Tutorial

Topic 6

Secured Lending

1. Mortgages over land (real property)

Earlier, John Phu was preparing to purchase a residential property financed by WR Bank.
He signed the loan application and entered into an unconditional sale and purchase
agreement with the seller of the property.
The terms of the loan contract provide WR is entitled to register a mortgage over the
property once the purchase is completed.

(a) If a mortgage is granted, who will be the mortgagor and mortgagee?

(b) Describe the nature of the ‘Torrens System and the advantages it confers on the
bank in registering its mortgage.

In brief torrens system is a way of registering and recording land ownership aswell as a land
transfer system that maintains and creates registering of land holdings. Under this system
the person who has the ‘title’ in the register is considered as the owner or the proprietor of
the land, and also the interests recorded under the register. Accordingly the interests that
are not registered are known as ‘paramount interests’.
The registration under torrens system provides conclusive evidences of ownership. And
under this system a certificate of title is being attached to each and every parcel of land
registered. Further the initial owner or the first registered mortgage will obtain a copy of the
above certificate. This particular certificate plays a significant role and have a similar role in
some aspects to the old deeds of the title.

Under many of the real property acts the mortgages act as securities but not doesn’t
operate as a transfer of the land. Further it’s clear that any mortgage is a registerable
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instrument and must be registered because it is considered that an unregistered mortgage
is not a legal nullity. This may have an impact on the immediate parties and also the third
parties as it may create an equitable mortgage.
As an example we can take a document ( mortgage document) that purports to create a
mortgage under the torrrens system. In here even though the mortgage have no legal rights
provided by statutory registration still it’s a valid equitable mortgage which is from the time
of creation.

(c) Identify the rights WR has if John defaults.

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2 Glossary: Explain the following terms

1. Mortgage Mortgage is an arrangement/ agreement between the

lender and the borrower which provides the lender the
right of taking borrowers property if the borrower fails to
repay the promised money that is borrowed collectively
with the interest.
Under a mortgage agreement we can identify two
parties, the mortgagee who is the lender and the
mortgagor which means the borrower. Accordingly, the
mortgagee has two specific rights during any case of
default. Those are the mortgagee may;
✓ enter into procession of the borrower’s property
✓ sell the property (Real Property Act)

2.personal property A personal property is any kind of a property interest

other than land.

3. Real Property

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4.Perfection

5. Mortgagor and mortgagee

6. Indefeasible title

7. Standby credit

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8. Letters of comfort

9. Overdraft Overdraft is a current account that allows the bank

customers to overdraw funds from their account in
excess to the existing amount. Normally, this facility
(overdraft) is repayable on demand.