KINNAIRD COLLEGE FOR WOMEN AND UNIVERSITY

LAND LAWS

Project:
Mortgages: Simple, Conditional sale and Usufructuary.

Submitted By:
Name: Sijal Zafar

Shanza Fatima

Sehrish Bano

Sitara Batool

Major: B.A (LLB)

Semester: 5

Section: A
Submitted To:
Instructor: Ma’am Shaffaf
Department: law
Date: 2nd December, 2020
 INTRODUCTION OF TRANSFER OF PROPERTY:
Transfer of property is an act of conveying property from one person to another, in present or
future. According to section 8 of the Transfer of Property Act 1882 (The Act), by transferring
property, transferor transfers all rights in a property. There are different modes by virtue of which
immovable property can be transferred.

Modes of transferring of property:

Property can be transferred by different following modes:

1. Sale
2. Mortgage
3. Lease
4. Gift
5. Exchange etc.

Transfer of immovable property by each of the aforesaid modes has its own significance,
advantages and disadvantages. Here our concern is with “mortgage”.

INTRODUCTION TO MORTGAGE:
Mortgage is a security for a debt. However, mortgage in itself is not a debt. Contrary to this it is
lender’s security for a debt. It is a transfer of an interest in immoveable property from owner to
lender, and such transfer is made on this condition that this interest will be returned to owner after
satisfaction or performance of terms of mortgagor. Thus, mortgage is a security for that loan, which
lender makes to borrower.
 DEFINITION OF MORTGAGE:
According to Black Law Dictionary:

A conveyance of title to property that is given as security for the payment of a debt or the
performance of a duty and that will become void upon payment or performance according to the
stipulated terms.

According to Sec # 58 of Transfer of Property Act:

A mortgage is the transfer of an interest in specific immoveable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, an existing or future
debt, or the performance of an engagement which may give rise to a pecuniary liability.

MORTGAGOR, MORTGAGEE, MORTGAGE MONEY, AND

MORTGAGE DEED DEFINED:
Following are the important term which is used in mortgage:
 MORTGAGOR: A mortgagor is the one who borrows money from lender in order to
purchase a home or other piece of real estate.
 MORTGAGEE: A mortgagee is a lender or an entity that lends money to a borrower for
the purpose of purchasing real estate.
 MORTGAGE MONEY: The principle money and interest of which payment is secured for
the time being is called mortgage money.
 MORTGAGE DEED: The instrument if any way which the transfer is affected is called a
mortgage deed.

ESSENTIALS OF MORTGAGE:
Following are the essentials of mortgage:

TRANSFER OF INTEREST: The first essential of a mortgage is that there should be a transfer
of an interest in immoveable property. So where there is no actual transfer of some interest there
is no home loan. An unimportant consent to exchange can't make a mortgage. The transfer of
interest in a specific immovable property is called mortgage. The mortgagor who has the
possession of the overall interest of the property only cedes a part of the interest in favor of the
mortgagee while mortgaging his property in order to secure a loan. After the completion of the
mortgage, the interest of the mortgagor reduces to that proportion that has been mortgaged to the
mortgagee. His ownership also reduces temporarily until he makes good of the loan that he has
taken from the mortgagee. When the mortgagor transfers his property, then under the rights
provided to the mortgagee, the transferee can recover what he has loaned to the mortgagor.
SPECIFIC IMMOVEABLE PROPERTY: Another essential the transfer of an interest must be in
specific immoveable property. There must be specific mention of the property to be mortgaged in
the mortgage deed. The reason behind stating specific property is in case, the mortgagor cannot
repay his loan, then the court can decree a sale of the specific property mortgaged by him when
the mortgagee files a suit for non payment of loan.
SECURITY FOR A LOAN: The third essential in the definition of a mortgage is that the interest
in the property should be transferred to secure a debt. The transaction involved in a mortgage is
for performance of obligations or payment of a loan. The mortgagor and the mortgagee share the
relation of a debtor and a creditor.

KINDS OF MORTGAGE:
As per Section 58 of Transfer of property Act there are following kinds of mortgage:

 Simple mortgage
 Mortgage by Conditional Sale
 Usufructuary mortgage
 English mortgage,
 Mortgage by deposit of title deeds
 Anomalous mortgage.

Here we discuss simple, conditional sale and usufructuary mortgage

SIMPLE MORTGAGE [58(b)]:

According to section 58 (b) of Transfer of Property Act, In a simple mortgage, the mortgager does
not deliver the possession of the mortgaged property. He binds himself personally to pay the
mortgage money and agrees either expressly or impliedly, that in case of his failure to repay, the
mortgagee shall have the right to cause the mortgaged property to be sold and apply the sale
proceeds in payment of mortgage money.

