What are the Types of Charges on the Property?

Different Types of Charges You Can Create on Your Property

Introduction

Property ownership encompasses the ability to establish a range of charges that serve as security interests, providing protection for assets and ensuring the fulfillment of financial obligations. These charges, governed by the Transfer of Property Act, 1882, are applicable to both movable and immovable property. In this article, we will delve into the different types of charges that can be created on your property, the distinction between movable and immovable property, and emphasize the significance of the Transfer of Property Act, 1882.

What is a Charge?

A charge is a security interest created over an immovable property to secure the payment of a debt or obligation. As per Section 100 of the Transfer of Property Act, 1882, a charge is formed when someone uses their immovable property as security for repaying money to another person.

What are the Different Types of Charges on Properties?

There are different types of charges that can be created on your property. Some of the most common types of charges include:

• Equitable Charge: An equitable charge is created through an agreement between parties without the need for registration with the Registrar of Assurances. While it can be enforced in a court of law, the charge holder doesn’t have the authority to sell the property to recover the debt.

• Legal Charge: A legal charge, on the other hand, requires registration with the Registrar of Assurances. This type of charge gives the charge holder the right to sell the property to recover the debt, and it holds legal enforceability in court.

• Fixed Charge: A fixed charge is created when the charge holder has a specific interest in the property. It is commonly used when the property is offered as collateral for a loan. With a fixed charge, the charge holder can sell the property to recover the owed debt.

• Floating Charge: A floating charge is created when the charge holder has a general interest in the property. This type of charge allows the charge holder to sell the property to recover the debt, but only when the debt becomes due. Until that point, the charge holder does not have immediate permission to sell the property.

Overview of Movable and Immovable Property

In India, property is classified into two categories: movable and immovable property. Movable property refers to property that can be moved from one place to another, such as furniture, vehicles, and jewelry. Immovable property refers to property that cannot be moved from one place to another, such as land, buildings, and fixtures.

The provisions of the Transfer of Property Act, 1882, apply to immovable property only. However, the Act also provides for the creation of charges over movable property. These charges are created under the Indian Contract Act, 1872, and they are governed by the provisions of that Act.

Conclusion

In conclusion, charges serve as security interests, guaranteeing the fulfillment of debts and obligations. Familiarizing yourself with the diverse types of charges, including equitable charges, legal charges, fixed charges, and floating charges, is essential for property owners. The Transfer of Property Act, 1882, governs the establishment and transfer of property interests, predominantly concerning immovable property. Nonetheless, charges over movable property are subject to the provisions of the Indian Contract Act, 1872. Equipping yourself with knowledge about these varied charges and the corresponding legislative frameworks is vital for safeguarding property interests and making informed decisions.

Suggested Read: Different Types of Charge Registration with ROC