13. When the mortgage becomes immediately pay able.—The third covenant states the circumstances under which the whole of the principal sum of the mortgage and interest becomes due and payable prior to the agreed date. This may be on account of non payment of interest, taxes or assessments, or by rea son of actual or threatened demolition or removal of the buildings on the premises. The covenant does not say that thirty days grace shall be allowed for the payment of interest, but it does say that if the in terest remains unpaid for thirty days the mortgagee can not only enforce payment of the interest in ar rears, but can require payment of the principal as well. Were it not this agreement, suit could be brought for the unpaid interest only. The mort gagee is _also given the option of calling for payment of the mortgage if taxes or assessments remain un paid for thirty days. As taxes and assessments cre ate a lien which takes precedence of the mortgage, the security of the mortgage lien is impaired when they are not paid. The mortgagee need not extend fur ther credit under such unfavorable circumstances.
The buildings on the premises are under the con trol of the owner. They are very often an important part of the security. Under this clause the mortgagee can require payment of his mortgage if the owner threatens to destroy or remove the buildings, or if he actually has accomplished their destruction or re moval. If he knows such action is threatened he can obtain an injunction, restraining the owner from corn mthing waste.
Any new building placed upon the land becomes realty and comes under the lien of the mortgage. The mortgage attaches to all that is realty as long as the lien continues.
14. Appointment of a receiver.—The fourth cov enant provides that if an action of foreclosure is brought, the mortgagee shall be entitled to the ap pointment of a receiver for the rents and profits of the property. Under this clause no notice need be given of the application for the appointment of the receiver, and the right is given regardless of whether the property is sufficient security for the debt or not. It happens frequently that when it is necessary to foreclose, the land and buildings are not adequate se curity for the amount owing. This is so especially if the amount of unpaid taxes and interest is large. The appointment of a receiver gives added security to the mortgagee, as in the event of a deficiency at the foreclosure sale, the surplus in the receiver's hands, less commissions, will be applied to the payment of the mortgage.
The court may decline to appoint a receiver, even when the mortgage contains a receivership clause, if the court deems it unnecessary to do so. Similarly,
they may appoint a receiver during foreclosure upon proper application and due notice, even tho the mort gage contained no such privilege.
This covenant also proceeds to pledge the rents and profits as further security for the debt in the event of default. The intent of this is to give the mortgagee the right to exercise the assignment, and to go in and collect the rents. It is often difficult to put the assignment into operation, however, as the tenants are not inclined to recognize it. Usu ally it is necessary to resort to the receivership. There is no reason why the owner should not give up possession of the property if he wishes to do so, and instruct the tenants to pay zent to the mort gagee. The owner is, however, entitled to an account ing and any surplus must be applied to the amount due to the mortgagee.
15. Obligation to pay taxes.—The third cove nant made the principal sum due by reason of non payment of taxes or assessments. The fifth cov enant coptains an agreement on the part of the owner to pay such taxes (and also to pay water rates). If they are not paid, this clause gives the holder of the mortgage the right to pay them. The owner then be comes liable for their repayment, and they are added to the lien of mortgage.
16. Changes' in tax laws.—The sixth covenant has to do with taxation upon mortgages. The loan is made relying upon mortgage tax laws in force at the time, and if any change- which affects;the mortgage is made in the law the holder has the right to give thirty days' notice requiring the the mort gage. The responsibility for any hardship occa sioned to the owner by such procedure rests with the legislative body making the change in the law.
17. Notices.—The seventh covenant provides for giving to the owner such notice as the holder of the mortgage may desire to give him. There is no ne cessity under the instrument for any notice except those the holder may desire to give. Notices are fre quently sent, however, notifying the owner of in terest becoming due, or fire insurance policies expir ing, or taxes and assessments due.
18. Warranty.—The eighth covenant includes the covenant of further assurance and the covenant of warranty, similar to two of the covenants found in the warranty deed. By reason of this covenant any interest in the land acquired by the borrower subse quent to the date of the mortgage, would come im mediately under the lien of the mortgage.