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Property A Summary Security Interests Notes

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This is an extract of our Property A Summary Security Interests document, which we sell as part of our Property Law Notes collection written by the top tier of Monash University students.

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Security Interests: Mortgages A security interest is a property right attached to a debt

Types of Mortgages o


General Law Mortgage

Legal title is transferred to the mortgagee while the debt is outstanding, but has a
contractual obligation reconvey it to the borrower when the debt is repaid


o

They are not entitled to possess or sell due to their equitable rights. Equity looks
to the substance not form of the transaction: it is the provision of security for a
loan, not a transfer of ownership

Mortgagor left with equity of redemption.


Torrens System Mortgage

It is not a "true" mortgage, rather a statutory charge or hypothecation security.

It crystallises when the borrower defaults.

The mortgagor remains the registered proprietor of the legal estate

Subsequent registered mortgages can be made


o

Upon registration, the mortgagee acquires a registered interest in land in the form of a
statutory charge, NOT the legal title (S 74(2) TLA)

When debt is repaid, the mortgagor has a statutory right to call for a discharge


Equitable mortgage (same of GLL and TSL)

An advance of a sum of money by the lender upon the borrowed handing over the title
deeds are acts of PP

Equity would enforce a mortgage which did not satisfy the requirements of GLL or TSL if
it was evidenced in writing OR in an oral agreement supported by sufficient acts of part
performance ANZ v Widin

Creation of equitable mortgages without written documentation is now restricted by the
NCC in transaction to which the code applies.

Right of the mortgagor o


In Statute (National Credit Code): A nationwide scheme the offers protection to people

who enter into a credit arrangement


The NCC applies to mortgages if:

They secure obligations under a credit contract (s7a) and the mortgagor is a
natural person or strata corp. (s7b); AND

The credit contract is a contract under which credit (debt deferred, defined in
s3) may be provided (s4); AND

A charge is made for providing credit (s5(1)(c); AND

A charge is provided in the course of business providing credit (s5(1)(d)); AND

The credit must be provided wholly or predominately for personal, domestic or
household use (s5(1)(b)(i))

o

Predominately means more than half or where goods/services are
mostly used for those purposes (s5(4)(a +b)

o

Investments which are not personal, domestic or household purposes
(s5(3)).

o

If the mortgagor, before entering into the contract, declares that the
credit is not predominately for a personal, domestic or household
purpose, it will be presumed not to be for those purpose (s13) - this is
rebuttable.

If a party claims the NCC applies to a mortgage, a presumption will arise that it
does - this is rebuttable (s13).


The NCC doesn't apply to a range of situations
in s6, including a credit contract
for less than 62 days (with conditions) or where credit is provided without prior
agreement.


You cannot contract out of the NCC
(s191)

o

Presumed code applies unless the debtor declares before entering
contract that the credit is not obtained for a code purpose. This
declaration is ineffective if the credit provider knew or ought reasonably
to know that the predominant purpose was a code purpose s 13


Key NCC provisions for Mortgages:

o

S42 - Mortgage must be in writing and signed by the mortgagor.

o

S 44 - Mortgage must identify/describe the property. Mortgages over
"all property" are void

o

S45 - Mortgage over future property are void unless the property is
described/identified or in order for a property to be acquired with the
credit

o

S48 - 3 party mortgages are prohibited.

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