Legal and Equitable Mortgages Flashcards
What are the two essential formalities required for a legal mortgage?
A) It must be created by deed and registered
B) It must be signed and notarized
C) It must be agreed orally and noted in land records
D) It must be approved by a court and the Land Registry
A) It must be created by deed and registered
Explanation:
A legal mortgage must:
Be created by deed (LPA 1925, s 52)
Be registered at the Land Registry (LRA 2002, s 27(2)(f))
If a legal mortgage is not registered, what happens?
A) It remains a legal mortgage but is unenforceable
B) It becomes an equitable mortgage
C) It automatically becomes void
D) It converts into a leasehold interest
B) It becomes an equitable mortgage
Explanation:
A legal mortgage must be registered to be legally effective. If not registered, it cannot operate as a legal mortgage, but it may still take effect as an equitable mortgage if it meets LP(MP)A 1989, s 2 (written agreement, signed by both parties).
Which situation would create an equitable mortgage?
A) A mortgage granted over an equitable interest in land
B) A mortgage created by deed and registered
C) A verbal mortgage agreement between a lender and borrower
D) A mortgage that has been signed but not executed as a deed
A) A mortgage granted over an equitable interest in land
Explanation:
A mortgage over an equitable interest (e.g., a beneficiary under a trust) must be in writing and signed by the grantor (LPA 1925, s 53(1)(c)), making it equitable.
How is a mortgage officially discharged after full repayment?
A) The borrower must request removal from the Charges Register
B) The lender must destroy the mortgage deed
C) The lender must file a cancellation request with the court
D) The borrower must sign a waiver with the lender
A) The borrower must request removal from the Charges Register
Explanation:
A mortgage remains in effect until it is removed from the Charges Register at the Land Registry using the appropriate discharge form.
John grants a mortgage to a bank by deed but fails to register it. The bank tries to enforce the mortgage.
What is the status of the mortgage?
A) Void and unenforceable
B) Still a legal mortgage because it was created by deed
C) Takes effect as an equitable mortgage
D) Becomes a charge over personal assets
C) Takes effect as an equitable mortgage
Explanation:
Since the mortgage was created by deed but not registered, it cannot be a legal mortgage under LRA 2002, s 27(2)(f). However, it may still be enforced as an equitable mortgage under LP(MP)A 1989, s 2.
Sarah is a beneficiary under a trust, holding an equitable interest in land. She wants to mortgage her interest.
What is required to create a valid equitable mortgage?
A) It must be created by deed and registered
B) It must be in writing and signed by the grantor
C) It must be signed by the lender only
D) It must be formally approved by a judge
B) It must be in writing and signed by the grantor
Explanation:
Mortgages over equitable interests do not require a deed but must be in writing and signed by the grantor under LPA 1925, s 53(1)(c).
A company agrees to grant a mortgage over its land, but fails to execute it as a deed. The lender wants to enforce the agreement.
What type of mortgage exists?
A) Legal mortgage
B) No mortgage at all
C) Equitable mortgage
D) Unregistered lease
C) Equitable mortgage
Explanation:
A defective legal mortgage (one that lacks a deed) may still take effect as an equitable mortgage if it meets the writing and signature requirements under LP(MP)A 1989, s 2.
Tom takes out two mortgages on his property:
Mortgage A is created first but not registered.
Mortgage B is created later and registered.
Which mortgage takes priority?
A) Mortgage A because it was created first
B) Mortgage B because it was registered
C) Both mortgages rank equally
D) The mortgage with the higher loan amount takes priority
B) Mortgage B because it was registered
Explanation:
Under LRA 2002, s 27, a legal mortgage must be registered to take effect. Since Mortgage A was not registered, Mortgage B (which is registered) takes priority.
A lender includes a term in a mortgage agreement stating that if the borrower defaults, the lender can take full ownership of the property permanently.
Is this term enforceable?
A) Yes, because mortgage terms are freely negotiable
B) No, because the borrower has an equity of redemption
C) Yes, because the lender has a legal charge over the property
D) No, because all mortgage agreements must be approved by the court
B) No, because the borrower has an equity of redemption
Explanation:
The Equity of Redemption principle ensures that a mortgage only secures a loan—it cannot give the lender additional rights beyond security. Any term attempting to remove the borrower’s right to repay is void.
A borrower defaults on their mortgage repayments. The lender wants to take possession immediately. The property is a residential home.
What must the lender do before taking possession?
A) Enter the property and change the locks
B) Apply for a court order for possession
C) Send a written notice giving the borrower 14 days
D) Wait until the borrower voluntarily leaves
B) Apply for a court order for possession
Explanation:
For residential properties, a lender must obtain a court order before taking possession, under Protection from Eviction Act 1977.
