Report No. 70
Renewal of Lease Under Mortgage
The adjustment of claims of the mortgagor and the mortgagee in regard to property newly acquired is dealt with by the next section-section 64-which deals with renewal of a lease under mortgage. Where the mortgaged property is a lease and the mortgagee obtains, a renewal of the lease, the mortgagor, upon redemption, shall, in the absence of a contract by him to the contrary, have the benefit of the mortgagee's title thereto. Before 1929, the section was confined to cases, where the mortgaged property was a lease for a "term of years". This restriction has now been omitted so that, whether it is a term of years as such or a lease for an indefinite period-for example, a lease until the happening of a certain contingency-the section is applicable.
The section is subject to a contract by the mortgagor to the contrary. What is the position where there is no express contract? Such a question may arise where, at the time of creating the mortgage, the parties did not advert to the possibility of renewal. This question arose in Calcutta High Court in 1921.1
An opinion was expressed in the judgment that there is only a presumption that the mortgagee acquires renewal of the lease for the mortgagor's benefit and that such a presumption might be rebutted, and that when a new lease was obtained bona fide by the mortgagee after giving all parties interested notice and an opportunity of renewal, the new lease is not for the benefit of the mortgagor. Although this conclusion may not be strictly according to the terms of the section, the view taken, with respect, seems to be a sensible one.
1. (1921) 62 Ind Cas 692 (694, 695) (DB) (Cal).
63.3. Purchase of reversion-Recommendation.-
In England, where the mortgaged property is lease-hold and the lease contains an option to renew or to purchase the reversion, and the mortgagee exercises the option, the mortgagor is entitled on redemption to have the renewed lease or the reversion transferred to him, subject to payment of the property expenses involved in exercising the option.1 Section 64 does not make any express provision for the situation of purchase of reversion by the mortgagee.
It would appear that it will be convenient if this situation is also dealt with by an express provision. We recommend that the section should be so simplified. It may be noted that the English law as stated above, is wide enough to cover such a case. In fact, the principle is much wider than the situation of a lease. Every student of equity is familiar with the doctrine in Keech v. Sandford, 1726 Select Cases in Chancery 761; Chose Law of Mortgage in India, (1902), p. 327.
In this leading case on the subject of constructive trust, the lessor distinctly refused to renew the lease to the infant and it was not suggested that the trustee was guilty of any improper conduct; yet the trustee was not allowed to take a renewal to himself. In the application of this principle to the particular subject under discussion, the position is that the additional term of the lease comes from "the old root subject to the same equity of redemption", as was observed by the Master of the Rolls in the leading case of Bakestraw v. Brewer, (1728) 2 P Wms 510.
1. Nelson v. Hennam, 1943 Ch 59: (1942) 2 All ER 680.