MORTGAGES
A mortgage is the conveyance of an interest in property as security for the payment of a debt or the
discharge of some other obligation. Mortgages are usually taken out by the buyer of the land as a method of
financing the purchase of that land. The person who takes out the loan is a mortgagor and the financier to
whom the debt is owed is known as the mortgagee.
Mortgage is a concept that partakes both of the law of contract and of the law of real property. Therefore
although a mortgage is a contract and the parties are subject to contractual rights and obligations, a
mortgage is also a proprietary interest in the land over which it takes effect. Thus, under a mortgage, the
lender obtains a proprietary interest in the land of the borrower with all it entails, and the borrower retains
an “equity of redemption” which is in itself a proprietary right which encapsulates his residual rights in the
property.
The proprietary nature of a mortgage brings with the intervention and attention of equity and can result in a
conflict between the mortgage as an interest in land and the mortgage as the subject matter of a contract.
This equity of redemption is very important for the mortgagor since it gives them the right to redeem the
mortgage, unencumbering the land. It also allows them some protection from oppressive terms.Both the
mortgagor and the mortgagee may transfer their respective property interests under the mortgage to third
parties.
9.2 CREATION OF MORTGAGES
9.2.1 Forms of mortgage
The LPA 1925 made significant changes to the ways in which mortgages could be created. The overall intent
was to ensure that a mortgagor retained the fullest possible interest in their property, even when seeking a
mortgage of it, provided the mortgagee had suitable remedies in the event of failure to repay the loan.
The mortgagee is now given some lesser proprietary rights in the mortgagor’s land appropriate to the type of
mortgage created. Further changes were also brought about after LRA 2002.
Legal mortgages under the 1925 legislation - Registered and unregistered land
Section 85 (1) of LPA 1925 provides that a legal mortgage of an estate in fee simple could be effected by two
methods. The first method was by a demise for a terms of years absolute subject to a provision for cesser on
redemption (cesser: the early termination of some right or interest; for example, one which stands until some
condition is fulfilled such as getting married or having children). This is also known as the long lease method.
The second method is by a charge by deed expressed to be by way of legal mortgage.
, Section 86 (1) of LPA 1925 provides that a legal mortgage of a term of years absolute could be effected by
either a subdemise for a term of years absolute (lease) subject to provision for cesser on redemption, or by a
charge by deed expressed to be by way of legal mortgage.
The mortgagor/ chargor and the mortgagee have legal estates, while the chargee has a legal interest ( Section
1 (2) (c) LPA 1925) and enjoys the same protection, powers and remedies as if he had taken a legal terms of
years (Section 87 LPA 1925). As the mortgagor retains the legal estate, they may create subsequent legal
mortgages.
Legal mortgages under the Land Registration Act 2002 - current law
Registered land
A legal mortgage of registered land can now only be made by charge by way of a legal mortgage. This must be
done by deed as provided in Section 52 of LPA 1925 and must be registered in the charges register of the land
affected as provided in Section 27 of LRA 2002.
At this point it is a registered charge. As per Section 23 (1) of LRA 2002, as noted above, the only method by
which registered land may be mortgaged is the charge by deed by way of a legal mortgage. Section 24 of LRA
2002 further provides that only the registered proprietor, a person entitled to be registered under a transfer,
or the owner before first registration, may create a legal mortgage.
Equitable mortgages: includes all mortgages of registered title land which are not on the register
One reason why a mortgage would be equitable would be where the interest mortgaged is an equitable
interest on the land. Therefore where an equitable interest is mortgaged it will necessarily be equitable and is
effected by a conveyance of the equitable interest to the mortgagee with a proviso for reconveyance. The
assignment must be in writing in compliance with Section 53(1) of LPA 1925 signed by the mortgagor or the
mortgagor’s agent authorised in writing.
It is also possible for the mortgagor and mortgagee to create a mortgage of legal interest by “informal
means”, that is by either not using a deed or by failing to register the deed that they do use. Where the
informality arises because of a failure to register the mortgage as required , the mortgage is equitable by
force of statute. Where no deed has been used at all, the mortgage will be equitable only if it complies with
the requirements for the creation of equitable interests, which means there must be a written instrument
within Section 2 of the LP (MP) A 1989. This is because the written instrument is treated as a valid contract
for the creation of a mortgage within section 2, which if specifically enforceable can take effect as an
equitable mortgage under Walsh v Lonsdale (1882). If either requirements of written contract or specific
enforceability are not met, the mortgage will be void at both law and equity.
