What are the different types of Mortgage?

Ans. There are six kinds of mortgages recognized by the Transfer of Property Act. These are:

i). Simple Mortgage.

ii). Mortgage by conditional sale

iii). English Mortgage

iv). Usufructuary Mortgage

v). Equitable Mortgage or Mortgage by deposit of title deeds.

vi). Anomalous Mortgage.

On the basis of transfer of title, Mortgage can be classified in to two categories:

i). Legal Mortgage ii). Equitable Mortgage

Discuss briefly different types of Mortgage?

Ans. i). Simple Mortgage: In a simple mortgage, the mortgagor binds himself personally to pay the mortgage amount without delivering possession of mortgaged property. The mortgagor however, agrees expressly or impliedly that in the event of his failure to pay the mortgage the debt, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied towards discharge of mortgage debt.

The word “cause the mortgaged property to be sold” mean that the mortgagee shall have to seek the intervention/involvement of the court for selling the mortgaged property & he directly cannot sell the property. As the possession of the property not remain with mortgagor, this is also called non-possessory mortgage.

Note: Banks do not prefer to make advances against this types of mortgage because of a number of obligations on Banks which are difficult to discharge. 

ii). Mortgage by conditional sale: In this type of mortgage, the mortgagor ostensibly sells the mortgaged property to the mortgagee under any one of the following conditions:

i). That on default of payment of the mortgage money on a certain date, the sale shall become absolute.

ii). That on such payment being made, the sale shall become void or

iii). That on such payment being made, the mortgagee shall transfer the mortgaged property to the mortgagor.

Characteristics of this types of mortgage:

a). It is an ostensible sale and not a real sale.

b). The ostensible sale is subject to few conditions.

c). The possession of the property continues with the mortgagor.

d). The mortgagor does not  have any personal liability except the ostensible mortgage.

Note: This types of mortgage is not usually taken by the bankers as there is no personal covenant/agreement for repayment of debt.

iii). English Mortgage: According to the Transfer of Property Act, an English Mortgage is a transaction in which “the mortgagor binds himself to repay the mortgage money on a certain date and transfers the mortgaged property absolutely to the mortgagee, subject to the provision that the mortgagee will re transfer it to the mortgagor upon payment of the mortgaged money as agreed”

Essential features:

i). It provides for personal promise to repay the mortgage money on a specific date.

ii). The property mortgaged is transferred to the mortgagee absolutely. The mortgagee therefore, is entitled to take immediate possession of the property.

iii). Such an absolute transfer of the property is subject to the provision that the property shall be re-conveyed to the mortgagor in the event of the repayment of the mortgage money.

iv). Usufructuary Mortgage: In this mortgage the possession of the property is delivered to the mortgagee who is entitled to recover the rents and profits of the property and appropriates the same to the principal and interest sum due. The mortgagor is not personally liable to pay the debt and cannot be sued.

Essential Features:

i). Transfer of possession over the mortgaged property to the mortgagee who is entitled to receive income and to appropriate the same towards the payment of the mortgage money. Or interest thereon.  The liability of the mortgagor is thus gradually reduced.

Note: Due to uncertainty regarding full recovery of mortgage money, Bank’s hardly entertain advance proposal of this type.

v). Equitable Mortgage/Mortgage by deposit of title deed:  Where a debtor delivers to the creditors or his agent documents of title to immovable property with interest to create a security thereon, the transaction is called Equitable Mortgage or Mortgage by deposit of title deed. Under this mortgage, the right of ownership, or of possession and of absolute power of disposal are not transferred to the mortgagee, only an equitable interest in the property is passed on to the mortgagee as security for the debt.

Important factors:

i). There must be delivery of the title deeds to the creditor.

ii). There must be an intention in writing to make the title deeds as security for the loan.

iii). The mortgage must be created in cities and such other towns and urban areas specified by notification in the official gazette by the Government.

vi). Anomalous Mortgage: A mortgage which does not come within any of the above classes is called an anomalous mortgage. A mortgage containing a mixture of the characteristics of the different types mentioned above comes within the category of anomalous mortgage.

Note: Such mortgages are not generally accepted by banks as a security for advances.

What are the distinctions between English Mortgage & Mortgage by way of conditional sale?

Ans. 

What do you mean by Legal mortgage? Write down the procedure of legal mortgage? What are the distinguish between Equitable Mortgage & Legal Mortgage?

Ans. In legal mortgage, the mortgagor transfer his legal title in respect of the mortgaged property to the mortgagee by a deed. The mortgagee gets a legal estate in the property and he is endowed with all sorts of rights & remedies which can be exercised, if required without seeking co-operation of a mortgagor. Legal mortgage is a perfect form of security.

