Land Law – Mortgages Test Questions
All Answered Correctly Rated A+.
What is a mortgage? - Answer -A loan secured on land
-If the loan is not repaid, the lender's security can be released through a forced sale of the
property
-A mortgage lender is in a privileged position vis-à-vis unsecured creditors if the borrower
becomes insolvent (who have no rights to assets that can be sold to meet the debt)
What is a mortgagor? - Answer The person who borrows, the mortagee is the person that
lends
How can a mortgage be created? - Answer -Under the LPA 1925, mortgages could be created
either by way of legal charge (ss85, 87) or long lease (s85).
-The long lease method was abolished for registered land by the LRA 2002 (s23(1)(a)) so that
today the only way to create a mortgage in registered land is by way of legal charge, which is an
interest in land (s(1)(2)(c) LPA 1925)
-Should be created by deed under s52
What is a legal charge? - Answer -The lender gains a legal charge but enjoys the same
protections as a lease
-Held as is a lease of 3000 years (s87)
What are the key questions when a mortgage is created? - Answer -Whether the terms are
fair
-What happens when the mortgagor cannot repay what they have borrowed
Inherent right of possession in mortgages - Answer -Note the provisions on sale in ss91, 101
and 103 LPA 1925 and how the AJA 1970 s36, AJA 1973 s8 and Norgan et al, grant jurisdiction to
the courts to restrict the mortgagee's inherent right of possession (in part a legacy from the
conveyance/reconveyance, demise/sub-demise model of mortgages)
-Must consider the rationale of s36 and note Krauz
Overreaching and mortgages - Answer -Overreaching is a key mechanism to protect
mortgagees
Statutes on the creation of mortgages - Answer -LPA 1925 s85-87 and 205
-LRA 2003 s23
, -LPMPA s2
Case on the rules of equity in the content of a mortgage - Answer Santley v Wilde [1899] 2
Ch 474
Santley v Wilde (rules of equity in the content of a mortgage) - Answer -A mortgage cannot.
have a term in it that goes against the borrower's right to redeem for security
-The case laid down the clogs and fetters doctrine, under which a provision in mortgage that
prevents redemption is void
-Appeal allowed; the mortgagor is not entitled to redeem the mortgage
-The right to a share of profits from the underlease was secured by the mortgage, which thus
cannot be redeemed until the 10 years is up
-'Any provision inserted to prevent redemption on payment or performance of the debt or
obligation for which the security was given is what is meant by a clog or fetter on the equity of
redemption, and is therefore void.'
-In this case, a right to a share of profits of the underlease is not a clog (Lord Lindley MR)
-Note Lindley MR's definition of a mortgage as the transfer of an interest in property as 'a
security for the payment of a debt or the discharge of some other obligation for which it is
given'
Anderson on the clogs and fetters doctrine - Answer -In Samuel v. Jarrah Timber in 1903 the
Court of Appeal ruled that the full force of the 'no fetters' principle applied to companies as
much as to anyone else, hence a company mortgaging its debenture stock could not in the same
transaction confer an option to purchase that stock on the lender/investor: once a mortgage,
always a mortgage
Cases regarding clauses that release the borrower's right to redeem (relates to the clogs and
fetters doctrine) - Answer -Samuel v Jarrah Timber [1904] AC 323
-Fairclough v Swan Brewery [1912] AC 565
-Kreglinger v New Patagonia Meat Company [1914] AC 25, esp 38-39
- Knightsbridge Estates v Byrne [1939] Ch 441
-*Jones v Morgan [2002] 1 EGLR 125
-Warnborough Ltd v Garmite Ltd [2003] EWCA Civ 1544
Samuel v Jarrah Timber [1904] AC 323 (clauses releasing the borrower's right to redeem) -
Answer -An option to purchase mortgages shares was deemed void
-'A perfectly fair bargain made between two parties to it, each of whom was quite sensible of
what they were doing, is not to be performed because at the same time a mortgage
arrangement was made between them.' (Earl of Halsbury LC)
All Answered Correctly Rated A+.
