Transfer of Property Act (TPA)
Transferee's Right Under an Insurance Policy: Section 49
A buyer contracts for a house and the house burns down before or after the sale, the seller holding a fire policy. The policy is a contract between the seller and the insurer, and the buyer is not a party to it; but the buyer has paid for a house, not for ashes. Section 49 gives him a limited but practical right: where the transferor actually receives money under the policy, the transferee may require it, or so much of it as is necessary, to be applied in reinstating the property. The money repairs the house; it is not handed over to the purchaser.
Figure 1: The claim money coming to the transferor, and the use to which the transferee may put it
1. The Section
Section 49, TPA 'Where immoveable property is transferred for consideration, and such property or any part thereof is at the date of the transfer insured against loss or damage by fire, the transferee, in case of such loss or damage, may, in the absence of a contract to the contrary, require any money which the transferor actually receives under the policy, or so much thereof as may be necessary, to be applied in reinstating the property.' |
2. The Conditions
- Immoveable property transferred for consideration. A gift is outside the section.
- The property, or part of it, was insured against loss or damage by fire at the date of the transfer. The insurance must have existed then; a policy taken afterwards is not within the section.
- Loss or damage by fire occurs.
- The transferor actually receives money under the policy. The section operates on money in his hands, not on a claim he has chosen not to pursue.
- There is no contract to the contrary. The parties may agree otherwise, and a well-drawn sale agreement commonly does.
3. What the Transferee May Require
Question | Answer |
|---|---|
Is the policy money paid to the transferee? | No. He may require it to be applied in reinstating the property — the object is to restore what he bought |
How much? | The money the transferor actually received, or so much of it as may be necessary for the reinstatement |
Does the transferee become the insured? | No. The section does not assign the policy; insurance is a personal contract, and the insurer's liability is to the person insured |
What if the transferor does not claim at all? | The section gives no right over money never received; the transferee's remedy, if any, lies in the contract of sale |
What about damage by flood, earthquake or riot? | Outside the section, which speaks only of fire |
What if the property was insured after the transfer? | The section does not apply; it requires insurance existing at the date of the transfer |
4. Why the Section Is Drawn So Narrowly
- Insurance is a contract of indemnity with a particular person. The insurer contracted with the transferor on the footing of his interest, and the Act does not force a new party on the insurer.
- Insurable interest must exist at the time of the loss. A transferor who has parted with the property may face that objection from the insurer, which is one reason the section works on money actually received rather than on the claim.
- Reinstatement, not payment, matches the transferee's loss. What he bargained for was the property in a particular condition; restoring it gives him precisely that, and prevents a windfall.
- And the parties can do better by contract. The section is a default rule, and a purchaser who wants real protection takes an assignment of the policy with the insurer's consent, or effects his own cover from the date of the agreement.
5. Practical Guidance for a Conveyancer
The risk | The answer |
|---|---|
Fire between agreement and completion | Stipulate expressly for the benefit of the seller's policy, or require the seller to keep it alive and to hold the proceeds for the buyer |
The insurer refusing to pay the seller after the sale | Obtain the insurer's consent to an assignment, or take a fresh policy in the buyer's name from the date of the agreement |
Damage by a peril other than fire | Section 49 does not help; only the contract will |
Part of the property insured only | The section applies to that part; the rest is uncovered |
Retention aid Fire, at the date of the transfer, money actually received, applied in reinstatement. Four limits, and all of them yield to a contract — which is why the careful purchaser does not rely on the section at all. |
6. Related Topics and Provisions
- Transfers in Special Circumstances, Sections 38 to 53A — the chapter scheme
- Section 8, TPA — what passes with the property, and what does not
- Section 55, TPA — the rights and liabilities of buyer and seller between contract and completion
- Section 50, TPA — the neighbouring provision on rent paid in good faith
- Section 51, TPA — improvements by a bona fide holder under a defective title
- Apportionment, Sections 36 and 37 — other adjustments between transferor and transferee