FAQ

What is Agreement for sale ?

the agreement of sale shows the willingness of the parties to buy/sell the property in future upon the satisfaction of certain terms and conditions. However, since it does not involve an immediate transfer of ownership, the buyer has no right and interest in the property in question.

Terms included in agreement of sale

• Proposal to purchase and agreement to sell in future
• Detailed description of the property
• Disclaimer that the property is free from legal encumbrances
• Value of the property including payment details
• Delivery of the original documents on the final payment
• Execution of sale deed and registration of the same if the titles are found good
• Method of property delivery
• Payment refund in case of improper titles
• Action course for non-completion of sale on the part of the seller
• Loss of advance payment if the purchaser fails to complete the transaction
• Remedy if legal issues besiege the property
• Transfer of tax-related certificates
• All other matters related to the proposed sale

Important points to check before signing an agreement to sale

Check the following field before signing the sale agreement:

• Name of parties
• Time period mentioned for property transfer from seller to buyer
• Penalty clause
• Encumbrance certificate
• Property details
• Possession details
• Elements of property such as carpet area, open area, etc.
• Property map
• Property address

What is a sale deed?

A sale deed is drafted on the actual sale/transfer of the property. Once the deed is executed, the new buyer takes the complete ownership of the property. However, the deed is drawn only after all the contractual terms of the sale agreement have been explicitly settled. Moreover, it is mandatory to register a sale deed at the registrar’s office under the Registration Act, 1908.

Details included in sale deed

• Details of the parties involved in the transaction
• Description of the property
• Transfer of titles
• The clause of sale consideration
• References to the agreement of sale and the price details
• Transfer of rights, interests and claim of the property to the new buyer
• A clause that the previous owner does not hold any authority on the facilities, privileges and easements of the property
• Compensation to the purchaser for losses arising out of the negligence of the seller or heirs of the asset
• The authority of the vendor to sell the property.

Generally, the sale deed is brief as most of the contractual terms have been already delineated in the agreement of sale.

Supreme Court ruling on sale deed and agreement for sale

It was in 2012 when the Supreme Court held that, “Immovable property can be transferred/conveyed only by a deed of conveyance (sale deed), duly stamped and registered as required by law. We, therefore, reiterate that immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance.”

“Any contract of sale (agreement to sell), which is not a registered deed of conveyance (deed of sale), would fall short of the requirements of Sections 54 and 55 of the Transfer of Property Act and will not confer any title, nor transfer any interest in an immovable property (except to the limited right granted under Section 53A of the Transfer of Property Act).”

The ruling came in the case of Suraj Lamp & Industries v State of Haryana while hearing the case on the validity of the sale of immovable properties made through power of attorney. From a legal standpoint, it is crucial to understand the terminologies mentioned above to arrive at a hassle-free closure. Lack of information might not only lead you to legal problems but may also risk your investment. For instance, if you bought a house under the agreement of sale and failed to execute a sale deed, then even after you avail the possession of the property, the right to property would remain with the developer. Even with regards to a resale property transaction, unless the registration of the sale deed follows the agreement to sell, the government will continue to consider the original owner as the current owner. Thus, to avoid such situations, it is imperative to draft a sale deed and get it registered. Only a stamped and registered deed guarantees legitimate property ownership to the buyer.

Key differences between agreement of sale and sale deed

In India, property transfers as gifts are governed by the Transfer of Property Act, 1882 (“Act”). A gift of a property involves transferring the ownership of one’s property to another person by executing a gift deed. The gift deed is an instrument through which the immovable or movable property owner transfers his/her property to another person without consideration as a gift. The person gifting his/her property is called the donor, and the person accepting the gift is the donee. The donor must voluntarily gift the property to the donee without considering the gift to be valid under the Act. The donee should accept the gift within the lifetime of the donor for the gift to be legally valid. The gift of immovable property will be effective when the gift deed is registered with the appropriate Registrar or Sub-Registrar. The gift of movable property is effective when the gift deed is registered or by delivery of the property. When the gift deed is registered, the transfer of the property from the donor to the donee takes place immediately, and the parties need not go to court for its execution. Registration of the gift deed is mandatory when the donor wishes to gift immovable property to the donee. A gift deed must be executed out of love and affection towards the donee without any consideration in return.

