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Property law repeated questions Q1. Elucidate the rule against perpetuity and explain the exceptions to this rule. Or State the rule against perpetuity as provided in the Transfer of Property Act. Or Discuss the rule against perpetuity. State the exception to the rule.

Ans. Perpetuity means indefinite period. Rue against perpetuity is the rule which is against a transferrer making the property inalienable for an indefinite period or forever. Where a property is transferred in such a way that it becomes non-transferable in future for an indefinite period, the property is tied up forever. This disposition would be a transfer in perpetuity. In any disposition, perpetuity may arise in two ways: (a) by taking away from the transferee his powers of alienation and, (b) by creating future remote interest. Section 10, states that conditions restraining the transferee’s power of alienation is void. A disposition which tends to create future remote inters has been prohibited under Section 14 which incorporates the ‘rule against perpetuity’. The object of the rule against perpetuity is to ensure free and active circulation of property both for the purpose of trade and commerce as well as for the betterment of the property itself. Frequent disposition of property is in the interest of the society and also necessary for its more beneficial enjoyment. A transfer which renders property inalienable for an indefinite period is determinantal to the interests of its owners who are unable to dispose it of even in urgent needs or for any higher value. In the absence of any rule prohibiting creation of perpetuities, there might come a time when almost all properties of the country would have become static properties. This would cause great hardship in the easy enforcement of law, detrimental to trade, commerce and intercourse and may also result into the destruction of property itself. Rule Against Perpetuity Under Section 14: Section 14 of the Transfer of Property Act provides that in a transfer of property, vesting of interest cannot be postponed beyond the life of last preceding interest in the living person and the minority of the ultimate beneficiary. The essential elements of the rule against perpetuity as given in Section 14 are: 1. There is a transfer of property 2. The transfer is for the ultimate benefit of an unborn person who is given absolute interest 3. The vesting of interest in favour of ultimate beneficiary is preceded by life or limited interest of living persons. 4. The ultimate beneficiary must come into existence before the death of the last preceding living person. 5. Vesting of interest in favour of ultimate beneficiary may be postponed only up to the life or lives of living persons plus minority of ultimate beneficiary; but not beyond that. Property may be transferred to any number of people who are living at the date of transfer. In this way, vesting of interest in favour of ultimate beneficiary may be postponed for any number of years. Thus, property may be transferred to A for life then to B for life and then to C for life and so on for

several years and all these persons who hold the property successively for their lives would tie up the property for many years before it goes absolutely to the ultimate beneficiary. However, as required under Section 13, such ultimate beneficiary must be born before the termination of the last preceding interest. Accordingly, there should not be any interval between the termination of preceding interest and its consequent vesting in the ultimate beneficiary, vesting of such interest cannot be postponed even for a moment. By way of relaxing this strict rule in section 13 it is provided in section 14 that vesting of interest may be postponed but not beyond the life of preceding interest and the minority of the ultimate beneficiary. In other words, Section 14 provides that vesting of interest may be postponed but not beyond a ‘certain period’. If in a transfer of property, vesting of interest is postponed beyond this period as prescribed in this section, the transfer would be void as been a transfer for an indefinite period or a transfer in perpetuity. Where property is made to vest withing the limit prescribe in this section, the transfer is valid. Any delay beyond this period would make the transfer void. Accordingly, where a property is transferred to A for life and then to an unborn person, when he attains the age of 19 years, the transfer to the unborn person is void under section 14. Maximum remoteness of vesting: Under section 14, the permissible remoteness of vesting in the life of the last preceding interest plus minority of the ultimate beneficiary. Accordingly, property may be transferred to A for life and then to B for life and then to the unborn person when he attains the age of majority. A and B hold the property successively for their lives; therefore, the property is tied up for their lives one after the other. After the death of B (the last preceding inters) although it should vest in the ultimate beneficiary, the unborn person, immediately but under this section the property may be allowed to vest in the unborn person when he attains the age of majority. So, the vesting may be postponed up the life of the last person (B) holding property for his life and the minority (18) years of the ultimate beneficiary. Ultimate beneficiary in mother’s womb: Where the ultimate beneficiary is in the mother’s womb, the latest period up which vesting may be postponed, (after the preceding interest) is the minor plus the period during which the child remains in the mother’s womb. It may be noted that that minority is counted from the date of worldly birth whereas for the purpose of being a transferee, a child in mother’s womb is a competent person. Where the ultimate beneficiary is in mother’s womb when the last person dies, the property vests immediately in him while his is still in mother’s womb. Therefore, the exact period from which the minority being to run is the date when ultimate beneficiary is conceived. Accordingly, the minority up to which the vesting is permitted to be postponed under this section would include the period during which the ultimate beneficiary remains in womb before he is born alive. Contingent interest: Under section 14, vesting of interest in favour of the ultimate beneficiary may be postponed up to his minority. In other words, the property does not vest in him until he attains the age of majority. Between the period when the las person dies and the majority of the ultimate beneficiary, the ultimate beneficiary holds a contingent interest which becomes vested upon him attaining majority. When the ultimate beneficiary is already born at the death of the last person but does not survive to attain majority, the interest does not vest in him and therefore, reverts back to the transferee or his legal heir.

