Mortgages and Charges over Land
What this domain tests
This domain tests the creation of legal and equitable mortgages, the remedies of a mortgagee, and the rights of a mortgagor.
Core rules
- A legal mortgage may be created by assignment with a proviso for redemption, by demise, or by charge by way of legal mortgage. An equitable mortgage may arise by deposit of title deeds or a written agreement.
- The mortgagor retains an equity of redemption; clauses that clog it are void.
- Mortgagee remedies include power of sale, foreclosure, appointment of a receiver, and possession. A power of sale must be exercised in good faith, for a proper purpose, and after required notice.
- Proceeds of sale are applied to the debt, costs and expenses; any surplus belongs to the mortgagor.
Worked example
A bank holds a legal mortgage over a house. The borrower defaults, and the bank sells without giving the contractual notice. The sale may be set aside or the bank may be liable in damages, even though the debt is owed. A purchaser who buys in bad faith may also be affected.
Traps
Thinking an equitable mortgage by deposit transfers the legal estate. Forgetting that a mortgagee's power of sale is not unlimited. Treating foreclosure and sale as the same remedy.