Improvements made by bona fide title holders under defective titles

improvement on the property

The transfer of Property Act, 1882 collaborates all the possible transactions between a transferor and a transferee. Similarly, section 51 of the Property act lays down “when the transferee of immovable property makes any improvement on the property, believing in good faith that he is absolutely entitled thereto, and he is subsequently evicted therefrom by any person having a better title, the transferee has a right to require the person causing the eviction either to have the value of the improvement estimated and paid or secured to the transferee, or to sell his interest in the property to the transferee at the then market value thereof, irrespective of the value of such improvement.

The amount to be paid or secured in respect of such improvement shall be the estimated value thereof at the time of the eviction.

When, under the circumstances aforesaid, the transferee has planted or sown on the property crops which are growing when he is evicted therefrom, he is entitled to such crops and to free ingress and egress to gather and carry them”.

Thus, the transferee who if unaware of the rights, in good faith makes any kinds of improvements ought to be compensated with. For instance X is the owner of an immovable property. He rents it to Y who continues to pay him rent unaware that X has now mortgaged his house to Z and upon the mortgage, Z being the mortgagee is now entitled to the rent. Y will not be charged again.Therefore, a tenant paying rent in advance in good faith to a person who is no longer entitled to receive will not be chargeable with the rent again, whereas any advance paid as a loan amount will not be protected like the loan amount.

Essential Requisites

  • The subject of transaction between the transferor and the transferee must be immovable property.
  • The transfer of property must be in absolute favour of the transferee.
  • The transferee in good faith must consider himself competent enough to make the improvements.
  • The transferee has sown plants, crops or made any other additions to the land.
  • The transferee is evicted by someone who holds a better title.
  • The right of transferee to be compensated for the improvements by seeking the amount spent or the interest in the property.

Notice and Application

  • This section can be applied only in cases where the transferee is unaware of the defective title, and in good faith transfers to the person who is not competent to accept it. Otherwise the transaction turns out to be mala fide and will not be protected. Das BansilalRathod v SumberlalSurajmal Gandhi [(1973) 75 Bom LR 678]. Hence, notice of any fact to the transferee or the tenant will make him liable to pay the rent again, the notice being actual or constructive.
  • In case of any improvements made by the transferee on defective title, the transferee is given two options by law, he can either secure the amount spent by him on the property to make the required improvements or can alternatively acquire that particular interest in the property from the original owner at market value. Further, if the transferee has sown any kind of crops on the property from which he is being evicted, he has the right to carry them anytime.
  • This section’s application is based on the maxim ‘he who seeks equity must do equity’ which imposes a legal obligation on the evictor to not appropriate any benefits arising from the improvements on the property and compensate the person who in good faith has made the improvements. The application further applies only in cases where the person who makes the improvements believes himself to own the title and be competent enough to make the changes.
  • In Harilal Ranchhod v Gordhan Keshav [(1927) 29 BOMLR 1414], the property belonging to the minor was sold by his guardian to Ram without seeking the permission of the court. Ram paid the consideration and in good faith renovated the house, considering himself as the owner of the property. The minor, on attaining majority evicted Ram. The court favoured the minor but at the same time also instructed the minor to compensate Ram.
  • This doctrine is applicable only in cases where there is a belief of absolute entitlement between the parties, and not merely an apprehension of the same. If the transferee with knowledge that the property does not belong to him or is pending litigation or with notice of a prior sale still continues to make improvements, he will not be compensated for the same.
  • Further, this rule is applicable only in cases of transfer between the parties and not a court sale. In other words if a person purchases rights in a property through a court auction and is later evicted, law demands that he be compensated whether or not he was apprehensive of his absolute rights in the property.

Transferee

A transferee is a person who believes himself to be the owner of the subject (immovable   property) of a lawful transaction and believes himself to be competent to make the improvements on the property.

An allottee of a plot by the government who erroneously enters and improves another land, or a person who does improve the land himself but purchases the property from the improver, cannot avail either the benefits of improvement or the protection under this doctrine as he does not qualify as a transferee. Similarly, any person who is in unlawful possession of the property is a trespasser and not a transferee and cannot claim any protection under this section. In Ganga Din v Jagat [AIR 1914 All 90] it was held that “No one can by merely trespassing upon the land of another and constructing costly buildings on it claim a right to retain its possession.”  Whereas a grantee of a land in truthful possession of the land will also fall under the category of a transferee. As has been thoroughly explained above, a person who claims protection under this section must be a lawful transferee fulfilling all the essential requisites of this doctrine.

