The Transfer of Property Act, 1882

What it does

The Act is about transfers between living persons. Succession, whether under a will or on intestacy, is outside it, and so is a transfer that happens by operation of law, such as a sale in execution or a vesting on insolvency. Inside that boundary it does three things.

It names the transactions. Sale, mortgage, charge, lease, exchange, gift and the transfer of an actionable claim. Each has a definition, and the definition is not a formality: a transaction is what the Act says it is on its terms, not what the parties have titled their document. A deed called a sale that leaves the price unpaid and the possession unchanged may be something else, and a document called a licence that gives exclusive possession for a term is a lease.

It sets the content of each relationship. The rights and liabilities of buyer and seller, which supply the warranties and the duty to disclose where the contract is silent. The rights of a mortgagor to redeem and of a mortgagee to enforce. The duties between lessor and lessee, and the ways a lease comes to an end.

And it supplies the general rules that apply whatever the transaction. Property of any kind may be transferred except what the Act excepts, and the excepted list includes a bare chance of succeeding to an estate, which cannot be transferred however willing both sides are. A condition absolutely restraining alienation is void. A transfer cannot postpone vesting beyond the lifetime of a living person plus the minority of the person who is to take.

The doctrines that decide contests

Four provisions do most of the work when two people claim the same property.

Part performance. A transferee in possession under a written contract to transfer immovable property, who has performed or is willing to perform his part, may defend that possession against the transferor. Since 2001 the contract must itself be registered for this to be available, which is the point at which the Registration Act, 1908 and this Act meet. An unregistered agreement to sell no longer founds the defence.

Lis pendens. While a suit about immovable property is pending, neither party may transfer the property so as to affect the rights of the other under the decree. The purchaser from a litigant takes subject to the result, and the search that misses the pending suit is the search that matters.

Fraudulent transfer. A transfer made with intent to defeat or delay creditors is voidable at the instance of a creditor so defeated, which is a remedy independent of the avoidance powers in insolvency.

Notice. Several of the Act's priorities turn on whether a transferee had notice, actual or constructive, of an earlier interest. Registration of the earlier instrument is the ordinary source of constructive notice, and possession by someone other than the seller is another.

Mortgages, and why the classification decides the remedy

The Act recognises six kinds of mortgage, and the kind is not a label. A simple mortgage is enforced by a suit for sale. A mortgage by conditional sale and an English mortgage carry their own consequences. A mortgage by deposit of title deeds, available only in the notified towns, needs no registered instrument, which is why so much bank lending uses it. A usufructuary mortgagee is paid out of the rents and profits rather than by sale.

Two things follow. The right of redemption is a right the mortgagor cannot be contracted out of, and a clause that bars it is bad however it is drafted. And whether a lender can sell without going to court depends on the kind of mortgage and on the power reserved, which is a separate question from the statutory enforcement route a secured creditor may have under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

What turns on it in practice

Three questions recur. What is this transaction under the Act, read from its substance, because the answer sets the form it must take and the remedy it carries. Whether the form was observed, since a sale of tangible immovable property above the threshold and a gift of immovable property each require a registered instrument, and a gift additionally requires attestation by two witnesses. And what the contest is, if there is one, because the doctrines above decide it on notice, on possession and on dates rather than on the merits of the underlying bargain.

The fourth, on a lease, is characterisation and notice. Whether the document is a lease or a licence, and whether it was determined in the manner the Act requires, decides whether a possession suit lies at all.