Mortgage - Definition - Law Dictionary Home Dictionary Definition mortgage

Definition :

Mortgage [fr. mort, Fr., dead, and gage, pledge], a deed pledge; a thing put into the hands of a creditor.

A mortgage is the creation of an interest in property, defeasible (i.e., annullable) upon performing the condition of paying a given sum of money, with interest thereon, at a certain time. This conditional assurance is resorted to when a debt has been incurred, or a loan of money or credit effected, in order to secure either the repayment of the one or the liquidation of the other. the debtor, or borrower, is then the mortgagor, who has charged or transferred his property in favour of or to the creditor or lender, who thus becomes the mortgagee. If the mortgagor pay the debtor loan and interest within the time mentioned in a clause technically called the proviso for redemption, he will be entitled to have his property again free from the mortgagee's claim; but should he not comply with such proviso, the legal estate becomes perfected in the mortgagee, i.e., indefeasible, and so lost at the Common Law to the mortgagor. Until the mortgage has been foreclosed, or unless the property has been sold under powers to satisfy the debt, it is redeemable in a Court of Equity upon payment of the debt or loan, with interest and expenses, at any period within twelve (formerly twenty) years after the last recognition of the mortgage security by the mortgagee; and this because equity deems the non-compliance with the proviso for redemption a penalty, against which it always relieves when practicable.

Seeing that in by far the greater number of loan transactions the mortgagor never performs the condition in the proviso for redemption, they have been denominated mortgages, as the pledge is then dead or lost (mortuum vadium) to the mortgagor at law. A mortgage differs from a vifgage (vivium vadium), so called because neither loan nor property is lost, for the creditor enters into possession of the estate, and receives its proceeds in satisfaction of his debt, with interest, upon which the debtor becomes entitled to his own again. A Welsh mortgage is one in which the creditor receives the proceeds of his security in satisfaction of the interest of his debt, the principal remaining due and the estate never becoming forfeited, but redeemable at anytime; and the creditor not being entitled to sue at law in the absence of a covenant or bond, or to foreclose in equity. When property is conveyed to a mortgagee and his heirs until out of its rents the loan and interest shall have been received, this is in the nature of a Welsh mortgage, and has been compared to a tenancy by elegit.

In order to protect a necessitous mortgagor from the exacting grasp of an inexorable mortgagee, equity will not suffer any compact whatever to infringe the right of redeeming a mortgage in its courts. The right or equity of redemption, then, is the chief and inseparable incident of a mortgage--an incident unextinguishable, save by a foreclosure decree, a sale by the mortgagee under a power, express or implied, in that behalf, a legislative provision, or unreasonable delay. see CLOG ON EQUITYOF REDEMPTION. A provision rendering a mortgage irredeemable for a short term, such as five or seven years, is, however allowed, Biggs v. Hoddinott, (1898) 2 Ch 311, and see Davis v. Symons, 1934 Ch 42 (covenant not to redeem for twenty years not allowed; redemption allowed in six months).

Every kind of property may be mortgaged except the salaries and emoluments of public functionaries; full pay and half-pay of naval and military men; retiring allowance of a person liable to serve again, or of a servant of the East Indian Company; commissions in the Army; and church livings with cure of souls, and other statutory prohibitions.

While an increase in the rate of interest upon default of regular payment is a penalty, and is not admissible, the reservation of a higher rate, with an abatement for punctual payment, may be made.

The (English) Real Estate Charges Acts, 1854 and 1877 (17 & 18 Vict. c. 113, and 40 & 41 Vict. c. 34), together with the Act of 1867 (see infra), commonly called Locke King's Acts, provided that the heir or devisee of real estate should not claim payment of mortgages out of personal assets; and the (English) Real Estate Charges Act, 1867 (30 & 31 Vict. c. 69), provides that in construing wills a general direction to pay debts out of personalty shall not include mortgage debts, unless an intention to that effect be expressed or implied. These Acts were repealed and reproduced in an amended form, to give effect to the assimilation of real and personal property by the (English) Administration of Estates Act, 1925, s. 35. This provision now relates to any property, whether real or personal, including estates-tails.

A mortgagor in possession or receipt of the rents and profits of any land, as to which the mortgagee has given no notice of intention to enter into possession or receipt of the rents and profits, may sue for such possession, or such rents and profits, or to prevent or recover damage for any wrong thereto, in his own name only, (English) Jud. Act, 1873, s. 25 (5) (now Jud. Act, 1925, s. 4, and repeated by the (English) Law of Property Act, 1925, s. 98); but see Turner v. Walsh, (1909) 2 KB 484.

The (English) Conveyancing Act, 1881 (44 & 45 Vict. c. 41), by ss. 15-17, reproduced with the amendments of the (English) Conveyancing Act,1882, s.12, by the (English) Law of Property Act, 1925, ss. 95, 96, gives a mortgagor power to require the mortgagee to transfer the mortgage debt instead of reconveying; power to inspect title deeds, and power to pay off one mortgage, where there are mortgages to the same person of different properties, without paying off the others, unless the power is excluded by the terms of the mortgage (s. 93 ibid.). See CONSOLIDATION.

