Property Mortgage Laws in India

Mortgage and its Various Types Under the Transfer of Property Act, 1882

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A mortgage is the conveyance of an interest in the immovable property with the intention of obtaining a loan or performing an obligation. In India, the Transfer of Property Act, 1882 governs the mortgage of immovable property. Even though a mortgage does not convey ownership of the property to a third party, it does generate interest in the immovable property. Several kinds of mortgages under Transfer of Property Act are available, like simple mortgages, conditional mortgages, etc., that are implemented while transferring any property as needed.

Transfer of Property Act

The Transfer of Property Act, 1882 was introduced by the Indian government on 1st July 1882. This act applies to the transfer of immovable properties. By following this law, an individual can transfer any property to himself/herself or another person. The property can be a firm, an entity, an association of persons, etc.

This act was enacted with the primary intention of establishing a diverse collection of property transfer laws. It explains the principles of property transfer and the involved factors in a transparent and precise manner.

Transfer of Property Eligibility Criteria

Here are the eligibility criteria that you must fulfil in order to transfer any property.

  • Property transfer must be carried out by a competent adult above the age of 18.

  • Any individual that intends to transfer any property but he/she is not the owner, in such circumstances, the person must have permission from the owner to do the same.

  • The individual transferring property must be mentally competent.

  • While transferring procedure, the person must not be intoxicated.

Types of Mortgage Under Transfer of Property Act

Below are the different types of mortgages under the Transfer of Property Act.

  • Simple Mortgage: In this kind of mortgage, the mortgagor agrees to make the payments as specified in the loan terms or grants the mortgagee the right to sell the property and use the revenues for the mortgagor's loan. Also, in a simple mortgage, the mortgagee does not have ownership of the site.

  • Mortgage by Conditional Sale: In this type of mortgage, the mortgagor sells the property on the provision that if the payment defaults, the sale becomes irreversible. Furthermore, there is a provision that states that after the payment is made, the sale is null and void, and the purchaser will convey the property to the seller.

  • Usufructuary Mortgage: It is one of the types of mortgage under TPA under which a mortgagor gives ownership of a property to the mortgagee and authorizes the person to keep it until the loan is paid. In return, the mortgagor will receive revenues and rents based on the loan's principal and interest components. In this case, the mortgagor is not personally liable.

  • English Mortgage: Under this, the mortgagor is individually obliged to pay back the loan on a particular date, and to transfer the property to the lender. However, such a transfer is subject to the condition that, following loan repayment, the mortgagor would get the funds on a certain date.

  • Mortgage by Deposit of Title Deeds: This is also known as an equitable mortgage. In this mortgage, the deposit of the property's title deed is made with the intention of using the ownership rights as collateral for the loan.

  • Anomalous Mortgage: Any mortgage that doesn’t fall under the category of a simple mortgage, a mortgage by deposit of title deeds, an English mortgage, or a mortgage by conditional sale is known as an anomalous mortgage.

Key Elements of the Transfer of Property Act 1882

Following are the key elements of the TPA 1882.

  • Property must be transferred by an authorized person over the age of 18 who is not drunk and legally forbidden.

  • The authorized person must be in a good state of mind while transferring the property.

  • The transfer of property must not take place before the title has been issued. Conveyance might be undertaken at the moment or scheduled for later.

  • If the condition became unlawful, unethical, unfeasible, or against government policy, the transfer would be considered null and invalid.

  • Any property cannot be transferred to an unborn child. However, it can be transferred initially in the name of another person. The property will reside in that person's name until the child is born, and after that, it can be transferred to the name of the child.

  • Property must be transferred within a person’s life span.

  • Except in circumstances where a legal agreement is required, property transfers can be done verbally. For example, a gift of immovable property, the lease of immovable property for more than a year, etc.

What is Section 52 of Transfer of Property Act?

According to Section 52 of the Transfer of Property Act, any immovable property engaged in an ownership dispute cannot be transferred or sold until the issue is settled or a court of competent jurisdiction rules.

However, if any conflicted property has already been sold, the purchase will not be void, but the purchaser will be obligated to follow the court's final decision.

Seller's Responsibilities During Transfer of Property

The Transfer of Property Act has mentioned multiple responsibilities that every seller is obligated to follow. Here are the details about the same.

  • If any buyer asks for a review of documents, the seller must reveal all title documents of the property.

  • The seller must make sure that any significant defects in the property are disclosed to the buyer.

  • During the period of property delivery, the seller will have to take good care of the property and all connected documentation in his possession.

  • All liabilities on the property that exist at the time of sale must be eliminated by the seller.

  • While transferring the property, the seller must transfer full ownership of the property to the buyer.

  • If the buyer has queries related to the property, the seller is mandated to clear all his/her doubts with the right information.

  • The seller is entitled to pay the rent and any other expenditures payable on the property until the date of sale.

  • The seller must complete the property transfer procedure at the convenience of the buyer after the payment.

Buyer's Responsibilities at the Time of Transfer of Property

Along with a seller, a buyer is also obligated to fulfil certain responsibilities mentioned by the TPA that are listed below.

  • If the buyer learns aspects about the property that significantly increase its worth but the seller is unfamiliar with them, the buyer is required to notify the seller.

  • Once property ownership is transferred to the buyer, the buyer is responsible for any losses incurred as a consequence of damage, destruction, or a decrease in property value, and the seller is not liable for any payments.

  • The buyer must pay the seller the purchase cost after the sale procedure is completed.

  • The buyer must pay the initial money owing on any entanglements according to which the property is sold.

FAQs on Kinds of Mortgage under Transfer of Property Act

  • ✔️What is the validity of a Property Mortgage?

    Any property mortgage is only legitimate if it is documented in a registered agreement prepared by the mortgagor and attested by two witnesses. 

  • ✔️What is Movable Property?

    A movable property may be transported from one location to another without affecting its quality, capability, or quantity such as personal property, automobiles, books, standing wood, and so on. 

  • ✔️What is Immovable Property?

    Immovable property is a property that cannot be transported from one place to another. Buildings, houses, real estate, etc. 

  • ✔️What is the scope of Transfer of Property Act?

    The Transfer of Property Act applies to the transfer of immovable property. Under this act, any property can be transferred in two ways:

    • By an act of the law

    • Through an act of two or more people

    However, the ordinance excludes property transfers through the operation of law, such as forfeiture, succession, or bankruptcy. The regulation also does not include the disposition of property that are not the eventuality of wills.