Introduction
A Mortgage with Possession Deed, known as “Anuboga Otti” or “Swadheena Adamanam” in Tamil, is a type of mortgage where the borrower (mortgagor) transfers possession of their property to the lender (mortgagee) as collateral for a loan. While the borrower retains ownership, the lender receives the right to enjoy the income generated from the property, such as rent or produce, until the loan is repaid. Let’s explore this concept in detail using a real-world example.
Example of Mortgage with Possession Deed: Mr. Kesavan’s Loan
In this scenario, Mr. K. Kesavan, a business owner in the production of tiles and earthenware, seeks to expand his business. To secure the necessary funds, he enters into a Mortgage with Possession agreement with Mr. P. Murugan, the lender.
Parties Involved in the Mortgage with Possession
- Mortgagor (Borrower): Mr. K. Kesavan, the property owner who pledges the property to secure a loan.
- Mortgagee (Lender): Mr. P. Murugan, who provides the loan and receives possession of the mortgaged property.
Purpose of the Loan
Mr. Kesavan requires a loan of ₹[Amount] to expand his tile and earthenware business. He agrees to pledge his property as security, transferring possession to Mr. Murugan, who will retain control of the property until the loan is fully repaid.
Transfer of Possession
As part of the mortgage agreement:
- Mr. Kesavan transfers possession of the property to Mr. Murugan.
- While Mr. Kesavan remains the legal owner, Mr. Murugan is entitled to collect any income generated from the property, such as rent or produce, until the loan is repaid.
- This arrangement allows Mr. Murugan to manage and benefit from the property without owning it.
Repayment Terms and Interest
- The loan term is 3 years, during which Mr. Kesavan must repay the full loan amount plus interest.
- Interest Rate: The interest is set at 15% per ₹100 of the loan.
- Income Usage: The income generated from the property is used to:
- Pay for taxes and maintenance of the property.
- Cover interest and principal repayment. Any remaining income will further reduce the loan balance.
Right to Redeem
The mortgagor (Mr. Kesavan) has the right to redeem the property at any time before the 3-year term ends. To do so, he must repay the full loan amount along with any outstanding interest. Once the loan is fully paid, the lender (Mr. Murugan) is obligated to return the property to Mr. Kesavan.
Assurance of No Encumbrances
Mr. Kesavan guarantees that the property is free from legal disputes and other encumbrances. This provides Mr. Murugan with the confidence that he can enjoy the property without any legal interruptions.
Use of Income from the Property
During the mortgage period, Mr. Murugan is entitled to the income generated by the property. This income will first be used to cover property taxes, maintenance costs, and other necessary expenses. Any surplus will be applied toward the loan repayment, reducing both the principal and interest owed.
Property Details in the Deed
The deed includes a detailed description of the mortgaged property, covering:
- Location: Full address of the property.
- Boundaries: Detailed boundaries to identify the property.
- Area Classification: Whether the property is within panchayat, municipality, or corporation limits.
Signatures and Witnesses
For the agreement to be legally binding:
- Both Mr. Kesavan (the mortgagor) and Mr. Murugan (the mortgagee) must sign the deed.
- The signing must take place in the presence of witnesses, ensuring the enforceability of the contract in legal proceedings.
Conclusion
A Mortgage with Possession Deed provides a practical solution for borrowers who need to secure a loan using their property but are willing to transfer possession to the lender. The lender benefits from the income generated by the property, while the borrower retains ownership rights and has the option to redeem the property by repaying the loan. Understanding the detailed terms of this type of mortgage is essential for both borrowers and lenders to avoid legal complications and ensure a smooth financial transaction.
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