Mortgage -Part III

Over the last two weeks, we have been looking at the legal mortgage. Besides the legal mortgage there is the equitable mortgage. Black’s Dictionary describes this as a transaction that has the intent, but not the form of a mortgage and that a court of equity will treat as a mortgage. So if a legal mortgage does not meet the requirement of a legal mortgage, it nonetheless comes into effect by an agreement to create a legal mortgage.{{more}} It can come into effect by the creation of an equitable charge for the repayment of the loan. The mortgagee will have the right to foreclose on the property and to sell it or to appoint a receiver in case of non-payment.

Part 66 of Civil Procedure Rules 2000 provides certain forms of relief for both the mortgagor and the mortgagee.

These include:

1. foreclosure

2. delivery of possession of the mortgagee

3. payment of moneys secured by a mortgage;

4. possession of a mortgaged property;

5. reconveyance of the property or release from the mortgage

6. redemption of a mortgage; and

7. sale of a mortgaged property

What is foreclosure?

Black’s Dictionary describes foreclosure as a legal proceeding to terminate a mortgagor’s interest in property.

Where the mortgagor (borrower) has defaulted in his obligation under the mortgage, the mortgagee (lender) can foreclose on the property by undertaking the relevant court proceedings to end the mortgagor’s rights in the security and to initiate a force sale in order to satisfy the unpaid debt secured by the property.

Statute dictates the procedure that must be taken. After the court has given its order, the mortgagee could sell the property to a third party. The proceeds of the sale are shared among those concerned. The first payment goes towards the cost of the proceedings and sale. The mortgagee is the next to be paid. If any equity remains, this is paid to the mortgagor. In an earlier article we mentioned the power-of-sale foreclosure, which is a non-judicial foreclosure (the court is not involved). Judicial foreclosure is far more burdensome when compared to the power-of-sale foreclosure.

What is Equity of redemption?

The mortgagor has the right to also recover the property at any time before a foreclosure sale by paying the principal, interest and other costs that are due even the contractual date of redemption has already been passed unless there was power-of-sale foreclosure.

Re-conveyance or release of property

When the property is mortgaged the mortgagee promises to return the property when all obligations are met. The property is re-conveyed to the mortgagor. The document is filed at the Land Registry.

Ada Johnson is a solicitor and barrister-at-law.
E-mail address is: exploringthelaw@yahoo.com