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1.4. Vested and Contingent interest, Difference, Conditional Transfer, (5.25) Difference between Contingent interest and spes-successionis. Vested interest - The Transfer of Property Act deals with two kinds of interest vested interest and contingent interest. Vested interest is to be distinguished from contingent interest. When an interest is vested, the transfer is complete but when the interest is contingent, the transfer depends upon a condition precedent. When the condition is fulfilled the transfer takes effect and that the interest becomes vested.
Definition of Vested Interest Section 19 of Transfer of Property Act defines vested interest as follows... "Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer." A vested interest is not defeated by the death of the transferee before he obtains possession.
Explanation: An intention that an interest shall not be vested is not to be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person.
Illustration A Hindu widow adopted son but there is an agreement which postpones the sons estate during the lifetime of widow. Here an interest created in favour of adopted son is vested right, which does not depend upon condition precedent, for example performance of any act, it is not to take effect on happening of the event which is certain i.e. the death of widow. The adopted son has Present proprietary right in the estate. The right of possession and enjoyment being deferred and therefore he can transfer the property even during the widows lifetime. Similarly, a Transfer of Property in favour of a person simply creates vested interest with an immediate right to the possession and enjoyment of the property. Such vested interest is not defeated by the death of the transferee even before getting possession of the property.
Illustration A transfer of property to B in trust for C and directs B to give possession of the property to C when C attains age of 25 years. In this problem the enjoyment in the property is postponed but this does not prevent the interest vesting immediately, but such transfer is itself void when C attains majority. Therefore C has vested interest and entitled to a possession of property at the age of 18.
When unborn person acquires vested interest on transfer for his benefit - Section 20 Where, on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless a contrary intention appears from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.
**Characteristics of vested interest
- Vested interest does not depend upon the fulfilment of a condition. It creates present and immediate right though the enjoyment may be postponed to future date.
- A vested interest is not defeated by the death of transferee before obtaining possession, it will pass on To His heirs.
- Vested interest is Transferable and heritable.**
Case Law Sundar Bibi vs Rajendra Narayan AIR1925 All.389. In this case the Allahabad High Court held that in a vested interest the title passes absolutely from the transferor to the transferee at the date of the transfer, though the enjoyment may be postponed.
Rajesh Kanta Roy vs Shrimati Sunita Debi AIR1957, S.C.255 - Fact - One Ramani Kanta Roy executed a registered trust deed in respect of his properties. The eldest son Rajesh was appointed the sole Trustee to hold the properties under the trust subject to certain power and obligation. After
**his death his two son Rajesh And Ramendra got interest in the property. There was a clause in the trust deed that both of them was to get interest in the properties allotted to each other happening of the two events -
- Discharge of all the debts specified in the schedule and death of the settler himself.
- The trust was to come to an end on the death of settler and the sons were to get properties allotted to them thereafter.**
A Supreme Court held that the interest taken by the two brothers under the trust deed was vested and not contingent because it was certain event
Contingent Interest - The Transfer of Property Act deals with two kinds of interest vested interest and contingent interest. Vested interest is to be distinguished from contingent interest. When an interest is vested, the transfer is complete but when the interest is contingent, the transfer depends upon a condition precedent. When the condition is fulfilled the transfer takes effect and that the interest becomes vested.
Definition of Contingent Interest - Section 21 defines Contingent interest as follows - Where, on a transfer of property, an interest therein is created in favour of a person to take effect only on the happening of a specified uncertain event, or if a specified uncertain event shall not happen, such person thereby acquires a contingent interest in the property. Such interest becomes a vested interest, in the former case, on the happening of the event, in the latter, when the happening of the event becomes impossible.
Exception: Where, under a transfer of property, a person becomes entitled to an interest therein upon attaining a particular age, and the transferor also gives to him absolutely the income to arise from such interest before he reaches that age, or directs the income or so much thereof as may be necessary to be applied for his benefit, such interest is not contingent.
Illustration 'X' bequeathed his property i.e. estate to 'Y' until he shall marry to 'Z'. 'Y's interest in the bequeath is contingent because it depends upon a condition precedent i.e. a marriage of 'Y' with 'Z'. An event has no proprietary interest in the estate and cannot alienate it. But as soon as 'Y' marries with 'Z' his contingent interest becomes vested interest.
