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MORTGAGE OF LEASED PROPERTY

(Querist) 20 August 2008 This query is : Resolved 
A property of leased hold rights for the term of 99 years, mortgaged without seeking permission of lessor.

What shall be the effect on mortgage?
Manish Singh (Expert) 20 August 2008
Dear Mr. Saxena,
If there is a clause prohibiting the Lessee to mortgage without seeking permission from the Lessor then the mortgage would be held null and void if its challenged in the court of law hence you will have to provide some other security as a mortgage.
Its better to take permission and settle it down by hook or crook.
I suppose its a govt land on lease so after getting intimation about the same, they will issue notice to explain the same and if the response is not satisfactory they will knock the doors og the cort.
it will be better to take permission.


GOPI KRISHNA (Expert) 20 August 2008
since it is a lease hold land, lessor will have first charge over it and mortgagor will have 2nd charge
praveen kumar (Expert) 20 August 2008
Dear Mr. Saxena,
The basic principle is that, nobody can transfer a better title than what he himself has.The nortgagor has only the lease rights in the property, therefore he can transfer, by way of mortgage the lease rights only.And the properietary rights of the owner will not be affected.
KamalNayanSaxena (Querist) 21 August 2008
Dear friends,
Thank you very much for your kind consideration into the matter.

I understand that the lessee is bound with the terms of lease, but I have some doubts, viz.;

It is well settled law that 99 years lease is as good as sale, and as per TP Act no restricted rights can be created in favour of buyer. Nevertheless, law is not very clear about this concerns.

I suppose that the development authrity has created the title and absolute right in favour of lessee for the period prescribed in the lease agreement, hence that authority must be estopped to interfere into the peaceful enjoyment by lessee for that period, moreovr when the use of land has not been changed.

One more question may be raised here that whether the creation of equitable mortgage is transfer of property?

In this regard your opinion is solcited.

Manish Singh (Expert) 21 August 2008
Dear Sir,
in my view, the lease for 99 years can not be understood to be a sale unless free land hold is obtained by the concerned authority. now govt is considering the free hold option frequently.there are cases where sub lease by the lessee has been held as void.

Please suggest me if I am wrong or otherwise.
GOPI KRISHNA (Expert) 21 August 2008
Mr Manish you r right


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