What is a mortgage? - Answer -A loan secured on land
-If the loan is not repaid, the lender's security can be released through a forced sale of the
property
-A mortgage lender is in a privileged position vis-à-vis unsecured creditors if the borrower
becomes insolvent (who have no rights to assets that can be sold to meet the debt)
What is a mortgagor? - Answer The person who borrows, the mortagee is the person that
lends
How can a mortgage be created? - Answer -Under the LPA 1925, mortgages could be created
either by way of legal charge (ss85, 87) or long lease (s85).
-The long lease method was abolished for registered land by the LRA 2002 (s23(1)(a)) so that
today the only way to create a mortgage in registered land is by way of legal charge, which is an
interest in land (s(1)(2)(c) LPA 1925)
-Should be created by deed under s52
What is a legal charge? - Answer -The lender gains a legal charge but enjoys the same
protections as a lease
-Held as is a lease of 3000 years (s87)
What are the key questions when a mortgage is created? - Answer -Whether the terms are
fair
-What happens when the mortgagor cannot repay what they have borrowed
Inherent right of possession in mortgages - Answer -Note the provisions on sale in ss91, 101
and 103 LPA 1925 and how the AJA 1970 s36, AJA 1973 s8 and Norgan et al, grant jurisdiction to
the courts to restrict the mortgagee's inherent right of possession (in part a legacy from the
conveyance/reconveyance, demise/sub-demise model of mortgages)
-Must consider the rationale of s36 and note Krauz
Overreaching and mortgages - Answer -Overreaching is a key mechanism to protect
mortgagees
Statutes on the creation of mortgages - Answer -LPA 1925 s85-87 and 205
-LRA 2003 s23
, -LPMPA s2
Case on the rules of equity in the content of a mortgage - Answer Santley v Wilde [1899] 2
Ch 474
Santley v Wilde (rules of equity in the content of a mortgage) - Answer -A mortgage cannot.
have a term in it that goes against the borrower's right to redeem for security
-The case laid down the clogs and fetters doctrine, under which a provision in mortgage that
prevents redemption is void
-Appeal allowed; the mortgagor is not entitled to redeem the mortgage
-The right to a share of profits from the underlease was secured by the mortgage, which thus
cannot be redeemed until the 10 years is up
-'Any provision inserted to prevent redemption on payment or performance of the debt or
obligation for which the security was given is what is meant by a clog or fetter on the equity of
redemption, and is therefore void.'
-In this case, a right to a share of profits of the underlease is not a clog (Lord Lindley MR)
-Note Lindley MR's definition of a mortgage as the transfer of an interest in property as 'a
security for the payment of a debt or the discharge of some other obligation for which it is
given'
Anderson on the clogs and fetters doctrine - Answer -In Samuel v. Jarrah Timber in 1903 the
Court of Appeal ruled that the full force of the 'no fetters' principle applied to companies as
much as to anyone else, hence a company mortgaging its debenture stock could not in the same
transaction confer an option to purchase that stock on the lender/investor: once a mortgage,
always a mortgage
Cases regarding clauses that release the borrower's right to redeem (relates to the clogs and
fetters doctrine) - Answer -Samuel v Jarrah Timber [1904] AC 323
-Fairclough v Swan Brewery [1912] AC 565
-Kreglinger v New Patagonia Meat Company [1914] AC 25, esp 38-39
- Knightsbridge Estates v Byrne [1939] Ch 441
-*Jones v Morgan [2002] 1 EGLR 125
-Warnborough Ltd v Garmite Ltd [2003] EWCA Civ 1544
Samuel v Jarrah Timber [1904] AC 323 (clauses releasing the borrower's right to redeem) -
Answer -An option to purchase mortgages shares was deemed void
-'A perfectly fair bargain made between two parties to it, each of whom was quite sensible of
what they were doing, is not to be performed because at the same time a mortgage
arrangement was made between them.' (Earl of Halsbury LC)
