40Trustee as mortgagee in possession, application of income by

##### 40. Trustee as mortgagee in possession, application of income by (1) Where a trustee is entitled, whether severally or as a co‑mortgagee, to a debt secured by a mortgage of land in trust as to the whole or part of that debt for persons by way of succession, and the trustee is at the date of commencement of this Act, or at any time after that date becomes, mortgagee in possession of the mortgaged land, the trustee shall apply the net income of the mortgaged land received by him after that date or after he becomes mortgagee in possession — (a) in discharge of all rents, taxes, rates, and outgoings affecting the mortgaged land; and (b) in payment of the premiums on any insurances properly payable on the mortgaged property; and (c) in keeping down all annual sums or other payments and the interest on all principal sums having priority to the mortgage in right whereof he is in possession; and subject to the rights of the mortgagor, the trustee shall hold the residue of the income so received by him upon the trusts to which the mortgage debt is subject. (2) The rents, taxes, outgoings, premiums, costs, annual sums, payments and interest to be discharged, kept down and paid, pursuant to subsection (1), shall be those accruing due — (a) after the date of the commencement of this Act, where the trustee is in possession of the mortgaged land at that date; and (b) after the date of possession by the trustee, where the entry into possession is after the date of commencement of this Act; but if at the date of commencement of this Act, or on the date of possession by the trustee, as the case may be, any rents, taxes, rates, outgoings, annual sums, payments, interest or premiums mentioned in subsection (1)(a), (b) or (c) were or are due and unpaid, and such of those rents, taxes, rates, outgoings, annual sums, payments and premiums as are periodic payments were payable wholly or in part in respect of any period subsequent to the date of commencement or to the date of possession, as the case may be, then the lastmentioned rents, taxes, rates, outgoings, annual sums, payments, and premiums shall, for the purpose of this section, be considered as accruing from day to day and shall be apportionable in respect of time accordingly. (3) On the recovery of the moneys secured by the mortgage, whether in whole or in part, and whether by repayment or on realisation of the security or otherwise, such part of the income applied by the trustee in the payments specified in subsection (1)(a), (b) and (c) as would otherwise have been payable as interest to the person entitled to the interest of the mortgage debt shall, as between the persons respectively entitled to the income and corpus of the mortgage debt, be deemed to be arrears of interest and the amount received by the trustee shall be apportioned accordingly. (4) Notwithstanding anything in this section contained, the trustee may, if in the administration of the trust he thinks it necessary so to do, apply income of the mortgaged property received by him after the date of commencement of this Act in payment of any rents, taxes, rates, outgoings, premiums, costs, annual sums, payments, and interest affecting the mortgaged land other than those specified in subsection (2); but the person entitled to the interest on the mortgage debt shall be entitled to recoupment out of the capital of the mortgage debt of all payments made by the trustee under the authority conferred by this subsection.