CHANAKYA NATIONAL LAW UNIVERSITY

A final draft of project of Transfer of property act

TOPIC : RIGHTS AND LIABILITIES OF A MORTGAGEE IN
MORTGAGE

Submitted to:-

Mr.Vijay Kumar Vimal

(Faculty of Transfer of Property Act)

By: Maira Hussain

Roll No: 1935

1st Year, B.A. L.L.B. (Hons.)

 DECLARATION BY CANDIDATE

I, hereby, declare that the work reported in B.A.,LL.B(Hons.) Project

report entitled “Rights and Liabilities of a Mortgagee in a Mortgage”
submitted at Chanakya National Law University is an authentic record
of my work carried out under supervision of MR.VIJAY KUMAR
VIMAL I have not submitted this work elsewhere for any other degree
or diploma. I am fully responsible for the contents of my project work.

SIGNATURE OF CANDIDATE
NAME OF CANDIDATE: MAIRA HUSSAIN
CHANAKYA NATIONAL LAW UNIVERSITY
 ACKNOWLEDGEMENT

I would like to thank my faculty, Mr. Vijay Kumar Vimal whose guidance helped
me a lot in structuring my project.
I owe the present accomplishment of my project to my friends, who helped me
immensely with materials throughout the project and without whom I couldn’t
have completed in the present way.
I would like to extend my gratitude to my parents and all those unseen hands that
helped me out at every stage of the project.

MAIRA HUSSAIN
 TABLE OF CONTENTS

DECLARATION BY CANDIDATE ...................................................................................................................... 2

ACKNOWLEDGEMENT ................................................................................................................................... 3
TABLE OF CONTENTS..................................................................................................................................... 4
INTRODUCTION ............................................................................................................................................. 5
English mortgage ...................................................................................................................................... 6
How a Mortgage Works ............................................................................................................................ 7
RIGHTS OF MORTGAGOR .............................................................................................................................. 8
Duties or Liabilities of Mortgagor ............................................................................................................. 8
Rights And Liabilities Of Mortgagor .......................................................................................................... 9
Liabilities of Mortgagor ........................................................................................................................... 10
WHAT IS A MORTGAGEE? ........................................................................................................................... 11
Breaking Down Mortgagee ..................................................................................................................... 11
Mortgage Lending Products .................................................................................................................... 11
Secured Mortgage Protections ............................................................................................................... 11
TERMS ......................................................................................................................................................... 13
Mortgagor ............................................................................................................................................... 13
Fixed Rate Mortgage ............................................................................................................................... 13
Perfected Lien ......................................................................................................................................... 13
Understanding Variable Rate Mortgages................................................................................................ 13
Defeasance Clause .................................................................................................................................. 13
Release Cause ......................................................................................................................................... 13
RIGHTS OF MORTGAGEE ............................................................................................................................. 14
LIABILITIES OF MORTGAGEE ....................................................................................................................... 15
CONCLUSION............................................................................................................................................... 16
 INTRODUCTION

A mortgagor is an individual or a business entity providing a mortgage or security lien to real

estate in exchange for the lender providing funds to the mortgagor. A mortgagee is a lender who
provides money to the owner of real estate and who takes security or a lien in real estate as
assurance for repayment of the loan. Often, the mortgagor is referred to as the borrower while the
lender is referred to as the mortgagee.

A mortgage is a lien against real estate in exchange for the repayment of money. A mortgage
may be for a loan used to purchase the real estate, or for money loaned after the real estate is
purchased. In either case, the real estate is used as security for the money lent, or mortgage loan,
and the mortgage is the security agreement. Mortgages are public documents and are recorded. A
mortgage is the loan used to secure ownership of a property.

Example: The Bank loans Rs200, 000 to Mr Singh for the purchase of a home. Mr Singh is
referred to as the mortgagor in the transaction, and the Bank is referred to as the mortgagee.
Amortgage is the transfer of interest in a property to secure payment of money advanced. The
transferor is called a mortgagor. The transferee is called a mortgagee. The principal money and
interest secured are called as mortgage money. The instrument by which this transfer is effected
is called mortgage deed. The provisions related to mortgage of property are contained in the
Transfer of Property Act.

A mortgage can be of various types. These include simple mortgage, mortgage by conditional
sale, usufructuary mortgage, English mortgage, mortgage by deposit of title deeds and
anomalous mortgage.

A mortgagee can take possession of mortgaged property in case of default. Under the Transfer of
Property Act, if there is default in payment of mortgage money, the mortgagee can take
possession of mortgaged property and sell it without intervention of a Court only in case of
English mortgage. In addition, a mortgagee can take possession of mortgaged property where
there is a specific provision in the mortgage deed and the mortgaged property is situated in
Kolkata, Chennai or Mumbai. In other cases, possession of property can be taken only with the
intervention of a Court.

