UNIVERSITY OF TECHNOLOGY, JAMAICA

FACULTY OF LAW 2020/2021

LECTURE NOTES- MORTGAGES

LECTURER: MS. SHANICE N. TROWERS

PROGRAMME: Bachelor of Laws

STAGE/YEAR: Year III Semester I

MODULE TITLE: Real Property II

Key definitions:

Mortgage: A mortgage may be defined as a conveyance or other disposition of an interest in

property designed to secure the payment of money.

Mortgagor- A person who takes out a mortgage in order to buy property.

Mortgagee- Mortgagees are entities that lend money to borrowers who want to purchase real
property like a home.

Introduction

A mortgage of land may be legal or equitable. In layman’s terms a mortgage is considered to

be a real tangible security for the repayment of money that has been lent by one party to
another.

In this legal exercise the creditor (known as the mortgagee) obtains rights over the property of
the debtor (known as the mortgagor), which is enforceable and exercisable in priority to the
claims of all other unsecured creditors. To have this status in law or in equity of being an
enforceable mortgage, the instrument of mortgage must contain a proviso that the land, the
subject of the mortgage loan, will be reconveyed to the mortgagor once the loan has been repaid.
Where the mortgage is secured by land for which there is a registered title, then an endorsement
is placed on the title which states the essential details of the mortgage loan. In the case of
Jamaica, the duplicate certificate of title is held by the mortgagee until the loan has been repaid

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in full. Upon such repayment, a discharge of mortgage is endorsed on the title and then the title is
returned to the mortgagor free and clear of the indebtieds.

In Jamaica, the duplicate certificate of title must be submitted to the officer of titles and this
dealing must be entered on the original title, which is retained at the office of titles, and it must
be replicated on the duplicate certificate of tile, which is returned to the custody of the mortgagee
until the loan has been repaid.

Where the property used to secure the mortgage loan is unregistered land (where a common law
conveyance exists) the mortgage is created by the mortgagor transferring his legal interest in the
property to the mortgagee with the inclusion of the specific condition that the land will be
reconveyed to the mortgagor when he has repaid the loan in full. In essence therefore, legal
mortgages are created by an endorsement of this dealing on the registered title to the land and in
the case of unregistered land it is created by way of transfer of land and the retransfer of same
when the loan has been repaid.

On the other hand, equitable mortgages are created as follows:

1. By the deposit of title deeds to secure the loan in the absence of an instrument of
mortgage;

2. In accordance with the principles laid down in the case of Walsh v. Lonsdale ;

3. Where there is an agreement for a legal mortgage;

4. Where the mortgagor has only an equitable interest in the property.

It should be noted that in most instances if not all, the sum of money loaned by way of mortgage
of land usually has a direct relationship to the value of the land. In other words it is extremely
unlikely that an individual will receive a mortgage loan that exceeds the value of the land.

The Rights of the Mortgagor

A mortgage deed refers to the loan amount and conveys the mortgage property to the mortgagee
subject to the right of the mortgagor to redeem his property on fulfillment of the contractual loan
obligations. The rights of the mortgagor are therefore essentially the right to redeem his property

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on repayment of the loan to the mortgagee. The right to redeem is treated differently in law and
in equity. The first right can therefore be classified as the legal right to redeem. At common
law the mortgagee owned the property, but the mortgagor had the chance to recover his
property. This had to be on a particular day at a particular time, as stipulated in the contract.
This was called the legal right to redeem and was based on the contractual agreement between
the parties. If the mortgagor did not repay the money on the correct day, the property could be
claimed by the mortgagee as his own. This could be worth much more than the actual sum
owed.

The second right of the mortgagor, the equitable right to redeem, is dealt with in the old case
of Thornborogh v. Baker 1675 36 ER 1000 – Lord Nottingham said “in natural justice and
equity, the principle right of the mortgagee is to the money, and his right to the land is only as a
security for the money”. The common law rules were seen by the courts of equity as retched and
equity viewed it as unconscionable that a mortgagor should lose his property merely because of
his failure to make prompt payment of repayment of the loan.

