Mortgage deed and lease deed

Drafting, Pleading and Conveyance · Unit IV · Topic 14 of 19 · 7 min read

The kinds of mortgage under section 58 of the Transfer of Property Act and the formalities of section 59, the clauses every mortgage deed needs, the lease under sections 105 to 108 and its registration, and model drafts of a simple mortgage deed and a three-year lease of a shop.

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On this page

1. Mortgage: the law the deed must meet
2. Clauses of a mortgage deed
3. Lease: the law the deed must meet
How this is examined

Cases checked to exist. Read the judgment before quoting a holding.

Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.

Two transfers of a limited interest. A mortgage transfers an interest in property to secure a debt; a lease transfers a right to enjoy property for a time in return for rent. Neither transfers ownership. Both deeds must therefore say precisely what interest passes, for how long, on what payments, and what happens on default.

1. Mortgage: the law the deed must meet

Section 58(a) of the Transfer of Property Act, 1882 (TPA) defines a mortgage as the transfer of an interest in specific immovable property to secure the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. Section 58 then names the kinds:

Simple mortgage (58(b)): no possession; the mortgagor binds himself personally to pay and agrees that on default the mortgagee may have the property sold.
Mortgage by conditional sale (58(c)): an ostensible sale that becomes absolute on default, void on payment; the condition must be in the same document.
Usufructuary mortgage (58(d)): possession to the mortgagee, who takes rents and profits in lieu of interest or principal.
English mortgage (58(e)): absolute transfer with a covenant to re-transfer on repayment on a fixed date.
Mortgage by deposit of title deeds (58(f)): in towns notified by the State Government, by delivering documents of title with intent to create security. No deed is needed, though banks record the deposit in a memorandum.
Anomalous mortgage (58(g)): any other combination.

Section 59: where the principal is one hundred rupees or more, a mortgage other than by deposit of title deeds can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. The mortgagor’s right to redeem (section 60) cannot be clogged: a clause that takes away the right of redemption is void.

2. Clauses of a mortgage deed

Parties and recital of the mortgagor’s title.
The loan: amount, date of advance, receipt.
Interest: rate, rests (monthly or yearly), compound or simple, default interest.
Repayment: date or instalments.
The operative words of mortgage and the kind of mortgage.
Covenants: to pay; to insure; to pay taxes; not to alienate or further encumber; to keep the property in repair.
Remedies on default: sale through court (or, for a bank, under its statutory powers).
Redemption on payment and return of documents.
Schedule, signature, attestation by two witnesses.

Illustrative template: simple mortgage deed, hypothetical facts.

SIMPLE MORTGAGE DEED executed at Hubballi on 25 November 2026

BY: Sri Shankar V. Hegde, aged about 50, merchant, residing at Vidyanagar, Hubballi (the “Mortgagor”) IN FAVOUR OF: Sri Prakash L. Jain, aged about 55, financier, residing at Deshpande Nagar, Hubballi (the “Mortgagee”).

The Mortgagor is the absolute owner of the Schedule Property under a registered partition deed dated 3 March 2010.
The Mortgagee has this day lent the Mortgagor Rs. 10,00,000 (Rupees Ten Lakh only) by RTGS, the receipt of which the Mortgagor acknowledges.
The Mortgagor shall repay the principal with simple interest at 12 per cent per annum on or before 24 November 2028. Interest shall be paid every quarter on the last day of March, June, September and December.
As security for repayment of the principal and interest, the Mortgagor hereby mortgages the Schedule Property to the Mortgagee by way of simple mortgage. Possession remains with the Mortgagor.
The Mortgagor binds himself personally to pay the mortgage-money. If he fails to pay according to this deed, the Mortgagee may sue for the sale of the Schedule Property and apply the proceeds towards the mortgage-money, and may recover any balance from the Mortgagor personally.
Until redemption the Mortgagor shall not sell, lease for more than one year, or further mortgage the Schedule Property without the Mortgagee’s written consent; shall pay all taxes; and shall keep the building insured for its full value.
On payment of the whole mortgage-money the Mortgagee shall execute a registered release and return the title deeds. The Mortgagor may redeem at any time before 24 November 2028 on payment of the principal and interest due to the date of payment.

