ZAFAR & ASSOCIATES - LLP | Real Estate Law Services - Pakistan

Real Estate Law Practice in Pakistan

Real estate law also known as the property law is the area of law that governs using, buying and selling of land, it’s the law that governs how people acquire property and what they can do with the property that they own.

From the ground-up construction project to the sophisticated financing transaction, our real estate attorneys provide clients with a broad range of skills and experience vital to the business of the real estate industry. A significant practice area at Zafar & Associates, our real estate group assists all who are involved in the dynamic real estate field from purchasers, sellers, and developers to borrowers and lenders. The strength of our attorneys' knowledge in complex transactions ensures efficient and timely attention to those clients engaged in major real estate investment, development, and lending activities across the country. Tapping into the firm's corporate, tax, and litigation practice areas, our attorneys can create teams designed for every type of real estate-related situation like Commercial and Residential Lawsuits, Buyer-Seller Disputes and Property Development Issues that might arise.

We deal with all kinds of Property cases including Transfer of Property by Act of Parties, Transfer of Property (Moveable or Immoveable, Tangible or Intangible), Sale, Mortgage, Lease, Charge of Immovable Property and Exchange, Gifts and all kinds of Claims regarding Property, Accession, Occupancy Rights, Vested Interests, Contingent Interest and Conditional Transfer etc.

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Property Law in Pakistan

Property is thing which is peculiar or proper to any person; that belongs exclusively to one. In the strict legal sense, an aggregate of rights which are guaranteed and protected by the Government. The term is said to extend to every species of movable right and interest. More specifically, ownership; the unrestricted and exclusive right to a thing; the right to dispose of a thing in every legal way, to possess it, to use it, and to exclude every one else from interfering with it. That dominion or indefinite right of use or disposition which one may lawfully exercise over particular things or subjects. The exclusive right of possessing, enjoying and disposing of a thing. The highest right a man can have to anything; being used to refer to that right which one has to lands or tenements, goods or chattels, which no way depends on another man's courtesy. According to Transfer of Property Act 1882 "Property means (i) the thing itself, or (II) some or all the rights in a thing."

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Land and anything permanently affixed to the land, such as buildings, fences, and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items which would be personal property if not attached. The term is generally synonymous with real property.

Classification of Property

Absolute Property	Property of another
Common Property	Public Property
General Property	Qualified Property
Mislaid Property	Real Property
Mixed Property	Special Property
Movable Property	State Property
Personal Property	Tangible Property
Private Property	Intangible Property
Immovable Property	Unclaimed Property

Table: Property Classifications

Transfer of Property

Property can be transferred to other persons with or without any conditions. Transfer of Property Act defines certain modes where transfer takes place by act of the parties that are enlisted as follows:

Modes of Transfer

• By act of parties

• By operation of law

Transfer of Property Act 1882 only deals with those transfers that take place by the act of parties.

Transfer of Property by act of parties

Property can be transferred to the other person with or without certain condition. Transfer of Property Act defines certain modes where transfer takes place by act of the parties that are enlisted as follows:

• Sales

• Mortgages

• Leases

• Exchanges

• Gifts

• Transfer of Actionable Claims

Rights that may be Transferred

• Spes Successionis (chance of succeeding to an estate);

• A mere right to take back the land (right of re-entry) given on lease to another for breach of a condition;

• An easement;

• An interest meant to be personally enjoyed by the person to whom it was given;

• A right to future maintenance;

• A mere right to sue for damages for breach of contract or tort;

• A public office;

• Pensions and stipends;

• Transfer of property for unlawful object or consideration;

• Occupancy rights.

Person who can Transfer a Right

The transferor must be:

• Competent to contract, i.e., neither minor nor lunatic, etc.;

• Full owner of the property or legally authorized to transfer it on behalf of the person having title to the property.

The person who transfers a right is called the "transferor" and the person to whom transfer is made is called the "transferee".

Absolute Transfer

Unless a different intention is expressed or implied, a transferor of property passes to the transferee all the interest in the property which the transferor is, at the time of the transfer, capable of passing and the accessories or legal incidents which follow the said property shall also be passed on along with the principal property. For instance, if a house is sold, the easements annexed thereto shall also stand transferred.

Oral Transfers

Unless expressly required by law to be in writing, a transfer may be made orally.

Conditions relating to Transfers

• Where property is transferred subject to a condition absolutely restraining the transferee from disposing of his interest, the condition is void. A lease is an exception to this rule.

