TAKING POSSESSION IN MORTGAGE

Can any equitable mortgagee take possession? The answer is no. The right of entry into possession is only available to a legal mortgagee. Possession goes with legal ownership; hence a legal mortgagee is entitled to possession whether or not the mortgagor is in default of payment of the loan. But where he takes possession, he is liable to account strictly to the mortgagor for the rent/profits accruing from the property.It is for this reason that mortgagees do not find the right to possession attractive unless it is used as a preliminary to enforcing the power of sale. But in practice, mortgagees insert in the mortgage instrument a clause that exclude the rule that a mortgagee in possession or a receiver appointed by him shall account strictly

Credit - proptiger.com 

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QUESTION:

When does the right to TAKE POSSESSION arise?

ANSWER:

As soon as you have executed the mortgage deed and the Governor has given his consent, the mortgagee becomes entitled to possession immediately.The right arises immediately after the execution of the mortgage deed. It is possible, however, for the mortgagee to give away this right under the mortgage deed. If there are the tenants on the mortgaged property, they will pay rent to the mortgagee. While in possession, the mortgagee can create leases and accept surrender of leases.

A mortgagee is advised not to take possession except the property is being squandered or being destroyed or depreciated is imminent or where there is need to intercept the profit. If a mortgagee decides to go into possession, equity imposes on him a strict liability to account for the profits on the property. He will be liable for negligence or wilful default for any sum not recovered. He is also liable for any deterioration or neglect or disrepair of the property. He cannot, however, be compelled to get the highest rent on the property. Note that he cannot make profit from the property; he can only realise his security.

To be continued with APPOINTMENT OF A RECEIVER

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