MORTGAGES I

Mortgage by Deposit of Title

deeds
It is known as Equitable mortgage,
Essentials :
-Existence of a debt, either existing or future ,
-Deposit of Documents Of Title:
Original Sale Deed, Gift Deed , Partition Deed ,
Allotment Letters ,etc
- Notified Centres : All taluka Centres
- Intention of the Mortgagor to deposit the deeds
as a security for the Debt,
- The deposit must be by the Mortgagor or by his
authorised agent ,
Now , it has to Registered with the Registrar of
Property, & required STAMP DUTY has to be paid
.
This type of mortgage is very popular amongst
Bankers ,

SECURITIES
The function of a security
Unsecured loans vs. secured loans
A security can link to:
People

Property
Personal

Land

The Mortgage = one form of security over land.

Lord Diplock in Pettitt v Pettitt (1970) AC 777 HL

Britain has become a property, particularly
a real-property-mortgaged-to-a-buildingsociety-owning, democracy
Figures for 2009 from Communities & Local Govt.
Website
14.6 million households in England (68 per cent of
the total households) own their home
11.1 million have mortgages

PRE-1926 DEVELOPMENT OF THE LAW

Creation of a mortgage
Effect of failure by mortgagor to repay loan on the fixed date
At law
In equity
The Decree of Foreclosure

TERMINOLOGY
A mortgage is an interest in property granted by a
mortgagor to a mortgagee as security for repayment of a
debt, with a provision for redemption.

The mortgagor is the Borrower

The mortgagee is the Lender
Redemption is the process of freeing property from a
mortgage by repayment of the debt.

POPULAR ABUSE OF TERMINOLOGY

In lay terms, aspiring property owners get a mortgage (a
valuable commodity) from a bank or building society (which
is in the business of offering mortgages to borrowers),
And the bank or building society may then allow the owners
to keep the mortgage when they move house
from Clarke and Kohler [2005]

What is wrong with lay terminology?!

THE CREATION OF A
LEGAL MORTGAGE

THE CREATION of a LEGAL MORTGAGE

I. LONG LEASE
with a provision for cesser on redemption
s.85(1) LPA 1925:
Mortgage of fee simple by grant of long lease
s.86(1) LPA 25:
Mortgage of lease by grant of a sub-lease

THE CREATION of a LEGAL MORTGAGE

II.

A CHARGE BY DEED by WAY OF LEGAL MORTGAGE

s.87(1) LPA

Sample clause in mortgage deed:

The Borrower charges the property by way of legal mortgage with

payment of all the money payable to the Lender under the mortgage
conditions.

s.87 LPA 25 : The charge gives the Lender

the same protection, powers & remedies as if the mortgage

had been created under s.85(1) or 86(1) LPA 25

The only method in registered land s.23(1) (a) LRA 2002

10

THE CREATION of a LEGAL MORTGAGE

FORMALITIES NEEDED FOR ACTUAL LEGAL STATUS
A deed (s.52 LPA 1925)
Registration at Land Registry if Borrowers title to the land
is registered
Registration at Land Registry if it is a FIRST mortgage of
an unregistered title (triggers first registration)

Example of a legal charge entered on a

registered title

C: Charges Register
[SPECIMEN]

------------------------------------------------------------------------------------------

1. (02.12.2002) REGISTERED CHARGE dated 23rd

November 2002
2. . PROPRIETOR: CHELSEA BUILDING SOCIETY
of Thirlestaine Hall, Thirlestaine Road,
Cheltenham, Glos. GL53 7AL

THE CREATION OF AN
EQUITABLE MORTGAGE

THE CREATION of an
EQUITABLE MORTGAGE
1. Where there is a contract for the grant of a mortgage:
an actual contract; or
a written mortgage made by no/defective deed;
which
complies with s.2 LP (MP)Act 1989 +
is specifically enforceable
2. Failure to register a legal mortgage in registered land

3. A mortgage of an equitable interest

A MORTGAGORS RIGHTS &

PROTECTIONS

include:1. The Right to Redeem

at law
in equity
significance of legal redemption date?
2.

The Equity of Redemption

3.

No clogs on the Equity of Redemption

TYPICAL PROVISIONS IN A MORTGAGE

Include:
For repayment of the loan
Covenants by the Mortgagor relating to the property
itself, e.g.
maintenance
insurance
leasing
Rights & remedies of the Mortgagee

A MORTGAGEES
RIGHT TO POSSESSION

A MORTGAGEES RIGHT TO POSSESSION

An inherent right
The mortgagee may go into possession before

the ink is dry on the mortgage unless there is

something in the contract, express or by implication,
whereby he has contracted himself out of that right.
He has the right because he has a legal term of
years in the property or its statutory equivalent.
Four Maids Ltd v Dudley Marshall Properties [1957]
Ch 317
Inhibitions on its exercise
White v City of London Brewery Co [1889] 42 Ch.D
Reason for its exercise

IS A COURT ORDER NEEDED TO REPOSSESS?

Residential Premises

s.1(2) Protection from Eviction Act 1977 If any person unlawfully deprives the
residential occupier of any premises of his occupation of the premises or any part
thereof, or attempts to do so, he shall be guilty of an offence unless he proves that
he believed, and had reasonable cause to believe, that the residential occupier had
ceased to reside in the premises.

