A mortgagee possesses rights against the property and the mortgagor. Mortgagee also has some liabilities and duties towards Mortgagor. Transfer of Property Act deals with Rights and Liabilities of Mortagagee in India.
The term MORTGAGE is a conveyance of property , upon condition, as security for the payment of a debt or the performance of a duty, and to became void upon payment or performance according to the stipulated terms; also the written instrument by which the conveyance is made or a state of being pledged; as, lands given in mortgage or to grant or convey, for the security of debt. A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.
Mortgages are also known as “Liens Against Property” or “Claims on Property”.
A burgeoning share of the lender market includes non-banks.
With a fixed -rate mortgage, the borrower pays the same interest rate for the life of the loan. The term “Mortgage” comes from the Old French “dead pledge “apparently meaning that the pledge ends either when the obligation is fulfilled, or the property is taken through foreclosure. The main function of the mortgage is to provide security to the lender.
Who is Mortgagor and Mortgagee of Property?
The person who has transferred the interest in a specific immovable property is known as Mortgagor and the transferee or person in whose favor the interest is being transferred is known as Mortgagee. A mortgagee is an entity that lends money to a borrower for the purpose of purchasing real estate. In a mortgage lending deal the lender serves as the mortgagee and the borrower is known as the mortgagor. A mortgagee presents the interests of the lending institution in a mortgage deal.
Types of Mortgages of Property
There are six kinds of mortgages which are recognized under the transfer of property act, 1882. They are discussed in the act from Section 58(b)-58(g). Following are the different types of Mortgage: –
1. Simple Mortgage
2. Mortgage by Conditional Sale
3. Usufructuary Mortgage
4. English Mortgage
5. Mortgage by Deposit of Tittle Deeds
6. Anomalous Mortgage
Rights and Liabilities of Mortgagee
A mortgagee possesses one right against the property and another against the mortgagor personally. Following are the rights of mortgagee: -·
Right to Foreclosure or Sale
The right of foreclosure is a right available to a mortgagee to recover his outstanding money. The transaction is affected through a document called the mortgage deed. The relevant provision regarding foreclosure are contained under section 67 of the transfer of property act.
Right to sue for Mortgage Money
A mortgagee has the right to sue for the mortgage money where the mortgagor bind himself to repay, where the mortgaged property wholly and partially destroyed, where the mortgagee is deprived of his security due to a wrongful act and where the mortgagor has failed to deliver possession of the property to the mortgagee. Section 68 deals with sue for mortgage money in transfer of property act.
Power of Sale when valid
Section 69 of the transfer of property act, 1882 states that, the mortgagee has the power to sell the mortgaged property without the intervention of the court, on default of payment of mortgage money by the mortgagor in following three cases:
1. When the mortgage is an English mortgage between non-Hindus, non- Muslims, non-Mohammedi’s and member of the race or sect notified by the by the state government of the official gazette.
2. When government is mortgagee, with the express provision of sale without intervention of the court.
3. When the mortgaged property is situated at Calcutta, madras, Bombay or any other gazette town or area.·
Right to Accession – Increased Mortgaged Property
If, after the date of a mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession. Provision of this act is under Section 70 of Transfer of Property act, 1882.·
Right to Accession – Renewal of Security. Section 71, Transfer of Property Act, 1882
When the mortgaged property is a lease, and the mortgagor obtains a renewal of the lease, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to the new lease.·
Rights of Mortgagee in Possession
A mortgagee may spend such money as is necessary for the mortgaged property from destruction, for making his own tittle thereto good against the mortgagor; and may in absence of a contract to the contrary, add such money to the principal money, at the rate of interest payable on the principal, and where no such rate is fixed, at the rate of nine percent per annum.
Right to proceed of Revenue sale or Composition on Acquisition
Section 73, Transfer of Property Act state that where the mortgaged property or any interest therein is sold owing to failure to pay arrears of revenue or other charges of a public nature or rent due in respect of such property, and such failure did not arise from any default of the mortgagee, the mortgagee shall be entitled to claim payment of the mortgage shall be entitled to claim payment of the mortgage-money, in whole or in part.
Liabilities of Mortgagee
Section 76 of transfer of property act provides that when during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property. Mortgagee must have to manage the property as a person of ordinary prudence. He must use his best endeavors to collect the rents and profit thereof; He must , in the absence of contract to the contrary, make such necessary repairs of the property as he can pay for out of the rent and profits thereof after deduction from such rents and profits the payments and the interest on the principal money. He must not commit any act which is destructive or permanently injurious to the property.
He must keep clear, full accurate accounts of all sums received and spent him as a mortgagee, and, at any time during the continuance of the mortgage, give the mortgagor, as his request and cost, true copies of such accounts and of the vouchers by which they are supported.
A mortgagee is bound to sue on behalf of all the mortgagees in respect of which the mortgage money has become due in the absence of express contract. During the continuance of the mortgage, the mortgagee is bounded to protect the mortgaged property.
Mortgages may be legal or equitable. Common law jurisdictions have evolved two main forms of Mortgage:
A. The mortgage by demise
In a mortgage by demise, the mortgagee becomes the owner of the mortgaged property until the loan is repaid or other mortgage obligation fulfilled in full, a process known as redemption. Mortgages by demise are the original form of mortgages, and continue to be used in many jurisdictions, and in a small minority of states in the united states.
B. The Mortgage by Legal Charge.
A legal charge is a method by which a lender protects the money they have lent to an individual or company. It is a legal document signed by the borrower and which is registered against a property at the land registry so as to alert any potential buyer of the existence of the debt .One of the most common types of a legal charge is a mortgage from a bank or building society. In consideration of the mortgage funds that you are borrowing, the bank or building society will require a legal charge to be secured against the property.
Case Study on Rights and Liabilities of Mortgagee
In the case of Venkata Reddy v. Pethi Reddy AIR 1963 SC 992, it is indisputable that in a mortgage suit there will be two decrees, namely, preliminary decree and final decree, and that ordinarily the preliminary decree settles the rights of the parties and the final decree works out those rights.
In Kausalya v. Kauleshwar 1945 ILR 25 Pat 305, it cannot also be disputed that a mortgage merges in the preliminary decree and the rights of the parties are thereafter governed by the said decree.
In the case of Stanley v. Wilde, it was held that any provision mentioned in the mortgage-deed which has an effect of preventing or impeding the right to redemption is void as a clog on redemption.
Conclusion to Rights and Liabilities of Mortgagee
A mortgage deed comes up with many rights and liabilities for both the parties involved i.e. mortgagor and mortgagee. These rights and liabilities were being mentioned in the Transfer of Property Act 1882 which is quite old. New amendments were also being made in the Amendment Act of 1929 which is not implemented in a proper way so there is way in which both the mortgagor and mortgagee are having various ideas for deceiving each other. So, the need of the hour is to amend the laws and make it more stringent so that no party attempts to enter into a fraudulent transaction.
Author Details: Shanu chandwasia (3rd year student of B.A. LL.B. (Hons.) at Amity University, Kolkata)