A mortgage is the conveyance of an interest in property as security for the payment of a debt or the
discharge of some other obligation. Mortgages are usually taken out by the buyer of the land as a method of
financing the purchase of that land. The person who takes out the loan is a mortgagor and the financier to
whom the debt is owed is known as the mortgagee.
Mortgage is a concept that partakes both of the law of contract and of the law of real property. Therefore
although a mortgage is a contract and the parties are subject to contractual rights and obligations, a
mortgage is also a proprietary interest in the land over which it takes effect. Thus, under a mortgage, the
lender obtains a proprietary interest in the land of the borrower with all it entails, and the borrower retains
an “equity of redemption” which is in itself a proprietary right which encapsulates his residual rights in the
property.
The proprietary nature of a mortgage brings with the intervention and attention of equity and can result in a
conflict between the mortgage as an interest in land and the mortgage as the subject matter of a contract.
This equity of redemption is very important for the mortgagor since it gives them the right to redeem the
mortgage, unencumbering the land. It also allows them some protection from oppressive terms.Both the
mortgagor and the mortgagee may transfer their respective property interests under the mortgage to third
parties.
9.2 CREATION OF MORTGAGES
9.2.1 Forms of mortgage
The LPA 1925 made significant changes to the ways in which mortgages could be created. The overall intent
was to ensure that a mortgagor retained the fullest possible interest in their property, even when seeking a
mortgage of it, provided the mortgagee had suitable remedies in the event of failure to repay the loan.
The mortgagee is now given some lesser proprietary rights in the mortgagor’s land appropriate to the type of
mortgage created. Further changes were also brought about after LRA 2002.
Legal mortgages under the 1925 legislation - Registered and unregistered land
Section 85 (1) of LPA 1925 provides that a legal mortgage of an estate in fee simple could be effected by two
methods. The first method was by a demise for a terms of years absolute subject to a provision for cesser on
redemption (cesser: the early termination of some right or interest; for example, one which stands until some
condition is fulfilled such as getting married or having children). This is also known as the long lease method.
The second method is by a charge by deed expressed to be by way of legal mortgage.
, Section 86 (1) of LPA 1925 provides that a legal mortgage of a term of years absolute could be effected by
either a subdemise for a term of years absolute (lease) subject to provision for cesser on redemption, or by a
charge by deed expressed to be by way of legal mortgage.
The mortgagor/ chargor and the mortgagee have legal estates, while the chargee has a legal interest ( Section
1 (2) (c) LPA 1925) and enjoys the same protection, powers and remedies as if he had taken a legal terms of
years (Section 87 LPA 1925). As the mortgagor retains the legal estate, they may create subsequent legal
mortgages.
Legal mortgages under the Land Registration Act 2002 - current law
Registered land
A legal mortgage of registered land can now only be made by charge by way of a legal mortgage. This must be
done by deed as provided in Section 52 of LPA 1925 and must be registered in the charges register of the land
affected as provided in Section 27 of LRA 2002.
At this point it is a registered charge. As per Section 23 (1) of LRA 2002, as noted above, the only method by
which registered land may be mortgaged is the charge by deed by way of a legal mortgage. Section 24 of LRA
2002 further provides that only the registered proprietor, a person entitled to be registered under a transfer,
or the owner before first registration, may create a legal mortgage.
Equitable mortgages: includes all mortgages of registered title land which are not on the register
One reason why a mortgage would be equitable would be where the interest mortgaged is an equitable
interest on the land. Therefore where an equitable interest is mortgaged it will necessarily be equitable and is
effected by a conveyance of the equitable interest to the mortgagee with a proviso for reconveyance. The
assignment must be in writing in compliance with Section 53(1) of LPA 1925 signed by the mortgagor or the
mortgagor’s agent authorised in writing.
It is also possible for the mortgagor and mortgagee to create a mortgage of legal interest by “informal
means”, that is by either not using a deed or by failing to register the deed that they do use. Where the
informality arises because of a failure to register the mortgage as required , the mortgage is equitable by
force of statute. Where no deed has been used at all, the mortgage will be equitable only if it complies with
the requirements for the creation of equitable interests, which means there must be a written instrument
within Section 2 of the LP (MP) A 1989. This is because the written instrument is treated as a valid contract
for the creation of a mortgage within section 2, which if specifically enforceable can take effect as an
equitable mortgage under Walsh v Lonsdale (1882). If either requirements of written contract or specific
enforceability are not met, the mortgage will be void at both law and equity.
