As per Section 58 of the Transfer of Property Act, 1882 (hereinafter refer to as said Act) defines various types of mortgage. Under Section 58(a) defines mortgage as the transfer of interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan.
If I am acting as lender, I will prefer a Mortgage by Conditional Sale which is one of the type of mortgage explain under section 58 ( c ) of the said Act.
Following are the reasons that why I will prefer a mortgage by conditional sale from rest of other forms of mortgage:
- In a mortgage by conditional sale, mortgagor ostensibly sell the mortgaged property to the lender (mortgagee) on condition that on default of payment of mortgage money on certain date the sale of mortgaged property shall become absolute, or on the condition that such payment being made the sale shall become void & buyer (mortgagee) shall transfer the mortgaged property to the mortgagor by re-conveyance.
- In mortgage by conditional sale, mortgagor executes a sale deed in favour of lender/mortgagee and on the same day lender also executes a re-conveyance & lease deed. Its happens in normal practice but as per section 58 ( c ) which state that the condition purporting to effect the sale as mortgage transaction must be incorporated in the one & same deed i.e. mortgage deed. Which is compulsorily registered under section 17 of Registration Act, 1908
- From 1 and 2 which is clear that because of that provisions lender doesn’t have any risk to lend the money to borrower. Lender has security of his lending in form of sale deed of the mortgaged property which is executed & registered by the mortgagor in favour of lender.
- As per the market trend any individual lender lends 50% to 70% max. to the borrower from the value of his mortgaged property.
- If I am individual/natural person don’t have license of lending money for commercial purpose under The Bombay Money Lenders Act, 1946 and RBI norms related with Money lending then the mortgage by conditional sale is good option for me for lending the money by executing sale deed, lease deed, re-conveyance & MOU. Normally Banks, NBFC and registered money lender have right to lend money for commercial purpose.
- As per the executing lease agreement which is necessary when the possession of the property is with the mortgagor & therefore safer side of lender he will execute the lease deed.
- As per above submission which is clear that any lender will prefer the mortgage by conditional sale rather than other form of mortgage under section 58 of said act.( As per condition of lending & mutual understanding of both the parties)