Paper 1: Lesson 7 Mortgage/Gift/Trust/Succession Flashcards
What is a Mortgage?
A mortgage is a security interest in real property held by a lender as a security for a debt, usually a loan of money.
*A mortgage itself is not a debt, it is the lender’s security for a debt.
*A mortgage is a security for the loan that the lender makes to the borrower.
What are some chracteristics of a mortgage?
- Mortgage is a security transaction, where the Mortgagor (borrower) conveys the title of his property to the Mortgagee (lender/bank) with a promise by the lender to return the title when the debt is fully paid up.
- Mortgagee (bank) holds the title as ‘lien’ till mortgage is fully paid.
- Mortgagor assigns the interest to Mortgagee in exchange for the sum borrowed.
- Mortgage is an interest. It can be passed to the next owner.
e.g. Mortgage is passed on to the beneficiary upon death of the mortgagor.
What is a “Charge” in mortgage?
It is a legal term on the priority of claims. (who has the 1st charge)
What is a Legal Mortgage? (secured)
A legal mortgage is a type of security interest that gives the lender the right to take the property if the borrower doesn’t repay the loan. It’s the most secure form of mortgage.
*Mortgagor assigns the legal interest to Mortgagee. Mortgagee has legal interest and mortgagor has equitable interest. Thus, Mortgagee and mortgagor have interests at the same time.
What is an Equitable Mortgage? (unsecured)
No mortgage agreement signed but done verbally or actions of parties shows that there is a mortgage. Not registered with SLA.
e.g. mortgagor passes the certificate of title to the mortgagee for a loan. If not redeemed at the time stipulated, title belongs to the mortgagee. mortgagee holds title as ‘lien’.
In this case, mortgagor still holds legal interest in the title but let mortgagee have equitable interest to the ppty.
^ Licencesed Moneylender.
What are some legal rights of the Mortgagee? (e.g. bank)
- Right to sell
- Without court order, mortgagee (bank) sells the ppty via private auction/treaty, known as mortgagee sale. Title is still held under Mortgagor’s name. Once sold, mortgagee will hold the sales proceeds on trust for the mortgagor.
After deducting the o/s loan + interest, balance will be returned to mortgagor.
- Right of foreclosure:
- Mortgagee repossess the ppty through court order.
- Title is transferred to mortgagee where they can decide to sell the ppty in the future or grant occupational lease. - Right to grant occupational lease (21 years max) or building lease (99 years max).
- Mortgagee can lease the ppty and collect rent.
What are the legal rights of Mortgagor?
- Right of Equity of redemption
- Mortgagor gets back his title after full settlement of the loan with mortgagee. - Mortgagor has revisionary interest.
- If mortgagor’s lease out the property for more than 3 years, he needs to get the mortgagee’s consent.
- Mortgagor is required to give 3 months notice/3 months interest in lieu of notice to mortgagee in the vent mortgagor wishes to make an early redemption.
- Mortgagor has the right to inspect title deeds.
What is a Caveat?
Caveat is a notice of a claim lodged by a person who claims an interest in land.
A caveat is a legal document lodged at SLA by someone against a property which the caveator claims an interest.
Land titles act allows anyone who claims an interest in the proepty to lodge a caveat.
When a caveat is lodged, Registrar of title will notify all parties including owners.
Who may lodge a Caveat?
- Buyer
- Financial institutions (banks)
- CPF board
- Benficiary (who has equitable interest in the ppty)
- Lessees (with legal interest in the ppty)
- Controller of residential ppty
(empowered to lodge a caveat on restricted ppty to prevent foreign person from selling it during MOP)
Who cannot lodge a Caveat?
- Creditors (unless through court order, as they have no interest/rights to the ppty)
- Licensees (no interest in ppty)
How long does a Caveat lasts?
5 years
What is the purpose of a Caveat?
- To give notice of interst of caveators to others (Doctrine of Notice)
- PRovides protection of unregistrable interests (buyer’s interest during transitional period prior to completion).
