A mortgage is a security for a debt. But, in itself isn’t a debt. As opposed to this it is the lender’s security for a debt. It is an exchange of an interest in the immovable property from the proprietor to the lender, and such exchange is made on the condition that this interest will be returned back to the proprietor after fulfillment or execution of terms of the mortgagor. Hence, a mortgage is a security for that loan, which the lender makes to the borrower. There are different kinds of mortgages.
This article explores a section of the informal credit market in an agrarian society, namely the usufructuary mortgage, a type of money-lending contract that is popular in rural economies of South Asia. The article will dive into usufructuary meaning, usufructuary mortgage characteristics, usufructuary mortgage deed, and usufructuary mortgage limitation.
Table of Contents
Usufructuary Meaning
A usufruct is a legitimate right concurred to an individual or party that presents the temporary right to utilize and get pay or benefit from another person’s property. It is a restricted genuine right that can be found in many mixed and civil law purviews. A usufructuary means the individual holding the property by usufruct.
A usufruct joins the two property rights of usus and fructus. Usus alludes to the right to utilize something straightforwardly without harming or modifying it, and fructus alludes to the right to enjoy the products of the property being utilized – that is, to benefit from the genuine property by leasing it, selling crops produced by it, charging admission to it, or similar.
Usufruct is generally given a temporary period. It very well may be conferred to the usufructuary, or individual holding usufruct, as an approach to take care of the property until the demise of a property owner and the estate can be settled if the property owner is extremely ill. While the usufructuary has the privilege to utilize the property, they can’t harm or pulverize it or discard the property. A usufructuary doesn’t have complete ownership of the property, since they do not have the third property right, abusus, which alludes to the right to consume, demolish, or transfer ownership of the property to another person.
Two Kinds of Usufruct
In usufruct, an individual or group has the option to utilize the property of another. They don’t claim it, however, have a legally authorized interest in it. There are two kinds of a usufruct:
Perfect Usufruct
In perfect usufruct, usufructuary means that the individual can utilize the property, and can benefit from it, yet can’t transform it in a substantial way. For instance, if the proprietor of a business gets severely ill and offers usufruct to a relative to maintain the business for the person in question, the usufructuary can maintain the business, but can’t sell it or destroy the structure and reconstruct it.
Imperfect Usufruct
In an imperfect usufruct framework, usufructuary means the individual has some capacity to alter the property, for example, when a landowner grants usufruct a piece of land for rural use. The usufructuary has the right to produce crops from the land and to make enhancements to the land that would help in that attempt. Notwithstanding, the usufructuary doesn’t possess these enhancements; when the usufruct closes, they belong to the original owner or to his or her estate.
Characteristics of Usufructuary Mortgage
Usufructuary mortgage has below-mentioned characteristics:
- That the possession of the property is delivered to the mortgagee;
- That the mortgagee is to get rents and profits in lieu of the interest or principal or both;
- That no personal liability is incurred by the mortgagor and
- The mortgagee cannot foreclose or sue for sale.
- That no time limit can be fixed expressly during which the mortgage is to subsist.
Usufructuary Mortgage Example
For instance, Ben has been given usufruct over Henna’s property. Henna’s property is a bed and breakfast with an enormous yard that requires tending. Henna is in bad health and can not, at this point, take care of the property and maintain the business. Ben, as the usufructuary, has the privilege to utilize the property and maintain the business for Helen’s sake for the time the usufruct is in effect. The usufruct might be in effect until Henna’s demise when the estate will be settled and the property will be passed according to the law or the directions in the estate.
Usufructuary Mortgage Deed
This Deed of Mortgage made on this ____________ day of _____________
Between
Sh. _________s/o Sh.___________ r/o ____________ hereinafter designated “the Mortgagor” (which expression shall unless contrary to the context including his related successors, executors, administrators and assigns) of the one part
And
Sh. _________s/o Sh.___________ r/o _____________ hereinafter designated “the Mortgagee” (which expression shall unless contrary to the context including his related successors, executors, administrators and assigns) of the other part
Whereas
- The Mortgagor being the owner of and completely seized of a plot of land located at _________ (more specifically stated in the schedule hereof).
- The Mortgagor wants to borrow a sum of Rs.__________(Rupees ___________) from the Mortgagee for doing his business and the Mortgagee has consented to grant him the loan of Rs.___________ at interest @ ___ % annually and on the mortgage of the said property as a security for the payment of the said loan.
Now, This Deed Witnesseth as Follows:
- In consideration of the sum of Rs.__________ borrowed by the Mortgagor from the Mortgagee (which receipt is acknowledged by Mortgagor ) the Mortgagor hereby transfers, by way of usufructuary mortgage, to the Mortgagee whole property stated in the schedule annexed hereto (hereinafter called “the mortgaged property”) inclusive right of possession of property with intention that Mortgagee right to reserve such possession until payment of mortgage money, and to receive the rents and profits and to appropriate the same (after paying the Government revenue and other taxes, of whatever nature, assessed, imposed or charged on the said property) in place of interest, or in paying the mortgage money, or portion thereto in place of interest or partly in paying the mortgage money.
- The Mortgagor also agrees with the Mortgagee that the mortgaged property is free from all encumbrances or charges.
- The Mortgagee also agrees with the Mortgagor that he may redeem the mortgage at any time after _________ years on repaying the said loan of Rs.__________ with interest. On such repaying, the Mortgagee will re-transfer the mortgaged property to the Mortgagor and will put him in actual possession of the property.
- The Parties also consent that the cost of registration of this deed with stamp duty and other misc. expenses shall be borne by the Mortgagor
In Witness Whereof, the parties hereto have signed below this day _________ of __________.
(The schedule hereinabove referred to)
Usufructuary Mortgage Limitation
According to the Limitation Act, 1963 — Art. 61 — Usufructuary home loan; There is no fixed time-limit for the usufructuary mortgagor to look for reclamation and recuperation of ownership of immovable property mortgaged. Option to look for recovery would accrue not from date of formation of mortgage but rather from date of payment of mortgage money out of usufructs or partly out of usufructs and partly on payment or deposit by mortgagor as given under S. 62 of TP Act. Up to that point, usufructuary mortgage limitation would not begin under Art. 61 and therefore, simple expiry of period recommended thereunder would not stifle mortgagor’s right of reclamation and qualifies mortgagee to look for declaration of title and ownership over the mortgaged property. Singh Ram v. Sheo Ram, (2014) 9 SCC 185.
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