Exceptions to Rule Against Perpetuity: The rule against perpetuity is not applicable in the following case: 1. Transfer for the benefit of public: where a property is transferred for the benefit of public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind, the transfer is not void under the rule against perpetuity, according to section 18 of TOPA. This exemption is necessary because transfers of property for the benefit of public generally are made through, he medium of religious or charitable trusts. In the trusts, the property settled is tied up for an indefinite or perpetuity period so that its income many be utilised for ever for the object for which the trust is created. Application of the rule of perpetuity on trusts would render every trust void and it would be impossible to create any trust for the benefit of public. 2. Personal agreement: Personal agreements which do not create any interest in property are exempted from the rule against perpetuity. Rule against perpetuity is applicable only to a transfer of property. If there is no transfer of property, i.e., no transfer of interest, the rule cannot be applied. In Ram Baran v Ram Mohit, the Supreme Court held that a mere contract for sale of an immovable property does not create any interest in immovable property and therefore, the rule cannot apply to such contracts. The rule against perpetuity is not applicable to mortgages because in mortgage there is no creation of nay future interest. The rule against perpetuity is not violate if a settlements deed reserves life estate for the executor and his with a vested remainder to their unborn children. In P. Venkata Subanna v D. Chinna Panayya, the husband executed a settlement deed under which he created a life estate in favour of his wife so that she may enjoy the property during her life together with husband (the executor) and after his death up to her remaining life and after her death the property was to vest in their children who would be born by that time. The Andhra Pradesh High Court held that the settlement deed was valid and it did not violate the provisions of Section 14.

Q2. What is lease? How lease may be determined? Or What are the essentials of a valid lease? Or Define Lease. Explain the rights and liabilities of lessee. Or Explain the meaning of the term lease. Bring out its distinction from sale, exchange, mortgage and gift.

