Property Law: Frequently Asked question (FAQ)

1. Question: What is “property”?

Answer: Property implies a bundle of rights over a thing. The scope of such rights is variable and can extend to excluding everyone else from interfering with his enjoyment of that thing.

2. Question: Can “trade marks” and “copy rights” be considered as property?

Answer: Property includes every possible interest a person can take in a thing and hence not only includes trade marks and copyright but also patents and personal rights such as debts.

3. Question: What is “transfer of property”?

Answer: Transfer of property takes place when a living person conveys some property to some other person or even to himself immediately or at some time in the future. Such living person may also be companies or any kind of association of individuals.

It is to be noted that any conveyance of property as a result of family arrangement or partition is not transfer of property

4. Question: What is a contingent interest?

Answer: It is possible to create an interest in a property in favour of a person, which shall come into effect only when a specified uncertain event happens or does not happen. Such interest is known as a contingent interest.

5. Question: Who is an “ostensible owner”? Can such person transfer property?

Answer: An ostensible owner is distinct from real owner and refers to such persons who appear or professes in the eyes of the public to be the real owner of the property.

Any transfer of property by such person is not voidable, merely on the ground that he was not entitled to make such transfer if the transferee has acted in good faith and taken reasonable care to ascertain the status of the transferor.

6. Question: What is “Sale”?

Answer: “Sale” refers to the transfer of ownership in exchange for a price paid or promised to be paid at a future date, or a part of the price is paid immediately with the remaining promised to be paid by a particular date in the future.

The Transfer of Property Act, 1882 provides that sale of immovable property whose value is hundred rupees or more can be made only by a registered instrument.

7. Question: What is “Hire-Purchase Agreement”?

Answer: In case of sale, the buyer immediately becomes the owner of the property but this is not so in the case of a hire purchase agreement.

When the buyer may not be able to afford the entire price of a property, a hire-purchase agreement allows the buyer to hire the goods for a monthly rent. When a sum equal to the original full price along with sufficient interest has been paid in equal installments, the buyer may then exercise an option to buy the goods at a predetermined price (usually a nominal sum) or return the goods to the owner.

8. Question: What are the duties of the seller in a sale of immovable property?

Answer: Before the sale takes place, the seller is duty bound to disclose all material defects in the property which is the subject of sale, to the buyer. He also has to produce the title deeds in order to execute conveyance in favor of the buyer.

Once the sale has been completed, the seller is bound to give the possession of the property and also to deliver the title deeds on receipt of the price

9. Question: What are the duties of the buyer in a sale of immovable property?

Answer: The buyer is duty bound to disclose all material facts to the seller, which he has reason to believe the seller might be unaware of and which materially increases the seller’s interest in the property.

Also, once the sale has been concluded, the buyer is to pay the purchase-money to the seller or any other person as directed by the seller.

10. Question: What are the rights of the seller?

Answer: The seller is entitled to the rents and profits of the property till the time that the ownership of the property is with him, and has not passed on to the buyer.

Also, the seller is entitled to exercise a charge (which is a term used to describe certain rights) on the property in the ownership of the buyer till the time the whole of the purchase-money has been paid to him.

11. Question: What are the rights of the buyer?

Answer: Once the sale has been concluded, the buyer is entitled to any subsequent improvement or increase in the value of the property as well as the rents and profits that might accrue to him in his capacity as the owner of the property.

Also, the buyer is entitled to a charge on the property as against the seller or anyone claiming under him to the extent of the seller’s share in the property for the amount of purchase money paid by him to the seller and includes any interest due on such amount.

12. Question: What is “marshalling in favour of purchaser”?

Answer: If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person the buyer is entitled to have the mortgage debt satisfied out of the properties not sold to him so far as the same will extend.

Thus where a mortgagee has the means of satisfying his debts out of several properties he shall exercise his right so as not to prejudice the purchaser of one of them as far as possible.

13. Question: What is a “mortgage”?

Answer: A mortgage is a transfer of an interest in immovable property as a security for a loan or an existing or future debt or for performance of any engagement, which might give rise to a pecuniary liability.

If money is lent by a lender to a borrower backed by a security, the lender will be protected as even if the borrower becomes insolvent the security is given precedence over the other creditors.

The person who transfers the interest is called the “mortgagor”.

The person to whom the interest is transferred is the “mortgagee”.

14. Question: What is the difference between a “mortgage” and a “charge”?

Answer: A “mortgage” is a conveyance of property, subject to a right of redemption, whereas a charge only gives a right to payment out of a particular immovable property without transferring it.

