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Mortgages: nature,
creation, source of rights
Specific Interests in Land
Understanding interests…
nature
creation
obligations
remedies
Sources of rights & obligations
Statute
Common law
Instrument
Reading law
Property
Law Act
Land Title
Act
Common
law
Making meaning from diverse provisions:
how do they work together?
Case-generated concepts
•interpreting instruments
•Inte...
The nature of the mortgage:
Two transactions
Loan agreement
•Loan of $ + promise to repay
(debt)
Security agreement
•Creat...
Nature of
mortgage
Security for
repayment
Contract
Interest
in land
Charge
over
land
Creating a mortgage
Form
• Requirements for
creation legal interest
in land
• Requirements for
creation equitable
interest...
Read the instrument of
mortgage (echoes approach to
statute)
Commence-
ment
Interest
secured
Structure of
instrument
Perso...
Read your instrument of
mortgage
Who is the
mortgagor
Who is the
mortgagee
Is it legal or
equitable? How
do you know?
What...
The right to redeem is essential
to the nature of a mortgage
Enter into
mortgage
1. Legal
right to
redeem
2. Equitable
right to
redeem
3. Equity of redemption
Common law concepts
Identify where redemption is
provided for
Source of law Provision
Instrument of
mortgage
Common law
Property Law Act
Land ...
Compare
Old System Torrens
Creation of
mortgage
Nature of mortgage
Equity of redemption
Foreclosure
Old System Torrens
Creation of
mortgage
By parties By registration – ss72,
181, 182 LTA
Nature of
mortgage
Conveyance of e...
What does it mean to say ‘once a
mortgage, always a mortgage’?
Once a mortgage, always a
mortgage
The very nature of a mortgage is as
security only & mortgagor will be able to
redeem th...
What do these phrases mean
and imply?
• Making the mortgage irredeemable
• Making redemption illusory
• Imposing a penalty...
Phrase Meaning/example
Making the mortgage irredeemable Stopping the mtgor from getting back
the security property (Samuel...
Case Issue How resolved
✗ Samuel v Jarrah
Timber & Wood
Paving Corp Ltd
Lender had option
to purchase
mortgaged
property
C...
Case Issue How resolved
✗ Fairclough v Swan
Brewery
17 year lease
mtged. Last
instalment due
6 wks before
end lease
mortga...
Contemporary Australian
position: Lift Capital ✓
Parties borrowed $
from Lift Capital,
gave shares as
security (eq mtge)
L...
Lift Capital: what the court said
Is intervention necessary to prevent
unconscionable behaviour? [131]
Allowing mortgagee ...
Credit | Power | Conscience
Locate Credit
(Commonwealth
Powers) Act 2010
(Qld)
Purpose
Operation
PLA
LTA
Contract
Consumer
credit law
Overview
Source of rights
& obligations
Formation of
mortgage
Nature of
mortgage
Mortgages: nature, creation, source of rights
Mortgages: nature, creation, source of rights
Mortgages: nature, creation, source of rights
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Mortgages: nature, creation, source of rights

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An introduction to the nature, creation and source of rights for mortgages in Queensland, focussing on real property mortgages.

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Mortgages: nature, creation, source of rights

