Nick Dowse Mortgages
Mortgages – Structure of Answer
1.Opening Statement
a.“A mortgage is a security interest given to a creditor to wh om a debt is owed against property of the debtor to sec ure money or money’ s worth (s 3 / Sch 6
PLA).
2.Classify the parties
a.The mortgagor is the person who borrows money and makes the promise to repay it by mortgaging their property .
b.The mortgagee is the lender of the money who takes th e mortgage.
c.Typically , the mortgagor would b e the house owner and the mortgagee wou ld
be the bank or some other institut ion lending money .
d.State who the mortgagor and mortgage e is. 3.General Law (Non-T orrens) Mortgages (only brief)
a.Most of the case law was developed under t he old system land, but the principles and doctrines laid down g enerally apply equally to T orrens mortgages.
b.Elements of the old system mortgag e
i.Promise by the mortgagor to repay a loa n of money; and
ii.Conveyance or transfer of th e mortgagor ’s land to the mortgagee; and
iii.Promise by the mortgagee to r econvey the land to the mortgagor upon
payment in full of the debt o wed, plus interest.
c.General Law Mortgagor ’s rights
i.Right to redeem:
1.Legal: Contractual right of mortga gor to repay the debt on the date fixed by the contract, thus req uiring the mortgagee to reconvey the land.
2.Equitable: Right of mortgagor to rep ay debt owed even after the date fixed by the contract has p assed.
ii.Equity of Redemption:
1.Distinguished from the equitable rig ht to redeem.
2.It exists as soon as the mortgage is given, and the sum of the mortgagor ’s interest and rights in the property .
3.Example: House worth $100k, borrowed $25k, equity of redemption worth $75k.
iii.Possession
1.The right to possession only arises if it is conferred by the mortgage.
d.General Law Mortgagee’ s rights
i.Power of foreclosure: extinguishes the mort gagor ’s equ ity of redemption and vests the full le gal and equitable ownership of the land in the mortgagee.
e.General Law Equitable Mortgage
i.Where the parties enter into an agre ement to mortgage, but does not comply with writing and form requir ements (s 1 1 PLA).
ii.Must be capable of specific performa nce, that is, must be in writing containing the essential terms and si gned by the party to be charged and supported by consideration, o r if there is no consideration, sufficient acts of part performance ( ). ANZ v Widam
f.Refer to Hedge notes if necessar y.
Page 1 of 12Very brief – only if necessary Nick Dowse Mortgages
4.Torrens Mortgages – Generally
a.Differe nt to an old system mortgage because ther e is no conveyance of the fee simple to the mortgagee.
b.Requirements of W riting and Form
i.A mortgage must be in writing and signed (s 10 PLA) and reg istered (s
72, 181 L TA)
ii.Contents of an instrument of mortgage is set out in s 73 L TA:
1.Validly executed by the mort gagor and the mortgagee; and
2.Include a description suf ficient to identify the lot to be mortgaged; and
3.Include a description of the debt or li ability secured by the mortgage; and
4.Include a description suf ficient to identify the interest to be mortgaged.
iii.The Registrar may refuse to reg ister an instrument which does not comply with the Act (ss 153, 10(1) and 10(3) L TA)
c.Effect Of Registration
i.Operates only as a charge on the lot secure d by the mortgage (s 74 LTA).
1.A charge is the appropriation or making answerable of specific property of the chargor for the payme nt of a debt. It gives the chargee the right to resort to t he property , but there is no transfer of ownership to the chargee.
ii.Mortgage obtains its legal characte r, mortgagee gets indefeasible title (s 181 L TA)
iii.Operates as if it were a deed (s 176 L TA)
iv.Even if there was a previous exception to indefeasibility or th e mortgage could be set aside due t o undue influence etc, the transferee of a registered mort gage is entitled to the benefits of indefeasibility and the mortgage cann ot be set aside ( Tessman v Costello ).
5.Covenants In A Mortgage
a.Express Covenants
i.The mortgage may contain express covenants, and usually contains these covenants:
1.Mortgaging covenant: covenant that charges the estate to the mortgagee – “the mortgagor char ges the estate or interest in the land with the repayment of $xxx” etc.
2.All monies clause: covenant to repay t his loan and any future loans, so that all future mortga ges are also secured by this mortgage.
3.Acceleration clause: If the mortgagor f ails to repay one instalment, the mortgagee can call up all the money to be repaid in the future.
a.However , s 95 PLA may provide relief.
b.Implied Covenants – apply unless there is a contrary intention
i.Covenant for the repayment of the pr incipal (s 78(1)(a))
1.Rates and times must specified in the mort gage itself
ii.Covenant for the repayment of interest (s 78(1)(a))
iii.Covenants to preserve the mortgag ed property (s 78(1)(b))
1.Mortgagor must keep buildings in good a nd substantial repair having regard to their conditio n at the start of the mortgage.
