This post is composed by Amandeep Kaur, a student of Symbiosis Law School, Pune. The author in this short article has gone over the standard ideas of mortgagor and mortgagee and likewise the rights and liabilities of a mortgagor.

Introduction

Nowadays mortgage is a really commonly used word. Each and every single individual has the knowledge that if he wants a loan to be approved, he needs to pay some collateral and for that, he needs to mortgage his residential or commercial property with a bank. Mortgagor and mortgagee are the celebrations who have a crucial role to play during mortgage of a residential or commercial property. Various statutes readily available in India offers with a mortgage. Following legislation deal with mortgage:

The Transfer of Residential Or Commercial Property Act, 1882- Sections 58-104, which are discussed in Chapter IV deals with the substantial part of mortgage.
The Civil Procedure Code, 1908- The procedural part of mortgage of stationary residential or commercial property is handled Chapter XXXIV of CPC.
Indian Contract Act, 1872- Any agreement related to mortgage and its general concepts are mentioned in the Indian Contract Act of 1872.
When do rights & liabilities of a mortgagor occur?

The rights and liabilities of a mortgagor occur throughout a mortgage. A loan may be secured or unsecured. Where a loan is given merely on the basis of debtor's promise to pay (e.g. on promissory-note), such loans are called as unsecured loans. But, where the lender takes security from the debtor for the repayment of his money, the loan is referred to as guaranteed loans. One such way to protect loans is mortgage. Section-58( a) of the Transfer of Residential Or Commercial Property Act, 1882 has actually specified mortgage as the transfer of an interest in a particular immovable residential or commercial property for securing:

The payment of cash provided to him or to be offered through loan, or
An existing or future financial obligation, or
The performance of an engagement which might generate a budgeting liability.

Who is a mortgagor?

The individual who has transferred the interest in a particular stationary residential or commercial property is called mortgagor. For example, A desires a loan from B. Now B wants his quantity to be protected which he is going to loan A. A will move the interest in a particular unmovable residential or commercial property to B and will offer him the authority of offering it in case A is unable to pay back B's quantity. Here A is the mortgagor.

Who is a mortgagee?

The transferee or person in whose favour the interest is being transferred is understood as mortgagee. In the above-given example, the individual who is lending cash i.e. B is the mortgagee.

What is mortgage-money?

The primary amount which is offered as loan and the interest quantity which mortgagor will pay to mortgagee along with the principal amount. Sum of both the principal amount and interest is referred to as mortgage-money.

What is a mortgage deed?

It is an instrument by which the transfer of interest in a particular immovable residential or commercial property is impacted. It is a kind of agreement which lawfully binds both the mortgagor and mortgagee.

Different type of mortgage

There are six kinds of mortgage which are recognized under the Transfer of Residential Or Commercial Property Act, 1882. They are gone over in the act from section 58( b) -58( g). Following are the various sort of mortgage:

Simple Mortgage [section-58( b)] Mortgage by conditional sale [section-58( c)] Usufructuary Mortgage [section-58( d)] English Mortgage [section-58( e)] Mortgage by deposit of title deeds [section-58( f)] Anomalous Mortgage [section-58( g)]

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Rights of Mortgagor

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

Right to redemption
Right to move mortgaged residential or commercial property to a 3rd party rather of retransferring
Right of assessment and production of documents
Right to accession
Right to enhancements
Right to a restored lease
Right to give a lease
Right to Redemption (section-60)

It is among the most essential rights of a mortgagor offered under section of the Act. This right puts an end to mortgage by returning the residential or commercial property of mortgagor. The right to redeem more grants three rights to the mortgagor:

Right to end mortgage deal
Right to transfer mortgaged residential or commercial property to his name
To take back possession of residential or commercial property in case of shipment of ownership
When it comes to Noakes & Co. vs. Rice (1902) AC 24, Rice was a dealership who mortgaged his residential or commercial property, facility and goodwill to N subject to the provision that if R paid back the entire quantity, the residential or commercial property would be moved back to his name or any other person's. A covenant was connected that specified whether the quantity is due, R would just offer Malt liquor by N in his facilities. Because of this covenant, R had difficulty in redemption and it didn't provide him absolute right over his residential or commercial property. House of Lords held that anything which blocks this right is bad and they came up with the concept that 'once a mortgage constantly a mortgage' and stated that mortgage could never be irreducible.

This concept was added to safeguard the interest of a mortgagor. Any condition or provision which prevents a mortgagor from redeeming his mortgaged residential or commercial property is an obstruction on the right of redemption. The right to redemption continues although the mortgagor fails to repay the loan total up to mortgagee. In the case of Stanley v. Wilde, (1899) 2 Ch 474, it was held that any arrangement mentioned in the mortgage-deed which has a result of avoiding or hampering the right to redemption is void as an obstruction on redemption.

Exceptions to the right- The right to redeem has three exceptions. It can be snuffed out under the following cases:

By the act of parties

By operation of law

By decree gone by the court

Obligation to move to the third party rather of moving it to mortgagor (section-60A)

This right was included the Act by Amendment Act of 1929. This ideal supplies the mortgagor with authority to ask the mortgagee to designate the mortgage financial obligation and move the residential or commercial property to a third person directed by him. The purpose of this right is to assist the mortgagor to pay off the mortgagee by taking a loan from a third person on the very same security.

