Mortgages, Charges and Lender Requirements
Security and priority
A mortgage of land is a charge by way of legal mortgage, created by deed. In registered land it must be registered to take effect at law; in unregistered land it is protected by deposit of title deeds or a land charge. Priority between mortgages is generally by date of creation, subject to the register and to the rule in Dearle v Hall for equitable interests. Candidates must understand the lender's requirements: good and marketable title, a satisfactory valuation, buildings insurance, and compliance with the Council of Mortgage Lenders' Handbook conditions.
Traps
Questions test the difference between a legal charge and an equitable mortgage, and the effect of a restriction on the register requiring a lender's consent to a further charge. Watch the rules on undue influence and the need for independent advice where a spouse or partner charges the home for another's debt. Also note the mortgagee's remedies: possession, sale, appointment of a receiver, and foreclosure (now rarely used). The sale remedy requires the power to have arisen and, in most cases, to be exercisable - usually after two months' arrears.
Rule of thumb
For any mortgage question ask: is it legal or equitable, is it registered or protected, what are the lender's conditions, and which remedy is available and on what trigger?
Worked example
A borrower defaults for three months. The lender may sell because the power of sale has arisen and is exercisable, but must obtain the best price reasonably obtainable and account for the surplus. A sale at an undervalue to a connected party risks being set aside.