Concept of Mortgage under TPA
Concept of Mortgage
Understanding the Transfer of Property Act, 1882
What is a Mortgage?
A mortgage is not just a loan; it’s a legal tool where an interest in a specific immovable property is transferred to a lender as security for a debt. This infographic breaks down the key players, types, and rules governing this crucial financial instrument.
The 6 Kinds of Mortgages
The TPA, 1882 defines six distinct types of mortgages, each with different conditions regarding possession, sale rights, and personal liability. Understanding these types is key to grasping the flexibility and nuances of mortgage law.
Simple Mortgage
The mortgagor retains possession and personally promises to pay. If they default, the mortgagee can force a sale of the property through the court.
Mortgage by Conditional Sale
Looks like a sale, but with a condition: the sale becomes final on default, or void upon repayment. The mortgagee’s remedy is foreclosure, not sale.
Usufructuary Mortgage
The mortgagee takes possession and collects rent/profits in lieu of interest or principal. The mortgagee cannot foreclose or sell the property.
English Mortgage
The property is transferred absolutely to the mortgagee, but with a promise to re-transfer upon repayment by a specific date. Involves personal liability.
Equitable Mortgage
Created simply by depositing the property’s title deeds with the lender to create a security. It’s only valid in specific notified towns.
Anomalous Mortgage
A hybrid mortgage that combines features from two or more of the other types. The terms are dictated entirely by the mortgage deed.
Key Distinctions at a Glance
The Balancing Act: Rights & Liabilities
The law creates a balance between the borrower (mortgagor) and the lender (mortgagee), assigning specific rights and duties to each party to ensure fairness and protect their respective interests throughout the loan period.
Profile of the Mortgagor (Borrower)
The mortgagor’s primary right is to redeem the property, while their main duty is to protect its value.
Profile of the Mortgagee (Lender)
The mortgagee has the right to recover their money through sale or foreclosure, and a duty to manage the property prudently if in possession.
Advanced Legal Doctrines
Beyond the basics, the TPA includes principles to handle complex scenarios involving multiple properties and lenders, ensuring equitable distribution of debts and securities.
Marshalling: The Right to Rearrange
This protects a subsequent lender. If a first lender has two properties for security, and the second lender has only one of them, the second lender can compel the first to recover their debt from the other property first.
Contribution: Sharing the Burden
When multiple properties are used to secure a single, common debt, each property is liable to contribute proportionally to that debt. This prevents one property from shouldering the entire loan amount unfairly.
Is a Charge a Mortgage?
While similar, a mortgage and a charge are legally distinct. A mortgage involves transferring an interest in the property, whereas a charge does not. It is simply a right to receive payment from a property, making it a weaker form of security.
- ✓Creation: A charge can be created by law, while a mortgage can only be created by an act of the parties.
- ✓Remedy: A charge holder can only sue for sale, whereas some mortgagees can foreclose.
