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Mortgages Notes

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Mortgages _______________________________________________________

General Principles A mortgage is a:
- Contract o Can vary terms o Evidence of Court of Chancery intervening because of unfair terms against borrowers
- A security over land o Legal property right - a secured debt which bites on the land Law favours lenders because mortgages are of crucial importance to a domestic economy (RBS v Etridge HL)

Governed by LPA 1925 and principles of registration in LRA 2002 As a contract???

A mortgage is usually an express contract o Mortgagor = land owner/borrower o Mortgagee = lender Parties are free to stipulate terms of the contract Sometimes the contractual nature of the interest is in conflict with the proprietary nature of the mortgage security It is both proprietary & contractual - the proprietary nature brings with it the attention of equity Mortgagee gets a proprietary interest in the land and the borrower retains an equity of redemption (though the modern method of creating mortgages doesn't involve a transfer of an interest S.87(1) LPA 1925 stipulates that the mortgagee is treated as having the right) Both mortgagee & mortgagor may transfer their property rights to a third party i.e. when a bank transfers its mortgage book to another lender.

Definitions A mortgage as the conveyance of a legal or equitable interest in the borrower's land to the mortgagee with the provision that the mortgagee's interest will end upon repayment + interest & costs The proprietary right upholds the contractual obligations: Stantley v Wilde (1899)

A mortgagee may stipulate in his mortgage deed for a collateral advantage for himself beyond the repayment of the sum advanced and interest, and may enforce the bargain against his mortgagor, provided it is not unconscionable or oppressive; and there is no presumption, in the absence of evidence to the contrary, that the collateral advantage was given by the mortgagor under pressure. Nonetheless, a mortgage is unique in nature as there is a principle 'once a mortgage, always a mortgage' i.e. the borrower has the right to have their property returned in full once the loan secured on it has been repaid and any clause that interferes with this is struck out. As device for purchase of property Mortgage = security for loan However now the loan is for the purchase of the very security Conceptually this throws up the question; how can you own something you don't have the money to pay for it?

1. Transfer of estate in land to new owner

2. Execution of mortgage over property

3. Transfer of purchase price to the vendor

Scintilla temporis a sliver of time between the transfer to the new owner & the mortgagee, which may in reality only be a matter of minutes but can make problems What if the new owner holds the property on trust? The equitable interest comes into being before the mortgagee's, and might therefore have the potential to override through, say, discovery of actual occupation However the Cann principle has cleared this up: Abbey National Building Society v Cann (1991) Held: (HL) as a matter of law there is no scintilla temporis if the purchaser has been enabled to purchase the property by means of a mortgage, and as such any equitable interests must rank second This is a practical decision as it reflects the realities of conveyancing: the equitable interests have been given effect by the mortgage and thus it should have precedence HOWEVER: this precedence is only applicable to those equitable interests dependent on the mortgage; if the equitable interests were there before they override.

Equitable Mortgage S.2 LPA(MiscProv) 1989 formality - must be in writing & contain all the terms

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