English mortgage

It is a type of mortgage where the mortgagor binds himself to repay the mortgaged money on a certain
date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a provision that he
will re-transfer the property to the mortgagor upon payment of the mortgage money as agreed. This is also
called registered mortgage.

This is the safest form of mortgage for a bank. No documents of the property are required to create this
kind of a mortgage. The borrower just needs to enter into a mortgage deed with the bank which needs to
be stamped and registered in order to make it enforceable. However, this is an expensive way to create a
mortgage as charges have to be borne by the borrower for stamping and registration. Further, the
mortgagor binds himself to repay the money at a certain date and transfers property absolutely to the
mortgagee subject to the condition that he will re-transfer it to the mortgagor on payment of the
mortgaged money.

A mortgagee has a right to sue for the mortgage money in these cases:

Where the mortgagor binds himself to repay.

_ Where the mortgaged property is wholly or partially destroyed or the security is rendered insufficient.
The mortgagee must have given the mortgagor a reasonable opportunity to provide further security to
render the security sufficient and the mortgagor has failed to do so.

_ Where the mortgagee is deprived of his security due to a wrongful act or default of the mortgagor.

_ Where the mortgagor has failed to deliver possession of the property to the mortgagee. If a suit is
brought, the Court may stay the suit and all proceedings until the mortgagee has exhausted all his
available remedies against the mortgaged property, unless the mortgagee abandons his security and re-
transfers the mortgaged property.
Section 67 of the Act gives the mortgagee the right to foreclosure or sale. As per this provision, in case
the mortgage money has become due to the mortgagee, before a decree has been made for the redemption
of the mortgaged property, the mortgagee has a right to obtain a decree from the Court that the mortgagor
be absolutely debarred of his right to redeem the property, or a decree that the property be sold. This suit
to obtain a decree that the mortgagor be absolutely debarred of his right to redeem the mortgaged property
is called a suit for foreclosure.

How a Mortgage Works

It is borrowed according to the terms outlined in the loan agreement. You will also sign a mortgage,
giving the lender a lien or security on the property. In the event you do not pay back the loan, the lender
has the right to sell the property to complete repayment of the loan. If there is more than one mortgage,
the first mortgage is paid before any secondary mortgages are paid, if there is enough left over from the
sale.

The lender will not own the property through a mortgage loan only retain a lien on the property. You are
generally free to do with the property as you wish, except that transferring the property without paying off
the mortgage is usually prohibited without the lender’s permission.

There may be more than one mortgage on a parcel of real estate. Mortgages filed later in time are called
second (or third) mortgages. Because they are considered inferior, the first mortgage gets paid out first in
the event of default.

Mortgages are recorded on land title certificates which are public documents recorded at the Land Titles
Offices in the city or province where the real estate is located. Public recording informs the public that a
lender has a security against the real estate.

Section 60 to 77 of the Transfer of the Property Act deals with the rights and duties of the mortgagor
and mortgagee.
 RIGHTS OF MORTGAGOR

The mortgagor has the nine rights.

They are:-
1. Section 60 of the Act,the mortgagor ha sthe right of redemption of the mortgaged property after
payment of mortgaged money.He can take delivery of possession of the mortgaged property and the
return of all the title deeds.
2. Section 60 A of the act,the mortgagor has the right to direct the mortgagee to transfer the mortgaged
property to a third party instead of transferring it to the mortgagor.
3. Section 60 B of the act,the mortgagor has the right to inspect the documents in the possession of the
mortgagee.But it must be only at a reasonable time.He can take copies from such documents.
4. Section 63 of the act,the mortgagor has the right to the properties accrued by natural means like
accretion,etc..This right is called "Right of Accession".
5. Section 65 A of the act,the mortgagor has the power to amke lease also,but it must be with the constent
of the mortgagee.Such lease must satisfy the prescribed conditions.
6. Section 66 of the act,the mortgagor has the right to reasonable waste of the property but he must not
make permanent injuries of destruction of the property or reduce its value.If he does so,then he must give
additional security to the mortgagee.

7. Section 63 A of the act,the mortgagor has the right to claim improvement made by the mortgaged
properties.
8. The mortgagor can avoid consolidation by the mortgagee in the mortgaged properties.
9. The mortgagor has the right to deposit the mortgage money in the court,if there is any suit relating to
the property.

Duties or Liabilities of Mortgagor

1. The mortgagor must indemnify the mortgagee for the defective title to the proeprty. If any third person
interferes,the mortgagor must compenssate the mortgagee for the expenses incurred by him in protecting
the title.
2. The mortgagor must compensate the mortgagee for payment of all taxes and public charges. Similarly
when the property the mortgagor must pay all taxes and public charges.
Rights And Liabilities Of Mortgagor
1. Redeem Of Property:- As the loan is returned then a mortgagor has a right to redeem the property.
All documents and the mortgage deed should be returned to the borrower.

