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In India, the Transfer of Property Act of 1882 governs the mortgage of immovable property. 

Even though a mortgage does not convey ownership of the property to a third party, it does generate interest in the immovable property. Several kinds of mortgages under the Transfer of Property Act are implemented while transferring a property. 

Read on to know more about the Transfer of Property Act, types of mortgages, eligibility, and more. 

Transfer of Property Act, 1882

The Indian Government introduced the Transfer of Property Act on 1st July 1882. This act applies to the transfer of immovable properties. By following this law, an individual can transfer any property to himself or another person. 

The property can be a firm, an entity, an association of persons, etc. This act was implemented with the primary intention of establishing a diverse collection of property transfer laws. 

It explains the principles of property transfer and the involved factors transparently and precisely.

Transfer of Property Eligibility Criteria

Here are the eligibility criteria you must fulfil to transfer any property.

  • You must be an Indian citizen

  • You must be a adult above the age of 18

  • You must be mentally competent and must not be intoxicated during the transfer

  • If you intend to transfer any property, but you are not the owner, then you must have permission from the owner to do the same

Types of Mortgage Under the Transfer of Property Act

Below are the different types of mortgages under the Transfer of Property Act.

  • Simple Mortgage: In a simple mortgage, the mortgagor agrees to make the payments as specified in the loan terms. Another option is to grant the mortgagee the right to sell the property and use the revenue for the mortgagor's loan. 

    Note that in a simple mortgage, the mortgagee does not have ownership of the site.

  • Mortgage by Conditional Sale: In this type of mortgage, the mortgagor sells the property on the provision that if the payment defaults, the sale becomes irreversible. Furthermore, the provision states that after the payment is made, the sale is null and void, and the purchaser will convey the property to the seller.

  • Usufructuary Mortgage: Under the usufructuary mortgage, a mortgagor transfers property ownership to the mortgagee, granting them the authority to retain it until the loan is fully repaid.

    In exchange, the mortgagor becomes entitled to revenues and rents linked to the principal and interest of the loan. In this case, the mortgagor does not bear personal liability.

  • English Mortgage: Under this, the mortgagor is individually obliged to pay back the loan on a particular date and to transfer the property to the lender. However, such a transfer is subject to the condition that, following loan repayment, the mortgagor would get the funds on a certain date.

  • Mortgage by Deposit of Title Deeds: This is also called an equitable mortgage. In this mortgage, the deposit of the property's title deed is made with the intention of using the ownership rights as collateral for the loan. 

  • Anomalous Mortgage: Any mortgage that does not fall under the other types is known as an anomalous mortgage. 

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Key Elements of the Transfer of Property Act, 1882

Following are the key elements of the Transfer of Property Act of 1882.

  • Property must be transferred by an authorised person over 18 years who is not intoxicated and legally forbidden.

  • Property must be transferred within a person’s life span.

  • The authorised person must be in a good state of mind while transferring the property.

  • Property transfer must not occur before the title has been issued. Conveyance may be undertaken at the moment or scheduled for later.

  • If the condition becomes unlawful, unethical, unfeasible, or against government policy, the transfer is considered null and invalid.

  • Property cannot be transferred to an unborn child. However, it can be transferred initially in the name of another person. The property will reside in that person's name until the child is born; after that, it can be transferred to the child’s name.

  • Except in circumstances where a legal agreement is required, property transfers can be done verbally. For example, a gift of immovable property, the lease of immovable property for more than a year, etc.

What is Section 52 of the Transfer of Property Act?

According to Section 52 of the Transfer of Property Act, any immovable property engaged in an ownership dispute cannot be transferred or sold. This cannot happen until the issue is settled or a court of competent jurisdiction rules.

Suppose any conflicted property has already been sold. In that case, the purchase will not be void, but the purchaser must follow the court's final decision.

Seller's Responsibilities During Transfer of Property

The Transfer of Property Act has mentioned multiple responsibilities that every seller must follow. Here are the details about the same.

  • If any buyer asks for a review of documents, the seller must reveal all title documents of the property.

  • The seller must ensure that any significant defects in the property are disclosed to the buyer.

  • During the period of property delivery, the seller will have to take good care of the property and all connected documentation in their possession.

  • The seller must eliminate all liabilities on the property that exist at the time of sale.

  • While transferring the property, the seller must transfer full ownership of the property to the buyer.

  • If the buyer has queries related to the property, the seller is mandated to clear all their doubts with the right information.

  • The seller is entitled to pay the rent and any other expenditures payable on the property until the date of sale.

  • The seller must complete the property transfer procedure at the convenience of the buyer after the payment.

  • The seller is liable to maintain the property until the sale agreement is handed over to the buyer.

Buyer's Responsibilities at the Time of Transfer of Property

Along with a seller, a buyer is also obligated to fulfil certain responsibilities mentioned in the Transfer of Property Act that are listed below.

  • If the buyer learns aspects about the property that significantly increase its worth, but the seller is unfamiliar with them, the buyer must notify the seller.

  • Once property ownership is transferred to the buyer, the buyer is responsible for any losses incurred due to damage, destruction, or a decrease in property value, and the seller is not liable for any payments.

  • The buyer must pay the seller the purchase cost after completing the sale procedure.

  • The buyer must pay the initial money owing on any entanglements according to which the property is sold.

  • Once the ownership is transferred to the buyer, the buyer is liable to pay property tax and other charges associated with the property.

This Act benefits every Indian citizen because of its systematic and uniform law for the transfer of immovable property between individuals.

FAQs on Property Mortgage Laws in India

Any property mortgage is only legitimate if it is documented in a registered agreement prepared by the mortgagor and attested by two witnesses.

A movable property may be transported from one location to another without affecting its quality, capability, or quantity. Movable properties include personal property, automobiles, books, standing wood, etc.

An immovable property cannot be transported from one place to another. Immovable properties include buildings, houses, real estate, etc. 

The Transfer of Property Act applies to the transfer of immovable property. The transfer of a property can be carried out by two or more parties or through an act of law. 

However, the ordinance excludes property transfers through the operation of law, such as forfeiture, succession, or bankruptcy. The regulation also does not include the disposition of property that is not the eventuality of wills.

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