Improvements Made by a Bona Fide Holder under a Defective Title
Chapter Twenty-Three
Syllabus topic 1.2, "General principles of transfer of property"
Pages 116 to 120 of 378
In one line
If you honestly believed the property was yours and you built on it, the person who turns you out must either pay you for what you built or sell you the land.
In exam wording: section 51 provides that when the transferee of immovable property makes any improvement on it, believing in good faith that he is absolutely entitled to it, and he is subsequently evicted by a person having a better title, he has a right to require the person causing the eviction either to have the value of the improvement estimated and paid or secured to him, or to sell his interest in the property to the transferee at the then market value, irrespective of the value of the improvement.
Why the law gives the improver anything
A person who builds on land that turns out not to be his has, at first sight, no claim: the building becomes part of the land, and the land belongs to somebody else. The true owner would get a house he never paid for.
That is unjust enrichment, and section 51 prevents it. The owner gets his land back, which is his right, but he is not permitted to keep the improvement for nothing as well.
Two conditions confine the equity, and they are what keep it from being an invitation to build on other people's land. The improver must have been a transferee, so he must have taken under some transfer rather than as a trespasser. And he must have believed in good faith that he was absolutely entitled, so a person who knew his title was doubtful gets nothing.
Broken down: the conditions
One, the claimant is a transferee of immovable property. A squatter or trespasser is outside the section, because he took under no transfer at all.
Two, he made an improvement on the property. Building, planting and permanent repairs qualify; ordinary maintenance does not.
Three, he believed in good faith that he was absolutely entitled to the property. This is the heart of the section. The belief must be honest and must be a belief in absolute entitlement. A person who knew he had bought from someone with a doubtful title, or who had notice of a defect, fails here. A lessee or a mortgagee, who knows perfectly well that he holds a limited interest, cannot claim under this section at all.
Four, he is subsequently evicted by a person having a better title.
The remedy, and who chooses
This is where answers go wrong. The right the section gives to the improver is a right to require the evictor to choose. The option is the evictor's, not the improver's. The evictor must either:
Improvements Made by a Bona Fide Holder under a Defective Title
- have the value of the improvement estimated and paid or secured to the transferee; or
- sell his interest in the property to the transferee at the then market value, irrespective of the value of the improvement.
Two points of measurement follow, and both are in the section.
The value of the improvement is its estimated value at the time of the eviction, not what it cost to build. A structure that has depreciated is worth less; one that has appreciated is worth more.
Where the evictor elects to sell, the price is the market value at that time, irrespective of the value of the improvement. In other words the improver does not pay twice: he is not charged for the value his own building added to the land.
Mesne profits: what the evicted holder must give back
Section 51 tells you what the improver receives. The other half of the account is what he pays, and that is mesne profits.
The term is not defined in this Act. It is defined by section 2(12) of the Code of Civil Procedure 1908:
"mesne profits" of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession.
Four elements, and each is examinable.
One, wrongful possession. There are no mesne profits against a person lawfully in possession. It is the wrongfulness that founds the claim.
Two, actually received or receivable with ordinary diligence. The measure is not what the possessor troubled to earn. A person who lets valuable land lie idle is answerable for what a diligent holder would have got from it.
Three, interest on those profits.
Four, the exclusion. Profits due to improvements made by the person in wrongful possession are not included.
That exclusion is why the definition belongs in this chapter. Section 51 gives the bona fide improver the value of his improvement; section 2(12) of the Code stops the true owner from clawing back, as mesne profits, the extra income that improvement produced. The two provisions point the same way: the improver is not to be enriched at the owner's expense, and the owner is not to be enriched at the improver's.
Do not confuse mesne profits with a mesne mortgagee. "Mesne" simply means intermediate. A mesne mortgagee is one with mortgagees both ahead of and behind him, under section 94 of this Act, taught in [Subrogation, and the Abolition of Tacking]. The two expressions share a word and nothing else.
Improvements Made by a Bona Fide Holder under a Defective Title
Growing crops
The section adds a separate rule. Where, in the circumstances above, the transferee has planted or sown crops which are growing when he is evicted, he is entitled to those crops and to free ingress and egress to gather and carry them.
This makes sense on its own footing. Crops are the fruit of his labour and, as chapter 10 explained, growing crops are excluded from immovable property by section 3, so they were never part of what the true owner is recovering.