Equity therefore, allows the mortgagor to redeem at any time after the contractual date for
redemption has passed. In equity the right to redeem must not be unduly restricted and any
provision that is calculated to “clog the equity of redemption” will be voided by the courts. The
equity of redemption is regarded as the sum total of the mortgagor’s interest in the mortgage
property after the mortgage has been created. The equitable right to redeem arises after the
contractual date for redemption has passed where as the equity of redemption come into
existence as soon as the mortgage is created.

Clogging the Equity of Redemption

The rules of equity in most all spheres including mortgages have always sought to promote fair
dealings and to prevent oppressive behaviour and in the case of mortgages equity will not allow a
mortgagee to take advantage of the financial circumstances of the mortgagor. A mortgagee can
be deemed to be taking advantage of a mortgagor by exhibiting any of the following modes of
conduct:

1. Excluding the mortgagor’s right to redeem by reserving in the mortgage instrument an

option to allow the mortgagee to purchase the mortgagor’s property;

2. By postponing the right to redeem for an unusually long time;

 3. By reserving certain benefits to be enjoyed by the mortgagee after redemption (this
practice is known as collateral advantages to the mortgagee).

Excluding the Mortgagor’s Right to Redeem

In equity any provision which excludes or restricts the mortgagor’s right to redeem may be held
void. The courts of equity will not uphold any provision in a mortgage instrument which gives
the mortgagee any particular right, advantage or privilege. A good case in point is that of Samuel
v. Jarrah Timber and Wood Paving Corp Ltd 1904 AC 323 – their lordships held that the
company had a right to redeem and to have the option to purchase contained in the mortgage
instrument in favour of the mortgagee declared illegal and void.

It should be noted however that their lordships expressed reservations as in their view it was not
for the courts to interfere with contracting parties where there is a perfectly fair bargain made
between two parties. The view of their lordships is clearly apparent in the earlier case of Reeves
v. Lisle 1902 AC 461 – the option to purchase the mortgage property was upheld as the option
was contained in a separate document and was agreed to between the parties some time after the
instrument of mortgage which did not contain any oppressive conditions in the eyes of the court.
It was therefore felt that the new agreement between the parties was an independent transaction
and not an oppressive or unconscionable one.

Also see the cases of Lewis v Frank Love Ltd [1961] 1 WLR 261- An option to purchase the
mortgaged property was included in a separate document but it was drawn up
contemporaneously on the same day with the mortgage deed. The court held there to be a clog
or fetter on the equity of redemption and refused to uphold the term.

Modern cases:
Jones v Morgan [2001] EWCA Civ 995- Morgan and his brother used some land as security
for a loan from Jones. Morgan intended to develop this land. The loan was later varied and
included a term whereby Morgan agreed to transfer to Jones a one-half interest in the property
for which Jones did not pay any sum. When Morgan did not transfer the interest Jones claimed
an order for specific performance. The Court of Appeal dismissed the claim partly on the
grounds that the agreement was a clog on the equity of redemption. The fact that the agreement
to transfer the share was made three years after the mortgage had been agreed did not prevent
the provision from being viewed as part of the mortgage.
See also the case of Warmborough Ltd v Garmite Ltd [2003] EWCA Civ 1544

Postponing the Right to Redeem

Equity ensures that unconscionable terms contained in an instrument of mortgage will not be
enforced. It will therefore not commit a postponement of a right to redeem except in certain
restricting circumstances. These circumstances are:

Where it is not oppressive: Knights Bridge Estate Trust Ltd. v. Bryne 1939 Ch 441 – Sir
Wilfred Greene MR said “equity is concerned to see two things – that the essential ingredients
of a mortgage transaction are observed, and the other, that oppressive and unconscionable
terms are not enforced.

Where it does not make the right to redeem elusory: Fairclough v. Swan Brewery Co Ltd 1912
AC 565
Collateral Advantages

A collateral advantage in the mortgagee’s favour, denotes some benefit conferred on him by the
mortgagor in addition to repayment of the loan plus interest. The general rule is that a mortgagee
will not be allowed to enjoy any benefit or privilege other than the repayment of the principal
sum secured under the loan and any interest accrued thereon. However, equity will allow and
uphold a collateral advantage in favour of the mortgagee provided that same does not unfairly
restrict redemption by the mortgagor. In order to allow the collateral advantage two general rules
apply:

a) That the advantage is not deemed to be unfair or unconscionable:

City Land and Property (Holdings) Ltd v. Dabrah 1967 2 ALL ER 639

Multiservice Bookbinding Ltd v. Marden 1978 2 ALL ER 489

b) That the advantage does not unfairly restrict redemption:

Biggs v. Hoddinott 1898 2 Ch 307

Nokes v. Rice 1902 AC 24

Kreglinger v. New Patagonia Meat Whole Storage Co Ltd 1914 AC 25- Kreglinger marked a
turning point in the law on collateral advantages in mortgages because it allowed such terms to continue
after the mortgage has been redeemed.