Section 22 provides.. Where, on a transfer of property, an interest therein is created in favour of such members only of a class as shall attain a particular age, such interest does not vest in any member of the class who has not attained that age.
Section.23 - Transfer contingent on happening of specified uncertain event – Where, on a transfer of property, an interest therein is to accrue to a specified person if a specified uncertain event shall happen, and no time is mentioned for the occurrence of that event, the interest fails unless such event happens before, or at the same time as, the intermediate or precedent interest ceases to exist.
Section 24 - Transfer to such of certain persons as survive at some period not specified Where, on a transfer of property, an interest therein is to accrue to such of certain persons as shall be surviving at some period, but the exact period is not specified, the interest shall go to such of them as shall be alive when the intermediate or precedent interest ceases to exist, unless a contrary intention appears from the terms of the transfer.
Illustration A transfer’s property to B for life, and after his death to C and D, equally to be divided between them, or to the survivor of them. C dies during the lifetime of B. D survives B. At B's death the property passes to D.
Characteristics of contingent interest A) A contingent interest is solely depending upon the fulfillment of a condition. B) If the transferee dies before obtaining possession the continent interest fails and property revert to transferor. C) Contingent interest is Transferable, whether it is heritable or not depend upon the nature of such contingency.
Modes of Sale: There are two modes of transfer of property by sale:
- By the registered instrument
- By 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. But in case of tangible immoveable of the value less than one hundred rupees, such transfer may be made either by a registered instrument or by the delivery of property, registration is not compulsory in such case. Delivery of tangible immovable property takes place when the seller places the buyer or such person as he directs, in possession of the property.
Essential Elements of Sale: Following are the essential elements of sale;
1. Parties: There must be at least two parties in a sale. The person who transfers the property is known as transferor or seller or vendor. The person purchasing the property is known as transferee or purchaser or vendee. For constituting a valid sale, both seller and purchaser must be competent on the date of sale. The seller must be competent to contract, i.e., he must be of sound mind and must have attained the age of majority. Besides that, he must be the owner of the property which he is going to sell. He must have legal title to it only then he can sell the property. For example, a tenant does not have the power to sell the tenanted property. The purchaser must not be disqualified or restricted by any law for the time being in force from purchasing a property. For example, under 136 of Transfer of Property Act, a judge, a legal practitioner or court official is incompetent to claim actionable claims. 2. Subject Matter: The Transfer of Property Act deals with the transfer of immoveable property only. Therefore, the transfer of ownership must be in some immoveable property only. The moveable properties, it should be noted, are governed by a Contract Act. Immoveable properties transferable under this Act may be either tangible or intangible. 3. Conveyance: Conveyance is an act which has the effect of transferring the seller’s rights in property to the buyer. Section 54 has provided two modes transfer of immoveable property: I. By the registered instrument II. By 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. But in case of tangible immoveable of the value less than one hundred rupees, such transfer may be made either by a registered instrument or by the delivery of property, registration is not compulsory in such case. Delivery of tangible immovable property takes place when the seller places the buyer or such person as he directs, in possession of the property. 4. Price or Consideration: The price is the essential element of sale. At the time of contract of sale the price must be ascertained for which the property is going to be transferred. The price may be paid at the time of execution of the sale, before it in advance or after the sale. In case of an agreement to sell immoveable property, the law requires that it must certainty identify the property agreed to be sold and the price fixed as consideration paid or agreed to be paid. Payment of price is not necessary condition for the validity of the sale. As the Act itself lays down that the price may have been paid or promised to be paid or partly paid or partly promised to be paid. It is sufficient if the consideration is sufficiently mentioned along with its mode of payment. The title of the property may pass to the purchaser after registration, though the consideration or the price has not been paid. Actually it is the intention of the parties that the price would be paid either in present or in the future.
4.3 Sec. 55- Rights and liabilities of buyer and seller. Rights and Duties of Seller and Buyer (Section: 55): The rights and duties of seller and buyer are subject to the contract. In the absence of any contract to the contrary, the rights and duties of seller and buyer before and after completion of sale are governed by section 55 of Transfer of Property Act. The rights and duties of seller and buyer under the provisions of section 55 are as under:
Duties of Seller Before Sale: Duties of seller before sale; Duties of Seller After Sale:
1. To Disclose Any Material Defect:
The seller is bound to disclose to the buyer any material defect in the property or in the seller’s title thereto of which the seller is and the buyer is not aware, and which the buyer could not with ordinary care discover. A latent defect is a defect, which cannot be discovered by the buyer with ordinary diligence.
2. To Produce Documents of Title:
The seller is bound to produce to the buyer on his request for examination all documents of title relating to the properties which are in the seller’s possession or power. The documents are produced only for inspection and not to deliver them. The seller’s duty is confined only to production of documents which are evidence of his title. Documents must be original and not mere copies, and where they are not available, then certified copies only.
3. To Answer Question About the Property:
The seller is bound to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto.
4. To Execute Conveyance:
The seller is bound on payment or tender of the amount due in respect of the price, to execute a proper conveyance of the property, when the buyer tenders it to him for execution at a proper time and place. The seller is bound to execute conveyance on the payment of price by the buyer.
5. To Take Care of the Property and Title Documents:
The seller is bound between the date of the contract of sale and the delivery of the property, to take as much care of the property and all documents of title relating thereto, which are in his possession as an owner of ordinary prudence would take of such property and documents.
6. To Pay Outgoings: 1. To Deliver Possession of the Property:
The seller is bound to deliver a possession immediately after the execution of the sale deed. He is to give such possession as the nature of property admits. Where the delivery of physical possession is not possible, such as right to fishery, physical possession need not be given.
2. Covenant for Title:
The seller shall be deemed to contract with the buyer that the interest which he transfers to the buyer consists and that he has a power to transfer the same. An express covenant of title in a sale deed is not necessary because such a covenant is implied in every sale.
3. Delivery of Documents of Title:
The seller is bound to give all legal documents relating to the property and the sale, once the consideration has been received in full. The production and furnishing of copies is to be at buyer’s expense. The title deeds pass without being named. The seller cannot claim to retain the deeds if he has sold off the whole property.
2. Entitlement to Charge on Immoveable Property:
Buyer is entitled to charge on immoveable property to extent of seller’s interest in the property, to charge for amount of any purchase-money, which is properly paid by buyer in anticipation of delivery, and to charge for interest on such amount. Such charge is against seller and all persons, who claim under seller. Here condition is that buyer should not have improperly declined to accept delivery of the property.
4.4 Sec. 56- Marshalling by subsequent purchase Marshalling by Subsequent Purchaser (Section: 56): According to section 56 of the Act, If the owner of two or more properties mortgages them to one person and sells one or more properties to another person, the buyer in the absence of a contract to the contrary, entitled to have the mortgaged-debt satisfied out of the properties and properties not sold to him, so far as the same will extend, but not as to prejudice the rights of the mortgagee or person claiming under him or any other person who has for consideration acquired an interest in any of the properties.
The concept of marshalling by subsequent purchaser given in section 56 can be divided point by point accordingly;
- If the owner of two or more properties
- Mortgages them to one person and sells one or more to another person
- The buyer is entitled to have the mortgage debt satisfied out of the properties or the properties not sold to him. (subject to contrary contract)
- But this will not prejudice the rights of I. Mortgagee II. or, person claiming under him III. or, of any other person
This section says that if a person mortgages two or more properties to a person and sells one or more properties of them to another person, then the buyer is entitled to claim the mortgage debt is satisfied out of the property not sold to him. Therefore, this provision safeguards the interest of the buyer and only applies between the seller and buyer and do not apply for a subsequent purchaser. This section is based on a principle that if a person purchases a property free from encumbrances, then his absolute interest should not be prejudiced. Marshalling can be exercised only between the buyer and seller. It cannot be exercised detrimental against the rights of the mortgagee or any other person claiming under him or any other person having interest on the property. The subsequent purchaser can claim the right of the property only if the interest of the prior mortgagee or person claiming under him or any other person who has acquired interest in any of the properties for consideration is not affected thereby
As expressed by J Dart “If two estates X and Y are subject to a common charge and estate X be sold to A, A will as against his vendor and his representatives will have a prima facie equity in the absence of a express agreement whether or not he has notice of the charge, throw it primarily on estate Y in exoneration of estate X”
Marshalling of Securities According to section 81 of the Transfer of Property Act, 1882
- If the owner of two or more properties mortgage them to one person and mortgages one or more properties to another,
- The subsequent mortgagee is, in the absent of contract to the contrary, entitled to have the prior mortgage debt satisfied out of the property or properties not mortgaged to him, so far as the same will extend.