Ans. Section 105 of TOPA defines lease. Lease is a transfer of ‘right of enjoyment’ of an immovable property made for a certain period, in consideration of a price paid or promised to be paid or, money, share of crops, services or any other thing of value to be given periodically or on specified occasions to the transferor by the transferee. As evident form the definition, lease is not a transfer of ownership in property, it is transfer of an interest in an immobile property. The interest is the right to use or enjoy the immovable property. Since “interest” in an immovable property is considered as property, lease is a transfer or property. However, lease is a transfer of only a particular interest. It is not a transfer of absolute interest. Lease contemplates separation of right of possession form the ownership. The interest which is transferred is the right to enjoyment of property for a fixed period on payment of some consideration in cash or kind. Essential elements of Lease: The essential elements of a lease are as under: 1. The parties: Lessor and Lessee: in a lease two contracting parties are necessary. The parties are lessor and lease. Every lease is based on an agreement between two persons competent to contract. Since one cannot contract with himself therefore one cannot also grant any lease to himself. a. Lessor: the lessor, who transfers the right of enjoyment of his property must be a person competent to contract and must also have right to transfer the possession of property. In the lease, there is no transfer of ownership and only transfer of possession. Therefore, not only the owner but also the lessee himself is entitled to grant lease. Such lease is called sub-lease or derivative lease. However, it must not extend beyond such person’s own possession. b. Lessee: Lessee to must be competent to contact at the date of execution. Lessee may be a juristic person, i.e., a company or a registered firm. 2. The Demise: Right to Enjoy immovable Property: Lease is a transfer of right of enjoyment in an immovable property. It is not a transfer of ownership; it is transfer of partial interest. Ownership or absolute interest is aggregate of several interest. In a slae, gift or exchange absolute interest is transferred. In mortgagee only partial or limited interest is transferred for

securing the debts. In a lease too partial or limited interest namely, the right of enjoyment of immovable property, is transferred. Lease, is therefore, transfer of limited estate. This limited estate which is ‘right of enjoyment’ of property, is called demise. In a lease the right of enjoyment or demise is the subject matter of transfer. In the case of Girdhari Sighg v Megh Lal Pandey, the court held that “the essential characteristic of a lease is that the subject is occupied and enjoyed and the corpus of which does not, by reason of the user, disappear.” 3. The term: Duration of Lease: the right of enjoyment must be given to the lease for a certain period of time. The period for which the right to use the property is transferred is called the term of the lease. The term maybe any period of time, longer or shorter, even for perpetuity. However, the term must be specified in the deed. The time from which the right of enjoyment begins and the time when it ends must be fixed and ascertainable. It is not necessary that the lease must commence immediately after execution of the deed, it may also commence with effect from a specified future date. The lease in perpetuity is also called as permanent lease. 4. Consideration: Premium or Rent: the contract of lease must be supported with some consideration. Consideration in the lease maybe premium or rent. Where the whole amount to be recovered as consideration from the Lessee is paid by him in Lump Sum, the consideration is called premium. Consideration paid periodically is called rent of the lease. Rent need not be necessarily in the form of money. Under the section, rent may be paid in the form of services rendered by Lessee to the lesser or it may be in the form of share or crops. However, the rent fixed for the lease must be certain. It may vary from time to time, but it must be reasonably ascertainable. Rights and Liabilities’ of Lessor and Lessee: The rights and liabilities of lessor and lessee in Section 108 are in the absence of any contract other contrary. Lessor and lessee themselves may agree upon their respective rights and duties. If the parties have agreed to be governed by their own terms and conditions regarding their mutual relationship during the subsistence of lease, the respective rights and duties of lessor and lessees are determined by that contract. Rights and liabilities of Lessor: Rights of Lessor: Section 108 does not provide for any specific right of the lessor. But, since rights and duties are corelative, the liabilities of the lessee as given in this section would mean identical rights of the lessor. Liabilities of Lessor: The liabilities of a lessor as laid down in Section 108 clauses (a) to (C) are: 1. Duty to disclose latent material defect: lessor must disclose latent material defect in the property to the lessee. Defect in the property is latent if it is not apparently visible but the lessor has knowledge of it. Such defect is material if it is of substantial nature. It must be of such nature that if lessee would have known about it, he would either not accepted the lease or would have taken it

