Understand the legal implications of dealing in real estate owned by minors before the transaction is done
Sometimes parents or guardians of a minor wish to sell or purchase a property in the name of their child (not yet 18 or 21 in case of appointment of guardian). According to prevalent laws, a minor is not deemed competent to deal with property or contracts related to it for the purchase or sale of property. However, subject to the provisions of applicable laws, the guardian (whether natural or appointed by a court) of a minor can deal with the properties in the name of minor.
There is no legal impediment in purchasing and registering a property in the name of a minor and guardians can do so without any hassles.
However, it is to be kept in mind that minors have no contractual capacity and thus documents for purchase of property in the name of the minor should be signed by the guardians on behalf of the minor. As far as sale in the name of the minor is concerned, there are certain restrictions and conditions which one should be aware of before selling such properties.
In case of a minor who is Hindu as defined under the law, provisions of the Hindu Minority and Guardianship Act, 1956, will govern the transfer of property of the minor. The prevailing law says that any property in the name of the minor or part thereof can be transferred by way of sale, gift, exchange or otherwise only after obtaining prior written permission of the court of law. It also specifies that in case any charge is to be created on whole or any part of the property owned by minor or if the same is to be mortgaged, then creation of such charge or mortgage by the guardian of the minor will be subject to the prior written permission of the court of law.
It is further provided under the law that a guardian shall not without the previous permission of the court of law lease any part of the property owned by the minor for a term exceeding five years or a for a term extending for more than one year beyond the date on which the minor will attain majority. To obtain authorisation from the court of law, an application along with necessary documents in the manner specified by law must be submitted by the guardians of the minor. It is important to note that these provisions are applicable in case the property to be transferred is held by the minor as its sole and absolute owner.
The court of law, at its sole discretion, may permit the transfer of the minor’s property by his guardian to any third party subject to adherence to and observance of certain restrictions and conditions. However, the process of obtaining permission from the court of law can be expensive and time-consuming, which may cause delay in the sale of the minor’s property.
Any transfer of property of a minor without the prior permission of the court of law can be challenged at the instance of the minor or any person at his or her behest.
Such transactions are voidable. It is left to the minor to agree or disagree to such transfers without the prior permission of the court of law.
He may exercise his option on attaining majority and within three years of coming to know of such a transfer.
In case a minor has interest and rights in the undivided share in joint-family property and such undivided property is being managed by an adult member of the family or karta of the family, then the undivided share of minor in the joint Hindu family can be alienated by such adult manager of the property without obtaining any prior written permission of the court of law.
It is to be noted that property of minors can be transferred irrespective of whether any permission is required from court of law or not, by the guardian of a minor only when alienation of such property is for some legal necessity and such alienation will be beneficial and advantageous for the minor. Further, the guardian of a minor cannot enter into any contract for transfer of minor’s immoveable property whereby the minor becomes bound by his personal covenants.
Thus, it is evident that having a property in the name of a minor has its own advantages, disadvantages, as well as legal implications. Since, the welfare of the minor is of paramount importance, guardians who are considering purchasing or selling the minor’s property should be aware of the possible advantages, disadvantages and implications and thus take legal advice in advance for finalising any transaction.
The author is senior partner, ZEUS Law Associates, a corporate commercial law firm. One of its areas of specialisation is real estate transactional and litigation work