Clauses in a Gift Deed

• Details of Donor and Donee – The gift deed should mention the name, address and relationship between the donor and donee.
• Consideration – The gift deed should mention that the donor is transferring the gift property out of love and affection towards the donee, and there is no consideration of any other type involved in the transfer.
• Voluntary Transfer – The gift deed should mention that the donor is voluntarily and freely transferring the ownership of the gift property to the donee. The transfer shall be free of any fear, coercion or threat.
• Ownership of Property – The gift deed should mention that the property is in existence and the donor is the absolute owner of the gift property, and the donor has delivered the possession of the gift property to the donee.
• Property Details – The gift deed should specify the detailed description of the gift property.
• Rights of the Donee – The gift deed should mention the rights of the donee. It includes the rights of the donee to enjoy the property peacefully and sell or mortgage or lease the property.
• Acceptance by Donee – The gift deed should mention that the donee accepts the gift of the property.
• Delivery – The gift deed should mention the intention of delivering the possession of the gift property, expressly or impliedly.
• Witnesses – The gift deed should mention the name and address of the witnesses. It should be signed and attested by at least two witnesses mandatorily.
• Revocation – The gift deed need not have a revocation clause of the gift property, but it is advisable to avoid any conflict in the future.

Parties in a Gift Deed

There are two parties in a gift deed, i.e. donor and donee. The donor is the person who gifts his property, and the donee is the person to whom the property is gifted. The donor should have a sound mind and must be competent to enter into agreements at the time of making the gift.

A minor is incapable of gifting property as he/she is incapable of entering into agreements. However, the guardian of a minor can accept the gifts given to a minor on his/her behalf. The donor should make a gift without any consideration, i.e. the donor should not receive anything from the donee for making the gift.

Properties that can be gifted through a Gift Deed

Both immovable and movable properties can be given away as gifts by the donor to the donee. Immovable property means land or any benefits arising out of land or anything attached to the earth but does not include growing crops, standing timber or grass. The properties that are not considered immovable properties are considered as movable properties.

However, the donor can gift only the properties that are existing at the time of registering the gift deed. He cannot gift the property which he expects or will get in future. The donor can gift only the properties of which he/she is the lawful owner. The donor must be owning the property of the gift at the time of making the gift.

Registration of Gift Deed

Under Section 123 of the Transfer of Property Act, 1882, the gift of immovable property is valid when gifted through a registered gift deed signed by the donor and the donee and attested by two witnesses. The gift of movable property is valid when gifted under a registered gift deed or by giving delivery of the property to the donee. For registration of the gift deed, the gift deed containing all the clauses (as mentioned above) must be drafted on stamp paper. The donor and donee should sign on all pages of the gift deed and must be attested by at least two witnesses. The donee must accept the gift in the lifetime of the donor and when the donor is of sound mind for it to be valid.

The value of the stamp paper on which the gift deed is executed varies from state to state. The gift deed executed on the stamp paper should be registered at the Registrar or Sub-Registrar’s office under whose jurisdiction the property to be gifted is situated. If the property is movable, the jurisdiction of the Registrar or Sub-Registrar’s office is the place where the donor resides.

Tax Implications of Gift Deed

Gifts are taxed under Section 56(2)(x) of the Income Tax Act, 1961, after 1 April 2017. Under Section 56(2)(x)(a), when any person receives a sum of money exceeding Rs.50,000 without consideration as a gift, then the whole of the gift amount will be taxed in the hands of the donee under the head ‘Income from other sources’.

Under Section 56(2)(x)(b), when a person receives an immovable property without consideration as a gift, and the stamp duty value of the gift deed exceeds Rs.50,000, then the stamp duty value of the property is taxable in the hands of the donee.

However, if the property or amount is received from any of the following persons, then the taxation on the gift is exempted, and the donee will not be taxed:

• If the gift is received from relatives, or
• If it is received on the occasion of the marriage of the individual, or
• If it is received under a will or by way of inheritance, or
• If it is received in contemplation of the death of the donor, or
• If it is received from a local authority (defined in Explanation to Section 10(20) of the Income Tax Act), or
• If it is received from any fund, university, foundation, other educational institution, other medical institution, hospital, trust or institution referred under Section 10(23C) of the Income Tax Act, or
• If it is received from any trust or institution registered under Section 12A or 12AA, or
• If it is received by an individual (donee) from a trust established or created solely to benefit the individual’s relative.

