Mortgages

• Pages: 188-217

DOI: 10.4324/9781003186946-10

A mortgage has been defined as ‘a conveyance or other disposition of an interest

in property designed to secure the payment of money or the discharge of some

other obligation’.1 Amortgage of land may be legal or equitable, and it may relate

to freehold or leasehold land.

A mortgage is essentially a real security for the repayment of money lent. The

creditor (the ‘mortgagee’) obtains rights over the property of the debtor (the ‘mort-

gagor’), which are exercisable in priority to the claims of the debtor’s general– that

is, unsecured– creditors. Since a real security gives priority over general creditors, it

is more attractive to a creditor than a debtor’s personal credit or a personal security,

such as suretyship, the usefulness or ecacy of which will depend on the solvency of

the debtor or guarantor. Another feature of a mortgage is that, so long as the mort-

gaged property remains worth as much as the amount of the debt, the mortgagee

will be sure to receive payment of the debt in full; if, on the other hand, the property

depreciates in value so that it becomes worth less than the loan, the mortgagee will

recover the value of the property, but, with respect to the balance, he/she will be in

no better position than the mortgagor’s general creditors.

A charge may be used as an alternative to a mortgage. Acharge is the appro-

priation of real or personal property for the discharge of a debt or other obliga-

tion, and diers from a mortgage in that the chargee is not vested with either the

general or the special property in the subject matter of the charge, nor does he/

she have possession of the subject matter. However, the chargee is entitled to real-

ise his/her security in much the same way as a mortgagee.

In modern times, mortgages and charges are used as security for the purchase

of land and dwelling houses by private individuals, or for the purchase of business

premises; in the Caribbean, mortgagees are most often banks, building societies

(especially in Jamaica), or insurance companies.

FORM

A legal mortgage of unregistered land may be created by a conveyance of the mort-

gagor’s fee simple estate to the mortgagee subject to a proviso that, upon redemption

(that is, repayment of the debt), the property should be reconveyed to the mort-

gagor.2 Where the mortgagor has only a leasehold estate, a mortgage is created by

subdemise, subject to a proviso for cesser on redemption. This method of creating

1 Cheshire and Burn, Modern Law of Real Property, 15th edn, 1994, London: Butterworths, p 657.

2 In The Bahamas, once the loan is repaid by the mortgagor to the mortgagee, and an acknowl-

edgment or receipt for all the monies due under the mortgage is issued to the mortgagor,

endorsed on or annexed to the indenture of mortgage and recorded at the Registry of Records

together with the certificate of the Registrar General issued pursuant to s32 of the Conveyanc-

ing and Law of Property Act, Ch 138, the mortgage is vacated and the estate in the property

comprised in the mortgage is revested in the mortgagor by operation of law, without the need

for an actual reconveyance. See Wilson Distributors Ltd v Strachan (2001) Supreme Court, The

Bahamas, CL No 1252 of 1998, per Osadebay Sr J.

CHAPTER 10

MORTGAGES

Mortgages 189

mortgages applies in most Commonwealth Caribbean jurisdictions.3 In Barbados, a

mortgage of a legal estate can be eected only by a charge by deed.4

A mortgage of registered land is created by execution of a memorandum of

mortgage or charge in the prescribed form, which must be lodged for registration in

the Land Registry.5

Equitable mortgages are created:

(a) by deposit of title deeds (or deposit of a duplicate certificate of title to regis-

tered land),6 usually with a bank to secure an overdraft or loan;7

(b) under the Walsh v Lonsdale principle, where there is an agreement to grant a

legal mortgage;8 or

(c) where the mortgagor has only an equitable interest in property, by assign-

ment of the interest to the mortgagee.

RIGHTS OF THE MORTGAGOR

Legal right to redeem

A mortgage deed refers to the loan and conveys the mortgaged property to the mort-

gagee subject to the right of the mortgagor to redeem (that is, to repay the loan plus

interest and recover his/her property) on a fixed date, which is, by tradition, nor-

mally six months from the date of execution of the mortgage. There is, therefore, a

contractual right to redeem on the stipulated date. At common law, if the mortgagor

failed to redeem his/her property onthe exact day fixed by the agreement, then the

estate of the mortgagee became absolute and the mortgagor’s interest in the land

3 See, eg, ss27, 32–35, 48 of the Conveyancing and Law of Property Act, Ch 56:01 (Trinidad and

Tobago); s17 of the Conveyancing and Law of Property Act, Ch 138 (The Bahamas); s18 of the

Conveyancing Act ( Jamaica); cf ss64 and 65 of the Law of Property Act, Cap 190 (Belize). See also

Canadian Imperial Bank of Commerce v Wells (1996) Supreme Court, The Bahamas, No 287 of 1995.

4 Section96 of the Property Act, Cap 236. Unlike in the case of the conventional mortgage, the

chargor by deed can create successive legal mortgages (charges) on his/her land.

5 See, eg, s103 of the Registration of Titles Act ( Jamaica); s75 of the Real Property Ordinance,

Ch 56:02 (Trinidad and Tobago); Land Registration Act, Cap 229, Pt VIII (Barbados).

6 See, eg, s59 of the Title by Registration Act, Cap 279 (StKitts/Nevis); s62 of the Title by Reg-

istration Act, Ch 56:50 (Dominica). See Caines v Barclays Bank plc (2000) High Court, StKitts/

Nevis, No 69 of 1997.

7 In Mapp v Barclays Bank International Ltd (1992) 43 WIR 30, Court of Appeal, Barbados, a husband

was sole owner at law and trustee of the matrimonial home, but his wife had an equitable interest

in the property by virtue of her financial contribution to its purchase. Unknown to the wife, the

husband created an equitable mortgage by depositing the title deeds with the respondent bank.

Williams CJ held that, in the absence of any fraud or negligence on the part of the wife, her

equitable interest, being earlier in time, had priority over the bank’s equitable mortgage.

An equitable mortgagee by deposit is entitled to call for a legal mortgage, even in the absence

of an express agreement to execute a legal mortgage, unless the right is excluded by agree-

ment, and a deposit of title deeds by a person other than the debtor is enforceable in the same

manner: Barclays Bank plc v Clarke (1998) Supreme Court, The Bahamas, No 517 of 1996, per

Dunkley J (Ag).

8 An example is Monsegue v First Citizens Bank Ltd (2013) Court of Appeal, Trinidad and Tobago,

Civ App No 224 of 2011, where it was held that a court can decree specific performance of

the agreement, ordering the mortgagor to execute a legal mortgage, which can then be entered

on the registered title to the land.