WHAT IS MORTGAGE

mortgage is the transfer of an interest in immovable property for the purpose of securing the payment of money advanced, an existing or future debt or the performance of an engagement that may give rise to a pecuniary liability.

Rights of Mortgagor

Every mortgage deed leaves a right to the mortgagor and a corresponding liability for the mortgagee and vice versa. Following are the rights given to a mortgagor given by the Transfer of Property Act, 1882:

  1. Right to redemption
  2. Right to transfer mortgaged property to a third party instead of retransferring
  3. Right of inspection and production of documents
  4. Right to accession
  5. Right to improvements
  6. Right to a renewed lease
  7. Right to grant a lease

Right to Redemption

It is one of the most important rights of a mortgagor given under section of the Act. This right puts an end to a mortgage by returning the property of the mortgagor. The right to redeem further grants three rights to the mortgagor:

  1. Right to end mortgage deal
  2. Right to transfer mortgaged property to his name
  3. To take back possession of the property in case of delivery of possession

 

  • Exceptions to the right- The right to redeem has three exceptions. It can be extinguished under the following cases:
  • By the act of parties
  • By operation of law
  • By decree passed by the court

 

Obligation to transfer to the third party instead of transferring it to the mortgagor

This right was added in the Act by Amendment Act of 1929. This right provides the mortgagor with authority to ask the mortgagee to assign the mortgage debt and transfer the property to a third person directed by him. The purpose of this right is to help the mortgagor to pay off the mortgagee by taking a loan from a third person on the same security.

Right to inspection and production of documents

This section is also inserted by the Amendment Act of 1929. It is the right of mortgagor to ask mortgagee for the production of copies of documents of the mortgaged property in his possession for inspection on notice of reasonable time. The expenses incurred on production or copies of documents or travel expenses of a mortgagee are to be paid by the mortgagor. This right is available to the mortgagor only as long as his right to redeem exists.

Right to Accession

Basically, accession means any addition to property. According to this right mortgagor is entitled to such accession to his property which is in the custody of mortgagee. There are two types of accession:

  • Artificial accession- It is when mortgagor made some efforts and it increased the value of land.
  • Natural accession- The name itself defines i.e. without any man-made efforts.

In case an accession is made to the property due to the efforts of mortgagee or at his expense and such accession is inseparable, mortgagor, in order to be entitled to such succession, needs to pay the mortgagee the expense of acquiring such accession.

If such separate possession or enjoyment is not possible, the accession must be delivered with the property; it is the liability of mortgagor, in the case of an acquisition which is necessary to preserve the property from destruction, forfeiture or sale, or made with his assent, to pay the proper cost thereof, as an addition to the principal money, with interest at the same rate as is payable on the principal amount, or, where no such rate is fixed, at the rate of nine percent per annum.

Right to Improvements

According to this right if the mortgaged property has been improved while it was in possession of mortgagee, then on redemption and in the absence of any contract to the contrary mortgagor is entitled to such improvement. The mortgagor is not liable to pay mortgagee unless:

  • Improvements made by the mortgagee were to protect the property or with the prior permission of mortgagor.
  • Improvements were made by the mortgagee with the permission of the public authority.

Right to Renewed Lease

If the mortgagor is entitled the mortgaged property is a leasehold property and during the duration of mortgage the lease gets renewed then, on redemption the mortgagor is entitled to have the benefit of the new lease. This right is available to the mortgagor unless he enters into any contract to the contrary with mortgagee.

Right to grant a Lease

This right was introduced by the Amendment Act of 1929. Prior to this right, the Transfer of Property Act did not allow a mortgagor to lease out the mortgaged property on his own but only with the permission of mortgagee. Now, a mortgagor has the right to lease out the mortgaged property while he is in lawful possession of that property, subject to the following conditions:

  • All conditions in the lease should be according to the local laws and customs to prevent any fraudulent transaction.
  • No rent or premium shall be paid in advance or promised by mortgagee.
  • The contract shall not contain any provision for the renewal of the lease.
  • Every such lease shall come into effect within a period of six months from the date of its execution.
  • Where the mortgaged property is a building, the term of the lease should not exceed three years in total.

Duties/liabilities of a mortgagor

Along with the rights given to a mortgagor, the Transfer of Property Act has also conferred some duties on him. Following are the duties of a mortgagor:

  1. Duty to avoid waste
  2. Duty to indemnify for defective title
  3. Duty to compensate mortgagee
  4. Duty to direct rent of a lease to mortgagee

Duty to avoid waste

This section imposes a duty on the mortgagor to not to commit any act which leads to the waste of property or any act which reduces the value of the mortgaged property. Waste is divided into two categories:

  • Permissive waste– A mortgagor who is in possession of the mortgaged property is not liable to the mortgagee for any minor waste.
  • Active waste– When an act is done which causes major waste of the property or leads to the reduction in the value of mortgaged property, then the mortgagor will be liable to the mortgagee.

Duty to indemnify for defective title

It is the duty of a mortgagor to compensate the mortgagee for a defective title in the mortgaged property. A defective title refers to a situation when a third party starts claiming or interferes with mortgaged property. It is a liability for the mortgagor to compensate for the expenses incurred by mortgagee for protecting the title of that property.

Duty to compensate mortgagee

If the mortgaged property is in possession of mortgagee who is paying all the taxes and other public charges, then it is the duty of mortgagor to compensate mortgagee for incurring such expenses. Similarly, when there is no delivery of possession i.e. the mortgaged property is still in possession of mortgagor, then it is his duty to pay all public charges and taxes levied on it.

Duty to direct rent of a lease to mortgagee

Where the mortgaged property is leased by mortgagor then it is his duty to direct lessee to pay the rent, etc. to the mortgagee.

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