Deed of Hypothecation HP

    What is Deed of Hypothecation HP?

    A deed of hypothecation is a legal document encapsulating a transaction between a lender and borrower, wherein the borrower offers a movable asset as collateral to secure a loan. Hypothecation of a movable asset does not include giving up any ownership rights such as title or possession. However, a deed of hypothecation grants the lender a right to seize the asset upon the borrower’s failure to meet the terms of the deed.

    Why is Deed of Hypothecation HP required?

    A deed of hypothecation is required to cement the terms upon which the borrower and lender agree to the hypothecation of a movable asset against a loan. The deed ensures that the parties are aware of their rights and liabilities and have a document which can be enforced in a court of law.

    What should a Deed of Hypothecation HP cover?

    A deed of hypothecation should include details of the parties, details of the asset offered as collateral and the terms upon which the loan has been advanced by the lender. The deed should include a recital regarding ownership of the movable asset by the borrower & should also lay down the respective rights and liabilities of both the parties.

    Documents Required for Deed of Hypothecation HP

    There are no specific documents required in a deed of hypothecation. However, hypothecation deeds may require different documents depending upon the movable property forming subject matter of the hypothecation deed. For example, in case of a vehicle hypothecation, the documents required would include the registration certificate of the vehicle, two copies of form 34 required for endorsement of hypothecation, copy of insurance documents and pollution test, address and identity proof of the owner as also other required documents as per the prevailing law, depending upon applicability in each case.

    Procedure for Deed of Hypothecation HP

    The aid of a lawyer is required to have a deed of hypothecation drafted which may be enforced in a court of law. Both the parties must read the deed as drafted carefully, and make any necessary changes. It is required to be dated and signed by both parties. Thereafter, the deed of hypothecation may be required to be registered under the prevailing law depending upon its nature and purpose as per the provisions of the registration act or companies act as the case may be. 

    How can a lawyer help to draft Deed of Hypothecation HP?

    Hiring a documentation lawyer is the most important step when a hypothecation deed is to be drafted. A lawyer has the requisite expertise in drafting such documents. He/She will be able to guide you and draft for you according to your particular situation -  the facts, circumstances, business risks and needs involved. A documentation lawyer is aware of good drafting technique and the clauses that must be included in your deed. Aid of a lawyer may be necessary to ensure that the terms of the deed are not in conflict with the prevailing law and forms a binding legal document enforceable in a court of law. A lawyer’s assistance may be required to get the document registered.

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