Mortgaging the leasehold rights


27 April 2019

Dear Sirs,

I am writing to seek your advise on the write up mentioned in the Lease Deed, I am having agriculture land around 0.5 acre and all other surrounding land owners are also giving land for lease.
The lessee is interested to built warehouse, hence he approaching land owners for lease. Presently land is using for agriculture.

In the lease deed, it is mentioned like..
(POWER TO RAISE LOANS: The Lessee shall be entitled to raise loans/borrow money from financial institutions i.e., Banks, Financiers, Financial Companies and/or other Financial Institutions by mortgaging its leasehold rights in the Schedule Property. However there shall be no liability on the Lessors in regard to any such debts or borrows.)

Is this Mortgaging land leasehold rights is legal? Does this safeguard Land owners in case of any default by lessee, what are the impacts on Land owners from mortgaging leasehold rights.

Kindly advise,

kavksatyanarayana (Expert)
27 April 2019

Dear queriest, for one or two clauses of the lease deed, it cannot be replied. The lease deed need to be verified. However, as per your narration, there is no bar to lease out your land.

Dr J C Vashista (Expert)
28 April 2019

How much loan can be raised on such a small piece (0,5 acre) of agriculture land ?
Consult a local prudent lawyer with relevant documents for better appreciation, guidance and proceeding.

P. Venu (Expert)
28 April 2019

There are bound to be complications as leasehold rights entail the warehouse built on the leased land and the superstructure so constructed is inseparable from the land.

By the way, what is the period of lease, and on the cessation of lease would the land together with the superstructure revert to the lessee?

Manohar (Querist)
10 May 2019

Dear Sirs,

Land is taking on lease for the period of thirty years and builder acquiring around 15-20 acres in that area to build commercial warehouse, wherein my piece of land is 0.5 acres (20 gunts).
Lock-in period is also 30 years...after expiry of lease, land remains with Lessor and super structure shall be dismantled by Lessee.

If Lessee raise loans/borrow money from financial institutions by mortgaging its leasehold rights in the Schedule Property. Is there any liability on the Lessors in regard to any such debts or borrowals, and if default happens by lessee, What would be the consequence that landlord face?

Manohar (Querist)
25 May 2019

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