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Real Estate Law - Module 1
Real Estate Law - Module 1
Real Estate Law - Module 1
- Payal Seth
MEANING :-
• Real estate, in context of real estate law, refers to properties
compromising land, buildings, or natural resources that are subject to
legal ownership or control. It emcompases a broad range of physical
assests, including residential homes, commercial buildings, offices, retail
spaces, industrial facilities, vacant land, and even natural rources like
minerals, water, and crops.
• Real estate law governs the legal aspects related to the acquisition,
ownership, use, and transfer of real property. It encompasses a variety of
legal principles and regulations that dictate how real estate transactions
are conducted and how property rights are established and protected.
• Real estate law covers numerous areas, including property rights,
contracts, zoning and land use regulations, landlord-tenant relationships,
finacing and mortgages, property taxes, environmental regulations, and
real estate development. It sets forth the legal framework for buying,
selling, leasing, renting, and managing real estate.
• Real estate law is crucial for protecting the righs and interets of property
owners, promoting fair and transparent transactions, and ensuring the
orderly development and use of real property within legal boundaries. It
is influenced by federal, state, and local laws, which can vary
insignificantly depending on the jurisdiction.
• Understanding and complying with real estate law is essentail for
individuals, businesses, and organizations involved in real estate
transactions to mitigate risks, safeguard their investments, and ensure
lawful and ethical practices in the dynamic and complex world of real
estate.
• Real estate laws in India are governed by various acts, regulations, and
policies at the national, state, and local levels. Here are some key
legislations that play a significant role in the rela estate sector:-
• Real Estate (Regulation and Development) Act, 2016 (RERA) -
RERA is a significant legislation enacted by the central government to
regulate the real estate sector and protect the interest of the home buyers.
It aims to bring transperancy, accountability, and fair practices into the
industry. RERA mandates the registration of real estate projects with the
respective state regulatory authorities, ensuring that developers provide
accurate and timely information about their projects to buyers. It
establishes rules for the timely completion of projects, disclosure of
projects, use of funds, and resolution of greviances. RERA also requires
real estate agents to be registered and comply with ecrtain standards of
conduct. The legislation provides a mechanism for buyers to seek
redressal of greviances through the regulatory authorities or the Real
Estate Appellate Tribunals.
• Transfer or Property Act, 1882: The Transfer of Property Act governs
the transfer of property in India. It lays down the legal framework for
various modes of property transfer, including sale, mortgage, lease, gift,
and exchange. The act defines the rights and responsibilities of parties
involved in property transactions and sets out rules for the proper
execution and registration of documents related to property taansfers. It
also governs the rights and liabilities of landlords and tenants in lease
agreements.
• Indian Contract Act, 1872: The Indian Contract Act regulates contracts
in India, including those in the real estate sector. It defines the formation,
enforceability, and breach of contracts. The act provides a legal
framework for real estate contracts, such as purchase agreemets, lease
agreements, and construction contracts. It outlines the rights and
obligations of parties, establishes rules for the validity of contracts, and
provides remedies in case of contract disputes.
• Registration Act, 1908: The Registration Act mandates the registration
of certain real estate documents to provide them with legal validity and
public notice. Documents such as sale deeds, lease deeds, and mortgages
need to be registered at the local sub-registrar's office. Registration
ensures the authenticity of the documents, prevents frauds, and facilitates
the transfer of property rights. It also allows the public to access
information about property transactions.
• Land Acquisition Act, 1894: The Land Acquisition Act governs the
acquisition of land by the government for the public purpose. It provides
the legal framework for the process of land acquisition, compensation
mechanisms, and dispute resolution. The act outlines the procedures for
land acquisition, including public notification, assessment of
compensation, and rehabilitation and resettlement measures for affected
parties.
• Town and Country Planning Acts: Various states in Inida have town
and country planning acts that regulate land use, zoning, and
development activities. These acts define the permissible land uses, set
building codes and development controls, and establish procedures for
obtaining devlopment approvals. They ensure that urban and rural areas
are planned and developed in a planned and sustainable manner. Some
examples are - Maharashtra Regional and Town Planning Act, 1966;
Delhi Development Act, 1957; Karnataka Town and Country
Planning Act, 1961; Tamil Nadu Town and Country Planning Act,
1971; West Bengal Town and Country (Planning and Development)
Act, 1979.
A. TRANSFER BY SALE
• Transfer by sale in India refers to the legal process of transferring
ownership of a property from one party to another in exchange for
monetary consideration. It is a common mode of property transfer and is
governed by various laws and regulations, including the Transfer of
Property Act, 1882.