  1. 1. Mortgages: nature, creation, source of rights Specific Interests in Land
  2. Understanding interests… nature creation obligations remedies
  3. Sources of rights & obligations Statute Common law Instrument
  4. Reading law Property Law Act Land Title Act Common law
  5. Making meaning from diverse provisions: how do they work together? Case-generated concepts •interpreting instruments •Interpreting legislation Property Law Act •Relationship with common law •Relationship with other legislation •What is the purpose of the Act, the provisions? Land Title Act •Relationship with common law •Relationship with other legislation •What is the purpose of the Act, the provisions?
  6. The nature of the mortgage: Two transactions Loan agreement •Loan of $ + promise to repay (debt) Security agreement •Create interest in land to cover debt if default
  7. Nature of mortgage Security for repayment Contract Interest in land Charge over land
  8. Creating a mortgage Form • Requirements for creation legal interest in land • Requirements for creation equitable interest in land Substance • Nature of a Torrens mortgage • Contrast nature of common law mortgage
  9. Read the instrument of mortgage (echoes approach to statute) Commence- ment Interest secured Structure of instrument Persons and things covered •Parties •Respective obligations Does the Property Law Act apply? How/why? Who has the power, and where are the protections: statute common law
  10. Read your instrument of mortgage Who is the mortgagor Who is the mortgagee Is it legal or equitable? How do you know? What is the security property? What is the debt that is secured? What are the obligations of this mortgagor? What are the obligations of this mortgagee? Does the PLA apply? If so, why? Does the LTA apply? If so, why?
  11. The right to redeem is essential to the nature of a mortgage
  12. Enter into mortgage 1. Legal right to redeem 2. Equitable right to redeem 3. Equity of redemption Common law concepts
  13. Identify where redemption is provided for Source of law Provision Instrument of mortgage Common law Property Law Act Land Title Act
  14. Compare Old System Torrens Creation of mortgage Nature of mortgage Equity of redemption Foreclosure
  15. Old System Torrens Creation of mortgage By parties By registration – ss72, 181, 182 LTA Nature of mortgage Conveyance of estate in fee simple Charge – s74 LTA Equity of redemption Equitable proprietary interest vesting in mortgagor, subsisting from date of creation of mtge, being a right to a reconveyance upon discharge of the debt Right to have a release of the mortgage, land restored free of charge Foreclosure Bar on mortgagor’s right to redeem Bar on mortgagor’s right to redeem + conveyance to mtgee for first time
  16. What does it mean to say ‘once a mortgage, always a mortgage’?
  17. Once a mortgage, always a mortgage The very nature of a mortgage is as security only & mortgagor will be able to redeem the property. Interfering with this alters the very nature of the transaction Noakes v Rice
  18. What do these phrases mean and imply? • Making the mortgage irredeemable • Making redemption illusory • Imposing a penalty on the mortgagor • Deriving a collateral advantage • Deriving a collateral advantage that is harsh and oppressive • Deriving a collateral advantage that is unconscionable
  19. Phrase Meaning/example Making the mortgage irredeemable Stopping the mtgor from getting back the security property (Samuel v Jarrah Timber) Making redemption illusory While technically allowing the mtgor to redeem the property, it’s so marginal as to not be real (Fairclough v Swan Brewery; Knightsbridge Estates v Byrne) Imposing a penalty on the mortgagor Allowing disproportionate benefit to mtgee via repayments in excess of genuine pre-estimate of damages Deriving a collateral advantage Receipt of some benefit or advantage beyond repayment of principal & interest Deriving a collateral advantage that is harsh and oppressive Look at relative power, whether continues beyond end of mtge; whether commercial arrangement (Noakes v Rice) Deriving a collateral advantage that is unconscionable Contemporary view; expansion of unconscionability (Westfield Holdings Ltd v Australian Capital Television; Lift Capital Partners Pty Ltd v Merrill Lynch International)
  20. Case Issue How resolved ✗ Samuel v Jarrah Timber & Wood Paving Corp Ltd Lender had option to purchase mortgaged property Clause invalid if it prevents mtgor from getting back his property on paying off the loan so clog ✓ Kreglinger v New Patagonia Pre-emption arrangement beyond redemption (collateral advantage) OK if: (1) mtgee hasn’t acted unfairly or oppressively; (2) mtge not made irredeemable: no clog ✓ Knightsbridge Estates Trust Ltd v Byrne Couldn’t be redeemed for 40 yrs – was postponement of redemption a clog? would grant relief if oppressive or unconscionable BUT here parties at arm’s length in commercial transaction so no clog
  21. Case Issue How resolved ✗ Fairclough v Swan Brewery 17 year lease mtged. Last instalment due 6 wks before end lease mortgagor’s right to get the property back illusory so clog ✓ O’Dea v Allstates Leasing On default, paid all instalments & forfeit property Not genuine pre-estimate of damages therefore penalty; clog
  22. Contemporary Australian position: Lift Capital ✓ Parties borrowed $ from Lift Capital, gave shares as security (eq mtge) Lift Capital  Lift Nominees  Lift Capital  Merrill Lynch Numbered shares now in general pool: mere contractual right to equivalent shares Lift Capital in liquidation – can borrowers recover their shares? Did Merrill Lynch take free from equitable mortgage? IF clog on equity of redemption, Lift Capital can’t enforce the relevant clause 😱
  23. Lift Capital: what the court said Is intervention necessary to prevent unconscionable behaviour? [131] Allowing mortgagee to acquire mortgaged property ≠ necessarily unenforceable [136] Real issue is power: ie whether unconscionable
  24. Credit | Power | Conscience Locate Credit (Commonwealth Powers) Act 2010 (Qld) Purpose Operation
  25. PLA LTA Contract Consumer credit law
  26. Overview Source of rights & obligations Formation of mortgage Nature of mortgage
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