2. Right to Claim Damages:- If the property is damaged during the possession of the mortgagee then
the mortgagor has a right to claim the damages from the mortgagee.

3. Partial Redemption:- If mortgagee wants to acquire a share in the mortgaged property through
inheritance or purchase the mortgagor has the right of partial redemption.

4. Right of Lease:- If the possession of the property is in the hands of mortgagor then he can make
lease of this property for the ordinary period.

5. Follow the Agreement Deed:- The mortgagor will observe all the conditions contained in the
agreement deed. He will also defend the title of property if the property is in his possession.

6. Recovery of Possession:- When the mortgagor returns the loan then he has a right to recover the
possession of the property from the mortgagee.

7. Liability of Taxes :- If property is in the possession of the mortgagor then the liability of all types of
taxes will be on the mortgagor over of Modaraba certificates is not impressive. Now the ratio of equity is
very high in relation to debt financing.

8. Control of Modaraba Companies:- There are many checks on the Modaraba companies to regulate
the modaraba. The state bank, religious board, corporate law authority and registrar of modaraba are
responsible to regulate the modaraba company.

9. Appointment of Auditor:- It is very necessary that Modaraba Company should appoint the auditor.
Auditor should be qualified charted accountant approved by the registrar. The auditor should certify the
objectives and accounts of the modaraba.

10. Audit Report of The Company:- Auditor verified balance sheet and profit and loss report about
the company must be given to the modaraba certificate holders with in six month of the closing accounts
period.
Liabilities of Mortgagor

Under Section 65 of the Transfer of Property Act, 1882 the liabilities of the mortgagor are as follows –

1) A Mortgagor must have the right to mortgage such property;

2) The mortgagor must have a legal title of the property;

3) The mortgagor is liable to pay all taxes if the property is not in the possession of the mortgagee.

4) The mortgagor is liable to pay the lease rent of the mortgaged property if the mortgaged property is
under the lease. The mortgagor must comply also with the terms and conditions of the lease deed if the
mortgaged property is under lease deed; and

5) The Mortgagor is liable to comply also with the terms and condition of the previous mortgage deed if
any relating with the same property.
 WHAT IS A 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.

Breaking Down Mortgagee

A mortgagee represents the interests of the lending institution in a mortgage deal. Lending institutions can
offer a variety of products to borrowers with mortgage lending representing a significant portion of
lending assets for both individual lenders and the credit market overall.

Most people take out a mortgage to finance the purchase of a residence or commercial building. In order
to limit its risk in the investment, the lender in the transaction creates a priority legal interest in the value
of the property, substantially lowering the probability the lender will not be repaid in full if the borrower
defaults on the loan. This is done through a perfected lien and title ownership.

Mortgage Lending Products

Mortgage lenders can structure mortgage loans with either fixed rate interest or variable rate interest.
Most mortgage loans follow an amortization schedule that provides for steady monthly cash flow to the
lending institution in the form of installment payments. Standard fixed rate installment mortgage loans are
generally the most common type of mortgage loan issued by lenders. Adjustable rate mortgage loans can
also be offered as a variable rate mortgage product.

Lenders can also issue non-amortizing loans however these products are not typically qualified mortgages
and carry much higher risk. Non-amortizing loans may have either fixed or variable rates .They are loans
that defer principal cash flows for the borrower to one lump sum payment. During the duration of the loan
interest payments may or may not be required. Popular types of non-amortizing mortgage loans are
balloon payments loans and interest only loans.

Secured Mortgage Protections

Mortgage loans are one of the credit markets most popular types of secured loans. In a mortgage
loan the mortgagee has rights to the real estate collateral associated with the loan. This provides
the lender with protections against default however it also requires certain provisions to be made
for the seizing of collateral assets if default occurs. For this reason, mortgagees include a
perfected lien and integrate title rights into a mortgage lending contract.

A perfected lien is drafted by a lender’s legal counsel to allow for a mortgagee to easily obtain
the real estate associated with a mortgage loan if the mortgagor defaults. A perfected lien is a
lien that has been filed and recorded with the appropriate agency giving the mortgagee rights to
more easily obtain the real estate collateral. In a secured mortgage loan, the mortgagee is also the
named real estate property owner on the property’s title. With the lien and property title a
mortgagee can easily obtain legal rights and institute specific procedures for vacating a property
to be taken over in foreclosure.
 TERMS

Mortgagor

A mortgagor is an individual or company who borrows money from a lender to purchase a piece of real
property.

Fixed Rate Mortgage

A fixed-rate mortgage is a mortgage loan that has a fixed interest rate for the entire term of the loan.

Perfected Lien

A perfected lien is a lien that has been filed with the appropriate filing agent in order to make the securing
interest in a collateral asset binding.