WHEN A PROPERTY IS TRANSFERRED BY SALE,
IT INVOLVES THE FOLLOWING KEY
ELEMENTs:
• Parties: The transferor, also known as the seller or vendor, is the current
owner of the property who intends to sell it. The transferee, also known
as the buyer or vendee, is the individual or entity acquiring the property.
• Agreement: The sale of a property is typically initiated through a sale
agreement or sale deed. This agreement outlines the terms and conditions
of the sale, including the purchase price, payment schedule, property
description, and any other relevant clauses.
• Consideration: Consideration refers to the monetary value or price
agreed upon by the parties involved in the sale. It is the amount that the
buyer agrees to pay to the seller in exchange for transferring ownership
of the property.
• Transfer of Ownership: Once the sale agreement is executed and the
consideration is paid, the ownership of the property is transferred from
the seller to the buyer. This transfer of ownership is legally recognized
through the execution of a sale deed or conveyance deed. The sale deed
is a legal document that records the transfer of ownership and acts as
proof of the transaction.
• Registration: To make the sale deed legally valid and enforceable, it
must be registered with the appropriate authority, usually the local sub-
registrar's office. Registration involves presenting the sale deed, paying
the applicable registration fees, and ensuring the presence of witnesses.
The registration process provides legal validity, authenticity, and public
notice to the sale transaction.
SURAJ LAMP & INDUSTRIES PVT. LTD. V. STATE
OF HARYANA, 2012
• In this case, the Supreme Court of India addressed the issue of the
validity of sales of immovable property through power of attorney
transactions. The court ruled that a sale of immovable property can only
be legally valid if it is executed through a registered sale deed and not
through an agreement or power of attorney.
• The case arose from a practice prevalent in some parts of India where
property transactions were conducted through power of attorney holders
without executing a registered sale deed. The power of attorney holders
would sell the property on behalf of the owner, and such transactions
were often considered as valid transfers.
• The Supreme Court, in its judgment, held that a mere power of attorney
is not sufficient to transfer the ownership of immovable property. It
emphasized that for a valid sale of immovable property, the transaction
must be executed through a registered sale deed as per the provisions of
the Transfer of Property Act and the Registration Act.
• The court's decision in this case brought clarity and emphasized the
importance of executing registered sale deeds for valid property
transactions in India. It curbed the practice of property sales through
power of attorney and reaffirmed the significance of adhering to legal
formalities to ensure the authenticity and legality of property transfers.
• Since this case, property buyers and sellers in India have been reminded
of the necessity of registering sale deeds to protect their rights and avoid
legal disputes. It has become a landmark ruling in the context of property
transactions and has had a considerable impact on real estate practices in
the country.
B. TRANSFER BY LEASE
• Transfer by lease, also known as lease assignment or lease transfer, refers
to the process of transferring the rights and obligations of a lease
agreement from the current tenant, known as the assignor or transferor,
to a new tenant, known as the assignee or transferee. It allows the
assignee to step into the shoes of the original tenant and assume the
rights and responsibilities outlined in the lease agreement for the
remaining term of the lease.
WHEN A TRANSFER BY LEASE OCCURS, THE
FOLLOWING KEY ELEMENTS ARE INVOLVED:
• Assignor (Transferor): The assignor is the current tenant who wishes to
transfer their leasehold interest to another party. The assignor typically
seeks to transfer the lease due to reasons such as the need to vacate the
premises, business changes, or other personal circumstances.
• Assignee (Transferee): The assignee is the new tenant who assumes the
rights and obligations of the lease. The assignee may be an individual, a
company, or an organization interested in occupying the leased premises
and fulfilling the remaining lease term.
• Lease Agreement: The lease agreement is the legal document that
establishes the terms and conditions of the lease between the original
tenant and the landlord. It outlines the rights, obligations, and
responsibilities of the tenant and landlord during the lease term,
including rent payment, maintenance responsibilities, use restrictions,
and other provisions.
• Assignment Agreement: To effect the transfer by lease, an assignment
agreement is executed between the assignor and the assignee. This
agreement details the terms of the transfer, including the effective date,
transfer of rights and obligations, any conditions or restrictions, and any
associated costs or fees.
• Landlord Consent: In most cases, the landlord's consent is required for a
valid transfer by lease. The landlord must agree to accept the new tenant
as the assignee and release the original tenant from their obligations
under the lease. The landlord may evaluate the financial stability,
creditworthiness, and suitability of the proposed assignee before granting
consent.
