Courts are often called upon to determine which party should be given priority when the parties have conflicting rights. In such cases, the principle of “Qui Prior Est Tempore Potior Est Jure” may be applied depending on the circumstances.
This principle is based on the doctrine of natural justice that no one can transfer a right they do not possess. Its literal translation is “he who is earlier in time is stronger in law”. It dictates that when competing rights are created in favor of two persons—natural or legal—at different times, the one who has the chronological advantage should also have the advantage in law.
In common law, this is known as the “Doctrine of Priority”, and in some cases, it is incorporated into legislation—for example, Section 48 of the Transfer of Property Act, 1882.
Conditions for the Application of the Principle:
- The owner transfers rights over the same property to different transferees,
- At different times, and
- The rights transferred cannot coexist.
The above, of course, presumes that there is no agreement binding the earlier transferee concerning the second transfer of rights.
A typical example is a situation where someone takes a loan, mortgaging their property to a lender, and later sells the property to a bona fide third party.
Applying the principle, we see that two agreements exist regarding the same property at different times, and the rights of the bank and the buyer cannot coexist. In case of default on the loan, the buyer would not acquire full ownership of the property and may even lose possession, as the mortgage predates the registration of the sale agreement and thus has executional precedence.
In the case of Durai Swams Reddi v. Angappa Redd (1945), the Court ruled that the first transferee had the right to execute the agreement, even though it was registered later than the date it was signed. Moreover, the fact that the subsequent purchaser entered into the agreement in good faith, unaware of the prior transaction, was not sufficient to establish rights over the property. It was further emphasized that the first party’s priority would only be set aside if fraud, estoppel, or gross negligence could be proven.
In Chouth Mal v. Hira Lal (1950), a sale agreement dated January 17, 1932 was registered on May 5, 1932, while on February 20, 1932, the property was burdened with a mortgage. The Court ruled that the mortgage had precedence, precisely because its registration occurred earlier than that of the sale agreement.
Recognizing superiority based solely on the agreement’s signing date would be risky, as the rightful owner could become a victim of delayed and possibly fraudulent agreements by third parties.
It is also well established in case law that only a registered sale agreement creates proprietary rights in favor of the buyer.
The Sale of Immovable Property (Specific Performance) Law of 2011 introduced provisions to enhance and upgrade the protection of the buyer, provided that the sale agreement is filed with the Land Registry. One of the most important protective innovations of this legislation is the ability to register the property in the buyer’s name, even when a prior mortgage exists.
Specifically, when the property is mortgaged, the buyer may pay the purchase price directly to the mortgagee instead of the seller. Once the portion of the mortgage debt corresponding to the purchased property is paid, the Court may issue an order for specific performance, directing the registration of the property in the buyer’s name.
Final Note:
Filing a sale agreement with the Land Registry is not mandatory. That is, while specific performance cannot be sought for an unregistered agreement, the agreement itself still produces legal effects.
However, the above highlights the importance of researching the legal status of the property of interest to the prospective buyer and the need for prompt registration of sale agreements, especially when the transfer will occur after the payment of a substantial sum.
This article is for informational purposes only and should not be considered legal advice.
Panayiotis G. Kyprianou
Lawyer
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