A “mortgage” can be enforced against a bonafide purchaser for value whether with or without notice but a charge cannot.

15. Question: What is the difference between a “mortgage” and a “lease”?

Answer: In “mortgage” some interest in the property is conveyed for securing payment of loan and a right of redemption is reserved for the mortgagor. In a “lease” however physical possession of the property is conveyed for use and occupation of the same by the lessee.

In lease, the property is not transferred by way security for the payment of money borrowed.

16. Question: Can a mortgage take place without the delivery of property?

Answer: The mortgagor without delivering possession of the mortgaged property may bind himself personally to pay the mortgage money and if he fails to pay the money back the mortgagee reserves the right to cause the property to be sold and apply the proceeds towards the satisfaction of the debt. This kind of mortgage is called “simple mortgage”.

17. Question: Can the rents, profits and other benefits be appropriated towards the satisfaction of the debt?

Answer: The mortgagee may retain possession of the mortgaged property and receive and apply the rents and profits made available from the property during the same time towards the satisfaction of the debt. He is entitled to retain such possession until complete payment of the mortgage money.

Such transaction is called a “usufructuary mortgage”.

18. Question: What is an “English mortgage”?

Answer: When there is an absolute transfer of the property to the mortgagee with a provision in the mortgage document that the mortgagee would have to re-transfer the property back to the mortgagor, the transaction is known as an “English mortgage”.

19. Question: Is it possible to create a mortgage by mere delivery or deposit of title deeds?

Answer: It is possible to create a mortgage by mere deposit of the title deeds. However such deposit must be backed with an intention to secure the debt with the said property.

Such a mortgage need not be written and registered. It is an oral transaction.

20. Question: What happens if the mortgage is not effected by a registered document and not attested by at least two witnesses?

Answer: If there is non-compliance of the above mentioned provisions and if the mortgage has not been executed by delivery of title deeds the mortgagee nevertheless acquires the status of a mortgagee by prescription. It must be mentioned that it is the duty of the mortgagee to ensure that a proper title deed is executed in his favour.

21. Question: What is the right of redemption?

Answer: The right of redemption signifies the inherent right of a mortgagor to get back his property and documents on payment of mortgage money on or before a specified date.

22. Question: What are the rights of a mortgagor to redeem?

Answer: On payment or tender of the mortgage money the mortgagor has a right to require the mortgagee to deliver the possession of the mortgaged property, mortgage deed and all other concerned documents.

Also the mortgagee will have to register a written document acknowledging that any right or interest that he might have had in the mortgaged property has been extinguished.

23. Question: Can the mortgagor redeem the property before the stipulated date?

Answer: It is possible for the mortgagor to redeem the property even before the stipulated date.

Any condition or provision in the mortgage document which prohibits such right is void.

24. Question: What happens if there is any accession to the property during the period of mortgage?

Answer: Accession is basically the process of increase by addition. The mortgagor is entitled to any accession to the mortgaged property during the continuance of the mortgage unless there is a contract to the contrary.

However the mortgagor cannot claim it if the addition has been acquired by the mortgagor at his own expense and if it is possible of separate possession and enjoyment.

He will have to pay the mortgagee if wishes to acquire the same.

Otherwise if the addition was such that it was necessary or done with the mortgagor’s consent the mortgagor will have to compensate the mortgagee for the same.

25. Question: What happens if there is any improvement to the property during the period of mortgage?

Answer: If there is any kind of improvement whatsoever which enhances the value of the property the mortgagee shall be entitled to such improvement at the end of the mortgage and if the mortgagor wishes to acquire the same he will have to pay the cost thereof.

26. Question: What happens if improvement was carried out by the mortgagee to save the property from destruction or deterioration?

Answer: If such improvement was absolutely essential, in the sense that it was carried out to save the property from destruction or deterioration which would diminish its value or was made with the consent of the mortgagor the mortgagor will have to pay the mortgagee the cost of the same

27. Question: When can the mortgagee sell the mortgaged property?

Answer: The mortgagee can sell the mortgaged property at any time after the mortgage money has become due and the mortgage money has not been paid or tendered by the mortgagor.

The mortgagee will however have to obtain a decree from the courts allowing him to sell the property or debarring the mortgagor from exercising any right whatsoever in relation to the said property including the right to redeem.

