Transfer of Property Act Section 77 — Receipts in lieu of interest

CHAPTER IV OF MORTGAGES OF IMMOVEABLE PROPERTY AND CHARGES — ibid.

General

Summary

If the mortgagor and mortgagee have a written or verbal agreement that the income from the mortgaged property will be treated as the interest payment (or as both interest and a set part of the loan repayment) while the mortgagee is in possession, then certain duties that normally apply to a mortgagee in possession do not apply. Specifically, the rules about collecting rents, managing the property, and accounting for income are set aside in such a case. This means the mortgagee can keep those receipts as their agreed compensation without having to follow the usual accounting requirements.

Official Text

Nothing in section 76, clauses (b), (d),

(g) and (h), applies to cases where there is a contract between the mortgagee and the mortgagor that the receipts from the mortgaged property shall, so long as the mortgagee is in possession of the property, be taken in lieu of interest on the principal money, or in lieu of such interest and defined portions of the principal.