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Mortgages – Structure of Answer
1.Opening Statement
a.“A mortgage is a security interest given to a creditor to wh om a debt is owed against property of the debtor to sec ure money or money’ s worth (s 3 / Sch 6
PLA).
2.Classify the parties
a.The mortgagor is the person who borrows money and makes the promise to repay it by mortgaging their property .
b.The mortgagee is the lender of the money who takes th e mortgage.
c.Typically , the mortgagor would b e the house owner and the mortgagee wou ld
be the bank or some other institut ion lending money .
d.State who the mortgagor and mortgage e is. 3.General Law (Non-T orrens) Mortgages (only brief)
a.Most of the case law was developed under t he old system land, but the principles and doctrines laid down g enerally apply equally to T orrens mortgages.
b.Elements of the old system mortgag e
i.Promise by the mortgagor to repay a loa n of money; and
ii.Conveyance or transfer of th e mortgagor ’s land to the mortgagee; and
iii.Promise by the mortgagee to r econvey the land to the mortgagor upon
payment in full of the debt o wed, plus interest.
c.General Law Mortgagor ’s rights
i.Right to redeem:
1.Legal: Contractual right of mortga gor to repay the debt on the date fixed by the contract, thus req uiring the mortgagee to reconvey the land.
2.Equitable: Right of mortgagor to rep ay debt owed even after the date fixed by the contract has p assed.
ii.Equity of Redemption:
1.Distinguished from the equitable rig ht to redeem.
2.It exists as soon as the mortgage is given, and the sum of the mortgagor ’s interest and rights in the property .
3.Example: House worth $100k, borrowed $25k, equity of redemption worth $75k.
iii.Possession
1.The right to possession only arises if it is conferred by the mortgage.
d.General Law Mortgagee’ s rights
i.Power of foreclosure: extinguishes the mort gagor ’s equ ity of redemption and vests the full le gal and equitable ownership of the land in the mortgagee.
e.General Law Equitable Mortgage
i.Where the parties enter into an agre ement to mortgage, but does not comply with writing and form requir ements (s 1 1 PLA).
ii.Must be capable of specific performa nce, that is, must be in writing containing the essential terms and si gned by the party to be charged and supported by consideration, o r if there is no consideration, sufficient acts of part performance ( ). ANZ v Widam
f.Refer to Hedge notes if necessar y.
Page 1 of 12Very brief – only if necessary Nick Dowse Mortgages
4.Torrens Mortgages – Generally
a.Differe nt to an old system mortgage because ther e is no conveyance of the fee simple to the mortgagee.
b.Requirements of W riting and Form
i.A mortgage must be in writing and signed (s 10 PLA) and reg istered (s
72, 181 L TA)
ii.Contents of an instrument of mortgage is set out in s 73 L TA:
1.Validly executed by the mort gagor and the mortgagee; and
2.Include a description suf ficient to identify the lot to be mortgaged; and
3.Include a description of the debt or li ability secured by the mortgage; and
4.Include a description suf ficient to identify the interest to be mortgaged.
iii.The Registrar may refuse to reg ister an instrument which does not comply with the Act (ss 153, 10(1) and 10(3) L TA)
c.Effect Of Registration
i.Operates only as a charge on the lot secure d by the mortgage (s 74 LTA).
1.A charge is the appropriation or making answerable of specific property of the chargor for the payme nt of a debt. It gives the chargee the right to resort to t he property , but there is no transfer of ownership to the chargee.
ii.Mortgage obtains its legal characte r, mortgagee gets indefeasible title (s 181 L TA)
iii.Operates as if it were a deed (s 176 L TA)
iv.Even if there was a previous exception to indefeasibility or th e mortgage could be set aside due t o undue influence etc, the transferee of a registered mort gage is entitled to the benefits of indefeasibility and the mortgage cann ot be set aside ( Tessman v Costello ).
5.Covenants In A Mortgage
a.Express Covenants
i.The mortgage may contain express covenants, and usually contains these covenants:
1.Mortgaging covenant: covenant that charges the estate to the mortgagee – “the mortgagor char ges the estate or interest in the land with the repayment of $xxx” etc.
2.All monies clause: covenant to repay t his loan and any future loans, so that all future mortga ges are also secured by this mortgage.
3.Acceleration clause: If the mortgagor f ails to repay one instalment, the mortgagee can call up all the money to be repaid in the future.
a.However , s 95 PLA may provide relief.
b.Implied Covenants – apply unless there is a contrary intention
i.Covenant for the repayment of the pr incipal (s 78(1)(a))
1.Rates and times must specified in the mort gage itself
ii.Covenant for the repayment of interest (s 78(1)(a))
iii.Covenants to preserve the mortgag ed property (s 78(1)(b))
1.Mortgagor must keep buildings in good a nd substantial repair having regard to their conditio n at the start of the mortgage.
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