Mortgages and Security Interests in Land
What the exam tests
Mortgage questions test how security interests are created, their priority, the mortgagor’s equity of redemption, and the mortgagee’s remedies. You must apply both land law and equity.
Core rules
- A legal mortgage may be created by a charge by way of legal mortgage or by demise; an equitable mortgage may arise from a contract, deposit of title deeds, or equitable charge.
- Registration affects priority. A later registered mortgage may defeat an earlier unregistered one, subject to notice and statute.
- The equity of redemption is the mortgagor’s right to redeem. Any term that clogs or fetters redemption is void.
- Mortgagee remedies include sale, possession, foreclosure, appointment of a receiver, and action on the covenant to pay. The power of sale must have arisen and be exercisable; notice requirements must be met.
- A mortgagee selling must act in good faith and take reasonable care to obtain a proper price; it need not delay indefinitely for a better market.
Worked example
M mortgages land to Bank. M defaults, and Bank sells privately to a friend of the manager for 60% of market value without valuation or advertising. The sale is not automatically void, but Bank has breached its duty to take reasonable care. M may claim damages; a purchaser with notice may be affected. If the sale were to a purchaser without notice, the purchaser’s title may still be protected.
Traps
Assuming a mortgagee can sell before the power arises; ignoring registration for priority; treating every clog as void; forgetting the duty to obtain a proper price.