- But not so as to prejudice the rights prior mortgagee or of any other person who has for consideration acquired an interest in any of the properties.
Marshalling means arranging things. Section 56 right of marshalling to a subsequent purchaser and section 81 confers same on the mortgagees. This right arises when two or more properties mortgage them to one person and mortgages
one or more of them (already mortgaged to the first mortgager) to another person. The subsequent mortgage is entitled, unless there is contract to the contrary, to have the prior mortgage debt satisfied out of properties not mortgaged to him. For example, a mortgager mortgages his three properties A, B and C to a mortgagee X for Rs.15, 000. He further mortgages only property C to Y for Rs.5,000. This section give Y a right to say that debt of X shall be satisfied out of sale proceeds of properties A and B and not C. In case if the proceeds of properties A and B is less than 15, 00 only then, the property C can be sold. Therefore, all though Y is subsequent mortgager his claim is not prior to that of X, but he has the right of marshalling i.e. arranging the securities in his favour as far as possible. S. 56 deals with the concept of marshalling in a transaction involved in subsequent sale, on the other hand, S. 81 is applicable only to mortgages. The doctrine of marshalling rests upon the principle that a creditor who has the means of satisfying his debt out of several funds shall not, by the exercise of his right, prejudice another creditor whose security comprises only one of the funds.
Essential Elements of Marshalling (1) The mortgages may be two or more persons but the mortgager must be common i.e. there must be a common debtor. (2) The right cannot be exercised to the prejudice of the prior mortgagee. (3) The right cannot be exercised to the prejudice of any other person having claim over the property.
5.1 Sec. 58- Mortgages- Definition and Essential its kinds of Rights and Liabilities of Mortgagors and Mortgagees. Definition of Mortgage: According to Black’s Law Dictionary: “A conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and that will become void upon payment or performance according to the stipulated terms.”
According to section 58 (a), a mortgage is the transfer of an interest in specific immovable property for the purpose of securing;
- Payment of money advanced or to be advanced by way of loan
- Payment of an existing or future debt, or
- The performance of an engagement which may give rise to pecuniary liability. In short, mortgage is the transfer of an interest in specific immovable property as a security for the repayment of a debt.
Mortgagor: A person who transfers the property is called mortgagor. Mortgagee: A person to whom the property is transferred is called mortgagee. Mortgage Money: The principal money and interest of which payment is secured for the time being are called mortgage money. Mortgage Deed: If there is any instrument by which the transfer is affected is called mortgage deed.
Essentials of Mortgage: Going through the definition of mortgage, following essentials can be taken out;
- Transfer of Interest
- Specific Immoveable Property
- To Secure the Payment of Loan 1. Transfer of Interest: The first essential is that mortgage is transfer of an interest in the specific immoveable property. The mortgagor as an owner of the property possesses all the interests in it, and when he mortgages the property to secure a loan, he only parts with a part of the interest in that property in favor of the mortgagee. After mortgage, the interest of the mortgagor is reduced by the interest which has been transferred to the mortgagee. His ownership has become less for the time being
agrees that B will have right to obtain decree of court for sale of the house for payment of mortgage money in case of A’s failure to pay mortgage money. It is case of simple mortgage.
2. Mortgage by Conditional Sale Section: 58(c): In this form of mortgage, the mortgager ostensibly sells the property to the mortgagee on the following conditions: I. The sale shall become void on payment of the mortgage money. II. The mortgagee will retransfer the property on payment of the mortgage money. III. The sale shall become absolute if the mortgager fails to repay the amount on a certain date. IV. The mortgagee has no right of sale but he can sue for foreclosure.
