Mortgage of Leasehold property

Querist : Anonymous (Querist) 09 October 2010 This query is : Resolved
If a company mortgage a leasehold property with a bank to avail financing facilities, does it mortgage leasehold rights or leasehold property? Does the bank has any rights over the leasehold land?

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R.Ramachandran (Expert) 09 October 2010
Dear Mr. Anonymous,
Please explain whether the leasehold property and lease hold rights over a property are separate things?
When the mortgage was done whether only lease hold property was mortgaged or only lease hold rights (as distinguished by you) were mortgaged.
The bank will have the right over whatever had been mortgaged to it - if it is lease hold rights then on lease hold rights and if it is lease hold property then on the lease hold property.

R.Ranganathan (Expert) 09 October 2010
It is only a mortgage of leasehold rights because the property belongs to a different owner who has leased it to the lessee. Bank cannot claim any right to the property.

Rajeev kulshreshtha (Expert) 10 October 2010
I agree with Mr. Ranganathan.

R.Ramachandran (Expert) 10 October 2010
A mere leasehold right without the property to exercise such a right, and similarly a leasehold property without lease holdright would have no meaning. Both will go hand in hand. As such, according to me, to say that one has a leasehold right is to say that he is in possession of a leasehold property; and similarly if some is said to hold a leasehold property he is having the leasehold rights over it. Both are synonymous.
Separation of the two is legally impossible. (My earlier reply was also on the same lines - whether one has mortgaged the leasehold rights; or leasehold property - the effect would be the same!)

DEFENSE ADVOCATE.-firmaction@g (Expert) 10 October 2010
Yes Mr Ramchandran these are finer points of law and the real truth.

But lenders just want to have some written instruments in hand so do various sorts of illegal things.

Querist : Anonymous (Querist) 10 October 2010
I agree with Mr. Ramchandran. But in case the bank takes over the assets of the company in the event of default, what are the options available with the bank to recover the money since a leashold property has no ownership rights?

R.Ramachandran (Expert) 10 October 2010
In case of default, the bank will through process of court get the possession. After termination of the lease period the Company is bound to give the possession to the original owner. In that situation the Company would not be able to do so without getting the possession back from the bank. The original owner will sue the Company.

Querist : Anonymous (Querist) 10 October 2010
Thank you Mr. Ramachandran. It has helped in clarifying the situation a great deal.

M/s. Y-not legal services (Expert) 16 October 2010
Yes. I agree with mr.ramchandran

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