A worked example
Anita buys a plot at Karad from a seller whose title she has checked as carefully as a prudent buyer would, and takes a registered sale deed. Believing the plot to be absolutely hers, she spends Rs. 18 lakh building a house on it and plants a crop of sugarcane in the strip behind.
Four years later Bipin establishes that the seller had no title and that the plot has always been his, and he obtains a decree evicting Anita. At the date of eviction the house is valued at Rs. 22 lakh and the bare land at Rs. 30 lakh.
Anita's claim. She was a transferee, she made an improvement, and she believed in good faith that she was absolutely entitled. Section 51 applies.
Bipin must choose.
If he elects to keep the land, he must have the value of the improvement estimated and pay or secure it to Anita. That is its value at the time of the eviction, Rs. 22 lakh, and not the Rs. 18 lakh she spent.
If he elects to sell, he must sell his interest to Anita at the market value at that time irrespective of the value of the improvement, that is at Rs. 30 lakh for the land, and Anita is not asked to pay for her own house.
The sugarcane is hers. She is entitled to the growing crops and to free ingress and egress to gather and carry them away.
Change the facts. Suppose Anita had been told before she built that Bipin claimed the plot, and had built anyway. She no longer believed in good faith that she was absolutely entitled, section 51 does not apply, and she loses the house.
Change them again. Suppose Anita had been a lessee who built on the land. A lessee knows he holds a limited interest and cannot believe himself absolutely entitled, so the section does not apply to him.
What it does NOT mean
The improver does not choose. The option belongs to the person causing the eviction. This is the single most common error on this section.
It does not protect a trespasser. The claimant must be a transferee.
Improvements Made by a Bona Fide Holder under a Defective Title
It does not protect a person who knew his title was doubtful. Good faith and a belief in absolute entitlement are required.
It does not apply to a lessee or a mortgagee. Neither can believe himself absolutely entitled.
Compensation is not the cost of the work. It is the estimated value of the improvement at the time of eviction.
The improver is not charged for his own improvement. Where the evictor elects to sell, the price is the market value irrespective of the value of the improvement.
It does not give a right to stay. The eviction stands; the section adjusts the money.
Distinctions
| Transferee under section 51 | Trespasser | |
|---|---|---|
| How he came to hold | Under a transfer | Without any right |
| Belief required | Good faith belief in absolute entitlement | Not applicable |
| Right on eviction | Compensation for the improvement, or to buy the land, at the evictor's choice | None under this section |
| Evictor's option | What he must do | What the improver pays or receives |
|---|---|---|
| Keep the land | Have the improvement valued and pay or secure it | Receives its value at the time of eviction |
| Sell his interest | Sell to the improver | Pays the then market value, irrespective of the value of the improvement |
Quick revision
- Section 51 rests on unjust enrichment: the owner recovers his land but may not keep the improvement for nothing.
- Conditions: a transferee of immovable property; an improvement; a good faith belief in absolute entitlement; eviction by a person with a better title.
- The evictor chooses: pay or secure the estimated value of the improvement, or sell his interest at the then market value irrespective of the value of the improvement.
- Compensation is the value at the time of the eviction, not the cost incurred.
- Growing crops belong to the improver, with free ingress and egress to gather them.
- A trespasser, a lessee and a mortgagee are all outside the section.
Test yourself
1. Who has the option under section 51? The person causing the eviction. He must either have the value of the improvement estimated and paid or secured to the transferee, or sell his interest in the property to the transferee at the then market value.
2. How is the compensation measured? By the estimated value of the improvement at the time of the eviction, not by what the improver spent.
3. If the evictor elects to sell, is the improver charged for the improvement he made? No. The section requires the sale to be at the then market value of the evictor's interest, irrespective of the value of the improvement.
4. Does section 51 protect a trespasser who builds on land in the honest belief that it is his? No. The section applies to a transferee of immovable property. A person who took under no transfer is outside it.
Improvements Made by a Bona Fide Holder under a Defective Title
5. Can a lessee who builds on the leased land claim under section 51? No. The section requires a belief in good faith that he is absolutely entitled, and a lessee knows his interest is limited.
6. What happens to crops the improver has sown which are standing at the eviction? He is entitled to them, and to free ingress and egress to gather and carry them away.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.