Frequently Asked Questions

Does a gift deed require stamp duty?

Yes, stamp duty must be paid on the gift deed. The amount of stamp duty and registration charges payable are usually the same as in the case of a regular sale. However, if the gift deed is executed between some specified close relatives, certain states provide concessions in stamp duty.

Who should pay stamp duty on the gift deed?

If the donee pays the stamp duty, it can amount to consideration (price) paid by the donee for the gift under the Transfer of Property Act. Since there cannot be a consideration in a gift deed, the deed may be considered void when the donee pays the stamp duty. So, the donor is responsible for paying the stamp duty.

Can the gift deed be cancelled?

The donor can revoke/cancel a gift transaction through a provision mentioned in the gift deed or by mutual understanding between the two parties or upon the happening of an event mentioned in the deed. A gift transaction can also be cancelled if the donor signed the deed under undue influence or coercion.

What is the meaning of attestation of a gift deed by two witnesses?

Attestation of a gift deed by two witnesses means that the witnesses who sign the deed should have seen the donor signing the gift deed, and they should sign as witnesses in the presence of the donor and donee.

Is the gift valid when it is made to several persons, and one person does not accept it?

Yes, when there are many donees, and one of them does not accept it, the gift is valid in respect of the donees who accept it. However, the gift is void regarding the person who does not accept it.

Child adoption in India

Every child has a right to family and the right to be nurtured and cared for. Adoption is a legal process that creates a parent-child relation between persons who are not related by blood.

Childhood is the most cherished stage of our lives. So when certain kids who are unfortunate to savour the true essence of childhood can be taken up by the family who could bring in lots of joy in their life, then why drift back?

So that’s where the term ‘adoption‘comes into play. Now before talking about the topic and its legal proceedings, there are two major questions that strike everyone’s mind:

1. Who is adopting?
2. Who is the one being adopted?

Now there are various laws enacted in India regarding the term ‘adoption’ and three of them being;

• Hindu Adoption and Maintenance Act, 1956
• Guardianship and Ward’s Act 1890
• Juvenile Justice (Care and Protection) Act 2000

All these acts throw light on the nature and significance of adoption and the various provisions for it alongside the eligibility of the individuals for carrying out the adoption of a child. Now what is worth defining is the term ‘child’. Though we all use the word child casually, there is a crystal-clear definition put forward by the Judicial system in the context of ‘adoption’. In the eyes of the Law; a ‘child’ is an individual who has not attained puberty or is below the maturity age.

Who is allowed to adopt?

All three laws enacted state that any Indian, Non-Indian, or a foreigner can adopt a child. The minimum age of the adopter should be 21 years with an age difference of 16 years between the ‘adopter’ and ‘adoptee’. However, if the age of ‘adopter’ is more than 55 years old then such adoptions are not encouraged by the law.

Who is to be adopted?

As mentioned earlier, the encouraged age difference between the adopter and adoptee is 16 years, but under certain circumstances, the requirement for the age difference can be relaxed where adoption is carried forward with the prevailing customs or practices in certain communities. Though there isn’t any specified age for the child being adopted; in general, the upper age limit of the adoptive child is considered as 12 years.

Procedure for registration of the adoption deed

1. Drafting of the Adoption deed by a legal expert or advocate in the specified format on stamp papers (available at Notaries)
2. Requesting an appointment date with ‘Sub Registrar’ to carry out the registration process in the Registrar’s Office.
3. Payment of Government registration fees.
4. Registering the Adoption deed in Sub Registrar Office along with two witnesses on the appointment date.
5. Registered Adoption deed available within a week or so after registration in Registrar’s office.

Key Points to look during the adoption of a child

• Only Hindus, Sikhs, Jains, and Buddhists are capable of adoption under the ‘Hindu Adoption and Maintenance Act 1956‘. Whereas Muslims, Christians, Parsis, and Jews can undertake the adoption process under the ‘Guardian and Wards Act 1890‘after prior permission from the court.

