Mortgages and Security Rights
Mortgages and Security Rights
This domain tests real security over land and movables, the mortgage bond, priority and the notary's drafting duties.
Core rules
- A Sri Lankan mortgage is a real right over immovable property securing a principal debt; it is accessory to the debt and must be registered to be effective against third parties.
- The Mortgage Act No. 22 of 1949 governs mortgage bonds, remedies and, where available, parate execution.
- Pledge over movable property requires delivery or equivalent control; a guarantee is personal security and creates no real right.
- Priority between mortgages is generally determined by registration, not by the date of the bond.
Worked example
A bank lends against a property already mortgaged. The notary drafts a second mortgage bond and registers it. If the first mortgage is later discharged, the second does not automatically become first unless the priority rules and the deed so provide; registration order governs. The notary must search the register, state the principal debt and interest clearly, and ensure all co-owners join if the whole property is charged.
Traps
Mortgaging the whole where the borrower owns only a share; omitting registration; failing to describe the secured debt; releasing security without the mortgagee's consent; and confusing pledge with mortgage.