See also the case of Re Petrol Filling Station,

The Rights of the Mortgagor in Possession

Certain rights accrue to a mortgagor who retains possession of the property. It is very common
that a mortgagor is not in fact dispossessed of the property during the life of the mortgage and it
is therefore very rare for a mortgagor not to retain possession during the term of the mortgage
loan. A mortgagor who remains in possession of the mortgage property has the rights:

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 1. The right to all rents and profits derived from the premises

2. The right to sue for trespass or any wrong which might be committed on the land by a
third party

3. The right to grant valid leases under and by virtue of the common law or any applicable
statutory provision:

Iron Trades Employer Insurance Association v. Union Land and House Investors Ltd
1937 1 ALL ER 481

Quennell v. Maltby 1979 1 ALL ER 568

The rights of the mortgagor in possession is actually contained in specific statutory provisions in
several Commonwealth Caribbean Jurisdiction. Some of these are as follows:

Jamaica: Section 21 of the Conveyancing Act of Jamaica

Trinidad and Tobago: Section 37 of Chapter 27 #12

Bahamas Section 20 of Chapter 128

Barbados: Section 108 of Cap 236

Rights of the Mortgagee

There are five (5) main recognized rights that the mortgagee possesses upon extending a
mortgage loan to a mortgagor on the security of land. These five (5) rights are as follows:

1. The right to sue on the personal covenant – As soon as the date stipulated for the
repayment of the loan has passed, the mortgagee can sue under the covenant contained in
the mortgage deed to recover the principal sum and any arrears of interest. Case: Halifax
Building Society v. Clarke (1973) 2 All ER 33.

With respect to an equitable mortgage, the equitable mortgagee also has the right to sue
for recovery once the repayment date has not been observed.

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2. The right to enter into possession of the mortgage property – A popular quotation
attributable to Harmond J in the leading case of Four Maid’s Ltd v. Dudley Marshall
Properties Ltd 1957 2 All ER 35, where the judge said that a legal mortgagee has a right
to take possession of the mortgage property “before the ink is dry on the mortgage”.
Harmond J said further “the right of a mortgagee in possession… has nothing to do with
the fault on the part of the mortgagor.” In practice however, a mortgagor will not take
possession of the mortgage property except in circumstances where there is a default on
the part of the mortgagor and this is done by the mortgage as a precursor to exercising his
statutory power of sale.

In Barbados however, the Common law right of the mortgagee to enter into possession
has been abolished by virtue of Section 98 (2)(b) of the Property Act Cap 236 of
Barbados. In Barbados, when a mortgagor is actually in possession of the property the
mortgagee will have to make an application to the court for the recovery of possession.
Cases:
Holders Ltd v. St. Hill 1980 15 Bard LR 206
Bermingham Citizen’s Building Society v. Caunt 1962 1 All ER 163
Bank of Nova Soctia v. Morrison 1995 SC Bahamas No 1579 of 1991
City Bank NA v. Major 2001 CA Bahamas No. 28 of 1996 Marriott
v. Anchor Reversionary Co. 1961 45 ER 846
White v. City of London Brewry 1889 42 Ch 237
Quennel v. Maltby (note citation in prev. notes)
Baksh General Wholesaler’s Ltd v. Republic Bank Ltd 1999 HC TT No 1555 of 1998 –

3. The right to appoint a receiver – Mortgagee have a statutory right to appoint a receiver
for the mortgage property when the mortgage has been made by deed. In many
Commonwealth Caribbean Jurisdiction there are statutory requirements that must be
followed before the appointment of a receiver. Some of them are as follows:

