There are some important precautions to be taken while planning to buy properties. Among them, the most important one is perhaps………Want to know that?
Then read on…….
Whether the proposed property is free from mortgage or not.
Perhaps, that is the most important precaution to be taken while planning to buy a property. Mortgage being very common now-a-days in respect of furnishing securities, let us try to understand the details of mortgages.
Mortgage is defined in Transfer of Property Act, 1882, Vide section 58. It involves the transfer of interest in a specific immovable property for the purpose of securing an existing or future debt or for the performance of an engagement which may give rise to a pecuniary liability.
In other words, mortgage means transfer of some interest in property while the legal ownership continues with the mortgagor.
As per Transfer of Property Act, there are six types of mortgages viz;
- Simple Mortgage
- Mortgage by conditional sale
- Usufructuary mortgage
- English Mortgage
- Mortgage by deposit of title deeds (Equitable mortgage)
- Anomalous mortgage
Among these 6 types of mortgages, the most common two types of mortgages prevailing among bankers is Equitable Mortgage also known as Mortgage by Deposit of Title Deeds and Simple Mortgage also known as Registered Mortgage and as such ,now, we focus on these two types of mortgages in this discussion.
Simple Mortgage or Registered Mortgage
Section 48 0f the Registration Act 1908 lays down that all mortgages which are put in writing must be registered when the mortgage money exceeds Rs.100. In a Simple Mortgage, the mortgagor binds himself personally liable for the debt and gives his consent that in case of default; the mortgagee can sell the mortgaged property through the intervention of court.
However, this type of mortgage does not necessitate transfer of possession or ownership of the property. At the same time, the mortgagee has the right to proceed against the mortgagor and can move the court to get order to sell the property. Also he has no right for claiming the income derived from the property towards liquidation of the debt.
Equitable Mortgage or Mortgage by Deposit of Title Deeds
An inherent condition of Equitable Mortgage under Section 58(f) of the Transfer of Property Act is that the mortgagor should deliver the title deeds in a notified place and it must be with an intention to create mortgage. (This notification is done by State Government concerned. If the branch is located in non-notified place, the mortgagor can report to a branch in any notified centre for delivering the title deeds.)
Unlike all other types of mortgages, Equitable Mortgage is not done in writing. Section 48 of Registration Act makes the mortgages made in writing to be registered mandatorily if the mortgage money exceeds Rs.100. But this clause is not applicable in case of Equitable Mortgage.
In other words, Equitable Mortgage does not require registration. Naturally this mode of mortgage is less expensive one. At the same time the rights enjoyed by the mortgagee in the case of Equitable Mortgage are the same as in the case of Simple Mortgage. Due to these reasons, it is the most common type of mortgage prevailing among banks.
Since the Simple Mortgage necessitates preparation of mortgage deed, remittance of advalorem stamp duty and registration of the deed, it becomes a costly type of mortgage. Moreover, mortgagor also prefers Equitable Mortgage as it does not necessitate registration and other paraphernalia.
As the deposit of title deeds is the important feature of Equitable Mortgage, ordinarily banks do not accept duplicate copies of title deeds certified by the Sub Registrar for the purpose of creation of Equitable Mortgage.
However, in exceptional situations, equitable mortgage will be allowed to be created by deposit of certified copies of title deeds in case concrete proof is produced to the effect that the originals were lost irretrievably.
There is another situation in which Equitable Mortgage may be allowed to be created without the original deed .i.e. in the case of partition deed for family property, only one of the parties will be having the original deed and other parties will be left with only certified copies. The persons having such certified copies will be allowed to create Equitable Mortgage by depositing the certified copies subject to certain precautions to be taken by the bank concerned.
The article is very nice, thank you for sharing it!
Thank you for sharing this informative article.