Chapter 22 Self-test Questions

. What was the normal method of creating a legal mortgage of a legal freehold estate prior to 1926?

The freehold estate was conveyed to the mortgagee, subject to a proviso for redemption, ie a provision that if the debt is repaid on a named date, the mortgagee will reconvey the land to the mortgagor.

The grant of a very long lease (e.g. 3,000 years) subject to a proviso for 'cesser on redemption', ie if the debt is repaid on a named date, the lease automatically terminates.

A charge by way of legal mortgage.

By the mortgagor executing a deed, saying something like 'I, Charles Farns-Burns, create a mortgage in favour of Bloggs' Bank over my farm, Highacres'.

. What was the normal method of creating a legal mortgage of a legal lease prior to 1926?

The leasehold estate was assigned to the mortgagee, subject to a proviso for re-assignment on redemption.

The grant of a sub-lease one day shorter than the lease being mortgaged, with a provision for 'cesser on redemption' if the debt is repaid on an agreed named date.

A charge by way of legal mortgage.

By the mortgagor executing a deed saying something like 'I, Algernon Postlethwaite, mortgage my 99-year lease of my home, High Mansion, to Brown's Bank Ltd.'

. What is the normal method of creating a legal mortgage of a legal freehold estate, unregistered title, after 1925?

The leasehold estate is conveyed to the mortgagee, subject to a proviso for redemption if the debt is repaid on a named date.

The grant of a very long lease (usually 3,000 years) subject to a proviso for 'cesser on redemption', ie if the debt is repaid on a named date the lease automatically terminates.

A charge by way of legal mortgage.

By the mortgagor executing a deed saying something like 'I, Sunil Patel, mortgage my house, 77 Threefountains Way, to the Southern Rock Bank'.

. John Smith is registered freehold proprietor of 37 Acacia Drive. He wants to create a legal mortgage in favour of National Eastminster Bank. What form should that mortgage take?

John creates a 3,000 year lease in favour of Eastminster Bank, with a proviso for cesser on redemption.

John transfers the freehold to Eastminster Bank, who become registered proprietor. They agree to re-transfer when the debt is repaid.

John executes a deed in which he says 'I, John Smith, create a mortgage in favour of National Eastminster Bank over my home, 37 Acacia Drive'.

John executes a mortgage by registered charge, using the current Land Registry form.

. In legal terms, what is meant by the phrase 'equity of redemption'?

The right to redeem the mortgage after the legal redemption date.

The sum total of all the mortgagor's rights with respect to the mortgaged land.

The right of the mortgagor to retain possession of the mortgaged land despite the existence of the mortgagee.

The right of the mortgagor to insist that if the mortgagee takes possession of the land, the mortgagor gets a good return from the land.

. In 1985, Stanley needed an overdraft. He went to see his bank manager with the title deeds to his fish-and-chip shop. He handed over the deeds 'as security', and the manager immediately authorised a £50,000 overdraft facility.
At the meeting between Stanley and the manager, nothing was put into writing. What was the (legal) result of this meeting?

There was no valid mortgage of any kind. The overdraft will be an unsecured debt, owed to the bank.

There is an immediately-valid equitable mortgage.

The mortgage is 'unenforceable', but will become enforceable (in effect validated) when Stanley signs a memorandum setting out the terms and conditions of the mortgage loan.

The mortgage is 'unenforceable', but will become enforceable (in effect validated) when the bank manager signs a memorandum setting out the terms and conditions of the mortgage loan.

. Same facts as in the previous question (Question 7), except that the meeting between Stanley and the manager took place in 1994. What was the (legal) result of the 1994 meeting?

There was no valid mortgage of any kind. The overdraft will be an unsecured debt, owed to the bank.

There is an immediately valid equitable mortgage.

The mortgage is 'unenforceable', but will become enforceable (in effect validated) when Stanley signs a memorandum setting out the terms and conditions of the mortgage loan.

The mortgage is 'unenforceable', but will become enforceable (in effect validated) when the bank manager signs a memorandum setting out the terms and conditions of the mortgage loan.

. Same facts as in Question 6 (a valid equitable mortgage by deposit of title deeds created in 1985). Is there anything the bank should do to ensure that its mortgage has priority over other transactions?

Hang on to the title deeds until the overdraft is paid off.

Register its mortgage as a general equitable charge on the computer at Plymouth.

Register its mortgage as an estate contract on the computer at Plymouth.

Protect its mortgage by entering a notice on the register of title.

. The Duke of Hertfordshire has a life interest under a trust of land of the vast Scratchworth Estate. Tim and Tom are the trustees and registered proprietors. The Duke is an enterprising young man who wants to mortgage his life interest to finance a business venture. Can he do this and, if so, how?

He cannot mortgage his interest.

He can mortgage his interest by assigning it to the mortgagee (lender), with a provision for re-assignment on redemption.

He can create a mortgage by registered charge.

He can create a mortgage by deposit of the land certificate.

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