Procedure of legal mortgage:

i). An instrument mortgaging the property is executed, It is signed by the mortgagor and two witnesses.

ii). If the principal money secured is Tk. 100 or more, the instrument must be registered.

iii). The mortgage is complete as soon as the deed is registered but it will be effective from the date of execution.

Note: In case the instrument is not duly attested and registered where it is so required, the mortgage will be void.

Distinguish between Legal Mortgage & Equitable Mortgage:

Write down the rights of Mortgagor & Mortgagee?

Ans.

Rights of Mortgagor:

i). Right of Redemption/release: The mortgagor has a right of redeem the mortgaged property. The right of redemption is indivisible/undividable. The mortgaged property cannot be redeemed in part. This right can not be declared void because otherwise a mortgage would cease to be a mortgage and become an absolute transfer. (Sec. 60)

ii). Transfer to third party: The mortgagor can ask the mortgagee to transfer to a third party the mortgaged property instead of re-transference to the mortgagor. This right has been included so that the mortgagor may find a financier in times of difficulty and save himself from the mortgagee. (Sec.61)

iii). Inspection & production of documents: The mortgagor with the right of redemption can inspect & make copies of all documents of title which are in the mortgagees custody or power. (Sec. 60B)

iv). Additions to property: Where the mortgaged property is in the possession of the mortgagee and he has made some additions to or improvements in the property, the mortgagor on redeeming the property, is entitled to all such additions or improvements, in the absence of any contract in the contrary.

Rights of the Mortgagee:

i). Right to foreclosure: Foreclosure means debarring the mortgagor from exercising his right of redemption. After amendment of Artha Rin Adalat Law in 2003, now Bank can sale the mortgaged property with the power provided them by mortgagor through execution of Registered Power of Attorney to sell the mortgaged property.

ii). Right of suit for sale: The mortgagee may bring a suit for sale in place of a decree for foreclosure.

iii). Right to sell without courts intervention: The mortgagee may sell the mortgaged property without intervention of the court by the power provided them by mortgagor through execution of Registered Power of Attorney to sell the mortgaged property.

iv). Right to sue for mortgage money: In certain circumstances, mortgagee may sue the mortgagor for mortgage money.

v). Right to spend money: A mortgagee may spend money on the mortgaged property for preservation, to protect from forfeiture/penalty, to insure the property etc.

vi). Right of accession to property: In the absence of any contract on the contrary, the mortgagee, for the purposes of security, is entitled to any additions to the mortgaged property.

vii). Right of possession: In case the mortgagee as per terms of the mortgage deed is entitled to the possession of the, he must get such possession.

Write short notes on the following:

Ans. Second Mortgage: If the mortgaged property of the mortgagor is mortgaged again to another person as security for further borrowing, such a mortgage is called second mortgage. So, mortgagor, after giving a first mortgage, can thereafter legally create a second and even subsequent mortgage on the same property. The second mortgage will rank in priority after the first, the third after the second and so on.

Sub-Mortgage: A sub-mortgage is the mortgage of a mortgage. If the mortgagee mortgages his interest in the mortgaged property wholly or partly by way of security, it is called sub-mortgage.

Priority of mortgage: In case of two or more mortgages on the same property, the mortgage first executed takes priority over other  mortgages executed subsequently. It is to be noted that priority is by the time of execution and not by the time of registration of documents.

What do you mean by “Assignment” ? What do you mean by “Actionable Claim”? What are the different types of Assignment?

Ans. An assignment means transfer of an existing or future right, property or debt by one person to another person. This is a method of charging under which borrower may assign any of his rights, properties or debts to the banker to secure a loan from the latter.

In Banking an actionable claim is the subject of assignment. It is permissible under section 130 & 136 of the Transfer of property Act,1882 to assign actionable claim to anyone except to a judge, a legal practioner or officer of any court of justice. An actionable claim is an unsecured claim to money which is actionable i.e. for recovery of which an action may be brought in the court of law. In Banking business, a borrower may assign to the banker i). The book debts ii). Money due from Govt. department or semi Govt. organization  and iii). Life insurance policies.

Assignments may be two types. These are i). Legal Assignments & ii). Equitable Assignments.

i). Legal Assignments: As per section 130 of the Transfer of Property Act, an assignment is one where:

• Assignment Deed us un writing duly signed by the assignor and the intention to pass by assignment is clear.
• The Transfer of actionable claim is absolute.
• The Assignee informs the assignors debtor about the assignment and also gets the confirmation of the notice and the debt.

ii). Equitable Assignment:  An equitable assignment is one which does not fulfill any of the above requirements.

What are the common types of assignments? Distinguish between legal & equitable assignment?

Ans. The most common types of assignments are:

a). Book debts

b). Contract money due from Govt. & Semi Govt. Organizations.

c). Supply bills.

d). Life insurance policies.

Distinguish between legal & equitable assignment: