Property mortgage involves one party using their own property to secure the performance of obligations without transferring the property to the other party. When implementing Property mortgage measures, one of the critical aspects that all parties involved need to pay attention to is the rights and obligations of the Mortgagor. In this article, TNTP will provide information about the Rights and Obligations of the Mortgagor in Property mortgages.
1. Rights of the Mortgagor
The Mortgagor in asset mortgages has the following rights:
• Exploit, and enjoy the yield and income derived from, the property, except where the yield and income also form part of the mortgaged property as agreed.
• Invest in order to increase the value of the mortgaged property.
• Recover the mortgaged property and related documents held by a third person when the obligation secured by the mortgage is terminated or is substituted by other security.
• Sell, replace, or exchange the mortgaged property, if it is goods circulating in the process of production or business. In this case, the right to demand payment from the buyer, the amount received, property formed from the amount received, or the property replaced or exchanged becomes part of the mortgaged property.
When a warehouse is mortgaged, the mortgagor may substitute goods in the warehouse but must ensure the value of the goods in the warehouse remains the value agreed.
• Sell, exchange or give mortgaged property not being goods rotating during the production and business process with the consent of the mortgagee or as prescribed by law.
• Lease or lend the mortgaged property provided that notice must be provided to the lessee and the borrower that the property is being mortgaged and that the mortgagee must also be notified that such notice has been provided.
2. Obligations of mortgagor
The mortgagor in property mortgages has the following obligations:
• Transfer documents related to the mortgaged property, unless otherwise agreed or prescribed by law.
• Take care of and preserve the mortgaged property.
• If the mortgaged property is in danger of losing its value or depreciating in value due to its exploitation, to take necessary remedial measures, including ceasing the exploitation of the mortgaged property.
• When the mortgaged property is damaged, the mortgagor is obligated to, within a reasonable period, repair or substitute another property with equivalent value, unless otherwise agreed.
• Provide information about the actual condition of the mortgaged property to the mortgagee.
• Deliver the mortgaged property to the mortgagee for realization in one of the cases prescribed in the cases: i) An obligator fails to perform or perform not as agreed an obligation when it falls due; ii) An obligator must perform the secured obligation before time limit due to his/her violation against the obligation as agreed or prescribed by law; iii) Other cases as agreed by the parties or prescribed by law.
• Notify the mortgagee of any third-person rights with respect to the mortgaged property (if any). In the case of failure to provide such notice, the mortgagee shall have the right to cancel the contract of mortgage of property and demand compensation for damage or the right to maintain the contract and agree on the rights of the third person with respect to the mortgaged property.
• Do not sell, exchange or give the mortgaged property, except in the cases:
i) In cases where the mortgaged property is goods circulating in the process of production or business, the mortgagor is allowed to sell, replace, or exchange this property. In the case of mortgaged goods, the mortgagor has the right to replace the goods in the warehouse but must ensure the value of the goods in the warehouse as agreed.
ii) In cases where the mortgaged property is not goods circulating in the process of production or business, the mortgagor can only sell, exchange, or donate this property if agreed upon by the mortgagor or as stipulated by the law.
This article, “Rights and Obligations of the Mortgagor in Property Mortgage” is provided by TNTP for your reference. If you have any questions or need further clarification, please feel free to contact TNTP for timely assistance.