ABSTRACT
QUESTION 42 Analyse the methods by which legal and equitable mortgages might be created since 1925. What was the purpose of the 1925 reforms?
Answer Plan The following areas need to be discussed:
ANSWER All land has an economic value, and a mortgage is one of the most effective ways by which an owner may realise it. Although today the mortgage is most commonly employed to enable the purchase of land in the first place, the true nature of a mortgage is that it is a lender’s security for money lent to the borrower. Of course, the mortgage is much more than a simple contract of loan, for the mortgagee will acquire an interest in the land over which the mortgage operates. In technical terms, a mortgage is regarded as a conveyance of an estate in the land to the mortgagee, with a provision that the mortgagee’s interest shall lapse upon repayment of the loan plus interest and costs, although this is no longer the way in which mortgages are actually created. It is one of the most important aspects of the mortgage that the lender obtains not only a right to have the money repaid but also a proprietary interest in the land charged as security for that loan. However, as well as being a powerful form of security for a lender, a mortgage also has advantages for the borrower or mortgagor. It is a general principle of the law of property that ‘once a mortgage always a mortgage’, which effectively means that the borrower has a right of full access to his property once the loan secured on it has been repaid. In other words, that the proprietary nature of the mortgage lasts only for so long as the debt remains outstanding. Thus, the mortgagee’s remedies (which can be proprietary or contractual in nature) only endure so long as the borrower owes money.
