mortgages Flashcards
What is mortgage?
Mortgage is granted to a lender by a landowner in return for the loan of money.
Borrower: mortgagor
Lender: mortgagee
Types of mortgages?
1- Legal Mortgages: (made by deed)
a) By Demise: made in the form of long lease of the mortgagor’s land to the mortgagee with the provision that the lease will come to an end when the mortgage is redeemed and all capital and interest is repaid.
b)By way of Legal Charge:
-Executing deed:mortgagor charging the land by way of legal mortgage
-Charging a registered estate: by deed with payment of money
2- Equitable Mortgages may be of either a legal estate or an equitable interest and can be created
a)A Mortgage expressed to take effect in equity only: parties can agree that an equitable mortgage will be sufficient for their purposes and will state that it is to take effect equir=ty only. (suitable for short term loan) this charge must be in writing and signed by mortgagor or his agent.
-By contract to create a legal mortgage
Any contract to create legal mortgage will be regarded as giving rise to an equitable mortgage from the date of the contract (it is like they want to make legal mortgage. but for some reason they become unsuccessful)
-Where mortgagor owns equitable interest only
If the mortgagor holds only equitable interest, an equitable mortgage is all that can be created. need not be by deed but it must be in writing and signed by the mortgagor or his agent.
note:: a person can not create a legal mortgage over property in which they do not have a legal estate. but if a charge is created an at the time the mortgagor does not own the property , if they subsequently acquire the legal estate and the intention is clearly that a valid legal mortgage on the specified property was the desired outcome, then a valid legal charge will be created.
3-Statutory Charges:
For example charging order being made by the court.
protection of mortgages
1- Mortgages of registered land
a)Legal mortgages of registered land
must be completed by registration if the mortgagor is to be able to exercise the power of sale. once registered, it has priority over competing interests unless they are protected on the register or are overriding interests.
b)Equitable mortgages of registered land
*Protection of an equitable mortgage under LRA 1925
Prior to the LRA 2002, an equitable mortgage should have been protected by a notice or caution being placed on the register of title
*Protection of equitable mortgage under LRA 2002
Under the act an equitable mortgage is not a disposition to be completed by registration. The equitable mortgage should be protected by a notice or restriction.
2- Mortgages of Unregistered land
a) First mortgage
A mortgagee with first most mortgage (that is the mortgage which takes priority over any other borrowing secured on the property; if the property sold, the first mortgage will. be paid first) Any legal mortgage which is not protected by the deposit of any title deeds must be protected by the registration of puisne mortgage (a class C(i) land charge)
b)Equitable Mortgage
If the mortgage is an equitable mortgage of the legal estate , it should be protected by registration as a class C (iii) land charge.
If the mortgage is an equitable mortgage of an equitable interest, the mortgagee should give notice to the trustees
3- Mortgages by companies
must be registered at the Company Rgistry within 21 days of creation of the charge. a charge not registered in this way will not bind the liquidator or creditors if the company subsequently goes into liquidation.
must accompany the application to register the charge at HMLR.
Protection of third parties with an interest in land:
1- Interest of tenants:
a) Tenancies granted before the mortgage was created
a.a) Legal tenancy of unregistered land:
-will bind the mortgagee.
-if the land is registered and the tenancy doea not exceed 7 years, it will bind the mortgagee and it will be overriding interest
- if the tenancy is for more than 7 years the lease should be registered with its own independent title. If this is not done, the lease will not be treated as an overriding interest unless and until the tenant goes into occupation.
a.b) Equitable Tenancy of unregistered land:
An equitable tenancy of unregistered land must be protected as an estate contract by the registration. of a class C(iv) estate contract. If this is not done, it will be void against a purchaser of the legal estate for money.
*once the tenant goes into possession and pays rent a court would normally infer a periodic tenancy, which is a legal tenancy and will bind the mortgagee.
a.c)Equitable Tenancy of Regsitered land:
An equitable tenancy of registered land that does not exceed 7 years is not an overriding ineterst. Once the tenant goes in to the occupation, his ineterst would then override that of mortgage.
b) Tenancies Granted after mortgage
the mortgagee will not be bound by unauthorized tenancy.
c)Occupiers with an interest in the land
-spouse
partner who contributed to the purchase price, court may be willing to allow the non owning party tostay in the occupation, thus defeating the mortgagee;s ability to repossess.
2- Co-owners
all co -woners eneyterd I to the mortgage agreement, as coowners will be bound by it and mortgagee will be able to o obtain vacant possession on default.
problem: if the mortgagee is le di g money for a purpose of other than acquisition of the property
for example: leading money to finance the husband’s business
in that case the wife is effectively acting a s a guarantor of her husband’s debt.
and she must:
1- be separately represented by another solicitor
2- be given full financial information
the creditor must take reasonable steps to satisfy itself that the practical implications of the proposed transaction has been understood by the wife. If the bank follow this guidelines and receives certificate of confirmation from the solicitor , the wife will not later be able to argue that the mortgage should be set aside. but if the solicitor has failed to carry out instructions properly, the wife may be able to sue for breach of duty.
Mortgagee’s remedy to enforce their security
1- Legal Mortgages
a)Sue for debt
-if the mortgage is in arrears
b)Take possession
-normally always but if it is dwelling, it should by by court order
c)Foreclose
-does not arise until the after the contractual date for repayment of the mortgage has passed.
-takes place by court order
-After foreclose of registered land, the mortgagee becomes registered as the registered proprietor, and entries relating to the charge are re,moved from the register.
d)Sell-most often usage
-no need to apply to court
-provide only, the mortgage created by the deed and contractual date set to redeem the mortgages has passed.(usually six monthsafter the creation of the mortgage)
requirements(one or more should be satisfied:
*interest payments are more than two months on arrears
*theer has been a written request for repayment of the capital and three months have passed without payment
*some other breach in the mortgage
2-Equitable Mortgages:
same as legal mortgages