Foreclosure means the loss of right possessed by the mortgager to redeem the mortgaged property. The mortgagee has the right to institute a suit for a decree so that the mortgager will be absolutely debarred from his right to redeem the property. The right to foreclosure arises when the time fixed for repayment expires and the mortgager fails to repay the mortgage money. Without the foreclosure order the mortgagee will not become the owner of the property Example: A apparently sells his house to B for ten lac rupees on this condition that such sale will become absolute on certain date when there will be default of payment of mortgage money. It is case of mortgage by conditional sale.
3. Usfructuary Mortgage Section: 58(d): Under this form of mortgage, the mortgager delivers possession of the property or binds himself to deliver possession of the property to the mortgagee. The mortgagee is authorized to retain the possession until the debt is repaid. The mortgager reserves the right to recover the property when the money is repaid. The essential feature of this form of mortgage is that the mortgagee is entitled to receive rents and profits relating to the mortgaged property till the loan is repaid and appropriate the same in lieu of interest or in repayment of the loan or both. The mortgager is not personally liable to repay the mortgage money. So the mortgagee cannot sue the mortgager for repayment. He can neither sue foreclosure nor sue for sale of the mortgaged property; the only remedy for the mortgagee is to remain in possession of the property and pay himself out of the rents or profits of the mortgaged property. Since there is no time limit he has to wait for a very long time to recover his dues. Example: A delivers possession or binds himself expressly or impliedly to deliver possession of mortgaged property to B, and authorizes B to retain such possession until payment of mortgage money. A also authorizes B to receive those rents and profits which accrue from mortgaged property or A also authorizes B to receive any part of such leases and benefits. Indeed A approves B to proper such rents and profits in lieu of interest or in payment of mortgage money or partly in lieu of interest or partly in payment of mortgage money. It is case of Usufructuary mortgage. 4. English Mortgage Section: 58(e): The English mortgage has the following characteristics: I. The mortgager transfers the property absolutely to the mortgagee. The mortgagee, therefore, is entitled to take immediate possession of the property. The transfer is subject to the condition that the property shall be transferred on repayment of the loan. II. The mortgager also binds himself to pay the mortgage money on a certain date. III. In case of non-repayment, the mortgagee has the right to sell the mortgaged property without seeking permission of the court in circumstances mentioned in section 69 of the Transfer of Property Act. Example: A mortgages his house to B for a loan of one lac rupees, and he binds himself to repay mortgage money on a certain date, and transfers mortgaged property absolutely to B.
However such transfer is subject to this condition that B will re-transfer mortgaged property on repayment of mortgage money before agreed date. It is case of English mortgage.
5. Mortgage by Deposit of Title Deeds Section: 58(f): A mortgage by deposit of title deeds is commonly known as an equitable mortgage. When a debtor delivers to a creditor or his agent document of title to immovable property, with an intention to create a security there on, the transaction is called mortgage by deposit of title deeds. The essentials of such mortgage; I. A debt II. Deposit of title deeds III. An intention that the title deeds shall form security for debt. Example: A delivers to a creditor or his/ her agent documents of title to his own house with intent to create a security on these documents to title. It is case of mortgage by deposit of title deeds. 6. Anomalous Mortgage Section: 58(g): In terms of this definition an anomalous mortgage is one which does not fall under anyone of the above five terms of mortgages. Such a mortgage can be affected according to the terms and conditions of the mortgagor and the mortgagee. Usually it arises by a combination of two or more of the above said mortgages. It may take various forms depending upon custom, usage or contract. Example: Mortgage known as Lekha Mukhi prevails in Punjab. In such a mortgage land is transferred to the creditor for management, who in addition to interest charges for management.
Difference between English Mortgage and Simple Mortgage: Following are the points of difference between English mortgage and simple mortgage;
- In English mortgage property is transferred absolutely to the mortgagee. In simple mortgage the right of sale is transferred.
- In English mortgage, mortgagee being owner of the property has a right to enter into immediate possession of it. There is no such right in simple mortgage.
- An English mortgage has, in certain cases, a right of sale without the intervention of the court. Simple mortgagee has no such right.
Difference Between English Mortgage and Usufructuary Mortgage: Following are the points of difference between english mortgage and usufructuary mortgage;
- In English mortgage, there is a personal liability to repay the loan but in usufructuary mortgage there is no personal liability to repay the loan.
