Mortgage And Essentials Of Valid Mortgage

INTRODUCTION:

Simply put, a mortgage is an agreement between a borrower and a money lender, financier, or banker that gives the lender the right to take possession of the borrower's mortgaged property if the borrower defaults on the debt and incurs interest. 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.

To begin with, let's examine its legal definition. According to Section 58 of the Transfer of Property Act, 1882, a mortgage is the transfer of an interest in a particular piece of real estate with the intention of securing the-

• payment of money that has been advanced or is expected to be advanced through a loan,
• a debt, either current or future, or
• the fulfillment of a task that could result in a financial obligation.

Because a mortgage is the transfer of an interest in real estate, it acts as security for the fulfillment of obligations and the payment of debts, both current and future, which could result in financial liabilities. The debtor will transfer some interest to the lender, but not ownership; the creditor will still be able to use the transferred interest in the debtor's mortgaged real estate. "Dead pledge" is how the word mortgage is literally translated. According to Sir Edward Coke, the word "mortgage" originates from the Old French "dead pledge," and it seems to indicate that the pledge terminates (dies) when the debt is paid off or the property is repossessed through foreclosure.

GENERAL MEANING

MORTGAGE:

When someone takes out a loan, they are granting the lender some interest in their real estate as security for paying back the loan; this is referred to as a mortgage of real estate. The court clarified in Chetti Goundan v. Sundaram Pillai that the right created in the property by the transfer is accessory to the right to recoup the debt in a mortgage. So, a mortgage does not grant the lender ownership rights; rather, it only grants the lender an accessory right to ensure that the amount owed is paid.

MORTGAGER AND MORTGAGEE:

The mortgagor is the one who transfers property interest in a mortgage. The Mortgagee is the one whose favor has been transferred.

MORTGAGE DEED:

The mortgage deed is the legal document or instrument that created the mortgage.

ESSENTIALS OF A VALID MORTGAGE

The following are prerequisites for a legitimate mortgage:

• Offer and Acceptance: The borrower must make a clear offer to accept the loan, and the lender must accept it. This is typically stated in a formal mortgage contract.
• Competent Parties: In order to enter into a contract, both parties to the mortgage agreement must be of legal age. Usually, this means that they have to be of legal age and in good mental health.
• Legal Purpose: The mortgage must have a legitimate goal. For instance, the borrowed money must be utilized for legitimate purposes, like buying property.
• Property Description: The property being used as collateral needs to be described in detail in the mortgage document. This includes specifics like the property's address, boundaries, and any other pertinent details that help identify it.
• Consideration: Valued consideration must be given and received by both the lender and the borrower. This is typically the loan amount that the lender provides in exchange for the borrower's pledge to pay back the loan.
• Intention to Establish Legal Relations: In order to establish legal relations, both parties must be aware of the implications of signing the mortgage agreement.
• Free Consent: Both parties' consent must be given voluntarily, which means it cannot be acquired by deception, fraud, coercion, or other unfair means.
• Registration (where necessary): For a mortgage to be legally binding in some jurisdictions, it must be registered with the relevant government agency. In the event that there are several claims made on the property, registration aids in determining the mortgage's priority.
• Certainty of Terms: The mortgage's terms and conditions, including the interest rate, repayment schedule, and other pertinent information, must be unambiguous and certain.
• Legal Formalities: The mortgage must abide by any formalities mandated by the applicable laws. This could involve having witnesses present or getting the paperwork notarized.
• Delivery of Possession:  In certain instances, the delivery of possession of the property might be required in order for the mortgage to be enforceable. This is more typical in some legal frameworks.

RIGHT OF MORTGAGOR:

• 'The Right of Redemption- It is another name for this concept. Since the mortgagor is believed to be the property's natural owner, it is acknowledged that his interests in it will always be assumed to be natural. He should be able to establish his rights at the end through the use of legal remedies, as his rights are intended to be statutory and legal.

The mortgagor has the right, upon payment or tender of the mortgage funds at a suitable time and location, to demand of the mortgagee, at any point after the principal has become due:-

1. to deliver the mortgage deed and any other documentation pertaining to the mortgaged property that the mortgagee has control over to the mortgagor.
2. When the mortgagee has the mortgaged property in their possession, they must give it to the mortgagor.

• Retransfer Case: He has the inherent right to re-transfer his property to anyone else, even if he originally transferred it to them for financial gain. This is because he is the property's natural owner. To put it another way, the mortgagor will be responsible for paying for the execution of a written acknowledgment that any right in derogation of his interest to the mortgage has been extinguished, or for paying for the retransfer of the mortgaged property to him or to any third party he may designate.
• Right to Grant Lease: It should be understood that the mortgagor is not prohibited from leasing the property to any tenant following a mortgage. As previously mentioned, a mortgage implied a temporary charge over the mortgagor's real estate until the money was returned to the mortgagor. Therefore, the mortgager has the inherent right to lease the property whenever he wants and for any reason. The mortgagee is expected to be bound by each of these leases.
• Right of Property Inspection: Since the mortgager is the property's natural owner, he should have the inalienable right to view it whenever and whenever he pleases. The law itself has granted him the right to determine whether or not the mortgaged property is being properly maintained. In addition, he is entitled to copies of the property's records and may request access to them.
• Right to Reasonable Wastes: This legal right is likewise protected by law, but it should be noted that these types of wastes are minimal, reasonable, and do not harm or destroy property in any way that would make it permanent.
• Right of Accession: It should not be assumed that the mortgagor's right to the property they have mortgaged was eliminated upon transfer because of the mortgage. However, the mortgagor is always free to enter the property.