Right to examination and production of files (section-60B)

This area is likewise placed 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 residential or commercial property in his ownership for inspection on notice of reasonable time. The costs sustained on production or copies of files or travel costs of a mortgagee are to be paid by the mortgagor. This right is offered to the mortgagor just as long as his right to redeem exists.

Right to Accession (section-63)

Basically, accession means any addition to residential or commercial property. According to this right mortgagor is entitled to such accession to his residential or commercial property which is in the custody of mortgagee. There are 2 types of accession:

Artificial accession- It is when mortgagor made some efforts and it increased the worth of land.
Natural accession- The name itself defines i.e. with no manufactured efforts.

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

If such separate ownership or pleasure is not possible, the accession should be delivered with the residential or commercial property; it is the liability of mortgagor, when it comes to an acquisition which is necessary to protect the residential or commercial property from destruction, loss or sale, or made with his assent, to pay the correct expense thereof, as an addition to the principal money, with interest at the very same rate as is payable on the primary amount, or, where no such rate is fixed, at the rate of nine percent per year.

Right to Improvements (section-63A)

According to this right if the mortgaged residential or commercial property has been enhanced while it was in ownership of mortgagee, then on redemption and in the lack of any contract to the contrary mortgagor is entitled to such improvement. The mortgagor is not accountable to pay mortgagee unless:

Improvements made by the mortgagee were to secure the residential or commercial property or with the previous authorization of mortgagor.
Improvements were made by the mortgagee with the permission of the public authority.

Right to Renewed Lease (section-64)

If the mortgagor is entitled the mortgaged residential or commercial property is a leasehold residential or commercial property and during the period of mortgage the lease gets renewed then, on redemption the mortgagor is entitled to have the benefit of the new lease. This right is offered to the mortgagor unless he participates in any agreement to the contrary with mortgagee.

Right to grant a Lease (section-65A)

This right was introduced by the Amendment Act of 1929. Prior to this right, the Transfer of Residential Or Commercial Property Act did not allow a mortgagor to rent out the mortgaged residential or commercial property on his own however only with the approval of mortgagee. Now, a mortgagor deserves to rent out the mortgaged residential or commercial property while he remains in legal possession of that residential or commercial property, based on the list below conditions:

All conditions in the lease should be according to the local laws and customs to prevent any fraudulent deal.
No lease or premium will be paid beforehand or guaranteed by mortgagee.
The contract shall not consist of any provision for the renewal of the lease.
Every such lease shall come into result within a period of 6 months from the date of its execution.
Where the mortgaged residential or commercial property is a structure, the term of the lease ought to not exceed 3 years in total.

Duties/liabilities of a mortgagor

Along with the rights given to a mortgagor, the Transfer of Residential or commercial property Act has likewise provided some tasks on him. Following are the duties of a mortgagor:

Duty to avoid waste
Duty to indemnify for defective title
Duty to compensate mortgagee
Duty to direct rent of a lease to mortgagee
Duty to prevent waste (section-66)

This area imposes a responsibility on the mortgagor to not to devote any act which causes the waste of residential or commercial property or any act which lowers the value of the mortgaged residential or commercial property. Waste is divided into 2 categories:

Permissive waste- A mortgagor who remains in ownership of the mortgaged residential or commercial property is not responsible to the mortgagee for any minor waste.
Active waste- When an act is done which triggers significant waste of the residential or commercial property or leads to the decrease in the value of mortgaged residential or commercial property, then the mortgagor will be accountable to the mortgagee.

Duty to indemnify for malfunctioning title

It is the duty of a mortgagor to compensate the mortgagee for a faulty title in the mortgaged residential or commercial property. A defective title refers to a situation when a 3rd party starts declaring or hinders mortgaged residential or commercial property. It is a liability for the mortgagor to compensate for the expenditures incurred by mortgagee for protecting the title of that residential or commercial property.

Duty to compensate mortgagee

If the mortgaged residential or commercial property remains in ownership of mortgagee who is paying all the taxes and other public charges, then it is the task of mortgagor to compensate mortgagee for sustaining such expenditures. Similarly, when there is no shipment of belongings i.e. the mortgaged residential or commercial property is still in belongings of mortgagor, then it is his duty to pay all public charges and taxes imposed on it.

Duty to direct rent of a lease to mortgagee

Where the mortgaged residential or commercial property is rented by mortgagor then it is his responsibility to direct lessee to pay the lease, and so on to the mortgagee.

A mortgage-deed creates many rights and liabilities for both the celebrations included i. e. mortgagor and mortgagee. These rights and liabilities were developed and included in the Transfer of Residential Or Commercial Property Act in 1882 which is rather old and therefore is obsoleted. Though modifications were made in the Amendment Act of 1929, however no recent modifications have actually been made in the chapter of rights and liabilities of mortgagor. This has resulted in numerous deceitful deals as both the mortgagor and mortgagee has discovered numerous brand-new techniques of deceiving each other. Therefore, the requirement of the hour is to change the laws and make it more stringent so that no celebration tries to go into in deceitful transactions.