- Protects interest of caveators by prohibiting registration of conflicting interests (protect buyer’s interest. a caveat prevents another buyer from lodging the sam caveat before completion of sale).
- Caveats show that owners do not have 100% interest on his ppty when a caveat is lodged on his title.
What are the circumstances where Caveat can be removed?
- Upon Sale
- Caveator passed away or become bankrupt
- By court order.
What is a Property Under trust?
It means that there is a Trustee is holding and managing the ppty for another person (beneficiary).
Trusts may be created by contract/will or deed, which are the 3 Trust instruments.
Deeds are usually used when there are no considerations given for an agreement.
Max 4 trustees
What are some charateristics of Trust?
- Trust is for a defiinite term, usually 20 years but can be extended.
- Beneficiary can use this trust deed to lodge a caveat with Land registry on the title. To register the equitable interest. (cannot use Will to lodge a caveat)
- Trust deed may also be registered under the Registration of Deeds Act so that is if enforceable. Deeds not registered are not enforceable in court.
Who is the
- Settlor
- Trustee
- Benefiaciary
- Settlor
The person/entity who creates the trust. - Trustee
The person/entity appointed by the settlor to hold the legal title of the trust ppty and perform duties of the trustee. (trustee is like the manager of the trust property for the beneficiary). - Beneficiary
The person/entity named by the settlor to benefit from the trust. Beneficiary holds equitable interest to the trust ppty.
Explain the difference between “Inter-vivos trust” and “Testamentary trust”
“Inter-vivos trust”, also known as living trust, takes effect during when the grantor is still alive. (only signed by Settlor/trustor)
‘Testamentary Trust” also known as will trust / trust under will, is when the grantor Will it to the child where the child will only own the ppty upon their death.
- Parents can appoint a trustee who is at least 21 years old to hold the ppty for the child before he/she turns 21.
- Before the child turns 21, the child owns equitable interest in the ppty.
What is Public Trust and how is it formed?
Public trust is when a Trustee is appointed by Court/Law.
E.g. When someone dies without a Will. Court appoints a trustee (known as administrator) to distribute the estate of the deceased.
WHen someone becomes bankrupt. An official assignee (OA) acts as public trustee to handle bankrupt person’s assets. Bankrupt’s assetswill be vested with OA.
Why is a trust created?
- when a person is underage or has a mental disability.
- once beneficiary is deemed able to manage the real estate by terms dictated under trust, the beneficiary will receive possession of the trust.
- Trustees have the right to make decisions based on due diligence and in best interest of beneficiary.
What are the requirements to create a Trust?
- Certainty of intention:
- settlor must possess a specific intention or purpose behind creating a trust to create a trust obligation. - Certainty of subject matter:
- refers to the requirement that the specific property intended to be held in trust must be clearly identified and separated from other property - Certainty of object:
- means that the beneficiaries of a trust must be clearly identifiable, meaning it must be certain who is entitled to benefit from the trust - Constitution:
- refers to the process of establishing a trust by transferring property or making a declaration of trust. - Formalities:
- Statutory provisions must be followed - Capacity:
- The settlor must have the legal and mental capacity to create the trust
What are the ways Trust can be terminated?
- Trustee may resign.
- By Court order
- Upon passing the ppty to the beneficiary
- Upon sale (trust does not bind bona fide 3rd party - buyer)
What are the 4 types of Trust?
[Trust deed]
1. Express Trust
[Implied under Common Law]
2. Resulting Trust
3. Constructive Trust
4. Unregistered Trust
Explain how “Resulting Trust” works.
It can occur when someone pays for property that is registered in another person’s name.
*Not applicable for Singaporeans to hold restricted ppty (e.g. Landed) on trust for any foreign person. Trust is null n void. cannot claim.
Explain how “Constructive Trust” works.
A constructive trust can be imposed when someone has obtained property through fraud, or if they’ve been given money by mistake.
