- Definitions: – In this Part,
- “conveyance” includes assignment, lease, settlement and other assurance and covenant to surrender made by deed on a sale, mortgage, or settlement of any property or on any other dealing with or for any property, and “convey” has a corresponding meaning;
- “land” includes houses and buildings, whether used as a dwelling or not, and also an undivided share in land;
- “mortgage” means any charge on any immovable property for securing money or money’s worth;
- “mortgage money” means money or money’s worth secured by a mortgage;
- “mortgagor” includes any person deriving title under the original mortgagor or entitled to redeem a mortgage, according to the person’s estate, interest or right in the mortgaged property; and
- “mortgagee” includes any person deriving title under the original
- Application of this Part: – This Part applies only to charges on immoveable property, including land.
- Right of a mortgagor to inspect title of deeds: – Despite any stipulation to the contrary, a mortgagor, prior to foreclosure or sale, is entitled on request, to inspect and make copies of or extracts from the documents relating to the mortgaged property in the custody or power of the mortgagee. The right to inspect and make copies or extracts must be exercised at reasonable times and at the expense of the
- (1) Application of insurance: – A mortgagee may require that all money payable to a mortgagor on an insurance of the mortgaged property, shall, if the mortgagee so requires, be applied by the mortgagor in making good the loss or damage in respect of which the money is received.
(2) Application of insurance to discharge the debt: – Without prejudice to any obligation to the contrary imposed by law or by agreement, a mortgagee may require that all money received on an insurance of the mortgaged property be applied in or towards the discharge
of the money due under the mortgagee’s mortgage.
- Covenants to be implied: – Where one or more persons conveys by way of mortgage, each such person shall be deemed to covenant as set out in (a) to (f) below, and such covenants shall be deemed to be included and implied to the persons to whom the conveyance is Where the conveyance is to more than one person, such covenants shall be deemed to have included and implied to each of the persons to whom the conveyance is made:
- for payment of the mortgage money and interest, and observance in other respects of the terms and conditions of the mortgage;
- for good title;
- for the right to convey;
- that on default, the mortgage shall have quiet possession of the land, free from all encumbrances,
- that the mortgagor will execute such further documents regarding the lands being conveyed as may be required, and
- that the mortgagor has done no act to encumber the land
- Implied covenants in mortgages are joint and several: – In a mortgage, where more than one person are expressed to convey as mortgagors, the implied covenants on their part shall be deemed to be joint and several covenants by them. Where there are more than one mortgagees the implied covenant with them shall be deemed to be a covenant with them jointly, unless the amount is expressed to be secured to them in shares or distinct sums. If it is expressed in distinct shares and sums then the implied covenant with them shall be deemed to be covenant with each severally in respect of the share, or distinct sum secured to each mortgagee.
- Defence of purchase for value without notice: –Where a person purchases a mortgage in good faith, the purchaser may, to the extent of the mortgage, and except as against the mortgagor, rely on the defence of purchase for value without notice in the same manner as a purchaser of the mortgaged property might
- (1) Rights upon default: – Subject to the provisions of the mortgage agreement and this Act, where default has been made in making any payment of principal or interest due under a mortgage or in the observance of any covenant in a mortgage the rights of mortgagee include but are not limited to
- the rights provided under the covenants implied under Section 61;
- the right to distress moveable property and goods situated on the mortgaged property for interest in arrears;
- the right to exercise a power of sale; and
- the right to foreclose on the
(2) Agricultural Land: – Despite any agreement to the contrary, where the mortgaged property is agricultural land and the balance of such lands remaining in the possession of the mortgagor is less than five acres, and default has been made in making any payment of principal or interest due under the mortgage agreement, or in the observance of any covenant in a mortgage agreement, no rights of a mortgagee under the mortgage agreement or third Part are enforceable without prior permission of the Court.