It’s necessary for the parents who’re thinking of adopting a child are to produce certain original documents along with two self-attested copies to undergo the legal adoption process.

Documents to be furnished with the adoption deed format are listed below

• Any of the following documents for identity proof- Passport/ Driving License/ Voter ID / Pan Card
• Address proof- Aadhaar Card/ Ration Card/ Electricity bill
• Marriage Certificate
• The Prospective Adoptive Parents are requested to submit a recent Health certificate stating and proving that the individuals don’t suffer from any contagious disease or mental or physical agony and are fit and competent to take care of the adopted child.
• A family photograph
• Three recently clicked photographs of the adoptive family (postcard size).
• The self-employed prospective adoptive parents are asked to furnish an IT statement of the preceding three years. If they are employed in any organization then they are asked to submit an income certificate from the organization.
• Two letters of recommendation are to be submitted by the Prospective Adoptive Parents (PAP). One of them is the letter by a close acquaintance and the other one from a far relative of the Prospective Adoptive Parents.
• In case of any previous adoption, the PAP are requested to submit the Adoption Decree.
• In case if the PAP already has a biological or adopted child aged more than 7 years, written consent from that child is necessary to proceed further with the adoption process.
• Single Prospective parent needs to furnish a letter from any of their close relative stating their approval to take care of the child due to any unforeseen circumstances.

In conclusion, Child Adoption would not take more than 2 weeks, if the required documents are available and a draft adoption deed is prepared in advance. We have shared a draft adoption deed in this article as a reference that can be used to create a legally vetted ‘Deed’ for submission to Registrar’s office.

A partnership deed is also called a partnership agreement, a written document among partners engaging in a business together. Indian law provides entrepreneurs with several options for starting a business. And owing to myriad benefits, a partnership firm is one of the most preferred choices amongst entrepreneurs.

However, running a business in partnership isn’t easy and involves a lot of planning and risk; factors like disagreements, money or any other internal conflict can lead to a fallout. Before embarking on a new journey and investing all your savings and efforts towards starting your new joint venture, it is wise to sign a partnership deed, a legal practice that can help protect the interests of each party involved in the business partnership.

So, if you are planning to start a business venture and considering registering the partnership firm, then you are at the right place. You might wonder what partnership deed is?. In this blog, we will cover everything about the partnership deed in India and its significance.

Partnership Deed Documents & More

What is Partnership Deed? 

A partnership deed is a legal agreement when two or more people come together to run an enterprise. This document mentions all the essential terms and conditions related to the business, such as profit/loss sharing, obligations, admission of new partner/s, decided rules, salaries, exit process, etc.

This document plays a vital role, and if the firm ends up in a courtroom for some reason, it can be served as a legal document. A Partnership deed, also known as the Partnership Agreement, is registered under the Indian Registration Act 1908, so there’s no risk of the Deed of partnership being destroyed in possession of the partners.

Also, registration of the partnership deed provides several benefits, such as making the organization eligible for PAN and opening a bank account. It helps obtain GST registration or FSSAI license in the organization’s name. 

The Contents of the Partnership Deed

A partnership Deed can protect your interest if there’s any dispute or confusion over a particular matter. Hence, the Deed must include all the legal details related to the firm. Although there’s no standard format for drafting a Partnership Deed, to provide you with a fair understanding of its contents, we have provided you with a list of data that is present in the partnership agreement:

A partnership deed includes the following information:

• Purpose of Partnership: The name and address of all the partners and other necessary details to explain the type of business undertaken by the partners.

• Principal place of business of partnership: The firm will operate from such location(s) as the Partners determine from time to time. 
• Partnership duration: The Deed must mention the firm’s establishment date and the deal period.
• Capital contribution: Contribution of the firm’s capital, cash, property, goods, or services in agreed-upon value (partnership contribution share-wise).
• Capital Withdrawals: Details of the drawing policy permitted to every partner and whether any interest will be paid to the firm on such drawing.

• Salary & Commission: Details of the ratio or percentage of the partners’ salary.
• Profit & loss ratio: Profit/Loss ratio to be accrued to and be borne by the Partners

• Regulation for dissolving partnership: Details of the firm’s accounts and how it will be treated if the firm is dissolved.
• Rules for admission of a new partner: Details regarding the future admission, retirement and exit of a partner.

