Class notes
mortgages
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land law revision on the topic mortgages
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MortgagesMortgagee = lender (bank)
Mortgagor = borrower, property owner
Mortgage / Charge = interchangeable\
What is a mortgage?
A mortgage is not the loan itself, but the interest that the borrower (‘mortgagor’) grants the
lender (‘mortgagee’) in his or her land (or other asset), to ‘secure’ his or her repayment of the
loan.
=> It's a SECURITY for the loan
A mortgage is a proprietary interest in land granted by the mortgagor (the borrower) to the
mortgagee (the lender) as security for a cash loan.
If a lender makes a loan without security, he runs the risk of the borrower becoming bankrupt
and being unable to repay anything more than a small fraction of the money owed. However,
the giving of security involves giving the lender a claim against or an interest in an item of
property, so if the borrower becomes unable to repay the loan, the lender may claim against the
property.
-Contractual arrangement between lender (mortgagee) and borrower (mortgagor)
=> It creates personal rights between them (i.e. to repay the loan)
-Proprietary interest over the land of mortgagor, granted to the mortgagee as security for the
money lent. Allows mortgagee to charge less interest since there’s a smaller risk of default.
Mortgagee = secured creditor with “right of resort” to the property.
Since 1925, mortgagee normally gets a charge over the land and the mortgagor retains
ownership (before 1925 mortgagor would only have the property with a “provision for
redemption” upon full payment
, - Today the only way to create a legal security over registered land is the ‘charge by way
of legal mortgage’, s. 85 LPA 1925 & s. 23 LRA 2002
- It gives the mortgagee a legal interest in the land under s. 1(2)(c) LPA 1925 and gives
him all the rights he needs
- In unregistered land, the creation of a legal mortgage or charge may trigger a
requirement to register the estate under s. 4 (1) LRA 2002
- In registered land, it is a registrable disposition (s. 27(2) LRA 2002)
- Failure to register a mortgage means that it will take effect in equity only
Equitable mortgages can come into being in three ways:
- Where the mortgagor only has an equitable interest in the property: Must comply with s.
53(1)(c) LPA 1925, i.e. be in writing.
- Where there is a contract for a legal mortgage pursuant to s. 2 LPA(MP)A 1989 (Equity
considers done that which ought to be done)
- A legal mortgage which has not been registered – s.27 LRA 2002
What happens when a borrower takes out a mortgage?
- Borrower (Mortgagor) remains the legal owner
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