- In English mortgage, the property is absolutely transferred to the mortgagee on the condition that the property will be re-transferred to the mortgagor on his repayment of loan. In usufructuary mortgage, the mortgagee does not get the ownership of the property only possession is transferred to him which he can retain till his debt is paid off.
- In English mortgage, the mortgagee can sue for a sale and in certain circumstances even without intervention of the court but in usufructuary mortgage, the mortgagee cannot sue for sale. He also does not have the power without the intervention of the court.
Difference Between English Mortgage and Mortgage by Conditional Sale: Following are the points of difference between English mortgage and mortgage by conditional sale;
- In English mortgage, there is a personal liability to repay the debt but in mortgage by conditional sale there is no personal liability to repay the debt.
accretion etc, this right is called "Right of Accession".
- According to the section 63(A) of the Act, the mortgagor has the right to claim improvement made in the mortgaged property by the mortgagee.
- According to section 65(A) of the Act, the mortgagor has the power to make lease also, but it must be with the consent of the mortgagee. Such lease must satisfy the prescribed conditions.
- Section 66 of the Act says that the mortgagor has the right to reasonable waste of the property but he must not make permanent injuries of destruction of the property or reduce its value. If he does so, then he must give additional security to the mortgagee.
- The mortgagor can avoid consolidation by the mortgagee in the mortgaged properties.
- The mortgagor has the right to deposit the mortgage money in the court, if there is any suit relating to the property
Rights of Mortgagee: Liabilities of Mortgagee:
- According to section 67 of the Act, at any time after the mortgage money has become due, the mortgagee has the right to obtain from the court, a decree for foreclosure.
- Section 68 of the Act provides that the mortgagee has the right to file a suit in a court of law for the mortgage money in the following cases:
a. Where the mortgager binds himself to repay the mortgage money, as in the case of simple and English mortgage.
b. Where the mortgaged property is wholly or partly destroyed or the security is rendered insufficient and to mortgager has not provided further security.
c. Where the mortgagee is deprived of the whole or a part of his security by the wrongful act of the mortgager. d. Where the
- A mortgagee is bound to sue on behalf of all the mortgagees in respect of whom the mortgage money has become due in the absence of express contract. During the continuance of the mortgage, the mortgagee is bound.
- A mortgagee is under liability to manage the property as a person of ordinary prudence would manage if it were his own.
- It is the liability of the mortgagee to use his best endeavor to collect the rents and profits thereof.
- In the absence of a contract to the contrary, the mortgagee is bound to pay Government revenue and the other charges of a public nature and all rents, out of the income of the property.
- In the absence of a contract to the
mortgager fails to deliver the mortgaged property in case the mortgagee is entitled to it.
- The mortgagee in case of a simple, English and equitable mortgage has the right to sell the property after filing a suit and getting a decree from a court. A mortgagee has a right of sale without the intervention of the court under certain circumstances mentioned in Section 69 of Transfer of Property Act.
- According to section 70 after the date of mortgage, if any addition is made to the mortgaged property, the mortgagee is entitled to such addition for the purpose of security provided there is no contract to the contrary.
- Section 71 provides that if the mortgaged property is under lease, the mortgagee is entitled for renewal of the lease for purpose of security.
- The mortgagee has the right for reimbursement with interest for the money spent for purposes like preservation of mortgaged property etc.
- When a property is mortgaged for successive debts to successive mortgagees a mesne mortgagee has the same rights against mortgagee posterior to himself as he has against the mortgagor.
contrary, the mortgagee is liable to make such necessary repairs as the income of the property permits.
- The mortgagee is bound to not commit any act which is destructive or permanently injurious to the property.
- When the whole or any part of the property is insured against loss or damage by fire, in case of such loss or damage to reinstate the insured property with the money obtained from the insurance policy or to discharge the mortgage debt with it, if the mortgagor so directs.
- To keep clear, full and accurate accounts of all sums received and spent by him as mortgagee and give them to the mortgagor when asked.
- To debit receipts from the mortgaged property or where such property is personally occupied by him a fair occupation rent thereof after deducting the expenses of management, the collection charges, revenue and costs of repairs, first against the interest on the mortgage money and then against the principal.
- To account for the receipts from the mortgaged property. Such accounting of receipt from the property shall be taken in lieu of interest on the principal money given to the mortgagor.
