LEGAL CHAT
Mortgage by conditional sale
N.C.S. RAGHAVAN
ARAVIND RAGHAVAN
In continuation of the discussion on “simple mortgage” of immovable property, we shall discuss other types of mortgages i.e., by conditional sale, usufructuary, English, by deposit of title deeds and anomalous mortgage.
Let us look at “mortgage by conditional sale.” There is a mortgagor who wants to create a mortgage on his immovable property as a security for the money received by him from a mortgagee. When such a mortgagor executes a deed in favour of a mortgagee containing the following terms and conditions the transaction becomes a mortgage by conditional sale:
The mortgagor states in the deed that he sells the property for the mortgage money as a consideration subject to conditions.
When the due date for repayment of the mortgage money arises and the mortgagor defaults, the sale becomes absolute and the mortgagee becomes the absolute owner of the property. However, if the mortgagor makes the repayment on the specified date, the sale of property become void and the absolute ownership of the property goes back to the mortgagor with possession.
There are a lot of advantages in this type of mortgage which is more favourable to the mortgagee. In a normal simple mortgage, if there is a default of repayment of money, the property has to be brought to sale for the recovery of the money and there is no question of the mortgagee becoming the absolute owner of the property. The mortgagee has to resort to lengthy legal steps. However, in the case of mortgage by conditional sale, the mortgagor becomes a legal owner absolutely when the default of the payment occurs on the specified due date. The legal steps for the mortgagee are simple and straight forward.
(N.C.S. Raghavan is a chartered accountant and Arvind Raghavan, an advocate)
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