Decoding Charge and Mortgage in Property Law

When it comes to property-based lending, two terms often appear in legal documents—charge and mortgage. At first glance, they might seem interchangeable, but their meanings under Indian property law differ significantly. Think of it this way: both ensure repayment security, yet the nature of control and legal rights attached to each is not quite the same. Understanding these distinctions isn’t just for lawyers; it helps borrowers and lenders know what rights are being created or transferred when a loan is taken against property. 

What is a Charge in Property Law?

A charge is a form of security interest created on property to secure a debt or obligation. However, unlike a mortgage, it doesn’t transfer ownership or any legal title. Imagine a soft lock placed on the property—preventing its unrestricted disposal but not handing over control. 

In simple terms, a charge gives the lender the right to claim payment from a specific asset if the borrower fails to meet their obligation. Under Section 100 of the Transfer of Property Act, 1882, a charge can arise either by act of parties (through agreement) or operation of law (for instance, a decree of a court). 

What is a Mortgage in Property Law?

A mortgage defined under Section 58 of the Transfer of Property Act, 1882, is a transfer of an interest in specific immovable property to secure the repayment of money advanced. In simple words, the borrower (mortgagor) offers ownership interest to the lender (mortgagee) as security, which gets restored once the loan is fully repaid. 

Think of it as lending the property’s ‘rights’ but not its ‘possession’—a symbolic assurance that gives the lender a stronger legal claim if the borrower defaults. 

Key Legal Differences Between Charge and Mortgage

Although both create security interests, their legal implications differ substantially. 

A mortgage involves a transfer of interest, while a charge does not—it only creates a right over the property. In case of default, a mortgage gives the lender an enforceable right to sell or take possession (depending on its type), but a charge usually requires court intervention to be realised. 

Another distinction lies in personal liability. In a mortgage, the borrower is personally liable unless specifically excluded. In a charge, such liability does not automatically arise—it depends on the contract or legal provision that created it. 

Think of it like this: a mortgage gives the lender the ‘keys’ to act, while a charge merely provides the ‘permission slip’ to ask the court for the keys. 

Also Read: Mortgage Loan Processing Fees and Extra Charges 

Creation and Registration Process of Charge and Mortgage

Both charges and mortgages must be created through clear intention and documentation. 

• A mortgage is created through a registered deed (except for equitable mortgages, which are perfected through title deposit). 
• A charge may arise automatically through law or through an agreement and must be registered if it concerns immovable property to ensure its validity against third parties. 

For companies, registration of both charge and mortgage with the Registrar of Companies (ROC) is mandatory under the Companies Act, 2013. Failure to do so can render the security void against other creditors. 

Financial and Practical Implications for Borrowers and Lenders

For borrowers, knowing whether their property is mortgaged or merely charged determines their level of control and responsibility. In a charge, the borrower usually retains greater flexibility—ownership remains untouched. In a mortgage, though, the lender’s interest is deeper, offering stronger assurance and enforceability. 

From a lender’s perspective, mortgages offer a more secure footing. They provide a direct remedy if repayment fails, unlike a charge, which often needs judicial enforcement. However, charges are quicker to create, making them useful for specific financial arrangements where speed matters more than control. 

Charge vs. Mortgage in Indian Property Financing

Consider a housing finance arrangement—when an individual avails of a Home Loan, the lender generally creates a simple or equitable mortgage over the property. The ownership remains with the borrower, but the lender’s interest is legally protected. 

Now, think of a charge created by a housing society over member contributions or maintenance dues. No transfer of property interest takes place, yet the right to recover remains. This shows how both concepts coexist in Indian property law, each with distinct legal outcomes. 

This content is for general understanding. Readers are advised to check official government and regulatory sources for the latest details.