Mortgages

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Mortgage

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A mortgage is a loan secured upon land and is both a contract and a proprietary interest, which can be either equitable or legal. They are given as a security for a repayment of a loan.

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James v Morgan (2001)

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Legal principle: Contracts that contradict that the rights of the mortgagee and the obligations of the mortgagor must end as soon as the debt (incl interests and costs) is repayed will be struck out.

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Mortgages before 1926

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The borrower would convey their legal/equitable title to the mortgagee and it would be re-conveyed when the loan was paid off.

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Equity of redemption (17th century)

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To mitigate the harshness of the legal date of redemption by allowing the mortgagors to be able to get the title re-conveyed even after legal date of redemption.

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Thornborough v Baker (1675)

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The authority for the equity of redemption.

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LPA 25, s 82 (1)

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The mortgage is created by way of a charge over the asset or by way of a long lease over the asset.

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Section 23 (1) LRA 2002

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Legal mortgages on registered titles can only be made by way of charge and not long lease

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Long Lease

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Only now available with unregistered titles since 2003. Would give the mortgagor a long lease (roughly 3,000) over the asset until loan was repaid. Mortgagor retains the freehold to the mortgaged property but the mortgagee acquires a proprietary interest.

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Four-Maids Ltd v Dudley Marshall Properties Ltd (1975)

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Long leases provide that the mortgage is entitled to take possession of the property 'before the ink is dry on the mortgage'.

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Section 87 LPA 25

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Legal mortgage : Charge must be made by DEED, 'a legal mortgage made by charge'. Chargee obtains 'the same protection, powers and remedies' as if the mortgage had been created by a long lease of 3,000 years

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Regent Oil Co. v Gregory

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‘the same protection, powers and remedies’ as if the mortgage had been created by a long lease of 3,000 years in the old way

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How to create equitable mortgage

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1. The mortgage has been created on an equitable interest

2. On registered land the mortgage has not be registered as a 'registrable charge' on LRA 2002

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Section 53 (1) (c) LPA

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Equitable mortgage does not have to be contained in a deed but must be in writing, signed by the donor or his agent.

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ss25 and 27 LRA 2002

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Legal mortgage of registered title must be registered as 'registrable charge'.

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Section 29 LRA 2002

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Registering charge of mortgage ensures that it takes priority as an overriding interest

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How is an equitable mortgage protected

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By means of notice against the mortgaged registered title

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What does a legal mortgage do in an unregistered title

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BINDS THE WORLD!

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What is a puisne mortgage

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A subsequent LEGAL mortgage

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Subsequent legal/equitable mortgages must be protected by...

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Means of registration as a class C(i) and C(iii) land charge respectively (Land Charges Act 1972)

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Land Charges Act (1972)

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Tells us how subsequent legal and equitable mortgages must be protected by means of registration

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What are the 4 rights of the mortgagor

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Equitable right to redeem

Equity of redemption

Freedom from unconscionable terms and unreasonable rates

Freedom from undue influence