• If a transferor creates an absolute interest in the transferee, any direction that such interest shall be enjoyed by him in particular manner is void. Such a condition shall however be valid if it is imposed for the benefit of transferor's adjoining land.

• A condition which makes interest determinable on subsequent insolvency or attempted alienation is void.

Conditions that can be imposed

• A condition precedent can be imposed, i.e., a condition which must be performed before the transferee can take the property, but such condition must not be impossible or forbidden by law, or fraudulent, or involving or implying injury to the person or property of another, or immoral or opposed to public policy. A condition precedent shall be deemed to be fulfilled if it has been substantially (although not wholly) complied with.

• A transfer may be made on the condition that in case a specified uncertain event shall or shall not happen such interest shall pass to another person.

• A condition subsequent which has the effect of divesting an estate is subject to the rule of strict construction, the condition must be strictly fulfilled.

• An interest may be created with the condition that it shall cease to exist in case a specified uncertain event shall happen or shall not happen.

Transfer in favor of an unborn person

A transfer can be made in favor of an unborn person by creation of prior interest in favor of living person subject to the condition that the transferor transfers his entire property to the said unborn person. The interest created in favor of the unborn person shall take effect and rest in the said person on birth only if he comes into existence before the termination of the last prior estate.

Transfer of Property by way of Sale

According to Transfer of Property Act 1882, "Sale is a transfer of ownership in exchange for a price paid or promised". Transfer by sale is effected by the following methods:

• by delivery of possession if the tangible immovable property is less than Rs. 100 in value;

• by registration in all other cases.

Rights and liabilities of Buyer and Seller

The seller is bound:

• To disclose material defects in property or in his title to property;

• To produce title deeds;

• To answer questions regarding title;

• To execute conveyance;

• To take care of property between date of contract and delivery of property;

• To pay outgoings, i.e. public charges, rents, etc., up to completion of sale.

Liabilities of seller after completion of sale:

• To covenant for title;

• To deliver documents of title; and

• To give possession.

The buyer is bound to:

• To disclose materially increasing the value of property;

• Duty of paying.

Buyer's liabilities after completion:

• The buyer suffers risk of loss only from the date of conveyance;

• The buyer has to pay principal and future interest accruing from the date of the conveyance.

Transfer of Property by means of Mortgages and Charges

Section 58 of the Transfer of Property Act says that "A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability."

Types of Mortgage

• Simple Mortgage

• Mortgage by Conditional Sale

• Usufructuary Mortgage

• English Mortgage

• Mortgage by Deposit of Title Deeds

• Anomalous Mortgage

Mortgages of Movables

The transfer of Property Act deals with mortgages of immovable property only, while the Contract Act, 1872 embodies the law as to pledges of movables. But a mortgage of movables is also recognized in Pakistan.

Principles Applicable to the Mortgage

Doctrine of Redemption

It is the right of the mortgagor, on tender at a proper time and place of the mortgage money, to require the mortgagee to deliver the mortgage deed to him, to deliver possession if it is given and to transfer the property to him.

Doctrine of Foreclosure or Sale

According to Section 67 of the Transfer of Property Act foreclosure is the right of the mortgagee. By this remedy the mortgagor is directed by court to pay up the mortgage money within a certain period and it is decreed that if he fails to pay up the amount, the mortgagor would be absolutely debarred of his right to redeem the property. The result of such a foreclosure decree is that the mortgagor cannot claim back the property from the mortgagee, who becomes the owner of it. This doctrine is not applicable to the simple mortgage; it applies only in case of mortgage with conditional sale.

Concept of Marshalling Securities

If the owner of two or more properties mortgages them to one person and then mortgages one or more of the properties to another person, the subsequent mortgagee is, in the absence of the 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 of the prior mortgagee or of any other person who has for consideration acquired an interest in any of the properties.

Concept of Subrogation

Subrogation is the right to step into the shoes of another, to acquire all his rights and to enforce them in his own names. It means substitution. When a subsequent mortgagee pays off a prior mortgagee he is subrogated to the rights of the prior mortgagee.

Charges

In a charge there is no transfer of property but the creation of a right of payment out of property specified. In a mortgage there is a transfer of an interest. A mortgage therefore good against subsequent transferee while a charge is only good against subsequent transferee with notice.

Transfer of Property by way of Leases

Section 105 of the Transfer of Property Act defines lease. A lease is a transfer of a right to enjoy such property, made for a certain time, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Forms of Lease

• Periodic Lease

• Perpetual Lease

• Bemiadi Lease (without any term and period)

There are also other forms of leases but the important ones are mentioned above.

