Tuesday, 27 January 2015

Ownership of Immovable Property

 Ownership of Immovable Property
Before understanding the terminology of 'Ownership of Immovable Property' it is necessary to understand what an immovable property is in common parlance immovable property means land, buildings and  things which are  permanently attached to the land.
According to Section 2(gg) of the Karnataka Stamp Act,1957 “immovable property” includes land, buildings, right to 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 anything attached to the earth. The Transfer of Property Act, 1882, does not define the word 'immovable property' in detail, but only mentions that immovable property does not include standing timber, growing crops or grass. According to the Karnataka General Clauses Act, 1899 immovable property shall include land, benefits to arise out of the land and things attached to the earth or permanently fastened to anything attached to the earth. The words “attached to the earth” has been elaborately described in Sec.3 of the Transfer of Property Act. According to this section, attached to the earth means --

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.

Let us now understand something about ownership. Ownership can be broadly classified into two absolute ownership and restrictive ownership. The ownership is an amalgam of rights, interest and title which is recognised under law. The word absolute ownership is a bundle of rights connected to some specified property. The word right has a wide meaning. It gives powers to the person said to have rights to do something or act, or not to do such thing or act, in relation to his property. Rights are of different types such as Right in Rem, Right in Personam etc. “Right in Rem” is available against the whole world while the “Right in Personam”, is available against a specified person, or group or group of persons. The owner of any property has a legal right which is recognised under the laws of the land. It consists of following rights which are only illustrative and not exhaustive:

2.      Right to use and enjoy his property without undue interference of outsiders.

3.      Right of alienation of his property as provided under law in favour of any person/s without any restrictions  by way of sale, gift, transfer by Will, and by creation of trust.

4.     Right to make alteration to the property/structure, consume, destroy, repair, reconstruct, hypothecate, mortgage, lease and to use the property as security to borrow funds.

These rights are rights in rem available against the whole world subject to the restrictions imposed under various laws like Land Reforms Act, Land Revenue Act, Town Planning Act etc.

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 period.

Under co-ownership, there will be more than one person who jointly own the same property.  Both the persons have equal or certain percentage of rights to possess and enjoy the property as agreed to between them. In the case of co-ownership, the owners own the whole property jointly and thereby their respective shares are not physically ascertainable with definite measurement and boundaries. The shares are undivided. For example, in case four persons own a property of 1200 sft, each of them would be entitled to 300 sft.of undivided share in this property. This 300 sft of undivided share of property could be any part of the building/property and cannot be confined to a specific part. Share of the co-owners in the property need not necessarily be equal. It depends on their investment in the property as detailed in the purchase document. In the absence of any such details as to the share of investment made for acquisition of property 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 and  transferable. The concept of this co-ownership is often termed as “Tenants in common” in legal parlance. Practically, it is not possible to identify or divide a property held jointly by metes and bounds. Thus, the co-owners possess and enjoy the property in unison.

Many owners of land, lease the property to others on 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 another person. The terms of lease also stipulate whether the ownership of the building will get transferred to the lessor or the 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.

In sale and purchase of immovable property, the parties generally enter into a sale agreement detailing the terms of contract and registration of the sale deed is done later, on performance of duties by the parties as detailed in sale agreement. At times the seller receives major portion of consideration and hands over 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 the purchaser / transferee, the rights of 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 of 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 details of the contract including handing over of the vacant possession of the property to the purchaser.

2.  The contract shall be for transfer of immovable property for consideration.

3. After the contract is entered into 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 is 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 the seller. But the provisions of this section do not affect the rights of a person who has purchased the property for valuable consideration and who has no notice of prior contract or part performance. Equitable rights of transfer under part performance are  recognized under the Income Tax Act 1961.

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. The interest may be vested, contingent or absolute.
Vested interest is an interest in property enforceable by a person at present or on a future date linked to happening of certain specified event whereas the contingent interest is an interest available only on a 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, whereas in contingent interest it is uncertain. Hence it is contingent. As the interest is contingent, it is not transferable or inheritable. But on the happening of such uncertain event, the contingent interest becomes vested interest, when it is transferable and inheritable.

The word title which an owner has over the property is a legal right. The title has to be established with documentary evidence. The title is transferable and inheritable. From the documents of title you will come to know who is the owner of the property and if the documents of title are defective even the financial institutions will not advance for purchase or construction.  

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 owner succeeds to the right of the deceased joint owner and not his legal heirs. This concept is not in practice in India, unless specifically made in certain 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.
Knowledge of the type of ownership of the property you own would help you immensely in your possession and enjoyment of the property.

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