28. Question: What is a suit for foreclosure?

Answer: When the mortgagee files a suit to prohibit the mortgagor from exercising any right whatsoever in relation to the property including the right to redeem, it is known as a suit for foreclosure

29. Question: What happens if the sale proceeds form the mortgaged property is not sufficient to satisfy the debt?

Answer: If the net income from the sale of the mortgaged property is not enough to satisfy the debt a personal decree will be passed against the mortgagor and he will be held personally liable to satisfy the balance amount.

30. Question: Can a mortgagee file a suit for foreclosure or for sale when the transaction is a usufructuary mortgage?

Answer: Since only the right to possession is transferred in such a transaction and the mortgagee is supposed to retain possession till the debt is satisfied with the help of rents and profits made available from the land he can neither sue for foreclosure nor for sale.

31. Question: When can the mortgagor be sued for the repayment of the mortgage money?

Answer: The mortgagor can be sued for the repayment of the mortgage money in three circumstances only.

1)  If he has bound himself personally to pay the mortgaged money.

2)  If the proceeds from the sale of the mortgaged property are insufficient to satisfy the debt.

3)  When though the mortgagee was entitled to possession, the mortgagor did not deliver possession

32. Question: What are the liabilities of the mortgagee when the property is in his possession?

Answer: When the property is in the possession of the mortgagee he should manage the property properly as well as carry out necessary repairs as required from time to time.

He must also collect the rents and profits and pay government revenue and all other charges of a public nature. He must also not commit any act, which has the effect of diminishing the value of the property

33. Question: What are the rights of the mortgagor?

Answer: The mortgagor has a right to redeem the mortgaged property on payment or tender of the mortgaged property and if he has mortgaged more than one property, he might do so separately or simultaneously. Also, he has a right to any accession or improvement to the mortgaged property that might have taken place

34. Question: What are the liabilities of the mortgagor?

Answer: The mortgagor has to first establish that the said property is indeed his own. Further, he has to ensure that the mortgagee enjoys quiet possession of the said property.

Further, he is liable to pay any charges, interest, rent etc that might have become due before the mortgage took place.

35. Question: Can any person other than the mortgagor sue for the redemption of the mortgaged property?

Answer: Any person who has an interest or charge upon the said property can redeem the property by payment of the tender money. Also if the payment of the debt has been guaranteed by another person, such surety can sure for the redemption of the property.

Any creditor of the mortgagor is also in a position to redeem the mortgaged property after he has successfully obtained a decree from the courts allowing him to sell the said property. On redemption, such person will step into the shoes of the mortgagee as regards the mortgagor and will enjoy all the rights relating to sale, foreclosure or redemption of such property. This right is known as the right of subrogation.

This right is also available to any person who has lent money with which the mortgage has been redeemed

36. Question: Does a “charge” involve any transfer of property?

Answer: A charge does not involve any transfer of property. Only a personal obligation to pay out of the specified property is created. In case of a charge, the property is made security either by the act of the parties or by the operation of law. However the transaction should not be a mortgage

37. Question: What is a lease?

Answer: A lease is the transfer of the right to enjoy the property. Such transfer might be for certain duration or in perpetuity and usually is in consideration of the payment of rent

38. Question: When does a “tenancy at will” arise and when does it end?

Answer: A tenancy at will arises when a person occupies land or premises as a tenant with the consent of the landlord on terms decided by either party.

The tenancy ends when either party does any act, which is incompatible with the continuance of the tenancy, for instance, a demand by the landlord to quit, an assignment of the tenancy by the tenant etc. A tenancy also automatically comes to an end on the death of the tenant

39. Question: Is it possible to alienate a tenancy at will?

Answer: A tenancy at will cannot be alienated. The landlord must give reasonable notice asking the tenant to quit.

40. Question: What is the difference between lease and license?

Answer: Though a license is similar to a lease in the sense that it allows a right to enjoy the immovable property of the grantor yet it does not create any interest in the property.

In order to determine whether a transaction is a lease or a license, the substance of the document should be preferred to the form and importance should also be given to the intention of the parties.

It is a lease only if it creates an interest in the property. If it merely permits another to make use of the property, it is a license

41. Question: How long will a lease last in the absence of a written contract?

Answer: In the absence of a written contract between the parties, a lease for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, and any party wishing to terminate the same will have to give a notice in writing at least six months in advance.

A lease for any other purpose shall be deemed to be a lease from month to month and in order to terminate the same, either of the parties will have to give a notice in writing at least fifteen days in advance

42. Question: What are the rights and liabilities of the lessor and lessee?

Answer: It is the duty of the lessor to reveal all material defects in the property as well as give possession of the same to the lessee.

