Legal Guide

An Explainer on Vested Interest in a Property: Sec 19 of Transfer of Property Act

by Digant Sharma · 3 min read

section 19 of transfer of property act

Introduction

Property transfer and exchange are fairly prevalent in an individual’s day-to-day existence. Indian Law has a number of provisions concerning the property. But first, what exactly do we mean by “property”? Property is any physical or virtual entity owned by an individual or group of individuals who have ownership and rights to the property.

According to Indian law, the property can be transferred or sold from one person to another by a variety of procedures such as a will, gift deed, etc. The Transfer of Property Act of 1882 (ToPA) governs the transfer of property from one person to another. Section 19 of the Transfer of Property Act deals with a provision called Vested interest.

What is Vested Interest?

  • A vested interest is an interest developed in favor of a person when the condition provided for the contract of property transfer is definite, and the event will occur in the future. 
  • The transferer and the transferee enter into a property transfer contract, and the transferer creates a condition for the fulfillment of the property transfer, and upon accomplishment of the condition, the transferee has ownership of the property. 
  • The transferee may not receive ownership of the property immediately after signing the contract, but he might anticipate it after meeting certain conditions.

Section 19 of the Transfer of Property Act

Section 19 of Transfer of Property Act of 1882[1] defines vested interest as –

“Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer. A vested interest is not defeated by the death of the transferee before he obtains possession.”

For example, person X commits to transfer the property and enter into a contract with person Y. In this case, X is the property transferer and Y is the property transferee. For the purpose of transferring the property, X stipulates that Y may take ownership only after X’s death. X’s death is a definite occurrence that will undoubtedly occur in the future, and hence Y can claim X’s property after X’s death. If Y dies before X, the property will be passed on to Y’s rightful heirs following X’s death. In this case, Y has a vested interest in X’s property.

Vested Interest Characteristics

Vested Interest has the following characteristics-

1.    Certain events have a vested interest in them. The condition of the contract must be definite for the fulfillment of a contract connected to the transfer of property by vested interest. A vested interest does not include an impossible or unknown occurrence.

2.    Certain occurrences are conditions that are expected to occur in the future, such as death, aging, and so on. The contract’s fulfillment is exclusively dependent on the occurrence of specific conditions.

3.    Vested Interest applies even if both parties die. The interest is not lost by the transferee’s death if he or she passes away before being able to use the property, and the transferee’s lawful heirs will be granted the right to use the property.

4.    Vested Interest is both a transferable and heritable right. The transferee, under a contract of property transfer by vested interest, possesses both transferable and heritable rights. It denotes that the individual has both the rights to the property while claiming it from the transferor and the rights to the property after his death. After the transferee’s death, the property will pass to his lawful heirs.

Conditions That Apply to Vested Interest

When the parties are minors, bankrupt, or unborn, the criteria for vested interest might vary. The Transfer of Property Act of 1888, the Indian Partnership Act of 1932, and the Indian Contract Act of 1872 all specify property rights and possession in such circumstances.

1.    Minor: When a contract for the transfer of property is entered into while a person is still a minor, that person is governed by the legal guardian who is in possession of the property until the minor reaches the age of majority and is not permitted to exercise any rights in the vested interest until that time.

2.    The Unborn Child: Section 13 of the Transfer of Property Act of 1888 states that an unborn child is not regarded as a living person and cannot possess a vested interest individually. The unborn child will have access to his or her rights upon birth, and the interest in the property is instantly passed to the unborn kid’s or children’s legal heirs.

What Is the Difference Between Vested and Contingent Interest?

Section 19 of the Transfer of Property Act of 1888 mentions vested interest. Section 21 of the Transfer of Property Act of 1888 mentions contingent interest. Vested Interest only occurs if a certain event occurs. Contingent Interest only occurs if an unclear occurrence occurs.

The death of the transferee does not negate vested interest. The transferee’s death will result in the failure of contingent interest. Vested Interest is both a transferable and heritable right. Contingent interest is transferable, but it is not always inherited.

The idea of Vested Interest

Vested Interest is defined under Section 19 of the Transfer of Property Act of 1882. It is an interest generated in favor of a person when no period is specified or a condition of the occurrence of a certain event. The individual with the vested interest does not have ownership of the property but expects to obtain it upon the occurrence of a specific event.

Conclusion

Under the Transfer of Property Act of 1888, the transferee has two basic categories of interests in the contract of transfer of property: vested interest and contingent interest. Section 19 of the Transfer of Property Act of 1882 to section 24 of the Act outline the requirements of vested and contingent interest.

Such interests in immovable property are obtained in the transferee’s favor upon the transfer of such property to him. This transfer of interest might occur immediately or upon the occurrence of a specific event. To know more about this, Consult a Lawyer now!

Interests in immovable property are obtained in the transferee's favor upon the transfer of such property to him. To know more about this, get online legal advice.

Digant Sharma

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Digant Sharma

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