In India, transactions for purchasing/selling/transferring/creating an interest in property and transmission of title in respect of a property are governed by several laws, rules and regulations made by Central and State Governments.
Transfer of Property Act, 1882 (TP Act) is one of the primary laws on transfer of property applicable to the whole of India. However, TP Act does not govern the transfer of property by operation of law, such as the sale by the order of a court, auction or forfeiture as well as transmission of the title of a person dying intestate, in which case succession laws as per the religion of the deceased will be applicable.
According to Section 6 of the Transfer of Property Act, the property of any kind, except the nine kinds of property mentioned therein, may be transferred. The person insisting non-transferability must prove the existence of some law or custom which restricts the right of transfer. Unless there is some legal restriction preventing the transfer, the owner of the property may transfer it.
Any person, who is competent to contract, is competent to transfer property, which can be transferred in whole or in part. He should be entitled to the transferable property, or authorised to dispose of transferable property which is not his own. The right may be either absolute or conditional, and the property may be movable or immovable, present or future.
A transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property unless a different intention is expressed or implied.
Here we will discuss the different types of transfers mentioned in the TP Act. In addition, we will also look into License as provided under Sec. 52 of Indian Easement Act, 1882, which is many times confused with lease and erroneously used.
According to section 54 of the TP Act, Sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. In a sale, there is an absolute transfer of all rights in the property sold.
ESSENTIAL ELEMENTS OF SALE
The essential elements of a sale are as follows:
- the parties ;
- the subject-matter ;
- The price or consideration.
MODE OF TRANSFER BY SALE
There are only two modes of transfer by sale, that is: (i) by the registered instrument; and (ii) delivery of possession. A transfer by sale of tangible immovable property of the value of one hundred rupees and upwards can be made only by a registered instrument.
Section 58 of TP Act defines a mortgage as the transfer of an interest in a 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. Thus, a mortgage is a transfer of an interest in specific immovable property as security for the repayment of a debt.
In order to create a mortgage, it is necessary to specify the immovable property. The description must at least be sufficient to identify the property according to the requirements of the Registration Act.
The transferor is called mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.
You can read more about mortgages here.
Section 118 of the TP Act provides that 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. The definition of the word exchange is not limited to immovable property. Exchange is not only exchange of lands but also barter of goods. A transaction of exchange presupposes existence of different properties owned by different persons, that as a result of the transaction of exchange both the properties continue to be owned by two different parties but the ownership of one property is transferred to the owner of the other and vice versa.
Section 122 of the TP Act defines Gift as the transfer of certain existing movable or immovable property made voluntarily and without consideration by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee. Such acceptance must be made during the lifetime of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void. A gift of immovable property to a minor is complete when it is accepted by a person on behalf of the minor and appends his thumb impression on the gift-deed in token of acceptance.
ESSENTIAL ELEMENTS OF GIFT
The following are the essential elements of a gift to be valid:
- No consideration –nothing to be received in lieu of a gift.
- The Donor-person making a gift.
- The Donee-person to whom a gift is made.
- The subject-matter of a gift.
- The transfer of the subject-matter of gift by the donor to the donee.
- The acceptance of the gift by the donee.
Section 105 of the TP Act lays down that 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. The transferor is called the lessor, the transferee, is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.
ESSENTIAL ELEMENTS OF LEASE
The essential elements of a lease are the following:
- The parties, i.e., the lessor and lessee.
- The subject-matter, or immovable property.
- The demise or partial transfer.
- The duration or term of the lease.
- The consideration for the lease, or rent.
Section 52 of the Indian Easements Act, 1882, defines the terms licence as follows:
“Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or as interest in the property, the right is called a licence”.
Thus, a licence is a permission to stay on an immovable property without which the stay would be a trespass.
DISTINCTION BETWEEN LEASE AND LICENCE
The Supreme Court has brought out distinction between a lease and a licence in various cases which may be summarised as follows:
- The lease is an inheritable right which is available as a right against any person in the world (right in rem): Licence is not an inheritable right. It is personal and exclusive to the licensee and on his death, it automatically stands revoked.
- The lease creates interest in the leased property in favour of the lessee whereas in licence no such interest is created in the licensee.
- Lease interest can be assigned but the licence is non-assignable.
- Denial of lessor’s title results in forfeiture of the lease whereas it is not so in a licence.
- The remedy for breaches in the case of a lease is that the lease can be enforced but in the case of a licence the only suit for damage can be filed.
- Termination of the lease requires notice to be served on the lessee but the termination of a licence can be done without notice.
- Lease deed requires registration under the Registration Act, 1908 and Transfer of Property Act, 1882 if the value of the leased property exceeds Rs. 100/- or the lease duration exceeds eleven months but a licence deed does not require registration.
- A lessee can sue stranger or third party in his own name but a licensee cannot do so.
Thus, where in terms of an agreement with respect to land and building for commercial purpose, exclusive possession is not given and there is a covenant for delivery of vacant possession after expiry of the term of the agreement, the agreement would be a licence and not a lease. However, exclusive possession itself is not decisive in favour of a lease and against a mere licence and the question whether a transaction is a lease or a licence “turns on the operative intention of the parties” and there is no single, simple litmus test to distinguish one from the other.