Further, a transfer will qualify under this doctrine only in cases of absolute transfers and not in transactions where an interest is transferred in favour of the transferee and not the entire property. In other words, a transferee can only claim protection under this section if he is a holder of all the rights in the subject of property and not merely an interest in the property.

Joint Hindu Family

A Hindu Joint family recognizes itself as a legal entity along with Karta being the manager of the day to day affairs of the family. The Karta is authorized to alienate the property under specified circumstances only, as any other can be challenged by the coparceners. In Lachmiprasad v Lachminarayan [AIR 1928 All 41] it was held that “An alienee from the father and manager/karta of a joint Hindu family is entitled to the value of improvements made by him, if the transfer is avoided later by the son”. Similarly in cases where the legal guardian alienates the minor’sproperty and the minor later on demands eviction, the law protects the alienee and expects the minor to either compensate the alieneefor the improvements or sell the property to him at an appropriate market value.

Improvements

Improvements by defective title holders does not mean ordinary changes to an old property or other operational changes. Improvements mean changes that enhance the value of the property and add to its value as a marketable subject. Thus, improvements are not ascertained merely on the basis of the money spent by the person making the improvements to the property.

The value of the improvements made by the person has to be ascertained at the time of eviction, though the amount spent on the improvements is not decisive of the market value of the property at which it is to be sold.

Illustrations

  • X is the legal guardian of Y, a minor. X alienated Y’s property in favour of Z and Z considering himself the absolute owner made improvements to the property. Y on attaining majority demanded Z’s eviction. Z can avail the protection under this doctrine and can demand either compensation from the real owner or an interest in the property.
  • A bought a house on a court auction and renovated the entire house, adding on to its market value. He was later given an eviction notice and denied compensation on the ground that he knew the possibilities. A in this situation cannot be denied compensation.
  • A land had been empty and barren since 10years, X without any authorization built a colony over it. The government demanded eviction on the ground that X had trespassed. X cannot avail the benefit of this doctrine under such circumstances.
  • X rented his property to Y for a subsequent amount per month. He later on mortgaged it to Z, Y not knowing the same continued to pay the rent to X. X cannot be asked to pay the rent again to Z as he acted in good faith and is protected under this doctrine.

Conclusion

The improvements made by bona fide title holders in a defective title is an essential remedy available to the transferee who in good faith has made improvements to the property. Law in order to provide justice to the grieved title holder provides protection under this doctrine as already explained above. Thus, section 51 is yet another equitable doctrine under the Transfer of Property Act,1882.

Frequently Asked Questions

1. What is meant by ‘improvements’?

Any modifications made to a property which add to its market value will be ascertained as an improvement to the property.

2. What is meant by ‘absolute entitlement in the property’?

Absolute entitlement means absolute rights in the property being transferred by the transferor in favour of the transferee. Even crops grown in the subject of property will be transferred in favour of the transferee.

3. What remedies can a bona fide title holder who has made improvements in a defective title hold?

A person who has in good faith made improvements thinking he is entitled to do so can avail the protection under this doctrine and either ask for compensation or an interest in the subject property.

4. What does ‘equitable estoppel’ mean?

Equitable estoppel mean that the evictor cannot avail the benefit of the improvements made by the person who considered himself the bona fide title holder.

Edited by Shikhar Shrivastava

Approved & Published – Sakshi Raje 

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I am Alisha Luthra pursuing LLB from Campus Law Centre, Faculty of Law, Delhi University. The endless minutiaes of law is what drives me to read and learn more about it every day. I have been a literature enthusiastic, always nabbing the first seat trying to grasp a little extra information about the subject. Knowledge is what excites me the most to read more and try a hand at writing. Apart from the academic interests I've loved traveling to the mountains since I was a kid. It is these travel and reading experiences that have shaped me to be the person I am today. This internship has been a helpful and learning experience giving me the opportunity to try a hand at writing while grasping in depth knowledge about the various intricacies of contract law.