A major financial decision is buying land, a house, a flat, or an apartment. In our country, most homeowners opt for long-term loans and funding to afford a residential property. As such, it becomes very important for every prospective homeowner to understand the laws and legislations governing the transfer of ownership and inheritance of immovable property. Such an understanding helps in establishing a legal right to property. The Transfer of Property Act 1882 is one such legislation that every property owner must know about.
What is the Transfer of Property Act, 1882
The Transfer of Property Act which came into effect in July 1882, is one of the oldest laws in India. Along with the prevalent succession laws and the Indian Contract Act 1872, this law defines the framework for the sale, inheritance, gift, and acquisition of property.
Understanding the scope of the ToPA
To understand the Transfer of Property Act (ToPA) better, let us first take a look at the types of property that can be transferred. Movable property refers to any property that can be physically moved from one location to another without changing the form in terms of quality or quantity, damaging or destroying it. The physical delivery of movable property with the intention of transferring its ownership is adequate, and registration of this transfer is not essential. In the case of immovable property such as land or house, however, delivery must be complemented by registration under the Indian Registration Act 1908.
While the ToPA largely pertains to the transfer of immovable property, some aspects also govern the transfer of movable property. The scope of the ToPA covers the voluntary transfer of property by two or more parties. It does not apply to transfer by operation of law (in case of forfeiture, insolvency, inheritance etc.)
Key components of the Transfer of Property Act 1882
- Transfer of Property Act governs property transfers through sale, mortgage, gift, lease, exchange, and actionable claim.
- The transfer of a property requires a conveyance through a contract or a deed. The parties entering into the contract for transfer must be competent. This means they must be adults of sound minds and legally competent.
- The seller should be the legal owner of the property, and the property must not be under dispute or illegally obtained. The conditions of the transfer of immovable property should be legal, moral, and conducive to public policy.
- The transfer of property must be done through a written agreement if the value of the property is over INR 100, the lease period is over a year, and if the property is transferred as a gift.
- If a property is under litigation or title dispute, it cannot be transferred until a court ruling is received, settling the matter.
- Property cannot be transferred to an unborn child. It must be transferred to a person who is alive and able to hold the property till the child is born.
- Transfer of property after conveyance must be completed during the lifetime of one of the parties, such as the seller.
Responsibilities of the buyer and seller
When property transfer occurs through sale, both the buyer and seller are tasked with certain responsibilities as defined by the Transfer of Property Act 1882.
The seller must disclose all title documents related to the property and must also inform the seller of any material defects to the property. The seller must bear any rent, tax, or charges incurred before the date of transfer. Between the contract's time and the property's delivery, the seller is tasked with maintaining the property and all relevant documents. With the sale, the seller must transfer ownership and possession of the property and release all encumbrances.
The buyer, too, has certain responsibilities under the ToPA. The buyer must complete the payment for the sale as stipulated by the sale contract. The buyer must ask for and verify all the documents and titles pertaining to the property. The buyer must also bear all expenses by way of rent, tax, and any loss from damage or destruction of property from the date of the transfer.
Conclusion
Despite being one of the oldest laws in the country, the Transfer of Property Act of 1882 remain extremely relevant today. With the real estate market booming and most Indians aspiring to own residential property, this legislation lays down the framework for the regulated and legal transfer of property, particularly concerning sale and purchase.
As a prospective homebuyer, it is essential to understand the terms of the ToPA to ensure a smooth transfer of the property you have invested in and plan to call home. If you are unclear about the terms of the contract or transfer, it may be a good idea to consult a legal advisor.
