Transfer of Property Act: Meaning, Types and Laws

Initiating a home purchase involves a Transfer of Property Act-regulated purchase agreement. This legally binding document, signed by both sellers and buyers, solidifies agreements on closing costs, dates, and clauses. While contract specifics may vary globally, certain provisions remain consistent. These provisions are essential for ensuring seamless property possession. 

Although risk-free transactions aren’t guaranteed in real estate, understanding the potential risks transferred through a sale agreement under the Transfer of Property Act is vital. To shed light on this, let’s delve into the Act’s core components and sections.

What is the Transfer of Property Act?

Immovable Property Under the Transfer of Property Act

Under the law of transfer of property, some items are not included such as standing timber, growing crops, or grass. These three items come under the movable property. Hence the basic understanding of immovable property under the transfer of property act is a property that is not movable. 

Individuals Competent to Transfer Property

Sec 7 of TP act has certain rules for those eligible for transferring their property. It states- “Every person competent to contract and entitled to the transferable property, or authorized to dispose of transferable property on his own, is competent to transfer such property, either wholly or in part and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in force.”

Operation of Transfer

Under Sec 9 of transfer of property, “Unless a different intention is expressed or necessarily implied, 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.” 
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Some of the incidents or circumstances covering this clause of property act 1882 include:

• Where the possessions are land, the privilege to take over, the gains and the rents that are obtained during transfer
• Where things are immovable
• Where there is an actionable claim or a debt to the property, but no interest or arrear materialized before the transfer.

Oral Transfer 

Under Sec 9 of the transfer of property act, “A transfer of property may be made without writing in every case in which writing is not expressly required by law.” Under this act, the property transfer may get affected through oral agreement. But if the law passes an order that a written agreement can be prepared to complete the transaction. 

Attempted Alienation

The term alienation under the property act means property transfer. Transferring of the property can be made through gifts, sales, and mortgages. Under Hindu law, no member of a joint family has absolute power to distance the joined property on his own accord without the approval of the coparceners (all the male members of the HUF Karta). Sec 10 of the TP act is all about free will of transfer property and has been specially created to promote free transfer. 

Transfer of Property to an Unborn Child 

Under the provisions of sections 13 and 14 of the transfer of property act 1982, the Favor to an unborn child is not admissible. To make this possible, a person has to apply for a transfer in favour of the individual.  
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Sec 13 of the transfer of property act states that “a transfer can be brought into effect between two individuals. It reads as, “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 a 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 whole of the remaining interest of the transfer in the property.” 

Sec 14 of transfer of property act states that “No transfer of property can operate to create an interest which is to take effect after the lifetime 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 of that period, and to whom, if he attains full age, the interest created is to belong.”

Conditional Transfer – Section 25 of Transfer of Property Act

Conditional transfer under section 25 in the TP Act states that any transfer happening on the fulfilment of a condition imposed on the other group after a property transfer. For example, one person agrees to transfer his property to another person after getting a job. This requirement of the first person for the second person to get a job is termed as a condition. 
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Restriction of Land 

A third person is entitled to restrain the benefits obtained from the other party’s property. Under sec 40 of the TPA the third person has the right to the benefit of a settlement coming out of contract and taking possession of the immovable property. 

Unauthorized Transfer

When a third party fraudulently presents a statement stating they are authorized to transfer immovable property and to further put it into consideration. This may be a misrepresentation further when they profess to transfer the property, enter into a contract and act on representing. This falls under sec 43 of the transfer of property act. Nothing in this section will impair the right of buyers’ trust without noticing the existence. 

Transfer of Property Pending Suit 

Sec 52 of TP act creates a right to be enforced to prevent a transfer. It states, “During the pendency in any court… of any suit or proceedings which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the right of any other party thereto.”
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Fraudulent Transfer

If any transfer of the immovable property is made with an intention to delay the process of the party relinquishing the custody, it shall be considered void. Similarly, a transfer of immovable property done without consideration of intent shall be held void. Sec 53 of the TP Act defines the agreement for sale as, “A contract for the sale of immovable property, is a contract that a sale of such property shall take place on the terms settled between the parties.” This means that no transfer can be made without any consideration or deemed to have intended to dupe by any reason. A subsequent transfer will be made after careful consideration. 

Part Performance 

The doctrine of part performance was based upon a principle of equity, introduced in England. This later became a part of the Transfer of Property Act, 1882 through the Amendment Act of 1929. Through the transfer of property act no rights can be passed to any party until the sale is complete. But a person will not be entitled to refunds or performance once they signthe contract. Sec 53a of the transfer of property act states that if one party makes an agreement with another party and allows the other party to act on their behalf such a party will create equity that will not be resisted on formality grounds. Hence, if the settlement is not completed in a timely manner, the transferor will not be able to hold it against the transferee. 

Sale Agreement 

A sale agreement is a contract to sell the property at a later date. Under this agreement, the terms and conditions of the property up for sale will be transferred. Under sec 54 of the transfer of property act, the same right is reserved for the seller for seeking a certain expectation from the buyer. The signed agreement of the property is a crucial step. Not only is this legal proof between the two parties but it is also an agreement on how future steps will be handled in case of disputes against landholdings.

Rights of Buyers and Sellers 

Sec 55a of transfer of property act highlights the responsibility of the buyer and seller. 

Duties of a seller:

• to be transparent to the buyer about any defective materials in the property
• to present all legal documents to the buyer related to property
• to preserve the property and documents well before giving possession to the buyer
• to be free from all public charges and rent acquired till the present date of the sale
• to disburse all encumbrances 

Duties of the buyer:

• to be transparent to the seller about any hidden property facts or interest accrued
• to disburse the full amount to the seller upon sale completion
• to bear all losses occurring from unintentional circumstances  

Mortgage

Under sec 58a of transfer of property act mortgage is defined as, “the transfer of an interest in the specific immovable 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 an engagement which may give rise to a pecuniary liability.”

Charges 

Sec 100 of transfer of property act defines charge as, “where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.”

Lease Defined 

Sec 105 of the transfer of property act states- “A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Duration of Certain Leases in Absence of Written Contract or Local Usage

Sec 106 of tp act states- “In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months’ notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days’ notice.”

Exchange 

Under sec 118 of transfer of property, act exchange is defined as, “When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing nor both things being money only, the transaction is called an “exchange. “Although the risks involved during a sale agreement are fewer, it cannot be ruled out. Selling of property comes with a lot of deliberation and is often time-consuming. The risks can be protected to a greater degree if all terms and conditions of the transfer of property act are followed. Both the parties involved should be transparent in their dealings and be free from all arrears until all legal formalities are completed. Do you want to learn more about the risks in property transactions? Browse NoBroker to find all the latest updates and properties for sale in all major cities.

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