Understanding the Law
August 20, 2010
Legal Mortgage

A mortgage contract is one of the most important contracts that you will probably make in your life. Most often it involves borrowing a large sum of money that requires a month-to-month commitment and conveying your assets to a lending institution, with a provision to have them returned to you after you have carried out your obligations.{{more}}

Mortgage contracts can be made with the security being made on the property you intend to buy or on any other real property you own. You can mortgage your property to obtain money for most legitimate reasons including building a house, buying land, or a business venture, among others, provided you get the approval of the lending agency. There are legal mortgages and equitable mortgages, but we will look at the legal mortgage, which is the common form in St. Vincent and the Grenadines.

Mortgage contracts are often made with financial lending institutions such as banks, building societies or credit unions. The approval of the institution depends on the security you put up. The assistance of a lawyer will be required to draft the mortgage document, which is a strictly legal document. Most lending institutions have their own lawyers to deal with this.

A search of the title of the property must first be carried out to find out whether there is any encumbrance such as a mortgage on the property. Lawyers’ clerks who peruse the deed books and receipt books carry out the search at the Land Registry. The Deed books contain original documents that were deposited at the Land Registry after the registration of deeds.

If there are no encumbrances, the lawyer proceeds to draft the deed of mortgage. Provision is made to convey the property to the mortgagee in the event of a default. The opening sentence of the deed gives the date and refers to the document as an “indenture”. This is an old word that is similar in meaning to the word “deed”. In the introductory paragraph the parties are identified. “The mortgagor” is the person who is taking the loan and “the mortgagee” is the institution that gives the loan. The expression “the mortgagor” includes the heirs, executor, administrator and assigns where the context admits. The expression “the mortgagee” includes its successors and assigns. After the names of the parties are given in the introduction, the words “mortgagor” and mortgagee are used thereafter instead of the names of the parties.

The introduction is followed by recitals that would touch on the important terms and conditions of the contract. It would refer to the status of the title, for example, it states that the mortgagor has the power to make the contract because he or she has an estate in fee simple free from encumbrances and that the deed was registered in the Land Registry on a stated date. The amount of money that is borrowed, the rate of interest and the agreed payment by installments are also recited.

Thereafter follows the covenants whereby the mortgagor covenants to do certain things, including that of conveying the property unto the use of the mortgagee. The mortgagee also gets the right to enter the property to view and to inspect the state and condition. One important element of the mortgage is the power of sale that is written into the contract where the mortgagor could sell the property for failure to observe certain covenants in the contract. Will continue with this next week. Enjoy.

Ada Johnson is a solicitor and barrister-at-law.

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