LIABILITIES OF A MORTGAGOR:

• Repayment of the Loan: A mortgagor's principal and largest obligation is to repay the loan. As stated in the mortgage agreement, the mortgagor must make regular payments that cover principal and interest.
• Property maintenance: Generally speaking, the mortgagor is in charge of keeping the property in good shape. This covers standard upkeep, fixes, and adherence to regional property laws. A breach of the mortgage agreement might be deemed to have occurred if the property was not maintained.
• Insurance: To safeguard the lender's interest in the event that the property is damaged or destroyed, the mortgagor is frequently obliged to acquire and maintain property insurance. Usually, this insurance covers specific risks as well as natural disasters and fire.
• Property Tax Payment: On the mortgaged property, the mortgagor is in charge of making property tax payments. Not paying property taxes can have legal repercussions and may even force the lender to foreclose on the property.
• Compliance with Loan Terms: The terms and conditions specified in the mortgage agreement must be followed by the mortgagor. This entails sending required paperwork, paying on time, and informing the lender of any changes that might have an impact on the mortgage.
• Notification of Changes: Generally speaking, the mortgagor must notify the lender of any major changes that could have an impact on the mortgage, such as adjustments to their financial situation, their ownership of the property, or their intended use of it.
• Surrender of Possession: The lender may be able to foreclose and seize ownership of the property if the mortgagor defaults on the loan. Costs related to the foreclosure process may fall on the mortgagor.
• Charges and Fees: Certain expenses and fees related to the mortgage transaction may fall under the mortgagor's purview. Loan origination fees, closing costs, and, in certain situations, prepayment penalties are examples of this.

RIGHTS OF A MORTGAGEE:

• Right to Foreclosure: Section 67 of the Transfer of Property Act, 1882 grants the Mortgagee the right to foreclosure, allowing them to take collateral on loan when loan payments have defaulted. The right to foreclosure and the right to redemption are co-extensive, with the former for the Mortgagee to recover outstanding loan money and the latter for the Mortgagor to take back the mortgaged property. To exercise the right of foreclosure, the Mortgagee must have paid the principal amount with interest on the due date, the mortgage deed should not waive the Mortgagee's right to foreclosure, and the Mortgagee's decree of redemption should not be obtained before the claim.
• Right to sue: Section 68 of the Transfer of Property Act allows a Mortgagee to sue for mortgage money under certain circumstances. These include default in repayment, destruction of the property, insufficient security, deprivation of security, non-delivery of possession, and security of possession. The Mortgagee can claim their security, possession, and rights without disturbance from the Mortgagor or other parties claiming superior title.
• Right to sell: Section 69 of the Act allows the Mortgagee to sell mortgaged property without court intervention, but only in three cases: if the mortgage is an English mortgage, if the Mortgagee is a government official, and if the property is located in specified towns.
• Right to appoint a Receiver: Section 69A of the Transfer of Property Act allows the Mortgagee to appoint a receiver as their agent, liable for receiver's acts and defaults unless the Mortgagee intervenes. The Mortgagee has the right to appoint a receiver upon the death or refusal of the nominated receiver, or request the court's appointment if the mortgagor doesn't consent.
• Right to accession: According to Section 70 of the Act, the mortgagee has the right to use any additions made to the mortgaged property after the mortgage date. Once more, this right will be abandoned in the event that a contract clearly states otherwise.
• Right to a renewed lease: Since the mortgaged property is a leasehold property, Section 71 applies if the mortgagor is successful in obtaining a renewal of the lease. Since the mortgagee still owns the property and the mortgagor hasn't redeemed it yet, he is qualified to benefit from the new lease.
• Right of the Mortgagee to spend money on mortgage-property: Should the mortgagee ever need to make expenditures on the mortgaged property to prevent it from being destroyed or for other purposes specified in Section 72 of the Act, they may be added to the principal amount at the same interest rate. It is payable at the annual rate of 9% in the absence of a fixed rate of interest.
• Right to proceeds of revenue sale or compensation on acquisition: In the event that the mortgagor fails to pay any outstanding amounts pertaining to rent, revenue arrears, or other charges associated with the mortgaged property, the mortgagee shall have the right to a full or partial claim for the mortgage money.

LIABILITIES OF A 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:

• obligation to keep up the mortgaged property.
• obligation to retrieve the property's profits.
• obligation, absent a contract to the contrary, to use the money generated from the property to pay government obligations.
• duty to use all reasonable efforts to prevent damage to the property and to take the appropriate precautions.
• obligation to maintain records of the property's receipts and outlays.
• obligation to make the necessary and urgent repairs to the property.

The Mortgagee will be responsible for any losses if he neglects to carry out any of the previously mentioned obligations.

CONCLUSION:

One comprehensive and codified law that promoted the idea of property conveyance is the Transfer of the Property Act. The transfer of immovable property from one person to another has become more just and morally pure thanks to this Act. As a result, each party involved in the transaction has been given certain rights and obligations. In the case of a mortgage, for example, both the mortgagor and the mortgagee are subject to the terms of the mortgage deed as well as the Transfer of Property Act. This Act's legislative goal is to outlaw the practice of transaction fraud.