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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
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
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))
Predominately means more than half or where goods/services are
mostly used for those purposes (s5(4)(a +b)
Investments which are not personal, domestic or household purposes
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
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
You cannot contract out of the NCC
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:
S42 - Mortgage must be in writing and signed by the mortgagor.
S 44 - Mortgage must identify/describe the property. Mortgages over
"all property" are void
S45 - Mortgage over future property are void unless the property is
described/identified or in order for a property to be acquired with the
S48 - 3 party mortgages are prohibited.
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