This website uses cookies to ensure you get the best experience on our website. Learn more

Law Notes Property and Equity 2 Notes

Other Proprietary Interests Mortgages Notes

Updated Other Proprietary Interests Mortgages Notes

Property and Equity 2 Notes

Property and Equity 2

Approximately 262 pages

UNSW Property and Equity 2 notes. Includes detailed case and materials notes and super summaries ideal to take into an open book exam. Structure of cases and materials notes:

Class 1: The Torrens System and Indefeasibility
Class 2: Indefeasibility of What?
Class 3 - The in personam exception
Class 4 - Other exceptions and overriding statutes
Class 5 - The register, equitable interests and caveats
Class 6 - Competing equitable interests
Class 7 - Co-ownership
Class 8 - Rights of enjoymen...

The following is a more accessible plain text extract of the PDF sample above, taken from our Property and Equity 2 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Class 12.2 – Mortgages – Introduction, Priorities, Power of Sale

  • The TB writers talk about how central mortgagers are to everyday life – they also distinguished between the significance of secured and unsecured mortgages in terms of the position of the debtor (who, after all securities are exhausted only has a claim for a personal action)

  • They also talk about the range of security transactions like charges, HPAs etc. and also the fact that mortgagers aren’t the only way land can be financed (e.g. payment by instalments on a contract of sale) giving the vendor the right to rescind if the purchaser defaults

  • Then there are also the ‘bills of sale Acts’ which govern mortgages of chattels

  • But the focus of policy makers has been consumer credit transactions, the laws of which have been subject to a number of examinations – all states having enacted a Consumer Credit Code which:

    • Had the objectives of uniform application across Australia, promoting the policy of “truth in lending” with a view to providing redress mechanisms to borrowers in the event credit providers don’t comply with the legislation

    • Provisions of contracts that seek to avoid/modify the code are void by s 169(1) of the CCC

  • What does it apply to?

    • S 8(1) – Mortgages over land if the mortgage secures obligation under a credit contract or guarantee and the mortgagor is a natural person or strata corporation

      • S 6(1)A credit contract is one where at the time the credit was entered into the debtor was a natural person in the jurisdiction or a strata corporation formed in the jurisdiction and:

        • Credit is provided or intended to be provided wholly or predominantly for a personal/domestic/household purpose

        • A charge is made for providing the credit and the credit is provided in the course of business of providing credit

    • The code has a number of consumer protection provisions such as requiring the contract to be written (s 12) and the debtor to be given a copy (s 18)

  • Special provision is made in the code for changes to contracts on the grounds of hardship/unjust transactions

    • For hardship if debtors can’t meet payments because of illness/unemployment/other-reasonable-cause but reasonably expects to meet them if the contract was altered then they can apply to the credit provider (s 66) and then to a court (s 68) to have it altered.

      • The court will consider a variety of factors outlined in s 70(2) like consequences of compliance with all the provisions, relative bargaining power of the parties etc.

The nature of mortgages

The general law mortgage

  • The earliest mortgage was an attempt to provide security for a loan and to avoid to prohibition on usury – the creditor was given possession of the debtor’s land and was entitled to rents and profits. Since the mortgagee had possession the security was regarded as a pledge (‘gage’) either a living pledge (vivum vidium) that discharged the entire debt or a dead pledge (mortuum vadium) that discharged the interest only

  • Eventually the common form of mortgage was for the mortgagee to take the legal title (by feoffment0 subject to a condition subsequent that if the loan was repaid by the agreed date the power to re-enter and determine the estate of the mortgagee was there

  • Then it became custom to use reconveyance instead of a condition subsequent – this gave the mortgagor right to relief in contract that depended on the intervention of equity to compel the reconveyance of the mortgage

    • This form remained until the Law of Property Act (UK) that permitted only mortgage by demise and by legal charge – both of which exist for old system land in Australia

  • At common law mortgages were characterised by strict enforcement if money was not paid on the due date the rights of the mortgagor were extinguished and the mortgagee was absolutely entitled – but equity took a different approach

  • Megarry and Wade trace the influence of equity:

    • Mortgages and securities – the idea that mortgagors lose their property because of a late payment was repugnant to equity; it started by relieving in cases of accident, mistake and special hardship but eventually relief was granted in all cases

      • This meant that mortgagees didn’t stand to gain property worth more than the debt – equity compelled the mortgagee to treat the property as just a security for the money owed

      • This equity of redemption was a valuable interest in the mortgagor – its value being the difference between the debt and the value of the property

    • Foreclosure – this was the limit to the equitable right to redeem; the decree of foreclosure in equity. This was an order of the court made on the mortgagee’s application declaring that the equitable right to redeem was at end. This would give the mortgagee an unencumbered fee simple – but if the property was more valuable than the debt the court would order sale of the property and the mortgagee would get only what was due.

    • The equity of redemption – the right to redeem is distinguished from this; this is wider. The right to redeem doesn’t rise until the contractual date for redemption has passed – this rises as soon as the mortgage is made. Also the equitable right to redeem is a particular right but the equity of redemption is an equitable interest in the land consisting of all the mortgagor’s rights in the property

      • Hence at law one will have parted with the land but in equity they will be the owner subject to the mortgage; the mortgagee is at law the owner but in equity a mere encumbrancer

  • Since a general law mortgage conveys the estate to the mortgagee it must be done by deed

    • But if an enforceable agreement is entered into without the formalities, a W v L equitable mortgage can arise )but equity won’t grant SP unless the loan is advanced)

    • If a lander advances and the borrower deposits title deeds with the lender, the parties’ actions are part performance that can be SP subject to equity’s discretion (Russel v Russel)

  • The equity of redemption that the mortgagor retains can be...

Buy the full version of these notes or essay plans and more in our Property and Equity 2 Notes.