MLL327 Study Guide - Final Guide: Pignus, Secured Loan, Financial Institution

103 views7 pages
Property Law Topic Eleven
appreciate the security nature of the mortgage
Is a form of security interest which confers upon a lender an enforceable proprietary interest until the
primary loan contract is discharged
Most common form of security interest in the case of land transactions
Purpose of mortgage is to ensure that the loan money lent pursuant to a loan contract are protected
by conferring security upon the lender
SECURED LOAN
Loan from a bank or financial institution
The borrower (mortgagor) enters into a contract with lender (mortgagee) to obtain a loan
Loan agreement is just a contract, protected by contractual remedies
Secured loan is a loan secured by property which belongs to the borrower
Loan is secured by the grat of a otgage  the otgago to the otgagee oe otgagos
property
Mortgage is an in rem alienable interest
Motgagos property will be security for loan in case of breach of contract
If the borrower defaults, rather than just contractual remedies, the lender can take action against
specific property
Upon default, the lender may (a) sell secured property to recoup amount outstanding and costs or (b)
take over property in exchange for extinguishment of debt of borrower
Mortgage the most common form of a secured loan
understand the type of interests that security interests can create
TYPES OF MORTGAGES
Nature and scope of mortgage depends on:
Source of law that validates mortgage: common law, equity or statute
Nature of proprietary right (Roman classification):
Fiducia (transfer of ownership to lender for duration of the loan): old title mortgage
Pignus (transfer of possession of property to lender for duration of loan, but not legal
ownership): lien
Hypotheca (creation of a charge in favour of lender to take action against property if
there is default): Torrens title mortgage
Two primary forms of mortgages of land:
Mortgage involving the actual conveyance of legal estate to mortgagee (old title mortgage)
Mortgage involving the acquisition of an enforceable charge against the property (Torrens
title mortgage)
Charge is in an interest that crystallises in possession when the terms of the loan contract
have been breached, entitling the lender to possession and title of secured property for
purposes of extinguishing the debt
POSSESSORY SECURITIES
Commonly associated with chattels
Commonly known as a lien
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 7 pages and 3 million more documents.

Already have an account? Log in
Only exist where lender has actual possession or right to immediate possession of the property
Right to retain possession of property until debt is paid
No right to exercise power of sale
May be created expressly at law or be enforced in equity
Usually chattels e.g. ehais lie oe a, soliitos lie oe douets
Vendor’s equitable lien over real property right to keep possession until full purchase price paid
Purchasers equitable lien over deposit paid until conveyance of estate takes place
OLD TITLE MORTGAGE
Involves a transfer of legal ownership in the secured land to the mortgagee coupled with the
contractual obligation for the mortgagee to re-transfer title upon the debt being discharged
Mortgagee has full legal title but not entitled to treat property as their own: not as absolute as full
ownership; can only exercise ownership rights on default in the loan contract
Mortgagee must act in accordance with interests of the mortgagor
This applies even when the mortgagor is in default and the mortgagee takes action against the
property, eg power of sale
Problems with the common law mortgagee had considerable power oe otgagos lad
If mortgagor failed to fulfil contract exactly, the mortgagee was entitled to full ownership of the
property, even if the remaining debt was very small or debt had eventually been paid
Only remedy available to mortgagor under common law on breach of contract by mortgagee was
damages
Court of equity allowed mortgagor to redeem property if debt was repaid, even if after contract date
Equity focuses on the security character of the mortgage
Mortgagee entitled to protection of their investment not to unfair windfalls
Equity of redemption led to mortgagees having no remedy against the property.
Equity developed right of foreclosure for mortgagees
Mortgagee can seek an order of foreclosure (of the equity of redemption) which extinguishes the
otgagos ight of edeptio i the popet
Legal estate is conferred as security for duration of mortgage; transfer by deed of conveyance
Mortgagee retains ownership of mortgaged land until debt is fully discharged and contractual
obligations are satisfied
Mortgagee as legal owner has right to possess; right to possession is transferred back to mortgagor
pursuant to a lease (attornment clause)
Mortgagee has contractual duty to re-transfer the property upon payment of debt
Mortgagor acquires right to reclaim property once the debt is repaid and obligations satisfied
Equity supplements the contractual right of re-conveyance
Old title mortgages not common because most land comes under Torrens system or has been
converted to Torrens title land
be aware of the nature and enforceability of the equity of redemption
REDEMPTION
Legal estate is conferred as security for duration of mortgage; transfer by deed of conveyance
Mortgagee retains ownership of mortgaged land until debt is fully discharged and contractual
obligations are satisfied
Mortgagee as legal owner has right to possess; right to possession is transferred back to mortgagor
pursuant to a lease (attornment clause)
Mortgagee has contractual duty to re-transfer the property upon payment of debt
Mortgagor acquires right to reclaim property once the debt is repaid and obligations satisfied
Equity supplements the contractual right of re-conveyance
Old title mortgages not common because most land comes under Torrens system or has been
converted to Torrens title land
find more resources at oneclass.com
find more resources at oneclass.com
Unlock document

This preview shows pages 1-2 of the document.
Unlock all 7 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Property law topic eleven appreciate the security nature of the mortgage. Is a form of security interest which confers upon a lender an enforceable proprietary interest until the primary loan contract is discharged: most common form of security interest in the case of land transactions. Purpose of mortgage is to ensure that the loan money lent pursuant to a loan contract are protected by conferring security upon the lender. The borrower (mortgagor) enters into a contract with lender (mortgagee) to obtain a loan. Loan agreement is just a contract, protected by contractual remedies. Secured loan is a loan secured by property which belongs to the borrower. Loan is secured by the gra(cid:374)t of a (cid:373)o(cid:396)tgage (cid:271)(cid:455) the (cid:373)o(cid:396)tgago(cid:396) to the (cid:373)o(cid:396)tgagee o(cid:448)e(cid:396) (cid:373)o(cid:396)tgago(cid:396)(cid:859)s property: mortgage is an in rem alienable interest, mo(cid:396)tgago(cid:396)(cid:859)s property will be security for loan in case of breach of contract. Types of mortgages: nature and scope of mortgage depends on: