How successfully do you consider the law of mortgages balances the legitimate interests of lender and borrower, and what changes (if any) might usefully be made? A mortgage is a security for a loan. It is both a contract between a lender and a borrower, and the grant of a proprietary interest over the land of the mortgagor, granted to the mortgagee, with the provision that the mortgagee’s proprietary right over the mortgagor’s land shall cease on payment of the principle debt and interest and costs accrued. The duality of the mortgage means that both parties may have rights arising on both a contractual basis and a proprietary basis. The nature of the mortgage is that it is merely a security for the loan, thus the mortgagor should be able to redeem the mortgage and retain his property in an unencumbered state, so long as he repays the principle debt, and any costs and interests accrued. The importance of a mortgagor’s right to redeem is highlighted by the fact that he is entitled to both a contractual right to redeem, which is usually 6 months after the starting date of the contract, whilst also being entitled to the equitable right to redeem, which starts once the contractual right for redemption ends. This demonstrates that the mortgagor should always have the right to redeem as signified by the maxim, ‘once a mortgage, always a mortgage.’ Thus any attempts by the mortgagee to limit or exclude the mortgagor’s right to redeem is seen as undesirable. Consequently, the equity of redemption steps in to protect the mortgagor’s rights under the mortgage. For instance, any provision that removes or renders the right to redeem illusory will be struck out. This was illustrated in Toomes v Consent, whereby a mortgage provision stated that the property would become the mortgagor’s if a certain event had occurred. However, this provision was struck out as it would prohibit the mortgagor from being able to retain his property, which goes against the very nature of a mortgage being merely security for a loan. In the same vein, the case of Fairclough v Swan highlighted that a provision which renders the right illusory will be struck out as void. In this case, the date for redemption was postponed until 6 weeks before the end of the mortgage. It was held that the right to redeem was worthless to the mortgagor, and thus he was entitled to redeem earlier. Despite this, there is no absolute rule that the mortgagor should always be able to redeem early as illustrated by Knighsbridge, in which the mortgagor’s request to redeem early was rejected on the basis that the mortgagor had freely agreed that the courts would not be able to set aside any of the terms agreed by the parties. Moreover, the mortgagor is also protected from unconscionable terms in a mortgage. This was illustrated in Cityland Property v Dabrah in which the extortionate interest rates was deemed as unconscionable by the courts, and thus struck out as void. However, to be unconscionable the term must be more than merely unreasonable and must be imposed in a morally reprehensible way. Thus in Multiservice Bookbinding v Malden, although the interest rates had also been extortionate, the mortgage was not struck out since there had been equal bargaining power between the two parties and the term had not been unreasonably enforced in a morally reprehensible way. This demonstrates that although to a certain extent the mortgagor may be protected from unconscionable terms, there is a limit to this safeguard as it must be proved that it was more than merely unreasonable and also imposed in a morally reprehensible was, meaning that the mortgagee can easily get away from imposing extortionate interest rates so long as it was not enforced in a morally reprehensible way. Further, the mortgagor has the right to have collateral advantages made in favour of the mortgagee struck out. This is because a collateral advantage is seen as a clog on the mortgagor’s right to...
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