Chapter 9: Mortgages

MORTGAGES
A mortgage is a conveyance or disposition of land or other property as security for the
payment of money or the discharge of some other obligation subject to the right to redeem
(the land or property has to be retransferred if the money is repaired or the obligation
performed).
The person who borrows the money is known as the mortgagor and the ender is the
mortgagee.
The mortgage acquires a real rather tan a personal security which prevails against
other creditors. A purchaser who acquires the property by way of mortgage takes the property
subject to the mortgage and does not take priority over it.

Rights of the mortgagor: the right to redeem

Once a mortgage has been created, there will normally be a contractual date set for
repayment of the loan. This is known as the legal redemption date. Equity also created an
equitable right to redeem which gave the mortgagor the right to redeem the property even
after the legal redemption date had passed.
The right to redeem in inviolable and shall not be interfered with. Any provision
preventing a mortgagor from recovering his/her property after performance of his obligation
is void.
The right to redeem may be lost:
a) On sale by the mortgage;
b) Where a foreclosure decree has been made;
c) if the mortgage has been in possession of the mortgaged land for 12 years;
d) where the mortgagor has surrendered his/her equity of redemption to the mortgage.

Rights of the mortgage (Remedies)

Where a mortgagor defaults under the terms of the mortgage, the mortgagee is given
various remedies. Sale, foreclosure and suing on the personal covenant are designed to
recover capital whereas the appointment of a receiver or taking possession are designed to
recover interest.
 The power of sale arises in a mortgage which shows no contrary intention and is made
by deed, and the legal redemption date has passed. The power of sale becomes
exercisable if notice requiring payment of the mortgage money has been served and
default for three months; if some interest under the mortgage is two months in arreas
and unpaid; and on breach of some provisions. A mortgage does not actually need a
court order to execute sale, but he/she must act in good faith.
 Foreclosure amounts to a confiscation of the mortgagor’s interest in the property. In a
foreclosure action the court declares that the mortgagor’s equitable right to redeem is
extinguished and the mortgagee becomes owner at law and in equity.
 The mortgagee’s right to take possession is automatic because the mortgage gives a
legal estate in possession and is exercisable even if the mortgagor is not in default.
 Appointment of a receiver is the appointment of a person with management powers
who may collect rents and profits.
 Right to sue on the personal covenant: a mortgage normally contains a specific
covenant by the mortgagor to pay the money on a specified date. The mortgagee can
sue on this covenant and satisfy judgment out of any of the mortgagor’s property.