Sardar Khan & Co | Real Estate Law Services - Pakistan

Table: Property Classifications

Transfer of Property

You can hand over property to others with or without specific rules attached. The Transfer of Property Act outlines how these changes happen when parties agree to them.

Modes of Transfer

• By the actions of the parties involved
• By the automatic operation of the law

The Transfer of Property Act 1882 specifically focuses on transfers initiated by the parties themselves.

Transfer of Property by act of parties

Owners can give their property to someone else under various conditions. The Act highlights the following main methods for these transfers:

• Sales
• Mortgages
• Leases (Rentals)
• Exchanges
• Gifts
• Transfer of Legal Claims

Rights that may be Transferred

• The chance of inheriting an estate (Spes Successionis);
• The right to take back leased land if a rule is broken;
• An easement (right of way);
• A right intended only for one specific person’s enjoyment;
• A right to future financial support;
• The simple right to sue for damages;
• A public office position;
• Pensions and government stipends;
• Property intended for illegal use;
• Occupancy rights.

Person who can Transfer a Right

To transfer property, a person must be:

• Legally capable of signing a contract (not a minor or mentally incapacitated);
• The actual owner or someone legally allowed to act for the owner.

The person giving the right is the “transferor,” and the one getting it is the “transferee.”

Absolute Transfer

Unless stated otherwise, a person transferring property hands over every interest and legal right they currently hold. This includes all “accessories” or legal perks connected to the property. For example, if you sell a house, the right-of-way access attached to it automatically goes to the new owner.

Oral Transfers

You can transfer property through a spoken agreement unless the law specifically demands a written document.

Conditions relating to Transfers

If a transfer includes a rule that completely stops the new owner from ever selling the property, that rule is legally void. However, this doesn’t apply to lease agreements.

If an owner gives someone absolute control over a property but tries to dictate exactly how they must enjoy it, that direction is usually void. An exception exists if the rule is meant to benefit the seller’s neighboring land.

Rules that cancel a person’s interest just because they go bankrupt or try to sell the property are also considered void.

Conditions that can be imposed

You can set “conditions precedent”, rules that must be met before the new owner actually gets the property. These rules cannot be impossible, illegal, fraudulent, harmful to others, or immoral. If a person substantially follows the rule, the law considers it fulfilled.

A transfer can also be set up so that an interest passes to another person based on whether a specific uncertain event happens.

“Conditions subsequent”, rules that take property away after it has been given, are interpreted very strictly by courts. Every detail of the rule must be followed exactly.

Property interests can also be designed to end if a certain event occurs or fails to occur.

Transfer in favor of an unborn person

You can set aside property for a person not yet born by first giving a “living interest” to someone currently alive. The original owner must give away their entire interest in the property for this to work. The unborn person gets the property only if they are born before the previous person’s interest ends.

Transfer of Property by way of Sale

Under the 1882 Act, a “Sale” is moving ownership in exchange for a price that is either paid immediately or promised for later. Sales are finalized in two ways:

• By physically handing over the property if it is worth less than Rs. 100;
• By official registration for everything else.

Rights and liabilities of Buyer and Seller

The seller must:

• Reveal any major flaws in the property or the ownership papers;
• Show the buyer the title deeds;
• Answer all questions about the property’s history;
• Sign the transfer papers;
• Protect the property until it is handed over;
• Pay all taxes and bills until the sale is finished.

After the sale, the seller must:

• Guarantee the title is valid;
• Hand over the ownership documents;
• Give physical possession to the buyer.

The buyer must:

• Mention any facts they know that would make the property much more valuable;
• Pay the agreed price.

After the sale, the buyer:

• Assumes all risks of loss;
• Pays any future costs or interest from that date forward.

Transfer of Property by means of Mortgages and Charges

Section 58 defines a mortgage as moving an interest in land to secure a loan, a debt, or a specific financial duty.

Types of Mortgage

• Simple Mortgage
• Mortgage by Conditional Sale
• Usufructuary Mortgage
• English Mortgage
• Mortgage by Deposit of Title Deeds
• Anomalous Mortgage

Mortgages of Movables

While this Act focuses on land and buildings, the Contract Act 1872 covers “pledges” of movable items. However, Pakistani law does recognize mortgages for movable property as well.

Principles Applicable to the Mortgage

Doctrine of Redemption

This is the borrower’s right. If they offer the full loan amount at the right time, the lender must return the mortgage papers, give back possession, and transfer the property title back to them.

Doctrine of Foreclosure or Sale

Foreclosure is the lender’s remedy. A court orders the borrower to pay by a certain date. If they fail, they lose their right to get the property back forever, and the lender becomes the full owner. This applies to “conditional sales” but not “simple mortgages.”

Concept of Marshalling Securities

If an owner mortgages multiple properties to one person and then mortgages just one of those to a second person, the second lender has a right. They can insist that the first lender gets their money from the properties not tied to the second loan first, as long as it doesn’t hurt anyone’s legal rights.

Concept of Subrogation

This means “stepping into someone else’s shoes.” If a new lender pays off an old lender, they gain all the rights and powers that the old lender once had.

Charges

A “charge” doesn’t transfer property ownership; it just creates a right to be paid out of a specific asset. A mortgage is stronger because it holds up against future owners, whereas a charge only works if the new owner knew about it beforehand.

Transfer of Property by way of Leases

Section 105 defines a lease as giving someone the right to use a property for a set time (or forever). In exchange, the person pays a price, a share of crops, or provides a service.

Forms of Lease

• Periodic Lease
• Perpetual Lease
• Bemiadi Lease (No fixed end date)

Distinction between tenancy and lease

The main difference isn’t how you pay rent, but how long the deal lasts. A “lease” has a locked-in time frame, while a “tenancy” lasts until the landlord or tenant decides to end it.

Leases how made

Any lease for more than one year must be officially registered. Shorter leases can be done with a simple spoken agreement and the handing over of keys.

Rights and liabilities of lessor (Landlord) and lessee (Tenant)

The landlord must:

• Disclose property defects;
• Give the tenant the keys/possession;
• Let the tenant use the property without interference.

The tenant has the right to:

• Cancel the lease if the property is destroyed;
• Fix essential items and take the cost out of the rent;
• Pay bills the landlord missed and deduct them;
• Take back their own fixtures when leaving;
• Keep crops they planted if the lease ends unexpectedly;
• Transfer their lease interest to someone else.

The tenant must:

• Disclose facts that increase property value;
• Pay rent on time;
• Keep the property in good shape;
• Warn the landlord if others try to interfere with the land;
• Avoid damaging the property;
• Avoid building on the land (except for farming);
• Return the property when the lease ends.

Determination of Lease

A lease ends when:

• The time runs out;
• A specific event happens;
• The landlord loses their own interest;
• The tenant becomes the owner (merger);
• The tenant gives it up (surrender);
• The landlord takes it back for a broken rule (forfeiture);
• A “notice to quit” period ends.

Effect of holding over

If a lease ends but the tenant stays and the landlord continues to accept rent, a brand-new tenancy is automatically created.

Transfer of Property by means of exchanges

An “exchange” happens when two people swap ownership of two different things. It isn’t an exchange if only one of those things is money.

Exchange of money

When swapping different types of currency, both people guarantee that the money they are giving is real.

Transfer of Property by gifts

A gift is giving property away voluntarily without taking any money in return. The person giving is the donor, and the receiver is the donee.

Acceptance when to be made

The receiver must accept the gift while the giver is still alive and capable of giving. If the receiver dies before accepting, the gift is cancelled.

Transfer how effected

Gifting a house or land requires a signed, witnessed, and registered document. Gifting movable items can be done either with a document or by simply handing the item over.

Gift of existing and future property

You can only gift property you currently own. A promise to gift something you might get in the future is legally void.

Gift to several of whom one does not accept

If you give a gift to three people and one says no, that person’s share goes back to the giver rather than the other two.

When gift may be suspended or revoked

Giver and receiver can agree that a gift will be taken back if a specific event happens, as long as that event isn’t just the giver changing their mind.

Universal Donee

If you receive a person’s entire estate as a gift, you also become responsible for all their debts, up to the value of what you received.

Not applicable to Islamic law regarding gifts

These specific rules in the 1882 Act do not override the established rules of Islamic law concerning gifts (Hiba).

Important doctrines regarding Transfer of Property

Transfer by Ostensible Owner (Section 41)

If a person looks like the owner with the real owner’s permission and sells the property to someone who pays a fair price, the real owner cannot later claim the sale was invalid.

Fraudulent Transfer (Section 53)

If an owner sells property specifically to hide it from people they owe money to, those creditors can ask a court to cancel the sale. However, this won’t hurt a buyer who paid a fair price and didn’t know about the scheme.

Part Performance (Section 53-A)

If there is a written contract to sell property and the buyer has already paid money or moved in, the seller cannot kick them out just because the final deed isn’t registered yet, provided the buyer is ready to finish the deal.

Registration of Transactions

All major property deals (mortgages, sales, leases, gifts) must be registered under the Registration Act 1908 if the value is Rs. 100 or more. You must submit the documents to the Registrar, follow all rules, and pay the required fee.

Stamp Duty on Transactions

The Stamp Act 1899 sets the fees for these documents. Different “Articles” in the law decide how much you pay:

• Article 23: Fixed duty on sales and transfers.
• Article 31: Duty on property swaps (exchanges).
• Article 32: Fees for adding more debt to a mortgage.
• Article 33: Duty on gift documents.
• Article 35: Fees for lease papers.
• Article 40: Duty on standard mortgage deeds.

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