LAND LAW 2.6 MORTGAGES; GENERAL INTRODUCTION
A mortgage was defined by Lindley MR in Santley V Wilde as “…A legal or equitable conveyance of title as a security for the payment of a debt… subject to a condition that title shall be reconveyed if the mortgage debt is liquidated”. Where a person (mortgagor) conveys his (legal or equitable) interest in land as collateral to secure loan from another (mortgagee) with a provision for redemption upon repayment of the loan-Olowu V Miller Bros Ltd.
Benefits of a mortgage: Land is a preferable security because there is no need for physical control of the property, title is usually reflected in the title deed and land stands the test of time and inflation (in fact, the value rises). Differences between a Mortgage and a:
Pledge: at customary law, is created where the owner-occupier of land (pledgor) gives possession and use of the land to the (pledgee) creditor in order to secure an advance of money. He shall retake possession once the debt is repaid. A mortgage gives proprietary interest while a pledge gives possessory interest. Unlike a mortgage, a pledge cannot be vitiated/defeated by lapse of time-Okoiko V Esedalue Furthermore, delivery of possession is not a sine qua non for mortgage-Re Morrit.
Lien: is the unpaid vendor’s right to detain his goods… which arises by operation of the law (usually where the buyer has not paid in full). A mortgage vests title while a lien cannot. Unlike a mortgage which arises by agreement of the parties, a lien arises by operation of law.
A Charge: is an appropriation of specific property for the discharge of an obligation without transfer of title or possession to the obligee. Generally, the chargee only has a right to payment out of the property but a mortgagee usually has title in the property. (Although under the PCL States, a charge by deed expressed to be by way of legal mortgage grants the chargee all rights and remedies of a legal mortgagee-Section 110 PCLLWN)
Sale: total alienation without right to redeem.
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