Mortgages essay question
- Mortgages are widely used and have immense social significance.
- Legally, their nature remains something of a mystery
o “no one, I am sure, by the light of nature ever understood an English
mortgage of real estate” – Lord Macnaghten in Samuel v Jarrah Timber and
Wood Paving
- Why does the mortgagor need protection?
o Often in vulnerable positions
o In need of money so more likely to agree to unfair contracts
o Remember that the mortgaged asset is more than a security for a debt. It’s a
person’s and their family’s home and the threat and reality of eviction can be
deeply problematic
o The law needs to strike a balance between protecting vulnerable mortgagors
and recognizing the freedom to contract and the need to encourage lenders
to secure property transactions, which is vital for a healthy economy
- What protections does the law offer the mortgagor?
o The equitable right to redeem
Basic principle: when a mortgagor wishes to redeem the loan, he
should be able to do so and recover his property in an unencumbered
state
Equitable right to redeem commences upon the expiry of the legal
date of redemption
o The equity of redemption – there must be no “clogs and fetters”
Rule against irredeemability
Mortgagee’s attempts to purchase the mortgaged property will be
void
Would otherwise be contrary to equitable right to redeem
Prevents mortgagee from exploiting their position by turning a
mortgage over property into an acquisition of the property
itself
Different and not the same as the mortgagee’s right to take
possession and sell mortgaged property in event of non-
payment of the loan
Right to have collateral advantages for the mortgagee struck out
Equity has been wary of collateral advantages as they go
against the basic principle of a mortgage being a mere security
for a loan
Recent greater respect towards freedom to contract means
that the collateral advantages can continue after the mortgage
has been redeemed as long as it
o Fair and reasonable
o Not inconsistent with or repugnant to the contractual
or equitable right to redeem
- Mortgages are widely used and have immense social significance.
- Legally, their nature remains something of a mystery
o “no one, I am sure, by the light of nature ever understood an English
mortgage of real estate” – Lord Macnaghten in Samuel v Jarrah Timber and
Wood Paving
- Why does the mortgagor need protection?
o Often in vulnerable positions
o In need of money so more likely to agree to unfair contracts
o Remember that the mortgaged asset is more than a security for a debt. It’s a
person’s and their family’s home and the threat and reality of eviction can be
deeply problematic
o The law needs to strike a balance between protecting vulnerable mortgagors
and recognizing the freedom to contract and the need to encourage lenders
to secure property transactions, which is vital for a healthy economy
- What protections does the law offer the mortgagor?
o The equitable right to redeem
Basic principle: when a mortgagor wishes to redeem the loan, he
should be able to do so and recover his property in an unencumbered
state
Equitable right to redeem commences upon the expiry of the legal
date of redemption
o The equity of redemption – there must be no “clogs and fetters”
Rule against irredeemability
Mortgagee’s attempts to purchase the mortgaged property will be
void
Would otherwise be contrary to equitable right to redeem
Prevents mortgagee from exploiting their position by turning a
mortgage over property into an acquisition of the property
itself
Different and not the same as the mortgagee’s right to take
possession and sell mortgaged property in event of non-
payment of the loan
Right to have collateral advantages for the mortgagee struck out
Equity has been wary of collateral advantages as they go
against the basic principle of a mortgage being a mere security
for a loan
Recent greater respect towards freedom to contract means
that the collateral advantages can continue after the mortgage
has been redeemed as long as it
o Fair and reasonable
o Not inconsistent with or repugnant to the contractual
or equitable right to redeem