on different terms and conditions. The lessor is bud to inform only latent material defects in the property which may affect the intended use or enjoyment of the property by lease. 2. Duty to give possession: lease is a transfer of the right to enjoy or use an immovable property. Without possession, enjoyment of property is not possible. Lessor is, therefore, liable to deliver the possession of property to the lessee so that he may use or enjoy it. On the request of the lessee, the lessor must deliver the possession to Lessee in any manner in which Lessee becomes capable of using the property. It may be actual or constructive. Where a lessor failed to put Lessee in possession, the Lessee can sue the lessor for obtaining possession. 3. Covenant for quiet enjoyment: lease being transfer of the right of enjoyment in an immovable property, it is an implied duty of lessor to ensure the lessee a peaceful enjoyment of this right. Accordingly, the lessor is deemed to have contracted that during the term of lease if lessee continues to pay the rent, he is entitled to possess the property without any interference or objection in the lessee's possession of the property. The court in Vinayaka Rao v Bhondu held that “The lessor’s duty to covenant for the quiet enjoyment of the property is indirectly connected with the duty to covenant for perfect title in the property. If the lessor does not have a good title in the property, there is a likelihood of interference by other claimants of the property which in turn will affect the covenant for quiet enjoyment”

Rights and liabilities of Lessee: Rights of lessee: In the absence of any contract or local usage to the contrary, the right of a lessee as given under Section 108 clauses (d) to (j) are: 1. Right to enjoy accretions to the leased property : Accessions means additions made to the property either by human being or due to natural forces. If, during the continuation of lease, some accretion is made to the property, it is presumed to be a part of the property. According to this clause, such accessions shall be compromised in the lease Therefore, the lessee can get enjoy such accessions since it will be included in the leasehold property. However, Lessee is bound to surrender the same, both natural as well as made by himself, to the lessor after the term of the lease. 2. Right to avoid the lease on destruction of the property: Where the property is rendered substantially and permanently unfit for the use due to fire, flood etc, the lessee has a right to get the lease terminated before the expiry of the term. However, this right is available only if the property is substantially and permanently destroyed and is unfit for the purpose of the lease. If the property can be made fit for use by repairs, the lessee has no right to avoid the lease. Lessee cannot exercise this also in cases where the damage has been occurred due to the default of the lessee. The right given is an optional

right: the lease will not be terminated unless the lessee exercises the right by giving notice to the lessor.

3. Right to deduct the cost of repairs: Under this Act the lessor has no obligation to repair the property. But, under an express agreement, the lessor may undertake the obligation of making necessary repairs in the tenanted property. Lessor’s duty to repair the property may arise also under some local law or custom. Where the lessor fails to repaired the tenanted property despite express covenant or in violation of local law or custom, the lessee has right to repair the property and deduct its cost form the rents. Lessee has right to deduct cost of repair only if lessor is bound to repair the property under and express covenant or local law or custom. 4. Right to deduct outgoings: Since the property is owned by the lessor, he is bound to pay the outgoings such as public charges of the property. But since the lessee is interested in holding the possession of the property, he is entitled to pay such public charges to avoid its sale in default of payment of these public charges. Where a lessee makes payment of the public charge in respect of tenanted property, he has right to deduct the amount form the rents. 5. Right to remove fixtures: At the termination of lease, the lessee has the right to remove the fixtures made by him in the property during the continuance of the lease. The lessee can remove and take out these fixtures even after determination of lease. However, he must remove the things without disturbing the state of land or the premises. 6. Right to remove crops: After the termination of lease, the lessee is entitled to remove crops sown by him during the subsistence of the lease. This right is usually exercised in case of lease of uncertain duration. In other cases, the parties usually pre - agree on the removal of crops. 7. Right to assign interest: In the absence of any contract to the contrary, a lessee has right to assign or transfer his right of enjoyment in the property. The lessee can mortgage it or sublease it and the transferees may further transfer it as long as there is no prohibition for doing the same. However, such transfer cannot extend beyond the period of the original lease. Also, the fact that lessee has transferred it to a third person does not absolve the liabilities under the lease deed. Liabilities of Lessee: Section 108 clauses (K) to (q) lays done the liabilities of the lessee as: 1. Duty to disclose material facts: Just as a lessor has duty to disclose a latent material defect to lessee, t...