Schedule: commercial building at CTS No. 789, Station Road, Hubballi, measuring 2,000 square feet, with boundaries.

Sd/- Mortgagor. Witnesses (two): 1. … 2. …

3. Lease: the law the deed must meet

Section 105 TPA: a lease is a transfer of a right to enjoy immovable property, for a certain time or in perpetuity, in consideration of a premium or rent.
Section 106: absent a contract, a lease for agricultural or manufacturing purposes is from year to year, terminable by six months’ notice; any other lease is from month to month, terminable by fifteen days’ notice. The deed should therefore state the term and the notice period.
Section 107: a lease from year to year, for a term exceeding one year, or reserving a yearly rent can be made only by a registered instrument, and where made by a registered instrument it must be executed by both lessor and lessee. Section 17(1)(d) of the Registration Act, 1908 is to the same effect.
Section 108: rights and liabilities in the absence of contract, such as the lessee’s right to transfer his interest (clause (j)), duty to pay rent (clause (l)) and to keep the property in good condition (clause (m)). Any departure must be written into the deed.
Section 111: determination of a lease, including expiry, surrender, forfeiture for breach of an express condition, and notice to quit.

Rented premises in notified urban areas of Karnataka are also governed by the Karnataka Rent Act, 1999, which controls eviction; check whether it applies before drafting a forfeiture clause.

Illustrative template: lease deed of a shop, hypothetical facts.

LEASE DEED executed at Dharwad on 1 December 2026 between Sri Ramesh G. Kulkarni (the “Lessor”) and M/s Sapna Stores, a partnership firm represented by its partner Sri Anand K. Shetty (the “Lessee”).

Premises. The Lessor leases to the Lessee the shop described in the Schedule (the “Premises”).
Term. Three years from 1 December 2026 to 30 November 2029.
Rent. Rs. 30,000 per month, payable in advance on or before the 5th of each month into the Lessor’s bank account; increased by 5 per cent at the end of each year of the term.
Security deposit. Rs. 3,00,000, paid today, refundable without interest on the Lessee handing back vacant possession, after deducting any arrears or cost of damage.
Use. The Premises shall be used only for a retail stationery shop.
Outgoings. The Lessee pays electricity and water charges; the Lessor pays property tax.
Repairs. The Lessee shall keep the interior in good condition, fair wear and tear excepted. Structural repairs are the Lessor’s responsibility.
No sub-letting. The Lessee must not transfer this lease, sublet the Premises or part with possession of any part without the Lessor’s prior written consent.
Forfeiture. If the rent is unpaid for two consecutive months after written demand, or the Lessee breaches clause 5 or 8, the Lessor may determine the lease by thirty days’ written notice.
Lock-in and early termination. Neither party may terminate during the first twelve months. After that the Lessee may terminate by three months’ written notice.
Handover. At the end of the lease the Lessee shall hand over vacant possession in the same condition, fair wear and tear excepted.
Registration. The lease is for a term exceeding one year and shall be registered. Stamp duty and registration charges are borne by the Lessee.

Schedule: ground-floor shop No. 3, 300 square feet, in the building at CTS No. 2456/B, Shrinagar, Dharwad, with boundaries.

Sd/- Lessor. Sd/- Lessee (both must sign: section 107). Witnesses: 1. … 2. …

Trap. The “11-month rent agreement” common in cities is drafted for a term under one year so that registration is not compulsory. If the agreement in fact reserves a yearly rent or is renewable as of right for longer, section 107 may still require registration, and an unregistered deed cannot then be used to prove the terms of the lease (section 49 of the Registration Act).

How this is examined

Both are standard conveyancing exercises (3 marks each). A usufructuary mortgage, a memorandum of deposit of title deeds and a residential leave and licence agreement make good additional exercises. At the viva: the kinds of mortgage; why section 59 requires attestation; clog on redemption; the difference between a lease and a licence; and when a lease must be registered.