Ropaigealach v Barclays Bank plc 1999 3 WLR 17

Residential and Commercial premises

s.6 Criminal Law Act 1977

any person who, without lawful authority, uses or threatens violence for the
purpose of securing entry into any premises for himself or for any other person is
guilty of an offence, provided that
(a) there is someone present on those premises at the time who is opposed to the
entry which the violence is intended to secure; and
(b) the person using or threatening the violence knows that that is the case.

CAN A MORTGAGOR POSTPONE

A MORTGAGEE OBTAINING
A POSSESSION ORDER?
1. s.36 ADMINISTRATION
OF JUSTICE ACT 1970
2. THE COURTS INHERENT
JURISDICTION to POSTPONE POSSESION

1. POSTPONING POSSESSION
- s.36 ADMINISTRATION
OF JUSTICE ACT 1970

s.36 ADMINISTRATION OF JUSTICE ACT 1970

Pre-conditions: AJA 1970

only applies to residential premises

is only available where the mortgagee brings an action

in court for a possession order (see Ropaigealach)

s.36 AJA 1970

s.36(1) AJA
Where the mortgagee under a mortgage of land which consists of
or includes a dwelling-house brings an action in which he claims
possession of the mortgaged property the court may

exercise any of the powers conferred on it by

subsection (2) below if it appears to the court that in the
event of its exercising the power
the mortgagor is likely
to be able within a reasonable period to pay any
sums due under the mortgage

s.36(2) AJA The court has power:

to adjourn possession proceedings
or stay or suspend execution of a possession order
or postpone the date of delivery of possession

s.36 AJA 1970

CRITERIA: the mortgagor must
1. Be LIKELY

2. To PAY ANY SUMS DUE under the mortgage

or to remedy any default
3. WITHIN A REASONABLE PERIOD

MEANING OF CRITERIA VARIES

ACCORDING TO MORTGAGORS PURPOSE
IN SEEKING POSTPONEMENT

To pay arrears off

To sell the property him/herself

PURPOSE - TO PAY OFF ARREARS:

THE MEANING OF

TO PAY ANY SUMS DUE

Halifax Building Society v. Clarke [1973] Ch. 307
s.8 ADMINISTRATION OF JUSTICE ACT 1973

PURPOSE - TO PAY OFF ARREARS:

THE MEANING OF
WITHIN A REASONABLE PERIOD
reasonable period can mean
the whole term of the mortgage
C& G B.S. v Norgan [1996] 1WLR 343

factors for the court to consider under Norgan

PURPOSE - TO PAY OFF ARREARS :

THE MEANING OF
LIKELY
A realistic prospect & evidence of this
First National Bank v Syed [1991] 2 All ER 250:

Town & Country B.S. v Julien [1991] 24 HLR 312

C&G B.S. v Grant [1994] Times 9th May

Case Law Extracts

FIRST NATIONAL BANK V SYED per LJ Dillon:

I need say no more than that the prospects [of Mr.Syed
obtaining work] are entirely speculative, & there is no
basis for estimating reliably when & whether any, & if so
what, income will be received. I have to say, with
every regret for the defendants' misfortunes, that if the
test to be applied [is that in s.36 AJA 1970], I am wholly
unable to see any prospect of the defendants paying off
the arrears within any reasonable period, while also
paying current instalments

TOWN & COUNTRY B.S. v JULIEN

"Since about January 1990, problems in the
commercial property market have much reduced my
income. However, I believe it is likely that within the
next six months. I will obtain substantial new
contracts which will restore my gross income to its
former levels and enable me to maintain my
mortgage payments and the discharge my arrears

What are the prospects of Mr. Julien actually earning sufficient

sums of money by his own efforts or through any other
commercial way to pay off this very substantial debt? What he
said in evidence was he was quite sure the recession was
ending, that he had, and I am paraphrasing it slightly, a number
of professional irons in the fire which he may be able to take out
and very profitably. It all seems to me, however you look at it,
highly speculative and at the moment quite frankly is asking the
Building Society to act, or his insurers to act, as his bankers for
the next year while he re-establishes his professional practice
which has suffered so much because of the effect of the
recession. Well I do not consider that being within the words of
Section 36 , I do not consider that, however one turns it round to
be, to say, that means that Mr. Julien is likely to be able, within a
reasonable period, to remedy the default which has occurred

PURPOSE - TO SELL:
THE MEANING OF
WITHIN A REASONABLE PERIOD
Nat. & Provincial B.S. v Lloyd [1996] 1 All ER 630:
Bristol & West B.S. v Ellis [1996] 73 P & CR 15:
Max. 6-12 months likely, but
no fixed rule
LIKELY
A real prospect and some evidence of a sale occurring
Further cases include:

Target Homes v Clothier [1994] 1 All ER 439

II. THE COURTS

INHERENT JURISDICTION
TO POSTPONE
POSSESSION

THE COURTS INHERENT POWER

TO POSTPONE POSSESSION
LIMITED FUNCTION
Birmingham B.S. v Caunt 1982 Ch 883
a short time to afford to the mortgagor a chance of
paying of the mortgage in full or otherwise satisfying
[the mortgagee] but this should not be done if there is
no reasonable prospect of this occurring

LIMITED USE = If s.36 AJA 70 unavailable

finally
CAN A COURT POSTPONE POSSESSION IN A CASE
OF NEGATIVE EQUITY?
PURPOSE - TO PAY OFF ARREARS (s.36)?
PURPOSE - TO SELL (s.36/inherent jurisdiction) ?
Cheltenham and Gloucester PLC v Krausz 1997 1All ER 21