Right of Foreclosure in detail

The right of foreclosure is a right available to a mortgagee to recover his outstanding money. The relevant provisions regarding foreclosure are contained under Section 67 of The Transfer of Property Act.

This right of foreclosure can be exercised when the mortgage money is due but not paid by the mortgagor & is available to the holder of a legal mortgage and, in certain circumstances, the holder of an equitable mortgage but not to the holder of a pledge or a charge.

As per this right, the mortgagee can obtain a court decree which debars the mortgager of his right of redemption.

CONDITIONS FOR RIGHT OF FORECLOSURE-

The right of foreclosure can be exercised only when the following conditions are fulfilled –

  • The money has become due for payment.
  • There are no contrary conditions in the mortgage deed.
  • At any time after the mortgage money has become due to the mortgagee but before the mortgagor gets a decree of redemption of the mortgaged property
  • At any time after the mortgage money has become due to him but before the mortgage money has been paid or deposited by the mortgagor.

After the mortgage money has become due, the mortgagor can pay off his debt in three ways:

  1. By tendering or making payment of the mortgage money directly to mortgagee
  2. By filing a suit for redemption
  3. By depositing the amount in court.

However, when mortgagor fails to redeem the property, the mortgagee does not become the owner of the property, he has to file a suit for recovery of the amount due. The limitation period for instituting a suit is 12 years.

 

Thus, in simple words, Foreclosure is the legal process by which a lender seizes and sells a home or property after a borrower is unable to fulfill his or her repayment obligation.

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