• Flour mill on Pagdi

Hello,

My father in law has a flour mill in Mazgaon which is on Pagdi. My father in law maintain this property for past 15 years. He also pay for all the maintenance. There is no whereabout the landlord of this property. His flour mill business is shutdown for the past 3 years, now he would like to sell the mill. Could you please guide us the process of selling this mill? Thank you
Asked 2 years ago in Property Law
Religion: Muslim

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8 Answers

File a suit seeking declaration of ownership over the property. You are owner of property by adverse possession being in unquestioned possession of 15. You will get such declaration  from Court but such declaration  is not effective against the true owner of property. If the true owner/landlord  comes he can claim back the property. Even if such claim is allowed as pugdee holder you will part owner of property.

Ravi Shinde
Advocate, Hyderabad
4041 Answers
42 Consultations

5.0 on 5.0

Father in law needs consent of landlord for  selling the tenanted premises 

 

he cannot sell the property without consent of ka sites as it would be ground fir eviction 

Ajay Sethi
Advocate, Mumbai
94510 Answers
7484 Consultations

5.0 on 5.0

For selling pagdi system property,  it is important that the landlord has to give NOC and agree for transfer of rental agreement. 

Whether your father in law was paying the monthly rental amount,  If yes to whom.

Without properly transferring the rental agreement,  the purchaser may not be able to claim his title. 

Alternately,  if the landlord is not traceable,  your father in law can file a petition before rent control court seeking permission to deposit the monthly rental amount to the court. 

On that basis he can sell the property and direct the new tenant to continue to deposit the monthly rental amount before the court which will protect his future tenancy rights. 

T Kalaiselvan
Advocate, Vellore
84709 Answers
2172 Consultations

5.0 on 5.0

He can't sell the pagadi property as it's tenancy. Only same  can be assigned to other tenant by paying landlord 33 percent of the same

Prashant Nayak
Advocate, Mumbai
31795 Answers
175 Consultations

4.1 on 5.0

The property belongs to the owner /landlord 

Without his consent/noc it cannot be sold 

Otherwise it would amount to illegal subletting 

So the tenancy has to be transferred to the purchaser 

However since the whereabouts of the landlord are not known it would not be possible to transfer tenancy to buyer 

And there would be few buyers who would be interested to buy without the tenancy being transferred to the buyer's name 

So your FIL can form a partnership firm having himself and one other partner 

The partnership firm can be registered at the address of the flour mill 

Your father can keep a very small stake in that firm , say 1% and that too as a non executive partner 

The other majority partner would be the buyer who would in essence own the firm 

There can also be a side agreement in which it will be agreed that your FIL will not stake any claim in the property by virtue of being its 1% shareholder 

As a commercial tenanted property can be used by a partnership firm formed by the tenant, that's the only way out I can see your FIL exiting from the property and without incurring any liability on the prospective purchaser if he were to purchase the tenancy rights without transfer of tenancy 

But the rent receipt will continue to be issued in the name of your FIL 

However he can give a PoA to the buyer 

So the buyer will have to compromise on the title which he would get since ideally there has to be a registered triparty tenancy agreement between outgoing tenant, incoming tenant and landlord 

I dont think capital gains tax on sale would be an issue since generally tenancy transactions are done in hard cash 

But few buyers do prefer to do payments by banking channels 

So there will  be not many buyers who would be interested given the above complications 

But those who are interested can certainly explore the above way out 

Also the purpose of the use would be changed by the buyer from flour mill to some other business. If there is no restriction in the tenancy terms regarding change of user then that may also not be an issue 

All in all this transaction would be a risky proposition for any buyer 

Yusuf Rampurawala
Advocate, Mumbai
7483 Answers
79 Consultations

5.0 on 5.0

- As per law, the tenant is a co-owner of the property who enjoys all the rights of an owner like selling or sub-letting the property in the pagdi rental system.

- Further, in this system, the tenant pays a fee, premium or consideration to the landlord as a lump sum payment.

- Further, the property rent remains unchanged for the tenant, which is much lower than the market rate. 

- Further, if the tenant sublets the property, the rental income is shared between the tenant the landlord in the percentage of 35%- 65%.

- Further , when the property is sold by the tenant , then the landlord will have share 30-50% of the sale proceeds, and the remaining share will go to the tenant. However it is not mandatory. 

- Hence, for selling the property , the tenant should take No Objection Certificate from the landlord lender. 

- Since, the landlord is untraced , then without getting the court order , this property cannot be soled. 

Mohammed Shahzad
Advocate, Delhi
13087 Answers
195 Consultations

5.0 on 5.0

Dear Client,

your father in law can sell the mill as the owner is not available. but if the land lord appears and asks for any share in the profits, your father in law should pay that.

Anik Miu
Advocate, Bangalore
8742 Answers
109 Consultations

4.7 on 5.0

1. Pagdi system does not have the legal sanction to bestow ownership.

 

2. However, it is shown as rented premise against payment of a big amount towards advance.

 

3. Your father in law can passover the tenancy of the said flour mill to the third party by taking pagdi or non refundable advance.

Krishna Kishore Ganguly
Advocate, Kolkata
27191 Answers
726 Consultations

5.0 on 5.0

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