These are the notes that I used to revise for my Land Law exam, in which I scored a good First Class mark. They are condensed and structured to make answering problem questions particularly easy, giving a brief outline to all the key cases and legislation in this area.
- Form of security for a loan. Ensures if can’t pay, has an interest in property.
o More likely to grant loan if security.
- Can be used to buy property / create wealth etc
- Can be used to raise funds.
- Can also mortgage real personal property (Bradley v Carritt shares in a tea company)
What is a mortgage?
- Borrower (mortgagor) grants lender (mortgagee) a mortgage over his property. Gives mortgagee rights in
property if defaults on repayment.
- Difference between mortgage and a charge: under mortgage mortgagee gets rights in property whereas
under charge only gets rights against the property.
Development of mortgages at common law and in equity
At common law
- Historically common law didn’t recognise a mortgage.
- Original mortgage took place as conveyance of property with covenant to transfer it back if repaid.
o Mortgagee literally became owner.
o If mortgagor didn’t repay on correct day, would lose property.
- Under common law, contractual right to redeem on date in mortgage contract. However intervention of
equity allows redemption at a later date.
Mortgages in equity
THE EQUITY OF REDEMPTION
- Arises as soon as mortgage created.
- Can be sold/transferred to others.
THE POSITION AT COMMON LAW
- Mortgagee of capital would become owner of property.
o Gave him rights eg to sell property and claim income arising. Rights would last until loan repaid.
- Only one day of repayment. ‘Legal date of redemption’. If delay land lost and still liable for debt.
- Mortgagors didn’t like this rule especially when not their fault why couldn’t repay eg if mortgagee
deliberately made self unavailable.
The equitable right to redeem
- Allows mortgagor to redeem after legal date for redemption has passed.
- Is at heart of the law on mortgages.
- Any mortgagor who fails to pay on legal date retains right to redeem.
o Therefore can ignore mortgage deed and repay when convenient.
o Equity uphold right to redeem at any day and any time.
- Initially this was only allowed in special circumstances:
o Mortgagor unable to pay because of physical accident or physically unable to pay.
o Mortgagor made mistake of date or who was owed money.
o Mortgagor could prove special hardship.
- Later, redemption allowed in all cases, so long as debt repaid.
- Right to redeem is right in property so can be enforced against third party purchaser.
- Hence legal date became less important.
- Usually now legal date is six months.
o Of course cannot pay, mortgagee only has right to recover loan and if money not forthcoming
could take proceedings.
o However equity would protect mortgagor.
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