Transfer of Property Act Section 78 — Postponement of prior mortgagee

CHAPTER IV OF MORTGAGES OF IMMOVEABLE PROPERTY AND CHARGES — Priority

General

Summary

If a first mortgage holder acts fraudulently, misleads someone, or is extremely careless, and because of that another person is persuaded to lend money against the same property, then the first mortgage holder loses their priority. In that situation, the later lender’s claim on the property comes ahead of the earlier one.

Official Text

Where, through the fraud, misrepresentation or gross neglect of a prior mortgagee, another person has been induced to advance money on the security of the mortgaged property, the prior mortgagee shall be postponed to the subsequent mortgagee.