Petitioner (buyer in possession) v. Respondent No. 1 (seller) - Rent matter

Background

The petitioner challenged two orders passed in rent proceedings. The order records that the parties' agreement (at page 19 of the file) was, for all intents and purposes, a sale and purchase agreement. On signing it the petitioner became part-owner of an apartment then under construction, having paid a substantial amount to Respondent No. 1, the seller, who held the balance of the property in trust.

A two-year period was assumed for completing the project. Until then, a reasonable monthly rent was to be paid to the seller pro rata to his diminishing interest in the property, after which the seller was to transfer his remaining interest to the buyer. The petitioner stated that the project was completed within about four months, that he repeatedly asked the seller to transfer his interest, and that the seller instead kept charging rent. A suit for specific performance was already pending, and the petitioner had deposited the balance sale consideration in it.

Issue before the Court

• Was there a relationship of landlord and tenant between the parties, giving the Rent Controller jurisdiction, once the project was complete?

The Court's reasoning

The Court said the point to consider in such "diminishing interest" matters is whether the transferee entered the premises as a tenant or as an owner. It noted that Section 53A of the Transfer of Property Act, 1882 safeguards a transferee who has taken possession under a written sale agreement, and that in such cases a person in possession can claim continued possession and seek part performance from the transferor.

On the facts, the petitioner entered the property as a part-owner, and rent was payable only until the project was completed, which happened within four months. From then on, the Court held, the petitioner was not obliged to pay rent; he had kept seeking performance of the contract.

Outcome

Both impugned orders, which had already been suspended by an earlier order of 31.03.2023, were set aside. The parties were left to resolve their dispute in the pending suit for specific performance, preferably within 90 days, and until final judgment the petitioner was not to be dispossessed from the flat.

Why it matters

Agreements that mix a sale with a temporary rent arrangement are common in Karachi, especially for flats bought during construction. This order shows the High Court looking at the substance of the agreement rather than its label, and leaving ownership questions to the civil court hearing the specific performance suit.