Legal Mortgages: Protection & Priority Flashcards
Why must a mortgagee consider protecting their mortgage immediately after its creation?
A mortgagee must consider protection to ensure the mortgage binds any purchaser and maintains priority over subsequent mortgages, safeguarding the mortgagee’s interest if the mortgagor tries to sell the property or create further mortgages
What is required for a legal mortgage on registered land to be fully effective and enforceable?
s 27 of the Land Registration Act 2002 classifies a legal mortgage as a registrable disposition, requiring its registration against the title affected to be legal and to bind a purchaser or later mortgagee of the land.
In the registered system, what happens to the mortgagee’s status upon the registration of a mortgage?
Upon registration, the mortgagee is entered as the proprietor of the charge on the Land Registry, officially documenting their interest against the property.
Has the method of protecting a mortgage on registered land changed with the introduction of the Land Registration Act 2002?
No, the method of protecting a mortgage on registered land has remained consistent before and after 13 October 2003; it requires registration to be legally effective.
What are the consequences of not registering a mortgage on registered land?
If a mortgage on registered land is not registered, it is not legally binding on a purchaser for value, jeopardizing the mortgagee’s security and priority over the property.
Under what condition is a legal mortgage of unregistered land not registrable on the Land Charges Register?
A legal mortgage of unregistered land is not registrable on the Land Charges Register if the mortgagee retains the title deeds. If the deeds are not retained, registration would typically be required.
How does the creation of a legal mortgage affect the registration status of unregistered land?
The creation of a first legal mortgage on unregistered land since 1998 necessitates the first registration of the title, marking a significant step towards formalizing the legal estate’s status.
What must second or third lenders check before lending on the security of land with existing mortgages?
They need to verify that the land’s value is sufficient to repay all existing mortgages in the event of the borrower’s default.
How is the priority of mortgages determined on land with multiple mortgages?
Priority is determined by the order of registration on the Land Registry, with earlier registrations taking precedence over later ones.
What effect does failing to register a mortgage have on its priority?
The order of priority shifts, placing fully registered mortgages first.
An unregistered mortgage becomes an equitable interest, losing legal priority and potentially being ranked after subsequent registered interests.
How do subsequent lenders ensure their mortgage is protected and prioritized?
By correctly registering their mortgage as a charge on the property’s title, ensuring it is recognized in the order of priority at the Land Registry.
What role does s 48 of the Land Registration Act 2002 play in determining the priority of mortgages?
s 48 stipulates that the priority of registered charges depends on their order of entry on the register, establishing a “first come, first served” basis for mortgage priority.
What determines the binding nature of third-party interests on a mortgagee?
The binding nature depends on whether the interest was created before or after the mortgage registration, the mortgagee’s consent to post-mortgage interests, and the protection status of these interests under the Land Registration Act 2002.
How does exercising the power of sale affect prior and subsequent encumbrances on a property?
Exercising the power of sale results in the property being sold subject to any encumbrances that have priority but free from those that do not.
If there are prior mortgages, the property is sold subject to these unless the selling mortgagee redeems them, allowing the sale to proceed free of these earlier claims. This approach resolves issues for purchasers concerned with buying a property subject to prior mortgages.
How do third party interests affect a mortgagee’s right to sell a property?
Third-party interests, such as leases, must be considered by mortgagees, especially when exercising the power of sale.
Interests created before the mortgage might take priority, requiring the mortgagee to sell the property subject to these interests.
Post-mortgage interests are generally not binding unless consented to by the mortgagee.
After the Land Registration Act 2002, registrable dispositions and interests must be registered or noted for priority, with certain overriding interests being automatically prioritized if existing by the mortgage completion date.