Understanding Variable Rate Mortgages

A variable rate mortgage is defined as a type of home loan in which the interest rate is not fixed.

Defeasance Clause

A defeasance clause is a mortgage provision indicating that the borrower will be given the title to the
property once all mortgage payment terms are met.

Release Cause

A release clause is a mortgage term that refers to a provision within a mortgage.

 RIGHTS OF MORTGAGEE

Following are the important rights of mortgagee:

1. Selling Right:- If borrower fails to return the loan in time then the mortgagee has the right to
sell the property of the mortgagor. But it will be sold and getting decree from the court. Property
will be sold by auction.

2. Shortage of Money Case:- After selling the property if amount is less than the loan, the
balance can be recovered from the person by getting the decree from the court.

3. Usufructuary Case:- In this case mortgagee has no right to sell the property and to obtain the
decree from the court. The banker can retain the possession till the recovery of the loan.

4. Refusal of Debt:- If a borrower refuses to return the loan or he is unable to pay the debt then
the lender can get a foreclosure decree from the court.

5. Adjustment of Payment:- The banker has a right to distribute the payment received after the
sale of property according the principal amount, interest and other charges.

6. Joint Suit:- If the mortgagor is more than one person then suit will be filed against all of them
if the loan is not returned

7. Sale of Private Property:- In case of private property the mortgagee will issue at least 3
months’ notice to the mortgagor before selling the property.
 LIABILITIES OF MORTGAGEE

When property is in the possession of the mortgagee then it has the following duties or liabilities:
1. Property may not be damaged.
2. No alteration is allowed in property.
3. The property must be insured.
4. Property must be kept secured.
5. Rent of the property must be collected.
6. Govt. Revenue must be paid.
7. Property must be kept clear from other things
 CONCLUSION

The dream of working class is to own a house. For the majority of aspiring homeowners, a mortgage is an
indispensable element of their home financing. This long-term financing option provides home buyers
with a valuable anchor that allows them to move forward with their purchase knowing that they will be
able to successfully finance this significant investment. When the process of selecting a mortgage begins,
it is not uncommon to be overwhelmed by the large number of terms and concepts that exist in this
industry. Understanding the language of home lending will help you make educated decisions about the
money you borrow. Defining the terms mortgagor and mortgagee is a great first step on the path to
educating yourself about home mortgages. Thus, the mortgagor is the entity lending the money and the
mortgagee is the individual or persons borrowing it.

There are different kinds of mortgages as enumerated in section 58 of the Transfer of Property Act.

Kinds of Mortgages

1. Simple Mortgage
2. Mortgage by Conditional Sale
3. Usufructuary Mortgage
4. English Mortgage
5. Mortgage by deposit of title of deeds
6. Anomalous mortgage

Simple Mortgage –
No delivery of possession if fails to repay the according to contract, of the mortgaged property mortgagee
has right to sell the property.

Simple mortgage:- the possession of the mortgaged property is not transferred from mortgagor to the
mortgagee. If the mortgagor fails to pay according to the contract, the mortgagee has the right to sell the
property and recover the loan from the sale amount.
Mortgage by Conditional Sale –
If fails to pay on condition that payment is made, sale is invalid , or a certain date, the sale will become
absolute.

On condition that on such payment , the buyer shall transfer the property to the seller.

Mortgage by Conditional Sale:

Under this Mortgage, the mortgagor apparently sells the property to the mortgagee on certain conditions.
1. On failure to repay the mortgage money before a certain date the sale shall become absolute, or
2.On condition that on such payment of mortgage money the sale becomes invalid, o
3.On condition that on such payment the buyer shall transfer the property to the seller.

Usufructuary Mortgage
Possession is transferred to mortgagee Mortgagee receives income from the property

The title deed retains with the owner

3. Usufructuary Mortgage
In this mortgage, the possession of the mortgaged property is transferred to the mortgagee. The
mortgagee receives the income (such as profit, interest ,rent etc) from the property until the
repayment of the loan. The title deeds remain with the owner.

4. English Mortgage
Mortgagor binds himself to repay the mortgage money on a certain date Transfers property
Absolutely yet Mortgagee shall retransfer it to the mortgagor upon payment of mortgage money

In an English Mortgage
1.The mortgagor binds himself to repay the borrowed money on a certain date.
2.The mortgagor transfers the property absolutely to the mortagee.
 BIBLIOGRAPHY

1. Tripathi, Dr. G. P. The Transfer of Property Act. (16th edition, 2009)

2. Shukla, S. N. Transfer of Property Act. (27th edition, 2009)
3. Mulla, Sir Dinshaw Fardunji. The Transfer of Property Act. (10 th edition, 2006)
4. Saxena, Dr. Poonam Pradhan. The Transfer of Property Act. (2 nd edition, 2011)
5. Singh, Dr. Avtar. Property Law. (2nd edition, 2009)