sure transfers of property are executed by legally competent individuals.

Rules Regarding Transfer of Property Act

Important definitions that govern the transfer of property by the Act are: 

• Transfers of property shall be made in accordance with law and voluntarily.

• There must also be an unclouded title and authority for the transferor.

• No transfer shall be contrary to public policy or law.

• Certain transfers must be made in writing and registered under the Registration Act, 1908.

Such rules hold the essence of all-in-all regulation for the transfer of ownership in immovable property in India-i.e., apart from crime, misrepresentation, and illegalities in conveyance.

See also: What Is a Home Loan Sanction Letter and Why Does It Matters?

Types of Property Transfer Under the Act

The Transfer of Property Act recognizes several modes of transfer of property, each governed by its own provisions.

Sale

A sale means the transfer of ownership of the property. Above a certain approved limit for sale in immovable property, it has to be carried out through a registered instrument.

Mortgage

A mortgage is the transfer of an interest in immovable property as security for the repayment of a loan or other obligation. The ownership of the mortgaged property remains with the mortgagor while the mortgagee gets limited rights.

Lease

According to this type of transfer, one party grants the use of immovable property to the other for a certain time, in consideration of rent or a premium. Leases that are longer than a specified duration must be registered.

Exchange

The exchange is when one or more mutual conveyances take place, without consideration, of one property for another.

Gift

A gift is simply the transfer of property without consideration. A gift of immovable property must be registered for its effectiveness.

These forms collectively form the type of property transfer recognized under Indian law.

See also: What Is RERA Approved? Key Facts Every Buyer Must Know

Transfer of Immovable Property Explained

Transfer of immovable property is defined as the legal act transferring rights in land, buildings, or benefits arising from it. According to Indian laws, immovable property is:

• Land and buildings

• Rights which are attached to the land

• Hereditary allowances and easements

The said act keeps all such transfers on record, and it makes them legally valid and enforceable. Registration, along with stamp duty and lawful execution, are the necessary elements in transferring the immovable property.

Section 38 of the Transfer of Property Act: Transfer by Ostensible Owner

Section 38 of the Transfer of Property Act lays out the provisions under which property may be transferred by an ostensible owner. An ostensible owner is one who, rather than being the real owner, appears to be.

The section offers protection to a transferee who:

• Exercises reasonable care and diligence in ascertaining the authority of the transferor

• Acts in good faith

Under these two conditions, there may be upholding of the transfer even though the transferor was not the owner. This provision balances equity and fairness in property transactions in a way.

See also: What is the sanction plan of building & why is it required?

Importance of the Transfer of Property Act in India

In India, the Transfer of Property Act occupies a very important place in the area of law regulating the transfer of ownership of immovable property. Its importance arises from the fact that it does the following:

Providing legal certainty to property transactions.

• Protecting the buyer or transferee.

• Preventing illegal and fraudulent transfers.

• Establishing uniform rules for all jurisdictions.

Without the legislation in place, property transactions will always have their own share of disputes and different interpretations.

Relationship With Other Property Laws

The Transfer of Property Act works with the following:

• The Registration Act, 1908

• The Indian Contract Act, 1872

• State-specific stamp duty laws

Together, they form an exhaustive code with respect to property ownership, documentation, and enforcement.

Conclusion

Property laws in India are mainly based on the Transfer of Property Act, 1882. The Act aims at ensuring greater certainty and simplicity in the practice of property transfers and lays down the requirements for establishing a valid transfer and protecting the rights of the parties regarding such transfer.

Thus, to act legally for purposes of compliance and self-protection regarding property buying, selling or managing, one needs to be aware of the law.

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