• Rules to be followed: Guidelines to be followed if a partner goes bankrupt.

• Account and audit details: Accurate and complete books of account of the firm’s transactions to be available at all reasonable times and open to inspection and examination by any partner. 
• Voluntary Withdrawal of a Partner: Rules for voluntary withdrawal to be mentioned in the Partnership Deed.

• Duties of Partners: It mentions the role and responsibilities of each partner.
• Banking and Partnership Funds: The funds held in the firm’s name will be placed in a bank account designated by the Partners.

• Borrowings: A written consent of all the partners will be required for taking loans from banks, financial institutions, or any third parties for the firm’s financial requirements. 
• Partnership Financial year

The term “property” was explained in the case of Raichand v. Dattatrya as “property includes all legal rights of a person except his personal rights”.

In R.C. Cooper vs. Union of India, the Supreme Court observed that the term property “includes both corporeal things such as land, furniture and incorporeal things such as copyrights and patents.”

Partition – A partition is a division of a property held jointly by several people called co-owners of that property.

After partition, each such co-owner gets a share of the property that he is entitled to and becomes the rightful owner of the property.

To carry out this partition, a partition deed is executed.

Partition Deed

A partition deed can be defined as a deed that enables the partition of the property among different people, usually, of a family, and defines the share of each co-owner of the property. The partition deed needs to be duly registered with the Sub-Registrar office, only then it’s considered a legal document and can be given as evidence. The deed must be executed on the stamp paper in a very clear and explicit manner, stating the share of each co-owner. After the partition of the property, each person gets the right to sell, gift, or transfer his share of the property according to his will.

Kinds of property that can be partitioned:

There are 2 main categories of property that can be partitioned in India:

Joint Family or Coparcenary Property:

In this kind of property, all coparceners have a joint interest in the property and it is possessed by all of them jointly. This kind of property can be further divided into 4 categories:

Ancestral Property- This property should be 4 generations old, i.e., property acquired by a Hindu Great Grand Father, which is inherited by 3 generations of grandchildren. Property inherited from mother, or uncle, or grandmother is not considered ancestral property.
b. Property jointly acquired by joint family members- This is the property which is acquired by Joint Hindu Family members by their labor and efforts through business or profession with or without the aid of Joint Family Funds. This property is considered as a joint family property unless intended contrary.
c. Property acquired by Joint Family Funds- When a member of Hindu Joint Family acquires separate property with the aid of Joint Family Funds, it will be considered as a Joint Family Property and not separate property.
d. Separate property given to Joint Family Fund- When a member of Hindu Joint Family acquires separate property and gives it to the Joint Family Fund intending to give up all his private rights associated with the self-acquired property, it becomes Joint Family Property.

Self-acquired Property:

 Self-acquired property is the property that a person acquires with his efforts and money and is not inherited from his forefathers. He is the sole owner of the property and has private rights regarding the same. Property acquired by gift or will is also considered self-acquired property. In the same manner, property acquired by adverse possession is also considered self-acquired property.

Modes of Partition:

There are mainly 3 modes by which partition of a property can be carried out:
1. Partition by mutual agreement,

This can be further divided into two categories:
a. By Partition Deed
b. By Family Settlement Agreement
2. Partition without mutual consent or Partition through Court,
3. Partition through Will Probate,

Partition by mutual consent:

Partition by mutual consent can be carried out by two methods, one by partition deed and another by family settlement agreement-
a. Partition Deed:

If the partition is with mutual consent, the partition deed is needed to be executed by the co-owners. If all the co-owners of the property have mutually decided to divide the property, they can do so by executing a partition deed and registering it at the local sub-registrar office. After that, the partition deed is required to be registered at the office of the sub-registrar where the property is situated. The stamp duty payable in such a case is Rs 1,000 for each share of the property and the registration fee is Rs 500.
• The partition deed can be executed when all co-owners mutually agree to have the property divided.
• The partition deed ensures the division of the property according to the share of the individual.
• Upon the execution of the partition deed, co-owners become rightful owners of their share of the property and become empowered to gift or sell or transfer their share of the property according to their will and needs.

