**The following points should be borne in mind while drafting a Deed of Mortgage:**
(a) Parties: There should be two parties, the mortgagor and the mortgagee. The former is usually defined
as the borrower. The Indian practice of having a deed of mortgage executed by the mortgagor only is
unscientific, because the mortgage deed usually contains covenants by both the parties.
(b) Recitals: These are of two kinds. Firstly, recital as to the title of the mortgagor, such as “Whereas the
borrower is the absolute owner of the property hereby mortgaged free from encumbrances”. The second
form of recital is as to the agreement for loan, such as: “And Whereas the mortgagee has agreed with
the borrower to lend him the sum of Rs………………. upon having the re-payment thereof with interest
hereinafter mentioned secured in manner hereinafter appearing”.
(c) Covenant for re-payment: This clause usually recites that in pursuance of the said agreement and in
consideration of the receipt of the mortgage money the mortgagor covenants to pay the mortgage
money with interest at the stipulated rate in the manner agreed upon.
(d) Mortgage clause: This clause describes the property mortgaged. In case of simple mortgage, the property
is charged and assured as security for re-payment of mortgage debt. In an English mortgage it is
absolutely sold to the mortgagee, subject to the covenants as to re-conveyance upon repayment of debt
with interest. A through investigation of the titles upto 60 years and preparation of an abstract of title to
ensure that mortgagor has an absolute right over the property is recommended.
(e) (i) Covenants by the mortgagor: To repair the mortgaged property, in default the mortgagee is given
power to enter into possession without being liable as a mortgagee in possession, with a view to effect
repairs. Mortgagee’s expenses for this purpose are considered properly incurred.
(ii) Covenant to insure: The mortgagor covenants to insure the mortgage property in the name of the
mortgagee of an insurance office approved by the mortgagee. In default the mortgagee is entitled to
insure and the costs incurred are to be charged to the mortgagor.
(iii) Covenant not to grant leases or accept surrender thereof: It often happens that the mortgagor while
in possession grants long term leases to the detriment of the mortgagee. To guard against such a
contingency, it is agreed that the mortgagor shall not grant leases of mortgaged property for a periodexceeding one year without the written permission of the mortgagee or accept surrender of existing
leases without like permission. (See Section 65A of the Transfer of Property Act)
(iv) Covenant to pay outgoings: The borrower undertakes to pay and discharge and indemnify the
mortgagee against all rates, taxes, duties, charges, assessments, outgoings, whatever.
(f) Period fixed for the mortgage: Under this clause, the parties enter into a covenant by which mortgagor
is debarred from redeeming the security before lapse of a certain period. This should not be unnecessarily
a long period, as otherwise the Court might hold it as clogging equity of redemption and unenforceable.
The mortgagee may also enter into a covenant not to call in his money before the lapse of certain period
(i) If the mortgagor is declared insolvent;
(ii) If he alienates the mortgage property or creates a subsequent mortgage in favour of a third person
without consent of mortgagee,
the mortgagee may call in his dues even before the expiry of the term agreed upon.
(g) Power of sale: Under this clause, the mortgagee is entitled to recover his dues by sale of the mortgaged
property, and if the sale proceeds are insufficient, to recover the balance from the person and other
property of the mortgagor.
(h) Power to appoint Receiver: Under this clause, the mortgagee is given power to appoint a Receiver of
the mortgaged property in case the payment of interest for two or more instalments is in arrear under
Section 69A of Transfer of Property Act.
(i) Power to sell given to mortgagor with the consent of the mortgagee: The mortgagor is authorised to sell
the whole or part of the mortgaged property with the consent of the mortgagee provided the sale proceeds
are paid to the credit of the mortgage account.
(j) Proviso for redemption: Under this clause, the mortgagee covenants and declares that on payment of
his dues, he shall re-transfer the mortgaged property to the mortgagor or his nominee at his expense.
(See Section 60A of the Transfer of Property Act)
(k) Possession: In English mortgage, the mortgagee has a right to take possession of the property. In
usufractuary mortgage, the possession of the property is given to the mortgagee.
(l) Attestation & Execution: Attestation is compulsory in every mortgage. In case where the mortgagor
does not know the language, deed must be explained to him by some competent person.
(m) Registration & Stamp duty is compulsory in case of mortgage value of Rs.100/- and above.
(n) Mortgagee is entitled to all the title deeds of the mortgaged property. If for any reason they are left with
the mortgagor through inadvertance or negligence he can manipulate a prior equitable mortgage by
depositing the same elsewhere.
(o) The application of any other law either to the mortgage or to the property under mortgage has to be
ascertained. For example: Urban Land Ceiling Regulation Act.