Distinction among the terms 'mortgage', 'lein',
This query is : Resolved
10 August 2013
I always got confused among the below-mentioned terms. So, please clarify. Distinction among the terms 'Mortgage', 'Lien', 'Charge', 'Hypothecation', 'Pledge' and so on.
10 September 2013
Please reply
25 September 2013
reply if any expert knows the issues...
21 July 2024
Certainly! Let's clarify the distinctions among the terms 'mortgage', 'lien', 'charge', 'hypothecation', and 'pledge':
1. **Mortgage:**
- **Definition:** A mortgage is a legal agreement where a borrower (mortgagor) pledges real estate or property as collateral to secure a loan from a lender (mortgagee).
- **Nature:** It involves transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan.
- **Possession:** The mortgagor retains possession of the property but grants the mortgagee a legal right over it.
2. **Lien:**
- **Definition:** A lien is a legal right or interest that a creditor has in another's property, typically as security for the payment of a debt or performance of some other obligation.
- **Types:** There are two main types:
- **Possessory Lien:** This occurs when a creditor retains possession of a debtor's property until the debt is paid.
- **Equitable Lien:** This is based on the principles of equity and does not involve possession but creates a charge or encumbrance over the property.
3. **Charge:**
- **Definition:** A charge is a form of security interest created over assets for the purpose of securing repayment of a debt or performance of an obligation.
- **Nature:** It can be created over both movable and immovable property. It does not involve transfer of ownership but gives the charge holder certain rights if the debt is not paid.
4. **Hypothecation:**
- **Definition:** Hypothecation is a legal concept where a borrower pledges collateral to secure a debt or loan without transferring possession of the collateral to the lender.
- **Usage:** It is commonly used in financing movable assets (like vehicles or machinery) where the borrower retains possession but gives the lender the right to sell the asset in case of default.
5. **Pledge:**
- **Definition:** Pledge involves delivering possession of movable property to a lender (pledgee) as security for a loan or debt.
- **Nature:** Unlike hypothecation, possession is transferred to the lender, but ownership remains with the borrower (pledgor). The lender has the right to sell the property if the borrower defaults on the loan.
### Summary of Differences:
- **Nature of Property:**
- **Mortgage:** Involves immovable property (real estate).
- **Lien, Charge, Hypothecation, Pledge:** Can involve both movable and immovable property.
- **Transfer of Possession:**
- **Mortgage:** Mortgagor retains possession.
- **Lien:** Depends on whether it's possessory or equitable.
- **Hypothecation:** Borrower retains possession.
- **Pledge:** Possession transferred to the lender.
- **Purpose:**
- **Mortgage, Hypothecation, Pledge:** Typically used to secure loans or debts.
- **Lien:** Ensures payment of a debt or obligation.
- **Charge:** Secures repayment or performance of an obligation.
Understanding these distinctions is crucial in legal and financial contexts to accurately describe the nature of security interests or encumbrances over property in various transactions.
1. **Mortgage:**
- **Definition:** A mortgage is a legal agreement where a borrower (mortgagor) pledges real estate or property as collateral to secure a loan from a lender (mortgagee).
- **Nature:** It involves transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan.
- **Possession:** The mortgagor retains possession of the property but grants the mortgagee a legal right over it.
2. **Lien:**
- **Definition:** A lien is a legal right or interest that a creditor has in another's property, typically as security for the payment of a debt or performance of some other obligation.
- **Types:** There are two main types:
- **Possessory Lien:** This occurs when a creditor retains possession of a debtor's property until the debt is paid.
- **Equitable Lien:** This is based on the principles of equity and does not involve possession but creates a charge or encumbrance over the property.
3. **Charge:**
- **Definition:** A charge is a form of security interest created over assets for the purpose of securing repayment of a debt or performance of an obligation.
- **Nature:** It can be created over both movable and immovable property. It does not involve transfer of ownership but gives the charge holder certain rights if the debt is not paid.
4. **Hypothecation:**
- **Definition:** Hypothecation is a legal concept where a borrower pledges collateral to secure a debt or loan without transferring possession of the collateral to the lender.
- **Usage:** It is commonly used in financing movable assets (like vehicles or machinery) where the borrower retains possession but gives the lender the right to sell the asset in case of default.
5. **Pledge:**
- **Definition:** Pledge involves delivering possession of movable property to a lender (pledgee) as security for a loan or debt.
- **Nature:** Unlike hypothecation, possession is transferred to the lender, but ownership remains with the borrower (pledgor). The lender has the right to sell the property if the borrower defaults on the loan.
### Summary of Differences:
- **Nature of Property:**
- **Mortgage:** Involves immovable property (real estate).
- **Lien, Charge, Hypothecation, Pledge:** Can involve both movable and immovable property.
- **Transfer of Possession:**
- **Mortgage:** Mortgagor retains possession.
- **Lien:** Depends on whether it's possessory or equitable.
- **Hypothecation:** Borrower retains possession.
- **Pledge:** Possession transferred to the lender.
- **Purpose:**
- **Mortgage, Hypothecation, Pledge:** Typically used to secure loans or debts.
- **Lien:** Ensures payment of a debt or obligation.
- **Charge:** Secures repayment or performance of an obligation.
Understanding these distinctions is crucial in legal and financial contexts to accurately describe the nature of security interests or encumbrances over property in various transactions.
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