5.2 Sec. 105- Leases – Definition of Lease, Lessor, Lessee, premium and rent. LEASE Introduction: Transfer of immovable property will take place by transferring it from one person to another. To make the transfer valid it is very essential that the person should be competent to make a contract and it should not be forbidden by law. Lease under Transfer of Property Act, 1882 deals with section 105 to section 117. A lease can be done only of immovable property. A lease is the enjoyment of immovable property for a certain period of time or in perpetuity. But, in lease transfer of immovable property is not absolute like there it is in sale. The right of possession is separated from the right of ownership.
According to section 105 of TPA, 1882 Lease is defined as, 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 price or promised, or of money, a share of crops, service or any other thing, of value, to be rendered
- All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.
Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee. Provided that the State Government may from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.”
Rights of the lessor Liabilities of the lessor:
- A lessor will have a right recover its rent from the property which is leased by him.
- Lessor having a right to take back his property’s possession from the lessee, if any breach of condition is done by lessee.
- If there is a damaged to the property which is leased, then the lessor having a right to recover the amount of damages from the lessee.
- On the termination of the contract of the lease, the lessor having a right to take back his possession from the lessee. 1. Section 108(a) : The lessor is bound to disclose all the material defect relating to the property which are lease with the former intended use, of which the former is and later is not aware. 2. Section 108(b): Lessor is bound to request the lessee, to put him in a possession of his property. 3. Section 108(c): Lessor can make a contract with the lessee that, if he pays the rent later on which is reserved by the lease and performs all the terms and conditions mentioned under the contract which binds the lessee, and then the lessee may hold the property during the specified time without the interruption.
Rights of the lessee Liabilities of the lessee
1. Section 108(d): During the continuing period of lease if any accession is made (alluvium for the time being in force) then that accession or area will be taken under such lease. 2. Section 108(e): During the continuing period of lease, if the material part of the property is destroyed wholly or partly through by fire, or by flood, or by war or by the violent act of the mob or by any other means and it becomes permanently unfit for the use for which it is to be rendered, then it becomes void at the option of the lessee. However, if the injury is caused due the default act of the lessee, then he cannot avail himself from the benefit of the provision. 1. Section 108(k): Lessee is under obligation to disclose all the material facts which likely to increase the interest or the value which the lessee and the lessor is not aware about. 2. Section 108(l): Lessee is under obligation to pay the premium or the rent to the lessor or his agent on a reasonable time. 3. Section 108(m): Lessee is under obligation to keep the property in a proper condition and on the termination of the lease restore all such good in such a way as it was at the time when he was in possession.
3. Section 108(f): During the continuing period of lease, if the lessor avoids to make any repairs to the property which he is obliged to do on a reasonable time even after notice, and if such repairs is done by the lessee himself, then he has a right to deduct such expenses from the rent or can recover from the lessor. 4. Section 108(g): If the lessor avoids making any such payment which a lessor is bound to make and if such payment is recoverable from the lessee or recovered against the property, then the lessee have a right to recover it from the lessor or can deduct it from the interest of the rent. 5. Section 108(h): Lessee having a right to remove all such things which he has attached himself to the earth provided that lessee has to leave the property in such a state in which he has received it. 6. Section 108(i): When a lease is of such duration which is not specified by any means, except the fault of the lessee, he or his legal representative having a right to collect all the crops which is planted, sown or growing by the lessee at the lease property and they are free to ingress and egress from such property. 7. Section 108(j): Lessee having a right to transfer the property absolutely or any part of his interest by the way of sub-lease or through mortgage. But, by such reason a lessee cannot by any means ceases himself from the liabilities which are attached to the leased property. 4. Section 108(n): if lessee is aware about any proceedings against the property or any encroachment or any interference is done, then lessee is under obligation to give notice to the lessor. 5. Section 108(o): Lessee having a right to use the assets or goods which are placed in the property as a ordinary prudence men and use it as it his own but, he is under obligation that he should not use or allow any other person to use the property in any other way or purpose other than the purpose for the property is leased. 6. Section 108(p): Lessee cannot without the consent of the lessor taken out any structure permanently of or on the property except in the case of agriculture purpose. 7. Section 108(q): On the termination of the lease, lessee is bound to give the possession back to the lessor.
