Security Interests

Question 2

What is a Mortgage?

Answer 2

• Form of security interest
• Incorporeal Property Right given to bank/lender

Question 3

What is the difference b/w Secured v Unsecured loans?

Answer 3

Secured = Property right in sth you own –> Fail to repay –> lender sue contract but SELL property to recoup money too
Unsecured = regular, contractual loans e.g. personal loans from bank –> fail to repay, lender sues for damages

Question 4

How are mortgages created?

Answer 4

GLL
Torren’s Land

Question 5

What if there is a failure to comply with Formalties?

Answer 5

• Possible to have mortgage recognised at Equity
• Works via same pathways
  –> s.126 Instruments Act
  –> Part performance = verbal agreements evidenced by actions

Question 6

Mortgages Process (GLL)

Answer 6

1. Borrower receives loan from bank –> Transfer legal title to bank and retain equitable title for themselves
2. Make repayments –> BANK looks after deed
3. Throughout time of agreed period –> Borrower has a RIGHT OF REDEMPTION –> Right to demand legal title back in exchange for full repayment of loan

Question 7

What is Right of Redemption?

Answer 7

• Ensures they have legal title back whenever pay off loan –> Right of Redemption expires 15 yrs after lender takes possession (s15 Limitation of Action Act)

Question 8

What are consequences of Mortgages in GLL?

Answer 8

• Equitable fee simple owner (borrower) can still operate as owner (s99 powers to make leaseholds for <7yrs) –> MUST get permission from lender before doing so

Question 9

Mortgage Process (Torren’s Land)

Answer 9

Borrower receives money from lender –> Borrower retains LEGAL title –> Borrower provides ‘security interest’ to bank
s72 TLA –>
a) Mortgage land
b) No need to transfer land
c) Borrower retains equity of redemption –> redeem mortgage by repaying loan at any time in order to remove mortgage from the register
d) Redemption right expires after 15 yrs

Question 10

What are consequences of Mortgages in Torren’s?

Answer 10

• Although borrower has LEGAL title –> limitation that:
  s87(c) TLA –> requires borrowers to gain consent from lender if they want to est. restrictive covenant, easement or lease over property
  –> 2nd mortgage? –> Must comply w formalities (Deed + registration)