PRIORITY OF MORTGAGES OVER REGISTERED LAND

Question 1

What is the priority of legal mortgages over registered land?

Answer 1

• s 48LRA 2002priority between registered charges depends upon the order in which they areentered on the register.
• This is regardless of the order of creation.

Question 2

What is the priority of equitable mortgages over registered land?

Answer 2

• Against other equitable mortgagee, equitable mortgages rank in order of creation (LRA 2002, s 28).
• This is the‘basic rule’ of priority that applies to all equitable interests because an equitable interest in the land can be validly created and exist without registration.
• An equitable mortgage over registered land can be protected by the entering of a notice on the charges register (LRA 2002, s 32).
• As between competing equitable mortgages, thisdoes not affectthe priority, which will always be determined bycreation.

Question 3

How will protecting an equitable mortgage by a notice impact the priority?

Answer 3

• Competing against other equitable mortgages, thisdoes not affectthe priority, which will always be determined bycreation.
• If the equitable mortgage or charge has been protected by a notice, a subsequent lender takes subject to it, even if that subsequent lender holds a legal mortgage(LRA 2002, s 29(1))
• An equitable mortgagenotprotected by a notice, willnottake priority (i.e. lose its priority) to a subsequent registrable disposition of either a registered estate or a registered charge (i.e. atransfer of the legal estate for valueor the grant of alegalmortgage)(LRA 2002, s 29(1)).

Question 4

How can you modify the priority rules?

Answer 4

Express Postponement
- Lenders can agree to alter the position that would apply according to the priority rules by entering into adeed of priorityorintercreditor deed.
- Any agreement would need to beregisteredat the Land Registry.
- Mortgagees will also often require an express waiver or postponement to be included in a mortgage agreement so that the rights of any person living at the mortgaged property with the mortgagor are postponed to the interests of the mortgagee.
○ This is important for the lender to be able to enforce their security and take possession of the mortgaged property in the event of default.

Implied Postponement - can be implied in certain circumstances

Question 5

What happens if the lender’s interest in the land does not rank priority to the interest of a person in occupation?

Answer 5

• the lender would not be able to take possession of the land in order to exercise its power of sale.