If the mortgagor fails to repay the loan, the lender has the right to sell the property and recover
the amount from its sale. This mortgage system is called simple mortgage. In this system, the
possession remains with the mortgagor (borrower). The fundamental characteristic of simple
mortgage is that the mortgagee has no right to liquidate the property without the permission of the
court. The mortgagee can:
 Apply to the court for consent to offer the sold property, or
 File a suit for recuperation of the entire sum without offering the property.
In simple mortgage, the mortgagor binds himself personally to the mortgagee to repay the loan
and also pledges his property as a security, which can be liquidated on default of payment.
EXAMPLE:
Basher mortgages his house to Ahmad to get one lakh rupees as loan from Ahmad, however, basher
does not deliver possession of his house to Ahmad, but binds himself personally to pay mortgage
money, and agrees that Ahmad will have right to obtain decree of court for sale of the house for
payment of mortgage money in case of basher’s failure to pay mortgage money. It is case of simple
mortgage.
ESSENTIALS OF SIMPLE MORTGAGE:
Following are the essentials of simple mortgage:-
 Property is mortgaged.
 Possession is not delivered.
 A personal obligation to pay the debt.
 Obligation may be express or implied.
 The transfer of a right to cause the mortgage property to be sold in default of the payment.

MORTGAGE BY CONDITIONAL SALE [58 (c)]:

According to section 58 (c) of Transfer of Property Act, In this form of mortgage, the mortgager
ostensibly sells the property to the mortgagee on the following conditions It is a mortgage which
appears to be a sale with a condition that the property sold would be transferred back to the original
owner on the repayment of the loan. This type of sale is, in fact, a mortgage. In the Indian case
of Prag Dutt v. Harish Bahadur, it was held that two documents were evidence of one transaction
and that transaction was not that of a sale but of a mortgage by conditional sale.
 The sale shall become void on payment of the mortgage money.
 The mortgagee will retransfer the property on payment of the mortgage money.
 The sale shall become absolute if the mortgager fails to repay the amount on a certain date.

The mortgagee has no right of sale but he can sue for foreclosure.

EXAMPLES OF MORTGAGE BY CONDITIONAL SALE:

Basher apparently sells his house to Ahmad for ten lakh rupees on this condition that such sale will
become absolute on certain date when there will be default of payment of mortgage money. It is
case of mortgage by conditional sale.
ESSENTIALS OF MORTGAGE BY CONDITIONAL SALE:
Following are essentials of mortgage by conditional sale:
 This mortgage is a form of sale.
 The sale becomes absolute on the non-payment of mortgage money.
 The sale may become void on the payment of mortgage money.
 No delivery of possession is given.
 There is no personal liability on the part of the mortgagor to pay the debt.
 The remedy of the mortgage is by foreclosure only.

USUFRUCTUARY MORTGAGE 58 (d):

According to section 58(d) of Transfer of Property Act, Where the mortgagor delivers possession
or expressly or by implication binds himself to deliver possession of the mortgaged property to the
mortgagee and authorizes him to retain such possession until payment of the mortgage money and
to receive the rents and profits accruing from the property and to appropriate the same in lieu of
interest and in payment of the mortgage money. According to the Act, in a usufructuary mortgage,
the borrower gives possession of the mortgaged property to the lender (mortgagee) and authorises
him to retain such possession until payment of the mortgage money. The title deed of the property,
on the other hand, remains in possession of the borrower (mortgagor).
If a farmer mortgages his agricultural land, the lender would have the right on the produce as long
as it remains in his possession. The income thus earned is understood to be the recovery money
for the lender. Similarly, if someone mortgages a property, the monthly rent the building earns
would belong to the lender till the period the mortgage is paid off.
Usufractuary mortgage is a special type of mortgage where the mortgagor delivers possession,
either expressly or by implication, and binds himself to deliver possession of the mortgaged
property to the mortgagee. He authorizes him to retain such possession until payment of the
mortgage money. The mortgagee is also authorized to receive the rents and profits accruing from
the property and to appropriate it towards interest or in payment of the mortgage money, or partly
for interest or partly in payment of the mortgage money. They are as following:
a) the possession of the mortgaged property is transferred to the mortgagee
b) he receives the income from the property e.g. rent, profit etc until the repayment of the loan
c) the title deeds remain with the owner.
EXAMPLE OF USUFRUCTUARY MORTGAGE:
Basher delivers possession or binds himself expressly or impliedly to deliver possession of
mortgaged property to Ahmad, and authorizes Ahmad to retain such possession until payment of
mortgage money. He also authorizes Ahmad to receive those rents and profits which accrue from
mortgaged property or he also authorizes Ahmad to receive any part of such leases and benefits.
Indeed he approves Ahmad to proper such rents and profits in lieu of interest or in payment of
mortgage money or partly in lieu of interest or partly in payment of mortgage money. It is case of
Usufructuary mortgage.
ESSENTIALS OF USUFRUCTUARY MORTGAGE:
Followings are essentials of Usufructuary mortgage:
 No personal liability on the mortgagor.
 Possession of property is delivered to the mortgagee.
 No time period is fixed, to pay the mortgage money.
 Mortgagee can not sale out the property.
 Mortgagee is entitled for rents and profits of the mortgage property.

Conclusion:
Thus to conclude, mortgage is security for a debt. A legal document by which the owner transfers
to the lender an interest in real estate to secure the payment of debt evidenced by a mortgage note.
When the debt is repaid, the mortgage is discharged, and a satisfaction of mortgage is recorded
with the register or recorder of deeds, where the mortgage was recorded. Mortgagor has 2
remedies: 1) suit for sale and 2) suit for money

References:
 Transfer of Property Act, 1882
 https://www.srdlawnotes.com/2016/05/kinds-types-of-mortgage.html
 http://thelawstudy.blogspot.com/2014/12/mortage-its-kinds-and-ingredients.html
 https://lawctopus.com/clatalogue/mortgage-transfer-of-property-act/