• Once the assignment agreement is signed, and the landlord provides
consent, the assignee assumes the rights and responsibilities of the
original tenant under the lease. The assignee becomes responsible for
paying rent, complying with lease terms, and performing any other
obligations outlined in the lease agreement for the remaining lease term.
• The transfer of lease rights, also known as lease assignment or transfer
by lease, is primarily governed by contract law principles rather than
specific legislation in India. The key legal framework for lease
transactions is provided by the Indian Contract Act, 1872.
• The Indian Contract Act governs the formation, rights, and obligations of
parties involved in contracts, including lease agreements. It sets out
general principles for the transfer of rights and obligations under a
contract, which apply to lease assignments as well.
• Additionally, lease agreements may contain specific provisions regarding
the assignment or transfer of the lease. These provisions, along with the
general principles of contract law, regulate the transfer of lease rights and
the conditions under which it can be done.
ASSOCIATED HOTELS OF INDIA LTD. V. R.N.
KAPOOR (1959)
• The Supreme Court of India addressed the legal concept of determining
whether a lease agreement is a lease or a license. The court established
important principles that distinguish between a lease and a license, which
have significant implications on the rights and liabilities of the parties
involved.
• The case involved a hotel owner (Associated Hotels of India Ltd.) who
granted possession of some hotel rooms to a person (R. N. Kapoor)
under an agreement. The hotel owner sought to terminate the agreement
and recover possession of the rooms. Kapoor claimed that he had a lease
agreement and could not be evicted without following the proper
eviction process.
THE COURT LAID DOWN THE FOLLOWING
ESSENTIAL CHARACTERISTICS OF A LEASE:
• There must be a transfer of an interest in the property, creating a
relationship of landlord and tenant.
• The transferee (lessee) must have exclusive possession of the property
for a defined period.
• The lessee must have the right to enjoy the property as if he or she were
the owner, to the exclusion of all others, including the owner (lessor).
• "When two persons mutually transfer the ownership of one thing for the
ownership of another, neither thing or both things being money only, the
transaction is called an "exchange".
KEY ELEMENTS OF TRANSFER BY EXCHNAGE :
• Mutual Agreement: For a transfer by exchange to be valid, it requires
the mutual consent of both parties involved. Both parties must agree to
transfer their respective properties to each other.
• Ownership Transfer: In an exchange, there is a mutual transfer of
ownership. Each party gives up ownership of their property and acquires
ownership of the property offered by the other party.
• No Money Involved: In a true exchange, the consideration for the
transfer is the property itself. Money is not involved in the transaction, or
it is involved only as part of the equalization of value if there is a
difference in the value of the properties exchanged.
• Equal Value: The properties exchanged are expected to have
approximately equal value. The law does not require an exact match, but
the properties should be reasonably equivalent in worth.
• Registration: Like any other property transfer, the exchange of
properties requires registration of the deed with the appropriate authority
to make the transaction legally valid and enforceable.
• In this type of mortgage, the mortgagor ostensibly sells the property to the mortgagee
on the condition that the sale will be void if the mortgagor repays the debt within a
specified time. Until the debt is repaid, the mortgagee holds the property, but if the
debt is not repaid within the stipulated time, the sale becomes absolute, and the
mortgagee becomes the owner of the property.
• Illustration: Mr. Singh wants to buy a property worth Rs. 50 lakhs but does not have
the full amount. He approaches a friend, Mr. Kapoor, who agrees to lend him the
money. Mr. Kapoor suggests a mortgage by conditional sale. Under this arrangement,
Mr. Singh sells the property to Mr. Kapoor for Rs. 50 lakhs on the condition that if he
repays the loan within two years, the sale will be void, and the property will be
transferred back to Mr. Singh. If Mr. Singh fails to repay the loan within two years,
the sale becomes absolute, and Mr. Kapoor becomes the owner of the property.
C. USUFRUCTUARY MORTGAGE
• The Real Estate (Regulation and Development) Bill, 2013, went through
several revisions and discussions in both houses of parliament. It was
passed by the Rajya Sabha (Upper House) on March 10, 2016, and by
the Lok Sabha (Lower House) on March 15, 2016. Subsequently, it
received the President's assent on March 25, 2016, and became the Real
Estate (Regulation and Development) Act, 2016 (RERA). RERA has
been instrumental in bringing more transparency and accountability to
the real estate sector in India and has provided significant protection to
homebuyers. It has established regulatory authorities in each state and
union territory to govern the real estate market and has led to increased
consumer confidence in the sector.
MAIN OBJECTIVES OF THE REAL ESTATE
(REGULATION AND DEVELOPMENT) ACT, 2016