9. Limitations on the rights to seize and sell goods and moveable property: –
- Despite any stipulation in the mortgage to the contrary, the right of a mortgage to seize and sell moveable property situated on the mortgaged property for interest in arrears is limited to those goods of the mortgagor which are not prescribed as exempt from seizure under
- Where the right to seize and sell for arrears of interest or for rent under the provisions of any mortgage is relied on against the creditors of a mortgagor, or a person in possession of a mortgaged premises, such right is restricted to one year’s arrears of the interest or rent, as the case may
- Notice of sale: – Goods and moveable property sold by a mortgagee shall not be sold except after such public notice as is prescribed by the
- (1) Statement of arrears, expenses, etc: – The mortgagor may, by a notice in writing, require the mortgagee to furnish the mortgagor with a statement in writing,
- of the amount of the principal or interest with respect to which the mortgagor is in default; or
- of the nature of the default or the non-observance of the covenant,
and of the amount of any expenses necessarily incurred by the mortgagee.
(2) Answer required within 10 days: – The mortgagee shall answer a notice given under Subsection (1) within ten days after receiving it. If without reasonable excuse the mortgagee fails to do so, or if the answer is incomplete or incorrect, any rights that the mortgagee may have to enforce the mortgage shall be suspended until the mortgagee has complied with
- Notice of power of sale: – A mortgagee shall not exercise a power of sale unless a notice of exercising the power of the sale in the prescribed form has been given by the mortgagee to the following,
- persons having an interest in the mortgaged property prior to that of the mortgagee;
- any other persons subject to whose rights the mortgagee proposes to sell the mortgaged property;
- every person appearing in the register of title;
- where there is a lien against the mortgaged property in favor of the Royal Government or any other public authority, and the mortgagee has written notice of the lien to the agency or department of the Royal Government claiming the lien;
- to any person who has provided the mortgagee with notice in writing of any other interest, provided the notice is received by the mortgagee prior to the giving of notice exercising the power of
- (1) When notice may be given and power exercised:- Upon default, a person wishing to exercise the power of sale must first wait ten days after the mortgagor has defaulted according to the terms of the mortgage before giving notice of their exercising the power of sale, following which the sale shall not be made for at least an additional forty-five days after the notice has been given.
(2) Abridgment of time: –
- If the period of default after which notice exercising a power of sale may be given as provided by the mortgage is greater than the period of default mentioned in Subsection (1) then the period of default stated in the mortgage applied; or
- If the period of time after notice has been given after which the mortgaged premises may be sold as provided by the mortgage is greater than the period of time mentioned in Subsection (1) then the period of time mentioned in the mortgage
- (1) Restrictions as to proceedings: – Where, under any condition or term contained in a mortgage, a demand or notice has been made or given, either requiring payment of all or part of the money secured by the mortgage, or declaring an intention to proceed under and exercise the power of sale contained in the mortgage, no further proceeding and no action to enforce the mortgage shall be commenced or taken, until after the lapse of the time provided for in the demand or notice, unless an order permitting further action has been obtained from the Court.
- Proof on which order may be granted: – The order of the Court authorizing further action may be obtained without notice or with such notice as the Court may direct upon such proof as satisfies the Court that it is reasonable and equitable that the proposed action or proceeding should be
- Exception: – This section does not apply to proceedings to prevent damage to, or diminution in the value of, the mortgaged
- (1) Where payment made on terms of notice: – Where a demand or notice requires payment of all money secured by or under a mortgage, the person making such demand or giving such notice is bound to accept and receive payment of the money if the payment is made as required by the terms of the demand or
- Payment or tender of costs: – If there is a dispute as to the costs payable by the person by or on whose behalf such payment is made or tendered, such costs shall be assessed and ascertained by the
- Deemed compliance with demand: – Where the time limited by the demand or notice requiring payment expires before the assessment of the costs has been completed, the amount due apart from the costs claimed may be paid, and payment of the amount allowed for costs within ten days after the costs are determined shall be deemed a compliance with the demand or notice.