Jamaica – Section 22 – 25 of the Conveyancing Act 1973

Trinidad and Tobago – Section 39 – 45 of Chap 27 No. 12
Barbados – Section 110 – 116 of Cap 236

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 Bahamas – Section 21 – 23 of Cap 138
Bermuda – Section 30 – 33 of the Conveyancing Act 1983
The appointment of a receiver must be in writing in accordance with the statutory
provisions. The right to appoint a receiver arises in the same circumstances as the
statutory power of sale (discussed below) and the receiver has a duty to account for the
finances of the property by collecting all rents and profits and paying out any arrears in
the loan payments before accounting to the mortgagor for the residue. In the same way as
the legal mortgagee, the equitable mortgagee may exercise the right to appoint a receiver
provided that the equitable mortgage has been made by deed.

4. The Powers of Sale (the right to sell the mortgaged property) – Statutory Provisions give
the mortgagee powers to sell the mortgaged property without the intervention of the
courts when the mortgage has been made by deed. The statutory requirements for the
exercise of powers of sale by the mortgagee are contained in the same sections as that
which have been outlined under the right to appoint a receiver above. These are:

Jamaica – Section 22 – 25 of the Conveyancing Act 1973

Trinidad and Tobago – Section 39 – 45 of Chap 27 No. 12
Barbados – Section 110 – 116 of Cap 236
Bahamas – Section 21 – 23 of Cap 138
Bermuda – Section 30 – 33 of the Conveyancing Act 1983

In Jamaica however, in addition to the statutory requirements stipulated in the

Conveyancing Act 1973, a mortgagee is also bound to absolute observe the statutory
provisions contained in Sections 105 and 106 of the Registration of Titles Act of Jamaica,
which statute governs the exercise of the powers of sale with respect to registered land
ONLY. The powers of sale arise as soon as a repayment date of the entire loan or the
payment of any instalment under the loan is passed due. However, the powers of sale
only become exercisable by the mortgagee on the occurrence of three specific conditions:

a. Some interest under the mortgage is two (2) months or more on arrears;

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 b. Notice requiring repayment has been properly served on the mortgagor and this
notice clearly identifies a default in payment and that such default has continued
for a period of three (3) calendar months prior to the service of the notice of
default;
c. There has been a breach of some provision contained in the statute or contained in
the instrument of mortgage which has not been observed or performed by the
mortgagor or someone acting on his behalf.

Cases:
Derrick v. Trinidad Asphalt Holdings Ltd 1979 33 WIR 273
Dickson and Playa Del Sol Ltd 1982 1 Bz LR 370

Duty of Care of a Mortgagee in Exercising Powers of Sale

The mortgagee who opts to exercise his statutory powers of sale is not obliged to ensure
that he gets the best price for the mortgage property. His obligation is to act in his own
interest and not that or the mortgagor. It is absolutely essential however, that the
mortgagee does not act negligently in exercising the powers of sale and he is required by
law to act in good faith and is deemed to have a duty to take all reasonable precautions to
obtain the true market value for the mortgage property as at the date of the sale.

Cases:
Cuckmere Brick Ltd v. Mutual Finance Ltd 1971 2 All ER 633, Judgement of Salmon LJ
Kennedy v. De Trafford 1897 AC 180
Tomlin v. Luce 1889 43 Ch D 191
Dereckett v. Rapid Volcanising Co. Ltd 1988 25 JLR 130
Adams v. Workers Trust and Merchant Bank Ltd 1992 29 JLR 447
Paradise Manor v. BNS 1985 CILR 437
Bank of Butterfield Cayman Ltd v. Craig 1992-3 CILR 409
Blake v. First Jamaica National Bank 1994 31 JLR 450

The mortgagee who exercises his power of sale is deemed to be the trustee of the
proceeds of sale and must allocate same to the payment of all expenses attendant to the

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 sale and to the repayment of the mortgage loan an interest thereon. The residue must then
be passed on to the mortgagor to whom the mortgagee must provide a detailed statement
of account. The conclusion of a sale exercised pursuant to the statutory powers of sale
operates to extinguish the mortgagor’s equity of redemption. It is very important to note
that the exercise of the powers of sale by the mortgagee can be set aside by the courts if
there is evidence that the mortgagee sold the mortgage premises in bad faith or without
observing the required duty of care.

