Mortgages Flashcards
What is a mortgage?
A conveyance of land as security for the payment of a debt or the discharge of some other obligation.
-Santley v Wilde [1899]
What is the purpose of a mortgage?
Provide a lender of money with security for the debt. If the borrower fails to repay the debt, the lender can use the property to recover the sum and any interest payable. The lender is able to deduct the sums owed from the proceeds of sale.
Legal Mortgages S.85
The mortgagor, instead of transferring the fee simple, grants a long lease of the property to the mortgagee.
Terminable when the loan is repaid
- Subject to ‘cesser on redemption’.
Advantage: The mortgagor retains his estate in the land, buy the mortgagee also has an estate, the lease, which gives him certain rights in relation to the land.
Legal Mortgages S.86
Provided for such a mortgage to be created by granting a sublease to the mortgage.
The period of the sublease would be the unexpired period of the mortgaged lease, less 10 days. S.86 (2)
Legal Mortgages S.87
Method in normal use today. Charge of deed by way of legal mortgage.
The mortgagor merely executes a deed which declares that he is charging his land by way of legal mortgage with the repayment of the loan plus interest.
This form of ‘charge’ may be used for both freehold and leasehold estates.
S.87 provides ‘the same protection, powers and remedies’ as if the mortgage had been made by lease or sublease.
- Grand Junction Co Ltd v Bates [1954]
- Held: That the provisions of S.87 gave him a right to apply for relief just as though he held a mortgage sublease.
Advantage: Enables an owner to mortgage his freehold property and leasehold property in one document.
Registered Mortgages.
Triggers Registration S.4(1)
Equitable Mortgages
Contract to create a mortgage.
“Equity regards as done that which ought to be done”.
Reliance on an equitable mortgage is dependent upon the contract being one which the courts would enforce by an order for specific performance.
-Tebb v Hodge 1869
Informal Mortgages by Deposit of Deeds
Equity is willing to recognise and protect any transaction in which it was clear that an estate owner had intend to charge his property with the repayment of a loan meant that many informal arrangements were regarded as equitable mortgages due to the events which had taken place as evidence of a contract to grant a mortgage.
- Russel v Russel
Need for Writing
Necessary to show that an agreement was made in writing to establish an informal mortgage.
United Bank of Kuwait Plc v Sahib [1997]
If a mortgage is ineffective due to S.2 the loan will become immediately repayable because the security has failed.
Rights of the Mortgagor (Borrower)
- Right to Redeem
- Equity of Redepmtion
- Right to Sue
Right to Redeem
At Law:
- Mortgagor can redeem on the date or dates and in the manner provided for in the mortgage.
- Can only redeem on that specified date.
Equity:
- As long as the advance and any interest was paid, the mortgagee should not be able to object to redemption because the purpose of the agreement was merely to provide the mortgagee with the security for the loan.
- Can redeem even after the date fixed by the mortgage agreement for repayment has passed.
- Clean hands doctrine.
- Substance of the agreement, not form. Darby v Read 1675
Equity of Redemption
Mortgagor’s equitable interest in the property and it consists of the sum total of the land mortgagor’s rights in relation to the land. An interest in land.
-Pawlett v Attorney-General 1667
No Clogs on Redemption
Equity does not allow any arrangement which either prevents or deters the mortgagor from exercising his right to redeem. Mortgage should provide security only, and that on redemption the mortgagor should recover the property without further fetter.
Prevention of Redemption:
Any provision in a mortgage which would operate to prevent the mortgage from redeeming will be disregarded by equity and will be void.
A mortgage cannot include a term that “should a specified event occur” the land would become his absolutely.
-Toomes v Conset 1745
Postponement of Redemption
Any provision in a mortgage that attempts to postpone redemption to such an extent that the right to redeem becomes illusory may also be rendered void. The equitable right to redeem arises only once the contractual, legal date for redemption has passed.
Freehold Cases:
Knightsbridge Estates Trust Ltd v Byrne 1939
Leasehold Cases:
Fairclough v Swan Brewery Co Ltd 1912
Collateral Advantages of Redemption
Common in commercial mortgages.
Collateral advantages are valid unless they are unconscionable or contrary to competition law, are valid whilst the mortgage continues.
-Biggs v Hoddinott 1898
They will not endure once the mortgage is redeemed.
An advantage will not invariably end once the mortgage is redeemed.
May also be held to be invalid if they are unconscionable or oppressive.
Right to Sue
S.98 allows a mortgagor in possession who has not been notified that the mortgagee intends to take possession, to sue in a number of situations in which there might otherwise be difficulties. Generally, the mortgagor is free to bring any necessary action in relation to the land.
