Mortgages Flashcards
Is the mortgage a proprietary right?
Yes; a legal interest
What is a mortgage?
- A bundle of proprietary rights granted to the lender (mortgagee) as security for a loan
- Rights = to possess and sell the land in event of default of mortgage repayments
Who grants the mortgage?
The borrower (mortgagor) to the lender (mortgagee)
Why is everyday language re bank giving a mortgage technically wrong?
From bank
The bank gives us a loan which is secured by the granting of a mortgage over property
To be a legal interest, what are the formalities of a mortgage?
- Deed
- Registration
What are the requirements of a deed?
- Intended to be a deed (clear on face of doc)
- Validly executed
- Delivered
Conveyances of land/interest void unless made by deed
Recall valid execution:
* Deed must be signed by grantor (seller) in presence of a witness
* Witness needs to sign deed to confirm witnessing (attesting the signature)
Recall delivery: An acknowledgement that person entering a deed intends to be formally bound by provisions (usually dating the agreement in practice)
How is a deed validly executed for an individual and a company?
- Individual = grantor
What happens to the deed once it has been made?
Registered at Land Registry
What happens if a mortgage is not registered at the Land Registry?
- Mortgage won’t take effect as a legal mortgage in the land
- May still be an equitable interest
What are the 2 reasons an equitable mortgage is likely to arise?
- Mortgage of an equitable interest
- Defective legal mortgage
When will there be a mortgage of an equitable interest?
Where borrower holds equitable interest in land (not legal owner) any mortgage of that interest will be equitable
How is a mortgage of an equitable interest created? Is it as strict as a legal mortgage?
As in how is a mortgage of an equitable interest created (not how is an equitable mortgage created)
No - only need be in writing and signed by grantor (borrower)
Whatare the conditions for a defective legal mortgage to be regarded as an equitable mortgage?
- Not granted by a valid deed/not completed by registration = defective
- Provided in writing, contains all agreed terms, signed by mortgagor and mortgagee = equitable mortgage (LP(MP)A s2)
What is the difference between:
1. Estate contract which is recognised as an equitable mortgage
2. Equitable mortgage which is inherently equitable
- Created through a defective legal mortgage
- Equitable mortgage over equitable interest in the land
How is a mortgage fully discharged?
Following full repayment
When all reference to it has been removed from Charges Register at Land Registry
What form is used to discharge a mortgage over:
1. Whole of land title
2. Part of land (e.g. part of land being sold to buyer)
- Whole = DS1 [dis 1 whole piece of land]
- Part = DS3 [dis third of the land (not whole)]
What is the equity of redemption?
The bundle of rights that equity recognises the mortgagor as having
Must be no ‘clogs and fetters’ on the equity of redemption
What does the equitable right to redeem recognise?
That mortgage is security for a loan and not opportunity for lender to gain something more
Allows the borrower to repay the loan any time after legal date of redemption has passed
What does the equity of redemption do?
- Recognises borrower as true owner of property and protects them
- Prevents borrower from exploitation by the lender
- Protects borrower from clauses postponing/preventing redemption, collateral damages and unconscionable terms
What are the four basic rights under the equity of redemption?
- The equitable right to redeem the loan
- No postponement or prevention of redemption
- No collateral advantages to the lender
- No unconscionable terms in mortgage deeds
I.e. rights 2, 3 and 4 prevent clauses that do these things
Right 2 makes sure the equitable right to redeem is not interfered with
When will the equitable right to redeem arise?
Any day after the legal date of redemption (date specified on which borrower has to repay loan in full)
I.e. borrower can repay loan in full any time after legal date of redemption has passed
Re legal date of redemption: historically the borrower could only redeem the mortgage on this one day, if they did not pay on legal date of redemption, the lender could keep property! However equity intervened with this harsh rule and recognised that the borrower has an equitable right to redeem the mortgage any day after the legal date of redemption has passed
When is the legal date of redemption?
Usually within first 6 months of mortgage term - but as banks loan £100,000s, people cannot pay on this date, so mortgage terms are 20-30 years usually
What is the financial value of the equity of redemption?
Market value less the outstanding debt
I.e. the equity people have in their homes
Will courts allow clauses which prevent redemption altogether?
No; will be automatically void