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

Introduction

Nowadays mortgage is a really typically used word. Each and every single individual has the understanding that if he wants a loan to be approved, he has to pay some collateral and for that, he has to mortgage his residential or commercial property with a bank. Mortgagor and mortgagee are the celebrations who have an essential role to play during mortgage of a residential or commercial property. Various statutes available in India deals 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 offers with the significant part of mortgage.
The Civil Procedure Code, 1908- The procedural part of mortgage of stationary residential or commercial property is dealt in Chapter XXXIV of CPC.
Indian Contract Act, 1872- Any contract associated to mortgage and its general concepts are discussed 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 protected or unsecured. Where a loan is given just on the basis of debtor's guarantee to pay (e.g. on promissory-note), such loans are called as unsecured loans. But, where the financial institution takes security from the debtor for the payment of his money, the loan is called safe loans. One such method to secure loans is mortgage. Section-58( a) of the Transfer of Residential Or Commercial Property Act, 1882 has defined mortgage as the transfer of an interest in a particular unmovable residential or commercial property for securing:

The payment of money provided to him or to be offered through loan, or
An existing or future financial obligation, or
The efficiency of an engagement which may generate a pecuniary liability.

Who is a mortgagor?

The individual who has moved the interest in a specific immovable residential or commercial property is referred to as mortgagor. For instance, A wants a loan from B. Now B desires his total up to be protected which he is going to loan A. A will move the interest in a specific immovable residential or commercial property to B and will give him the authority of offering it in case A is not able to pay back B's amount. Here A is the mortgagor.

Who is a mortgagee?

The transferee or person in whose favour the interest is being moved is known as mortgagee. In the above-given example, the person who is providing cash i.e. B is the mortgagee.

What is mortgage-money?

The primary quantity which is provided as loan and the interest quantity which mortgagor will pay to mortgagee in addition to the primary 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 specific unmovable residential or commercial property is affected. It is a type of contract which lawfully binds both the mortgagor and mortgagee.

Different type of mortgage

There are 6 kinds of mortgage which are acknowledged 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 kinds 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 instead of retransferring
Right of evaluation and production of documents
Right to accession
Right to enhancements
Right to a restored lease
Right to grant a lease
Right to Redemption (section-60)

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

Right to end mortgage deal
Right to move mortgaged residential or commercial property to his name
To take back belongings of residential or commercial property in case of shipment of possession
When it comes to Noakes & Co. vs. Rice (1902) AC 24, Rice was a dealer who mortgaged his residential or commercial property, property and goodwill to N subject to the arrangement that if R repaid the whole amount, the residential or commercial property would be transferred back to his name or any other individual's. A covenant was connected that stated whether or not the amount is due, R would just offer Malt alcohol by N in his premises. Because of this covenant, R had trouble in redemption and it didn't give him absolute right over his residential or commercial property. House of Lords held that anything which clogs this right is bad and they developed the idea that 'once a mortgage always a mortgage' and stated that mortgage could never ever be irreducible.

This principle was contributed to safeguard the interest of a mortgagor. Any condition or provision which prevents a mortgagor from redeeming his mortgaged residential or commercial property is a blockage on the right of redemption. The right to redemption continues despite the fact that the mortgagor stops working 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 pointed out in the mortgage-deed which has an effect of preventing or restraining the right to redemption is void as a blockage on redemption.

Exceptions to the right- The right to redeem has 3 exceptions. It can be extinguished under the following cases:

By the act of parties

By operation of law

By decree gone by the court

Obligation to transfer to the 3rd celebration instead 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 assign the mortgage debt and transfer the residential or commercial property to a third individual directed by him. The function of this right is to assist the mortgagor to pay off the mortgagee by taking a loan from a 3rd person on the very same security.

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

This area 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 residential or commercial property in his possession for examination on notification of affordable time. The costs sustained on production or copies of documents or travel expenditures of a mortgagee are to be paid by the mortgagor. This right is offered to the mortgagor only 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 best mortgagor is entitled to such accession to his residential or commercial property which remains 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 expense and such accession is inseparable, mortgagor, in order to be entitled to such succession, requires to pay the mortgagee the cost of acquiring such accession.

If such separate belongings or satisfaction 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 damage, forfeit or sale, or made with his assent, to pay the correct expense thereof, as an addition to the primary cash, with interest at the very same rate as is payable on the principal amount, or, where no such rate is repaired, 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 actually been improved while it remained in ownership 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 safeguard the residential or commercial property or with the prior consent of mortgagor.
Improvements were made by the mortgagee with the consent of the general 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 advantage of the brand-new lease. This right is available to the mortgagor unless he gets in into any contract 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 permit a mortgagor to lease out the mortgaged residential or commercial property on his own however only with the approval of mortgagee. Now, a mortgagor has the right to lease out the mortgaged residential or commercial property while he is in lawful ownership of that residential or commercial property, subject to the following conditions:

All conditions in the lease should be according to the regional laws and custom-mades to prevent any deceitful deal.
No lease or premium will be paid beforehand or promised by mortgagee.
The contract will not consist of any arrangement for the renewal of the lease.
Every such lease shall come into effect within a period of 6 months from the date of its execution.
Where the mortgaged residential or commercial property is a building, the regard to the lease ought to not surpass 3 years in total.

Duties/liabilities of a mortgagor

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

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

This area imposes a responsibility on the mortgagor to not to dedicate any act which results in the waste of residential or commercial property or any act which minimizes the value of the mortgaged residential or commercial property. Waste is divided into two categories:

Permissive waste- A mortgagor who is in belongings of the mortgaged residential or commercial property is not liable to the mortgagee for any small waste.
Active waste- When an act is done which causes significant waste of the residential or commercial property or causes the decrease in the value of mortgaged residential or commercial property, then the mortgagor will be liable to the mortgagee.

Duty to indemnify for defective title

It is the responsibility of a mortgagor to compensate the mortgagee for a faulty title in the mortgaged residential or commercial property. A malfunctioning title refers to a circumstance when a 3rd party begins declaring or hinders mortgaged residential or commercial property. It is a liability for the mortgagor to make up for the costs incurred by mortgagee for safeguarding the title of that residential or commercial property.

Duty to compensate mortgagee

If the mortgaged residential or commercial property remains 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 sustaining such expenditures. Similarly, when there is no delivery of belongings i.e. the mortgaged residential or commercial 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 residential or commercial property is rented by mortgagor then it is his duty to direct lessee to pay the lease, etc to the mortgagee.

A mortgage-deed creates numerous rights and liabilities for both the celebrations included i. e. mortgagor and mortgagee. These rights and liabilities were produced and consisted of in the Transfer of Residential Or Commercial Property Act in 1882 which is quite old and therefore is dated. Though modifications were made in the Amendment Act of 1929, however no recent changes have actually been made in the chapter of rights and liabilities of mortgagor. This has lead to various deceptive deals as both the mortgagor and mortgagee has actually discovered different brand-new approaches of deceiving each other. Therefore, the need of the hour is to amend the laws and make it more stringent so that no celebration attempts to enter in fraudulent deals.