Ustainability of Legal Mortgage of Shop Room

Mr. Z

Address….

Dear Sir,

RE:     USTAINABILITY OF LEGAL MORTGAGE OF SHOP ROOM.

We refer to your letter dated 09.06.99 on the above subject. We have perused the contents of your letter and the copy of the deed of Agreement referred to us.

The Deed of Agreement dated 19.10.98 executed between Ms. A and Mrs. B is unregistered. As such Ms. A has not acquired any right, title or interest over the shop to mortgage the same in favour of the Bank although in clause 9 of the Agreement such power has been given to Ms. A. As such Ms. A is merely a tenant.

Notwithstanding anything contained in the Agreement, the Agreement is terminable at any time upon giving proper notice under section 106 of the Transfer of Property Act. In such situation if Bank takes the leasehold interest as collateral security and subsequently the Mrs. B, lessor terminates the lease, Bank will have no security in hand to enforce.

As such we are of the opinion that Bank cannot take the shop as collateral security unless the same is mortgaged by the owner in favour of the Bank. The lessee (purchaser of the possession) has not right to mortgage the shop). Mortgage created by the lessees will not be tenable in law. Bank may also enter into a tripartite agreement with the borrower and the lessor/owner with conditions inter alia that until the liability of the borrower/lessee with the Bank is adjusted, the lessor/owner will not terminate the lease. In case any termination sanction by law, Bank will have a charge on the shop.

If you have any further query, please contact the undersigned.

Thanking you

Yours faithfully

………………….

For: “The Lawyers & Jurists”

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