- Powers incident to mortgages which do not expressly contain a power of sale: – Where any principal money is secured by mortgage of land, the mortgagee has the following powers as if they had been expressly conferred by the terms of the mortgage:
- A power to sell, or to agree with any other person in selling, the whole or any part of the mortgaged property by public auction or private contract, subject to any reasonable conditions the mortgagee may think fit to make, and to buy at an auction and to rescind or vary contracts for sale and without being answerable for any loss occasioned by such
- A power to insure and to keep insured against loss or damage by fire any building or any effects or property, whether affixed to the property or not, forming part or all of the mortgaged property, and the premiums paid for any such insurance are a charge on the mortgaged property, in addition to the mortgaged money and with the same priority and with interest at the same rate as the mortgage
- Manner if giving notice, general rules: – A notice exercising power of sale shall be given by personal service ot by registered mail addressed to the person to whom it is to be given at the person’s usual or last known place of address, or the address that is shown on the registered instrument under which the person acquired an interest in the
- When notice by mail effective: – A notice of exercising a power of sale shall, if given by registered mail, be mailed in Bhutan, and such a notice shall be deemed to have been given on the tenth day following the day on which it is
- Impeachment of title: – Where a notice has been given in professed compliance with this Part, the title of the purchaser is not liable to be challenged on the ground that the provisions of this Part respecting default, and the provisions of this Part respecting notice, have not been complied with. Any person who suffers a loss as a result has a remedy against the person exercising the power of
- Notice rules paramount: – Despite any agreement to the contrary or any provision contained in any mortgage, or any provision of this or any other Act, Section 73 applies to any power of sale.
- (1) Application to Court allowed for exercise of sale without notice: – Where default under a mortgage agreement has continued for fifteen days, a mortgagee may apply without notice to a judge of the Court for leave to exercise power of sale without
(2) Court may grant directions: – Upon an application under Subsection (1), the judge shall, having regard to the circumstances, either grant leave to exercise the power of sale without notice or with such notice to such persons, in such manner, and within such time as he pr she considers proper.
- Right to documents and conveyance of legal estate: – At any time after a power of sale has become exercisable, the person entitled to exercise the power of sale is entitled to demand and recover from the mortgagor all deeds and documents in the mortgagor’s possession, or power relating to the mortgaged property. If a party fails to comply with this Section, the court shall issue an order requiring
- Mortgagor may rectify default prior to sale or Court action: – Despite any agreement to the contrary, where default has occurred in making any payment of principal or interest due under a mortgage, or in the observance of any covenant in a mortgage and under the terms of the mortgage, by reason of such default, the whole principal and interest secured by the mortgage has become due and payable, then
- at any time before sale under the mortgage whether or not the mortgagee has taken possession of the property; or
- before the commencement of an action for the enforcement of the rights of the mortgagee, or of any person claiming through or under the mortgagee,
if the mortgagor performs such covenant or pays the amount then due under the mortgage, and pays any expenses necessarily incurred by the mortgagee, then the mortgagor is relieved
from the consequences of the default.
- Conveyance to the purchaser: – The person exercising the power of sale has the power to convey or assign to, and vest in the purchaser the property sold for all the estate and interest the mortgagor had in the property, and of which the mortgagor had power to
- (1) Disposal of mortgaged property: – Where a mortgagee chooses to enforce a power of sale the mortgagee may dispose of the mortgaged property without taking possession and in its condition either before or after any commercially reasonable repair, processing or preparation for
- Methods of disposition: – Mortgaged property may be disposed of in whole or in part, and any such disposition may be by public sale, private sale, lease or otherwise and, may be made at any time and place and on any terms so long as every aspect of the disposition is commercially reasonable and in compliance with this Act and the
- Mortgagee’s right to delay disposition: – The mortgagee may delay disposition of all or part of the mortgaged property for such period of time as is commercially
- Mortgagee’s right to purchase mortgaged property: – The mortgagee may buy the mortgaged property or any part of the mortgaged property only at a public sale, unless the mortgagor agrees in writing.