The lessee on the other hand has the right to any accession to the property during the lease. He also has a right to charge the lessor for any repair work that he might have carried out and also for any payment that he might have made on behalf of the lessor.

Simultaneously, the lessee has a right to ensure that the property leased remains in good condition. He is also not to erect any permanent structure on the property or commit any kind of waste, which might diminish the value of the property.

The lessee should promptly deliver the possession of the property back to the lessor on the expiry of the term

43. Question: What happens if the lessee dies before the expiry of the lease?

Answer: If the lessee dies before the expiry of the lease, the lease does not come to an end. It passes on to the heirs of the lessee for the remaining period.

44. Question: Can the lessor forcibly eject the lessee on the expiration of a lease?

Answer: On the expiration of the lease the lessor is supposed to deliver the possession of the property back to the lessor. If he does not do so the lessor will have to approach the courts to obtain a decree directing the lessee to vacate the property.

The lessor is however not empowered to eject the lessee

45. Question: Under what circumstances can a landlord forfeit a lease?

Answer: A landlord may forfeit a lease only under the following circumstances:

If there is an express condition in the lease document, which provides that on the breach of the said condition, the lessor may reenter the property.

The lessee has been adjudicated an insolvent by the courts.

If the lessee renounces his character as a tenant by either transferring the property to a third person or some other act inconsistent with the tenancy

46. Question: Can the forfeiture of a lease be waived?

Answer: If the lessor accepts rent from the lessee after forfeiture, or does any act which would give rise to the impression that the lessor wants the lease to continue, the forfeiture will be said to have been waived.

However if the rent were accepted after the institution of a suit to eject the lessee such acceptance would not amount to a waiver.

47. Question: Can the lessee avoid the termination of the lease once a suit to eject the lessee has been instituted?

Answer: When a lessor has instituted a suit to eject the lessee because of non-payment of rent, the lessee can avoid the forfeiture of the lease if the lessee pays or tenders the unpaid rent, together with interest and costs which the lessor had to incur in bringing about the suit.

In such cases, the court will pass an order relieving the lessee against the forfeiture

48. Question: Is the lessor supposed to give any kind of notice to the lessee before filing of a suit for ejectment?

Answer: The lessor cannot file any suit for ejectment until he has served a notice on the lessee which mentions the particular breach which has resulted in the determination of the property by forfeiture.

Also, if the breach is capable of remedy, a fair chance has to be given to the lessee to do so. However if such remedy is not possible or the lessee fails to remedy the breach within a reasonable time, nothing can prevent the lessor from filing a suit for ejectment

49. Question: Does an acceptance of rent from the under-lessee amount to a renewal of lease?

Answer: If the lessee lets the property to another individual during the continuance of the lease, such individual will be the under-lessee and if the lessor or his representative accepts rent from the under-lessee ordinarily, or even after the determination of the lease such lease will be said to have been renewed from year to year or from month to month according to the purpose for which the lease has been granted.

50. Question: What is an “exchange”?

Answer: When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money, the transaction is called an exchange

51. Question: What is the difference between “sale” and “exchange”?

Answer: In case of an exchange, money may be transferred for money. There can be no exchange of a thing or property for money, as that would constitute a “sale” of such property or thing.

When a property is transferred from one person to another, it will have to be done in the manner of a sale

52. Question: What is a “gift”?

Answer: A “gift” is the transfer of certain movable or immovable property made voluntarily and without any consideration from the person receiving the gift. The person who makes the gift is known as the donor and the one who receives the gift is known as the donee.

The gift may be accepted either by the donee or someone on his behalf.

53. Question: Can the gift be accepted by the heirs of the donee?

Answer: The gift has to be accepted by the donee during his lifetime. Such a gift cannot be accepted by the heirs of the donee after his death

54. Question: Is the act of acceptance on the part of the donee essential to constitute a valid gift?

Answer: The donee must make his acceptance known in order to constitute a valid gift. Also such acceptance should be made in the lifetime of the donor and while he is still capable of making the transfer

55. Question: Is it possible to gift an actionable claim

Answer: Unlike other movable property, the mere delivery of an actionable claim will not amount to a valid gift. The transfer of an actionable claim can only be done by execution of a written instrument signed by the transferor. Such transfer need not be registered.

56. Question: Are the rules on gifts under the Transfer of Property Act equally applicable to gifts made under Mohammedan law?

Answer: The rules relating to gifts under the Transfer of Property Act, 1882 do not apply if the gift has been made by a Mohammedan.