Property and Mortgages - Essay Example

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A mortgage is ‘money-lending’ relationship between a landowner and a lender in which interest in land is the security. A mortgage is different from other money lending arrangements such as bank loans in the sense that it passes interest in the subject land to the lender. …
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Property and Mortgages
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Download file to see previous pages The general rule is that the interest reverts to the borrower upon completion of refinancing the mortgage. The history of mortgages dates back to the seventeenth century. Throughout this period, doctrines of equity have been applied to protect mortgagors from mortgagees’ exploitations. Statutory regulations have however recently been formulated to ensure mortgagors’ protection. The courts have similarly joined the efforts. The scope of mortgages covers any venture in which land is used, and is offered on any interest on land as well as other properties other than land. This paper seeks to investigate the statement that ‘mortgages are a suppression of truth and a suggestion of falsehood,’ mortgage destroys our economy. The paper will explore the legal aspects of mortgages with the aim of supporting the statement. Difference between legal and equitable mortgages The major difference between equitable and legal mortgage is the level of formality that is involved on the process of creating the mortgage. A legal mortgage requires strict formalities that include a written contract. All terms of the mortgage agreement are stipulated and the document signed. Equitable mortgages on the other hand involve deposition of title to the subject estate without making formal commitments. Legal mortgages are executable within the strict interpretation of the law of property act (1925) and must be under deed. This means that the mortgage binds any interest in the land, both original and transferred. An equitable mortgage is however informal and do not bind a purchaser in good faith who takes the property for value without the knowledge of existence of the mortgage (Slorash and Ellis, 2007, 121). Another difference between a legal mortgage and an equitable mortgage is the transferability of interest in the subject land. While property in the piece of land is transferred to the mortgagee under a legal mortgage, only possession passes in an equitable mortgage and the mortgagee has to seek judicial intervention for transfer of property in the land in case of a defaulted refinancing (Sharma, 2010, 212). Rights of the mortgagee The mortgage agreement creates a number of rights to the mortgagee. The first right that a mortgagee acquires is the right over “the promise to pay” (Williams, 2011, 90). This right is enforceable against the mortgagee or any subsequent owner of the land subject to the law of property act (2007) and the interpretation of the case of Nefson Diocesan trust board v Hamilton [1926] NZLR 342. The mortgagee also has a right to foreclosure and to gain possession of the land if the mortgagor defaults in payments after a notice after a notice (Williams, 2011, 92). There is also the right to put the piece of land under receivership or even to sell the property as was held in the case of Alliance &Leicester plc v Slayford [2000] EGCS 113. The same case provides legal ground for suit against the mortgagor’s covenant (Pawlowski and Brown, 2002, 177). Rights of the mortgagor The mortgagor’s rights include the right to redeem the mortgage subject to the terms of the mortgage agreement as was illustrated in the case of Jones v Morgan (2001) (Dixon, 2011, 380). The redemption right can be enforced equitably or legally. Further, the mortgagor is entitled to right of possession, inspection of property and accession rights (Mau, 2010, p. 86- 88). Safeguards for borrowers Mortgagors are bound by the lending terms of their agreements that are enforceable under statutory laws. The doctrines of equity supplements statutory regulations to protect borrowers from exploitation. Mortgagor’s right of redemption is for instance absolute irrespective of the delayed ...Download file to see next pagesRead More
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