A mortgage is a contract that gives the money lender, bank, or financier the right to take possession of the borrower’s mortgaged property if the borrower defaults on paying the obligation, interest included. Put differently, a mortgage is the contingent transfer of real estate intended to act as security for loan payments or the performance of particular contractual obligations.
Anyone engaging in a mortgage agreement must be aware of their rights and obligations as both the mortgagee and the mortgagor. In the event that the mortgagor defaults, the mortgagee must be aware of their rights to reclaim the property and sell it to recoup the loan balance. Additionally, they must adhere to legal protocol and notify the mortgagor before to initiating any legal action.
rights and liabilities of mortgagee
rights of mortgagee
Right of Sale or Foreclosure:
- The Transfer of Property Act’s Section 67 deals with the right to a foreclosure or sale.
- It gives the mortgagee the right to ask the court for a foreclosure decision as soon as the mortgage payment is past due.
Possession of the Right to Suit for Mortgage Money:
The conditions under which the mortgagee may file a lawsuit to recover the mortgage funds are set forth in Section 68 of the Transfer of Property Act. Among these circumstances are the following:
- The mortgagor consents to pay back the loan.
- The mortgaged property is completely or substantially destroyed, unless the mortgagee is at fault or defaults.
- All or some of the mortgagee’s security is taken away.
- The mortgagor neglected to give the mortgagee access to the mortgaged property, even though the mortgagee was entitled to it.
Right to Sell:
Section 69 of the TP Act grants the mortgagee the authority to sell the mortgaged property without the need for court approval. However, the following requirements must be met in order to use this right:
- In the event that the mortgage is in English and neither the mortgagor nor the mortgagee belongs to any race, sect, tribe, or religion, as specified by the state government’s official gazette, nor are they Buddhists, Muslims, Hindus, or Buddhists.
- Where this power of the mortgagee is explicitly indicated by the mortgagee in the mortgage document and the mortgagee is itself the government as well as the property is located in certain towns i.e., Calcutta, Madras, or Bombay originally.
Right to Accession:
- Under Section 70 of the TP Act, any renovations or increases in value made to the mortgaged property are entitled to be inherited by the mortgagee.
The Right to Renew a Lease:
- Section 71 of the TP Act states that absent a contract to the contrary, the mortgagee shall be entitled to the new lease for the purposes of the security when the mortgaged property is under lease and the mortgagor gets a renewal of the lease.
Right to Mesne Mortgage:
- As per Section 72 of the TP Act, the mesne mortgagee has the exact same rights against succeeding mortgagees as they do against the mortgagor in situations when a property is mortgaged for repeated debts to successive mortgagees.
liabilities of mortgagee
Since the Mortgagee is the one who lends money to the Mortgagor on the security of the mortgaged property, he is responsible for maintaining it during the term of the mortgage and until the Mortgagor exercises his right of redemption.
Therefore, in addition to his rights, the mortgagee has obligations that must be fulfilled until he gives up ownership of the mortgaged property and pays the remaining balance.
The following obligations are listed in Section 76, which clarifies the responsibilities of the mortgagee in possession:
- Duty to keep up the mortgaged property.
- Duty to retrieve the property’s profits.
- Duty, without a contract to the contrary, to use the money earned from the property to meet government duties.
- Duty to make all reasonable efforts to prevent damage to the property and to take the appropriate precautions.
- Duty to maintain records of the property’s receipts and outlays.
- Duty to make the necessary and urgent repairs to the property.
rights and liabilities of mortgagee with case laws
- In the case of K. Vilasini v Edwin Periera, it was observed that the type and nature of the mortgage, as well as the parties involved, must be ascertained before a foreclosure order can be issued.
A mortgage is a useful financial tool that enables people or businesses to get loans by pledging the value of their real estate as security. The codified law known as the Transfer of Property Act, of 1882, permits the transfer of immovable property between two living individuals. It also establishes the rights and obligations of the mortgagee. These rights and liabilities are crucial in ensuring that neither party to the mortgage commits fraud and operates within the Act’s bounds.
