What is a mortgagee in possession?
A mortgagee in possession (MIP) may be appointed when the secured creditor takes possession of real estate (property) or other assets subject to the security instrument following a default in relation to the loan agreement.
The MIP may appoint an agent to act on its behalf.
What is the role of an agent for the MIP?
The role of the agent is to:
- take control of the property
- realise the property
- account to the mortgagee for the net proceeds
When is this type of appointment appropriate?
This type of appointment is appropriate when:
- there are relatively few assets subject to the security instrument
- there is no business to operate
What are the advantages of this type of appointment?
There are two key advantages to this type of appointment, outlined below:
- the mortgagee is in control of the realisation of the property or other assets subject to the security instrument
- the cost of the procedure can be relatively inexpensive as the mortgagee in possession is able to control the appointment
How is an appointment initiated?
An appointment is initiated when:
- the owner of the property is in default
- a notice has been issued to the owner to rectify the default and the owner has failed to rectify the default
- notice is given at the end of the default period that the mortgagee will take possession of the property or assets
What is the priority of repayment?
The net proceeds from the sale of the property or assets will be applied in reduction of the applicable loan account and/or mortgage facility. Any surplus would be available for the owner of the property or assets.