Distinction between tenancy and lease

Distinguishing factor between "tenancy" and "lease"is not the mode of payment of rent but the period for which land is rented out by landlord. In case of "lease" fixed period is stipulated while in case of "tenancy" occupier holds land till the same is terminated expressly or by implication.

Leases how made

According to Section 107 of TPA a lease of immovable property from year to year, or for any term exceeding one year can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. (See details in the article named as "Leasing").

Rights and liabilities of lessor and lessee

To put it briefly the liabilities of the lessor are:

• to disclose material defects in property;

• to put the lessee in possession; and

• to allow lessee uninterrupted enjoyment of property.

The rights of lessee are:

• to terminate the lease in case of destruction of property;

• to make essential repairs and deduct expenses from the rent;

• to make payments which the lessor is bound to make and deduct same from the rent;

• to remove his own fixtures;

• to benefit by crops growing on land and planted or sown by him if lease determines unexpectedly for no fault of his own;

• to assign his interest in the leasehold.

The liabilities of lessee are:

• to disclose facts materially increasing the value of the property;

• to pay rent;

• to maintain property;

• to give notice of encroachment upon or interference with property by others;

• not to commit waste or injure property;

• not to build, except for agricultural purpose;

• to restore possession on determination of lease.

Determination of Lease

A lease may be determined by:

• lapse of time;

• happening of a specified event;

• termination of the lessor's interest;

• merger;

• surrender;

• implied surrender;

• forfeiture; and

• expiration of time given in notice to quit.

Effect of holding over

After the determination of the lease:

• the lessee retains possession; and

• the lessor assents to the lessee's continuing in possession

The concurrence being evidenced by either acceptance of rent paid by the lessee, or by other acts. The result is that there arises a new tenancy.

Transfer of Property by means of exchanges

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".

Exchange of money

On an exchange of money, each party thereby warrants the genuineness of the money given by him.

Transfer of Property by gifts

Section 122 of TPA defined the property as a transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

Acceptance when to be made

Acceptance of the gift must be made during the life time of the donor and while he is still capable of giving. If the donee dies before acceptance, the gift is void.

Transfer how effected

For the purposes of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.

For the purposes of making a gift of movable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery. Such delivery may be made in the same way as goods sold may be delivered.

Gift of existing and future property

A gift comprising both existing and future property is void as to the latter.

Gift to several of whom one does not accept

Section 125 says that a gift of a thing to two or more donees, of whom one does not accept it, the gift is void to the extent of the share of the person who refuses it and the share reverts to the donor.

When gift may be suspended or revoked

The donor or donee may agree that on the happening of any specified event which does not depend on the will of the donor a gift shall be suspended or revoked.

Universal Donee

Where a gift consists of the donor's whole property, the donee is personally liable for all the debts due by and liabilities of the donor at the time of the gift to the extent of the property comprised therein.

Not applicable to Islamic law regarding gifts

The provisions of gift contained in the Transfer of Property Act 1882 are not applicable to any rule of Islamic law regarding gift.

Important doctrines regarding Transfer of Property

Transfer by Ostensible Owner under Section 41

Where, with the consent, express or implied, of the persons interested in immovable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorized to make it.

Fraudulent Transfer under Section 53

Every transfer of immovable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. This rule does not impair the rights of a transferee in good faith and for consideration.

Every transfer of immovable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.

Part Performance under Section 53-A

Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, the transferor or any person claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract.

Registration of Transactions made under Transfer of Property Act

The registration of transactions i.e. mortgage, sale, exchange, lease, gift etc. shall be made under Section 17 of the Registration Act 1908 if the value of the transaction is up to or more than Rs. 100. The documents have to be submitted to the Registrar after complying with all requirements of the Registration Act along with the prescribed registration fee. In the case of an assignment of a Mortgage the consideration for the deed of assignment shall be deemed to be the value for Registration.

Stamp Duty on Transactions

Schedule I of Stamp Act 1899 prescribes stamp fee / duty which is to be charged on the documents.

Article 23 of the First Schedule of the Stamp Act prescribes the fixed stamp duty on conyances which also includes sale of movable and immovable property according to Section 2 (10) of the Stamp Act 1899.

Article 31 of the first schedule prescribes the stamp duty on the documents of exchanges.

Article 32 describes the further charge on mortgaged property and the duty imposed on such instruments.

Article 33 prescribes the stamp duty on the instruments of gifts.

Article 35 describes the stamp duty on the documents of lease.

Article 40 talks about the duty on mortgage deeds.

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