Effect of Partition Deed:

A partition deed creates different owners out co-owners of a property jointly held by them; however, this deed needs to be registered at the office of the sub-registrar to give it a legal and binding effect. The partition deed should also mention the date from which the partition is effective. The names of the parties and their respective shares should also be expressly cited.

 Family Settlement Arrangement:

A property can be divided by the family settlement arrangement as well if the family does not want the Court to be involved. Such a partition is carried out by negotiation and discussion. It is made in the same format as a partition deed, but unlike a partition deed, it does not need to be registered or stamped. It is also not necessary that the family settlement agreement is in writing, it can be made with a mutual understanding of the family members. However, it is necessary that this partition is carried out with the mutual consent and complete satisfaction of the family members, without any fraud, pressure, coercion, or undue influence, and signed by all the co-owners of the property.

Partition without mutual consent or Partition through Court:

If the partition is not with mutual consent, i.e., the co-owners are not agreeing to the partition of the property or in conditions where only one or more of the co-owners want the property to be partitioned, the mode of partition is the filing of a lawsuit. So, in such cases, a partition suit is required to be filed in the appropriate court of law. But before a partition suit is filed in court, a legal notice is sent to all co-owners of the property to avoid the court case. The legal notice must state the details of the disputed property, shares of each co-owner, and action required to be taken. If the co-owners do not or insufficiently reply to the legal notice, then a partition suit can be filed. However, the limitation period for filing this suit is 12 years from the date the possession of the defendant becomes adverse to the plaintiff as provided in the Limitation Act, 1963, and the burden of proving that the suit is barred by time is upon the opposite party.

If the partition is not possible merely based on the partition suit, the Court may also appoint a Commissioner to conduct an inquiry and submit a preliminary report. The Commissioner then evaluates the property and submits the report based on which the Court determines the share of each co-owner and divides the property accordingly.
• A lawsuit is required to be filed in the appropriate court if co-owners of the property are not willing to execute a partition deed.
• This must be done after a legal notice has been sent to the co-owners.
• If co-owners ignore or insufficiently reply to the legal notice, then a partition suit can be filed.

Partition through Will Probate:

“Probate” is the copy of a Will certified under the seal of a court of competent jurisdiction. According to Section 222 of the Indian Succession Act, 1922, probate can only be granted to the executor under the Will. After the petition has been filed, the Court gives public notice in any newspaper to invite any objection, and if there is no objection, the Court upon being satisfied and considering the evidence grants probate in a probate court hearing.

Conclusion:

In India, both joint family property, as well as self-acquired property, can be divided and partitioned and this partition of property can be carried out in many different ways. If all co-owners of joint property consent to partition, then it can be done in a very simple and hassle-free manner. However, even if one or all co-owners do not consent to partition, the same can be carried out by filing a partition suit in the appropriate court. If the partition is being carried out by a partition deed, then it is compulsory that the partition deed gets registered and stamped before the sub-registrar for it to become legally binding. Only a registered partition deed can be given as evidence in the court. On the other hand, partitions carried out by family settlement arrangements need not be registered or stamped.
Partition where a partition suit is needed to be filed, it is necessary that first a legal notice is sent to all the co-owners of the property which states shares of each co-owner. If not fruitful, then a partition suit can be filed in the appropriate court. A partition can also be carried out through will probate. Partition of property empowers the sole owner of the property to transfer, sell or gift their share of the property, which cannot be done when it is a joint property held by two or more co-owners.

What is a Mortgage?

Before diving straight into the mortgage deed, first, we need to understand what a mortgage is? 

In India, Mortgage is governed under Section 58 to 104 of the Transfer of Property Act, 1882. A Mortgage can be defined as the transfer of interests in a specific property to secure the loan advanced or to be advanced in the future. In other words, we can say that when any person takes a loan from anyone, some security is required to be kept with the lender to have the assurance that in case of default in the repayment of the loan, the lender can recover his money from that security. 

The person who mortgages his property against the loan is called “Mortgagor.” Whereas the person to whom the property is mortgaged is called Mortgagee” and the terms and conditions related to mortgages are contained in the “Mortgage Deed”.