- (1) Receipts for purchase money sufficient evidence of sale: – A receipt for purchase money given by the person exercising the power of sale conferred by this Act is sufficient evidence of the sale to the purchaser, and the purchaser is not liable for the manner in which the seller applies the purchase
(2) Purchaser entitled to registration: – A person who purchases land from a person exercising a power of sale is entitled to the property, whether or not subject to encumbrances, and may apply to the appropriate Dzongkhag or City Corporation land records office to be registered as owner of the land and upon receipt of such application the registrar shall take such action or make such entries as is required to give effect to this section.
- (1) Application of purchase money: – The money arising from the sale shall be applied by the person receiving the money as follows:
First, in payment of the reasonable expenses of the mortgagee incident to the sale or attempted sale, including the cost of insurance and payment of taxes and other charges incurred in retaking, holding, repairing, processing and preparing for disposition and disposing of the mortgaged property, and to the extent provided for in the mortgage agreement, any other reasonable expenses incurred by the mortgagee;
Second, in discharge of all interest and costs then due in respect of the mortgage under which the sale was made;
Third, in discharge of all the principal money then due in respect of the mortgage;
Fourth, if the mortgagee does not receive a written claim in the proceeds, the residue shall be paid to the mortgagor. But if the mortgagor does receive a written claim in the proceeds, the residue shall be paid into court.
(2) Deficiency: – Unless otherwise agreed in the mortgage agreement, or unless otherwise provided under this or any other Act, the mortgagor is liable for any deficiency
- (1) Foreclosure: – A mortgagee may, after a power of sale is exercisable in accordance with this Part, propose to accept the property in satisfaction of the mortgage money secured and shall serve a notice of the proposal on the persons mentioned in Section
- Objection: – If any person entitled to notification under Subsection (1), whose interest in the mortgaged property would be adversely affected by the mortgagee’s proposal, delivers to the mortgagee a written objection within thirty days after service of the notice, the mortgagee shall dispose of the mortgaged property in accordance with this
- Proof of interest: – The mortgagee may require any person who has made an objection to the proposal to furnish proof of that person’s interest in the mortgaged property and, unless the person furnishes the proof within ten days after demand by the mortgagee, mortgagee may proceed as if no objection had been
- Application to judge: – Upon application to the Court by the mortgagee, and after notice to every person who has made an objection to the proposal, the Court may order that an objection to the proposal of the mortgagee is ineffective because,
- the person made the objection for a purpose other than the protection of the person’s interest in the mortgaged property or in the proceeds of a disposition of the mortgaged property; or
- the fair market value of the mortgaged property is less than the total amount owing to the secured party and the estimated expenses recoverable under Section
- Where no objection made: – If no effective objection is made, the secured party is at the expiration of the thirty day period mentioned in Subsection (2), deemed to have irrecoverably elected to accept the collateral in full satisfaction of the obligation secured, and is entitled to the mortgaged property free from all rights and interests in the mortgaged property of any person entitled to notification under Subsection (1) whose interest is lower in priority to that of the mortgagee and who was served with such
- (1) Redemption of mortgaged property: – At any time before
- the mortgagee has disposed of the mortgaged property or contracted for such disposition, or
- before the mortgagee shall be deemed to have irrecoverably elected to accept the collateral under Subsection 84 (5),
any person entitled to receive notice under Section 68 may, unless the person has otherwise agreed in writing after default, redeem the mortgaged property by tendering fulfillment of all obligations secured by the mortgaged property together with a sum equal to the reasonable expenses referred to in Section 83 incurred by the secured party.
(2) Where more than one wishes to redeem: – Where more than one person elects to redeem under Subsection (1), the priority of their rights to redeem shall be the same as the priority of their respective interests in the mortgaged property.
