Accession, Improvements, Renewed Leases and the Mortgagor's Power to Lease

In one line

Whatever the property gains while it is mortgaged belongs to the borrower when he redeems, he may still let it out on ordinary terms, and he must not damage it if the security would then be too small.

In exam wording: sections 63 and 63A give the mortgagor, on redemption, the benefit of any accession to and improvement of the property; section 64 gives him the benefit of a renewed lease; section 65 sets out the covenants implied against him; section 65A defines his power to lease; and section 66 fixes his liability for waste.

Section 63: accession

An accession is something that comes to the property, whether by nature, such as land added by a river, or by act, such as a building put up on it.

The rule. Where mortgaged property in possession of the mortgagee has, during the continuance of the mortgage, received any accession, the mortgagor on redemption is entitled, in the absence of a contract to the contrary, to the accession as against the mortgagee.

The principle is that the mortgagee holds as security only. He is not to profit from his temporary holding of somebody else's land.

Where the mortgagee paid for it, the section balances the accounts by asking two questions in order.

Is the accession capable of separate possession or enjoyment without detriment to the principal property? If yes, the mortgagor who wants it must pay the mortgagee the expense of acquiring it. He may equally leave it.

If separate enjoyment is not possible, the accession must be delivered with the property, and the mortgagor is liable to pay its proper cost only where the acquisition was necessary to preserve the property from destruction, forfeiture or sale, or was made with his assent. That cost is added to the principal money, carrying interest at the rate payable on the principal, or nine per cent per annum where no rate is fixed.

In that last case the profits from the accession are credited to the mortgagor, which is only fair since he is paying for it.

Usufructuary mortgages. Where the mortgage is usufructuary and the accession was acquired at the mortgagee's expense, the profits from the accession are, absent contrary contract, set off against the interest on the money so expended.

Section 63A: improvements

Inserted in 1929, this does for improvements what section 63 does for accessions, and it is stricter against the mortgagee.

Sub-section (1). Where mortgaged property in the mortgagee's possession has been improved during the mortgage, the mortgagor on redemption is entitled to the improvement, and shall not be liable to pay the cost of it, except in the cases in sub-section (2).