Most common forms of mortgages

Simple Mortgage or Registered Mortgage [Section 58(b)]

According to Section 58(2) of the Act, a property can be mortgaged:

• Without delivering possession of the mortgaged property.
• When the mortgagor binds himself personally to pay the mortgaged money by execution and registration of a mortgage deed. In the deed, he agrees that in case of his failure to pay the money, the mortgagee shall have the right over the property. The latter can sell the property to recover his money. 

Mortgage Clause

This clause highlights the type of Mortgage the parties have agreed. It is the most important clause of the mortgage deed as all the rights and duties of both the parties are dependent on the type of Mortgage by which the property is being mortgaged. Say for example, in the English Mortgage the mortgagee has the absolute right to sell the property. While the simple mortgage possession of the property is not necessary. The clause also describes the duty of the mortgagee and mortgagor like:

• In case the mortgagee has repaired the property, he can claim the money from the mortgagor if given in the Contract.
• The mortgagor shall repay all the other costs.
• If it is specifically mentioned in the clause that the mortgagor cannot lease the mortgaged property without taking the prior permission of the mortgagee, the former cannot do so without the consent of the latter.

Possession

The clause decided whether the mortgagor has the right to exercise possession over the mortgaged property or not. It also depends upon the type of Mortgage you are choosing to mortgage the property. E.g., in the simple Mortgage, the possession may remain with the mortgagor. On the contrary, in the Usufructuary Mortgage, the possession of the mortgaged property must be delivered to the mortgagee.

Title deeds

The above clause clarifies as to what title deeds need to be transferred to the mortgagee. If it is given in the clause that all the title deeds related to the mortgaged property must be given to the mortgagee, then the mortgagor shall transfer all the documents of the title deed to the mortgagee. 

Insolvency

This clause is an essential clause in the mortgage deed as it specifies the treatment of mortgaged property in case the mortgagor is declared insolvent. 

Required Documents

In this clause, all the documents which are necessary for making the deed valid and identifying the parties are specified. For e.g.: PAN card, Adhar card, Passport, Bank passbook, Property Documents, Voter’s ID, Driving License.

Redemption clause

Redemption is again the most important and fundamental right possessed by the mortgagor. It is an essential attribute of the transaction of the Mortgage. It’s a statutory right given to the mortgagor under Section 60 of the Act. The clause specifies the tenure of the mortgage deed as to when the mortgagor is entitled to get his property back. The clause says that on payment of the principal and interest after the expiry of the due date for the repayment of money, how the property is supposed to go back to the real owner of the mortgaged property. 

Attestation and stamp duty

It is pertinent to state that the mortgage deed shall be duly registered and stamped to have legal validity. In case of a Simple mortgage, if the deed is not signed, registered and attested by at least two witnesses, it is equivalent to not having a contract in the first place. The criteria of attestation and registration depend upon the kind of Mortgage.

The nominal stamp fee must be paid. The stamp fees depend upon the state the property is located. 

Certain clauses which should not be ignored 

We generally take loans from banks. They usually have standard contracts. We just sign them without reading the whole agreement, which later on hurt us. So it is essential to read the following clauses carefully: 

Interest rates

We have to be very careful about the interest rates charged by the mortgagee. Sometimes it is a fixed rate, but sometimes the rates can be fluctuating, which is a matter of concern. The fluctuating interest rate empowers the mortgagee to change the interest rates according to the fluctuations in the base rates. So whenever you are signing any mortgage agreement, you must carefully look at the interest rates in the agreement.

Amendment clause 

Such clauses may completely go against the interest of the mortgagor as it gives power to the mortgagee to alter the clauses of the agreements in the event of the default of the party. 

Lease Clause

This clause allows the mortgagor to lease the mortgaged property with the prior permission of the mortgagee. This clause is beneficial for the mortgagor.

Possession

You must check carefully whether you have to give the possession of the property to the mortgagee or not. Sometimes this clause creates legal issues if not read properly as there can be loopholes in this clause.

Wrapping up

It is imperative to understand the terms and conditions of a contract you are entering into. Legal professionals may make mistakes while drafting a mortgage deed, but you need to make sure that you won’t suffer from the common issues only because of negligence. There are some essential clauses in the deed which can create a lot of problems for you if not read correctly. That is why the understanding of these important clauses is necessary. I hope this article has helped you and made you understand about the Mortgage, the mortgage deed and some important clauses which are the backbone of the whole deed of Mortgage.