- (1) Court required to assist a party enforce its rights of possession etc: – Where a mortgagee is unable to obtain possession, or to enforce any other rights provided in the mortgage agreement or this Part for any reason whatsoever, then upon application of the mortgagee to the Court, and upon the mortgagee establishing that there has been a default under the mortgage, which default entitles the mortgagee to the rights and remedies provided in the agreement or this Part, the Court shall issue an order enabling the mortgagee to proceed with respect to the mortgaged property in accordance with the mortgagee’s rights, remedies and
(2) Discretionary Court orders: – Upon application to the Court by a mortgagor, a mortgagee, a person who may owe payment or performance of the obligation secured by the mortgage, or any person who has an interest in the mortgaged land which may be affected by an order under this section, the Court may,
- make any order, including binding declarations of rights and injunctive relief, that is necessary to ensure compliance;
- give directions to any party regarding the exercise of the party’s rights or the discharge of the party’s obligation;
- make any orders necessary to determine questions of priority or entitlement in, or to the mortgaged land or its proceeds; and
- make any order necessary to ensure protection of the interests of any person in the mortgaged land, but only on terms that are just for all parties
- (1) Care of mortgaged property: – Where a mortgagee has obtained possession of the mortgaged property prior to sale or foreclosure, the mortgagee shall use reasonable care in the custody and preservation of the mortgaged
- Rights and duties of mortgagee: – Unless otherwise agreed, where mortgaged property is in the mortgagee’s possession,
- reasonable expenses, including the cost of insurance and payment of taxes and other charges incurred in obtaining and maintaining possession of the mortgaged property and its preservation, are chargeable to the mortgagor and are secured by the mortgaged property. Costs associated with improving the property, other than reasonable repairs and modifications performed to prepare the property for sale are the responsibility of the mortgagee;
- sk of loss or damage, except where caused by the negligence of the mortgagee, is on the mortgagor to the extent of any deficiency in any insurance coverage;
- the mortgagee may hold as additional security any increase or profits, except money, received from the mortgaged property. Money so received, unless remitted to the mortgagor, shall be applied forthwith upon its receipt in reduction of the obligation secured.
- Liability for loss: – A mortgagee is liable for any loss or damage caused by the mortgagee’s failure to meet any obligations imposed by Subsection (1) or (2), but does not lose the security interest in the mortgaged
- Use of mortgaged property: – A mortgagee may use the mortgaged property,
- in the manner and to the extent provided in the mortgage agreement;
- for the purpose of preserving the mortgaged property or its value; or
- pursuant to an order of the Court upon application by the
- (1) Person deemed to be land lord: – A mortgagee who obtains possession of mortgaged residential premises which are the subject of a tenancy agreement between the mortgagor and a tenant or who obtains title to the residential premises by foreclosure or power of sale shall be deemed to be landlord under the tenancy
- Previous landlord ceases to be landlord: – A person who is the landlord under a tenancy agreement ceases to be the landlord while another person is deemed to be the landlord under Subsection (1).
- Obligations of new landlord: – A person who is deemed to be a landlord under Subsection (1) is subject to the tenancy agreement and is liable for the obligation of a
- Notice to tenants: – A person who is deemed to be landlord shall serve written notice in prescribed form to all tenants of the change in the
- Collection rights of mortgagee: – Where so agreed and in any event upon default under a mortgage agreement, a mortgagee is entitled,
- to notify any person obligated to the mortgagor under a lease or rental agreement in respect of the mortgaged property to make payment to the mortgagee whether or not the assignor was previously making collections on the agreements prior to such notice; and
- to take control of any proceeds to which the mortgagee is
- Priorities of mortgages: – Where more than one mortgage exists on a particular piece of property, the priority of the claims under such mortgages shall be determined by the order in which the mortgages were registered, unless otherwise