Interests in Land - Mortgages

Question 1

Mortgage -
Defintion
(2)

Includes?

Answer 1

s103(7) - mortgage incudes any charge/lien or other registered security for repayment of a loan

s2 - A personal covenant where a charge is taken as security on land in return for a loan

Mortgagee - Lendor
Mortgagor - Borrower
Land - can be tenements/hereditaments/corporeal/incorporeal/waterways/liberties/easements/priciledges

s4 - ‘mortgage’ Includes -
charge over property
registered mortgage
mortgage debenenture [taken from company]

Part 6 s 100 LTA - mortgage takes affect as security, not actual transfer of property

Question 2

Mortgage Instrument

Encumbrance Instrument

Answer 2

s101 - Mortgage instruments are:
- required to charge any estate/interest in land

• must contain : land/interest/estate to be mortgaged, who is mortgagor, who is mortgagee, nature of debt, covenants
• must be registered by RP

Encumbrance Instrument - must be executed by encumbrancer to secure charge on land; contain land/interest/estate to be mortgaged, who is mortgagor, who is mortgagee, nature of debt, covenants

Question 3

Variation of Mortgage Instrument

Requires
Variation
How can it be varied? [s?]

Discharge of Mortgage Instrument

Answer 3

Requires - mortgage variation instrument

• principle amount secured by mortgage may be reduced [by mortgagee] increased [by mortgagor]

s279(2) A covenant may be negatived, varied, extended by:

• express terms of instrument
• by written memorandum
• if implied in short term lease, by express or implied agreement of the parties

Discharge of Mortgage Instrument -
o S111 – mortgage discharge instrument required to discharge (must be executed by mortgagee; describe land – may be made by court)

Question 4

Priority of Mortgages

variation of priority?

Answer 4

• priority determined by date - s37

- mortgages priority can be varied by a mortgage priority instrument - s103LTA

Question 5

Mortgagor’s Duties / Covenants / Rights

Section?

Answer 5

s95 PLA

(1) Every Mortgage will contain implied covenants/conditions/powers relevent to circumstances unless contrary intention is expressed

Question 6

Mortgagor’s Duties / Covenants / Rights

Examples?
DERP

Answer 6

Duty to Pay

• Mortgagor has a duty to pay all principal/interest sums, and to observe all covenants in mortgage

Redemption of Title

• [Under Common Law] - mortgagor has duty to have title redeemed if they meet terms of the loan
HOWEVER - common law was strict - if the landowner did not repay in time, they could keep the title, and borrow would lose all moneys paid towards the loan

THEREFORE: STATUTORY SOLUTION

Equity of Redemption

• If borrrower defaults - mortgagor may redeem amount they have paid; court may order sale of property and reemburse mortgagor

Possession

• Mortgagor holds right to possession until mortgagee exercises his remedies against the land
• Mortgagor may deal with land as owner - subject to rights of the mortgage
HOWEVER s203-205 protects BFPV if property sold on - only after registration

Question 7

Mortgagee’s Duties / Covenants / Rights and Remedies

Custody
Personal Remedy
Remedy over land

Answer 7

Custody over Instrument of Title

• Right to grant/certificate or other instrument of title over land - s109 PLA

Due to nature of personal covenant/security - Mortgagee has personal remedies against mortgagor and remedies against land

Personal Remedies:
Right to sue mortgagor on personal covenant
Right to obtain judgement for principal sum and interest
• Per Limitation Act 2010 - mortgagee has
12 yrs to recover principal
6 yrs to recover interest

Remedies against the land

Right to enter into posession
• Where mortgagor defaults, mortgagee may [under s137 PLA]
- take physical posession
- assert management/control over land
- apply to courts for order of possession

and Right to sell the land under Power of Sale
Mortgagee must:
- give notice
- exercise reasonable care/good faith upon sale
[Per Downsview Ltd v First City Corp]
This duty is owed to mortgagor/subsequent encumbrancers and guarantors of mortgagor
s177 - no defence for breach of this duty

IF MORTGAGEE EXERCISES THIS POWER WRONG
Mortgagor may block the sale by applying to HC for interim injunction, for order setting aside, for damages.

However s203-205 protects BFPV after registration of purchase

Question 8

Westpac v Clark

Answer 8

Facts
- an imposter took out mortgage with Westpac on someone elses property
- Westpac became aware
- Registrar did not allow registration of mortgage
• Westpac argued the solicitor’s failure to register caused them loss; and if registered Westpac would have been a BFPV

Held

• Due to fraud - the registration was merely a debt instrument, not a mortgage
• Without fraud - W would have a valid charge

Question 9

Transfer of interest by mortgagee

Answer 9

s105 - registration of a transfer by a mortgagee exercising power of sale over land shall transfer mortgage interest to purchaser
• individual who accepts transfer holds same liability as original mortgagor, however liability of original mortgagor is not extinguished (s204)