Mortgage protection in unregistered conveyancing
There are two forms of protection in unregistered conveyancing: retention of the title deeds by the mortgagee or registration under the Land Charges Act (LCA) 1925/1972. A legal mortgagee is required to take the title deeds of the property, and the mortgage is more accurately described as a legal mortgage plus deposit of title deeds. The first legal mortgagee is protected against any subsequent mortgagee since the fact that the title deeds are no longer available for deposit is notice of the prior charge. Legal and equitable mortgagees with deposit of title deeds need do no more to protect themselves.
A mortgagee who does not hold the title deeds must register his mortgage in the Land Charges Registry. The register entry depends upon the type of mortgage. Legal mortgages without deposit of title deeds are registered as a class C.i charge; equitable mortgages by memorandum as a general equitable charge under Class C.iii; and an agreement to create a legal mortgage as an estate contract under Class C.iv charge. Failure to register renders the mortgage void against a subsequent purchaser for value of the legal estate irrespective of notice, although, in the case of a Class C.iv charge, the purchaser must be for money or money’s worth. A purchaser is defined as ‘any person (including a mortgagee or lessee) who, for valuable consideration, takes any interest in land or in a charge on the land’.
A mortgagee may use a priority notice. This is an application to the Land Charges Register by a prospective mortgagee intending to register a mortgage, at least 15 days before that registration is to take place. If the registration takes place within 30 days of the priority notice, registration takes effect as if it had been made at the time the charge was created.
Where the mortgaged land is owned by a company, the charge must be registered within 21 days of the date of the creation of the charge.
Mortgage protection in registered land
Registered conveyancing always requires some entry on the register of charges. The protection will depend upon the nature of the register entry, which depends on the nature of the charge.
Legal mortgages will generally be converted to registered charges effected by sending to the registrar the legal charge, the land certificate plus the registration fee. The charge will be entered in the charges register, the land certificate will be retained and the registry will issue to the mortgagee a charge certificate showing the register entry of the mortgage. Subsequent legal mortgages are protected in the same way, but the mortgagee will be subject to the earlier registered charge and is issued with a second charge certificate listing the earlier charge followed by the later charge held by the mortgagee.
For equitable mortgages with deposit of the land certificate, protection is by notice of deposit of land certificate which gives the mortgagee notice of any attempt to register any subsequent charge or dealing in the property. The mortgagee then protects his interest within the period allowed, failing which the mortgage will be ‘warned off’. This is also sometimes used by legal mortgagees since it is cheaper than registration. Other equitable mortgages obtain identical protection by means of a caution against dealings.
Where the land is owned by a company, there must be registration of both legal or equitable mortgages with the registrar of companies within 21 days of the creation of the charge, followed by registration with the Land Registry.
Questions
1. What forms of security are used to reimburse the lender?
2. Haw can the mortgagee recover the loan?
3. What systems are used for creating a legal mortgage?
4. What are the ways of creating an equitable mortgage?
5. In what case may a mortgage over land be set aside?
6. What are the two forms of protection in unregistered conveyancing?
7. How is a purchaser of land defined in the Land Charges Act 1925/1972?
8. When must a priority notice be made?
9. How are legal mortgages converted to registered charges?
10. How is mortgagee’s interest protected in case of equitable mortgage with deposit of land certificate?