Cases:
Seepersad v. Colonial Life Insurance Trinidad Ltd 1990 HC T&T No 404 of 1990
(unreported)
Alpras Investment Ltd v. NCB of T&T 1992 HC T&T 289 of 1991 (unreported)
**Lord Waring v. London and Manchester Insurance Co. Ltd 1935 Ch 310, Judgement of
Crossman J at p 318.
Once a mortgagee exercises the powers of sale either by statute or as a result of a breach
of covenant contained in the mortgage deed, he is entitle to sell the property in question
either subject to prior charges or not and he may opt to sell same by public auction or by
private treaty. As mentioned before, once the sale has been concluded the equity of
redemption is extinguished. Case: Lord Waring v. London and Manchester Insurance Co.
Ltd

Also distinguished as well are the rights of all subsequent mortgagees but the rights of
prior mortgagees remain intact and the purchaser may take subject to prior mortgages see
Section 24(1) of Conveyancing Act 1973 of Jamaica

5. The Right to Foreclose on the Mortgage – Once the date of the mortgage passed the
mortgagee has a right to commence an action in court to extinguish the equitable right to
redeem on the part of the mortgagor and acquire for himself both legal and equitable
rights to the property. This is referred to as the right to foreclosure but it is not
exercisable by the mortgagee until repayment of the loan becomes due in law and the
mortgagor is in breach of the mortgage agreement by not meeting the obligations of

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 repayment on the specified date for so doing. A foreclosure order affects all subsequent
mortgages but does not affect prior mortgages. In Jamaica, in addition to the statutory
provisions contained in the Conveyancing Act 1973, the Registration of Titles Act
similarly outlines the statutory procedure for foreclosing without the intervention of the
courts. Foreclosure by court order is in two distinct stage which are as follows:

a) The court first makes a foreclosure order nisi

b) The court will make a foreclosure order absolute once the conditions in the nisi
have been complied with. When the foreclosure absolute has been made the court
will be reluctant to reopen the foreclosure proceedings. Cases: Perry v. Barker
1806 33 ER 269; Campbell v. Holyland 1877 7 Ch D 166

The Rights of the Equitable Mortgagee

The equitable mortgagee has the right to sue for money due in the same manner as the legal
mortgagee. He may also take foreclosure proceedings in the same manner. However, as the
equitable mortgagee does not have the legal estate vested in him, a court order will have to be
first obtained which will direct the mortgagor to convey the land in question to the mortgagee
free from the right to redeem. Case: James v. James 1873 LR 16 EQ 153

An equitable mortgagee is only entitled to exercise statutory powers of sale and the appointment
of a receiver where the equitable mortgage has been made by deed, that is in circumstances
where there has been a deposit of title deeds accompanied by a memorandum of deposit made by
deed. Since an equitable mortgagee would have no legal estate to convey a purchaser when
exercising his powers of sale one of the following device may be employed in order to facilitate
a conveyance to a purchaser:

a) The insertion of a irrevocable power of attorney contained in the memorandum of deposit

of title deeds which empowers the mortgagee to convey the legal estate; or
b) The insertion of a declaration of trust in the memorandum whereby the mortgagor
declares that he holds the legal estate upon trust for the mortgagee. This latter device will

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 enable the mortgagee to vest the legal estate in himself or the purchaser. Barclays Bank
Ltd. v. Bird 1954 1 All ER 449; Ocean Accident and Guarantee Co. Ltd v. Ilford Gas Co.
1905 2 KB 493

The Right of a Mortgagee to Consolidate

A mortgagee to whom two or more mortgagee have been vested by a single mortgagor may
consolidate these mortgages so that one cannot be redeemed without the other. Case: Jennings v.
Jordan 1881 6 AC 698. Statutory Provisions: Section 20 of the Conveyancing Act 1973 of
Jamaica; Section 103 of Cap 236 Barbados; Section 19 of Chapter 138 Bahamas; and Section
35 of Chapter 27 No. 12 Trinidad and Tobago.
In most of the statutory provisions mentioned as it related to Commonwealth Caribbean
jurisdictions there is a provision that there shall be no right to consolidate mortgages unless a
contrary intention is expressed in one or more of the mortgage deeds.

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