The (English) Law of Property Act, 1925, s. 99, reproduces and extends the (English) Conveyancing Act, 1881, s. 18, and the Conveyancing Act, 1911, s. 3, which conferred on mortgagors and mortgagees in possession extensive powers of leasing, but powers of leasing were commonly provided for before the Act by express terms in the mortgage deed. These ss. are not retrospective. Before this Act, in the absence of a power of leasing, a valid lease could only be granted with the concurrence of both mortgagor and mortgagee, see Keech v. Hall, (1745) 1 Doug 21; 2 Sm. L.C. In West Bromwich Building Society v. Bullock, 80 SJ 654, it was held that the mortgagor remains liable on is covenant (unless discharged) after transfer of the mortgage.

Ss. 19-24 of the (English) Conveyancing Act, 1881, and the C.A., 1911, ss. 4 and 5, now reproduced with slight amendments by ss.101, 103 to 109 of the (English) Law of Property Act,1925, conferred on mortgagees powers of sale, insurance, and to appoint a receiver.

S. 102 enables a mortgagee of an undivided share inland to exercise such powers of sale, etc., as a mortgagee of a share in the land possessed before 1925, and for the effect of the powers of a mortgagee upon sale or foreclosure, over the fee simple or term remaining in the mortgagor and against subsequent incumbrancers, see ss. 88 and 89.

A mortgagee, however, cannot sell the mortgagor's beneficial interest apart from the legal title, Hunter v. Hunter, 1936 AC 202.

The (English) Law of Property Act, 195, ss. 117, 118, 119 and 120, and 4th Sched., repeating with modifications the Act of 1881 (ss. 26-29), amended by the (English) Conveyancing Act, 1911, s. 15,provides forms of Charge by Way of Legal Mortgage (see s. 87), and Statutory Charge by Way of Legal Mortgage (see ss. 87 and 117 and 119 as to implied covenants) and respective transfers and other forms, including respective forms of Receipt on discharge of any mortgage. This receipt by s. 115 of the Law of Property Act, 1925, operates as a surrender, reconveyance or transfer of the mortgaged property subject to prior incumbrances (if any). The provisions of s. 115 should be strictly attended to, especially sub-ss. (1) and (2), ibid. the vesting effect of a receipt in this form (without other reconveyances) applies to any class of property. The receipt need not be by deed and should be endorsed or attached to the mortgage.

The (English) Law of Property Act, 1925, s. 97, together with the (English) Land Charges Act, 1925, s. 10, has also introduced very considerable alterations in the substantive law of mortgage. By ss. 85 and 86 of the (English) L.P. Act, 1925, all mortgages of a fee simple existing on the 1st January, 1925, were converted into terms of 3,000 years from that day, there version in fee remaining in the mortgagor. Mortgages of a legal term were converted into mortgages less a few days, leaving the leasehold reversion in the mortgagor, the term of each subsequent then existing mortgage in either case being for a day longer than the term of the prior incumbrance. In the same manner mortgages after 1925 can only be effected by the creation of a term of years, leaving the freehold or leasehold reversion, as the case may be, in the mortgagor. Such mortgages carry the right to possess the documents of title subject to claims of prior mortgages, and may be effected by a charge byway of legal mortgage (see s. 87 and the 5th Schedule of the Act). Mortgages made after 1925 have one peculiarity; though creating a legal estate, the title is not perfected until the mortgage has been registered under s. 10, Class C, of the (English) Land Charges Act, 1925, in the Land Registry or in the Yorkshire Registry, unless the mortgage is accompanied by a deposit of the documents of title. The absence of document affects any purchaser (including a registered mortgagee) with notice of a prior title. Mortgages without the deeds obtain priority not necessarily by order of the date of creation but according to date of registration [s. 97, (English) Law of Property Act, 1925]. First and any subsequent mortgages which are not accompanied by the title deeds and not registered are void as against a purchaser for value if registration is not effected before completion of the purchase. Legal mortgages made before 1925 do not lose priority and bind the purchaser if he is affected with notice. Such mortgages may and should be registered unless the mortgagee holds the deeds, and in that case the precaution may be useful. Mortgages and charges registered under s. 79 of the (English) Companies Act, 1929, are not affected by these provisions; but in regard to registered land, see REGISTRATION.

For restrictions upon powers to call in or enforce mortgages created before 2nd July, 1919, see Rent etc. (English) Restriction Acts,1920, ss. 7 and 12, and 1933, s. 9; and for permitted increase of interest, s. 4 of the 1920 Act.

All causes for redemption or foreclosure of mortgages are assigned to the Chancery Division of the High Court: (English) Jud. Act, 1873, s. 34.

As to the power of trustees to invest in mortgages of land, see (English) Trustee Act,1925, ss. 1, 8, 9 and 10. Upon appointment of new trustees, the land mortgaged must be expressly conveyed or transferred to them. See s. 40 (4), ibid., and EQUITABLE MORTGAGE; NOTICE; LAND CHARGES.

A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or further debt. Or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the principal money an interest of which payment is secured for the time being are called the mortgage money, and the instrument, if any by which the transfer is effected is called a mortgage deed. Earnest money deposits of bidders at auction sale of forest produce is not mortgage and therefore not liable to stamp duty, Board of Revenue v. A.M. Ansari, 1976 SC 1813: (1976) 3 SCC (Tax) 350: 1976 UPTC 700: 38 STC 557: (1976) 3 SCR 661.