Friday 6 March 2015

OWNERSHIP OF IMMOVABLE PROPERTY

Leading advocate in Bangalore | Advocate at Koramangala | Real estate lawyers India


The ownership of immovable property is recognised under various laws. Before dwelling upon the rights and interest in immovable property, we shall understand what is immovable property. The Transfer of Property Act 1982 does not define the word immovable property in detail, what mentions it as “immovable property does not include standing timber, growing crops or grass”

General clauses Act defines immovable property, “which includes land, benefits which arise out of the land and things attached to the earth.  The words “attached to the earth” has been elaborately described in Transfer of Property Act which include following;

  1. Rooted in the earth as in case of trees and shrubs;
  2. Imbedded in the earth as in case of walls or buildings or
  3. Attached to what is so imbedded for permanent beneficial enjoyment of that to which it is attached.

However, we must remember that it does not include standing timber, growing crops or grass.

The Karnataka Stamp Act defines immovable property as “includes land, buildings, right of ways, air rights, development rights, whether transferable or not, benefits to arise out of land and things attached to the earth or permanently fastened to any thing attached to the earth. But in common parlance immovable property means land, buildings, things permanently attached to the land.

Rights
The word right has a wide meaning. It is which gives powers to the person said to have rights to do something, act, or not to do such thing, act, in relation to his property which may be immovable or movable. The right are of different types.

The most important is “Right in Rem”.  This right is available against the whole world.  Next is “Right in Personam”, which is available against a specified person, or group or group of persons.  But this is not available, enforceable against the whole world.  The owner of any property has legal right, which is recognised by the laws of the land and protected under such laws.

Interest
The other most frequently used word in property transaction is “interest”.  It is a right available against the entire world, when it is related to some property, land, building, immovable and movable.  It is transferable under modes recognised by law and also is inheritable.  Such interest is recognised and protected under law.

The interest may be vested, contingent or absolute.Vested interest is an interest in property enforceable by a person at present or in future date linked to happening of certain specified event.  Such vested interest is inheritable and transferable.

Where as contingent interest is an interest available only on future date and not at present, which is subject to happening of some uncertain event.  In vested interest the happening of the event is certain, where as in contingent interest it is uncertain, hence contingent.  As the interest is contingent, it is not transferable or inheritable.  But on happening of such uncertain event, the contingent interest becomes vested interest, when it is transferable and inheritable.

Title
The word title which a owner has over the property is a legal right and interest in the property. The title has to be established and evidenced.  The title is also transferable and inheritable.

Ownership
The ownership is an amalgam of rights, interest and title which is recognised and protected bylaw. In simple words it is right available against the entire world. Such right has no riders, restrictions as to the point of user and point of duration. The word absolute ownership is a bundle of rights connected to some specified property. It consists of following rights.

The list is only illustrative and not exhaustive;

1.   Possession and occupation.
2.   Use and enjoy.
3.   Alienation by modes recognised by law in favour of any person/s without any restrictions.
4.   Alteration of the property, structure, consume, destroy, repair, reconstruct, hypothecate, mortgage, lease and to use the property as security to borrow funds.
5.   Gift, transfer by Will, creation of trust.
6.   The right is a right in rem available against the whole world.
7.   The right is unrestricted in duration of time and use.

However, these rights are subject to various laws like Land Reforms Act, Land Revenue Act, Town Planning Act, and other local laws.


Other types of ownerships
Apart from absolute ownership, there are other types of ownerships which are restrictive in nature.In restrictive ownership, certain rights detailed under absolute ownership are restricted or not available for certain specified time.

Co-ownership
More than one person may jointly own the same property.Both the persons have equal or certain percentage of rights to possess and enjoy the property.One important ingredient of co-ownership is undivided share.  Though all the owners own equal or a part of the whole property their respective shares are not physically ascertainable with definitive boundaries.  The shares are undivided.  In case four persons own a property of 1200 sft, each persons share is 300 sft.This 300 sft is any part of the building property and is not confined to specific area.This is called undivided share in the property.

Share of the co-owners in the property need not necessarily be equal.  It depends on their share, investment in the property as detailed in purchase document.  In the absence of any such details as to the share of investments made for acquisition of property in purchase document, it is presumed in law, that all the co-owners have equal undivided share of interest, right and title in the property as per section 45 of Transfer of Property Act.

It is always advisable to clearly mention the share of investment of each co-owner in the property and their undivided share in right, interest, title in the property for the purpose of alienation, inheritance and taxation.

The Co-owners share in the property is inheritable, transferable.  The concept of this co-ownership is often termed as “Tenants in common” in legal parlance.

Joint Tenancy 

This is different from Tenants in Common or Co-ownership.  In Co-ownership, the legal heirs succeed to the right and title of the deceased co-owner.

In Joint tenancy, the other Joint owners succeed to the right of the deceased joint owner and not his legal heirs.  This concept is not in practice in India, unless specifically made certain in documents.  In the absence of any such specific reference the court presumes the ownership as ‘Tenants in common’, and legal heirs succeed to the share of the deceased joint owner.

Dual ownership of land and building

Many owners of land, lease the land property to others for long lease.  The terms of lease also gives right to the lessee to construct buildings and enjoy the benefits of such buildings on leased lands.  This practice has led to dual ownership of land and building. The land is owned by one person and the structures thereon is owned by other person. The terms of lease also stipulate, whether the ownership of the building will get transferred to the lesser, owner of the land, free of cost on expiration of the lease period or has to pay for acquisition of such structures.  The Income Tax Act recognises the dual ownership concept and the owner of the building is taxed for the income received from the property.

Ownership by part performance

In sale and purchase of immovable property, the parties generally enters into a sale agreement detailing the terms of contract;  the registration of sale deed is done later on completion of performance of duties by the parties as detailed in sale agreement.  At times the seller receives major portion of consideration, and hands over the vacant possession of the property to the purchaser pending registration of sale deed.  This is called part performance.  The purchaser / transferee who is in possession of property gets, equitable title over the property.  This is recognised under section 53 A of the Transfer of Property Act.  Even in the absence of registered sale deed, and though legal title is not conferred on purchaser / transferee, the rightsof the purchaser / transferee is secured against the seller or any person claiming through the seller.  The only remedy available to the seller is to file a suit for payment of balance sale consideration.  The requirements of part performance as detailed in Section 53A are as follows;

1.   There must be a contract like sale agreement, etc., in writing containing the details of contract including the handing over the vacant possession of the property to the purchaser, signed by the seller.
2.   The contract shall be for transfer of immovable property for consideration.
3.   After the contract is entered the seller has put the purchaser in possession of the property and the purchaser has taken the possession of the property in part performance as per the terms of contract.
4.   The purchaser has done something in pursuance of the contract like payment of consideration or has performed or willing to perform his part of contract.

However, this equitable right derived from part performance is available only against seller or anybody claiming under or through him. But the provisions of this section does not affect the rights of person, who purchased the property for consideration, who has no notice of contract or part performance.Equitable rights of transfer by part performance are recognised by the Income Tax Act 1961, and also for Capital Gains and part performance constitutes transfer as defined in Income Tax Act. 

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