Introduction
Much of the law on mortgages is directed at the protection of mortgagees. It achieves this by imposing obligations on the mortgagor and conferring rights on the mortgagee that ensure, first, the continued protection and maintenance of the mortgaged property and, second, the efficient and effective enforcement of the security on default by the mortgagor. These robust mortgagee protections stand juxtaposed against the relatively weak protections available to mortgagors. This chapter analyses those limited mortgagor protections with particular focus on three key aspects of Torrens system mortgages law: redemption, remedies (specifically, the mortgagee's power of sale) and priorities.
Background
Securities generally
A mortgage is a form of security: rights given in respect of property to ensure the performance of a personal obligation, usually the repayment of a loan. It would be very rare in the 21st century for a credit provider to lend money without insisting on some form of security. Enforcement of an unsecured loan requires the lender to take expensive, lengthy court action. In addition, the lender runs the risk that the borrower will not be in a financial position to repay the loan, particularly if the borrower is facing insolvency or bankruptcy. By contrast, the advantage of a secured loan is that the lender can proceed against the secured property in the first instance. This may result in selling the property over which the security has been granted. The secured lender will recover the outstanding loan from the proceeds of that sale.
While a security interest may be granted over any property, a mortgage over land is commonly regarded as the best form of security. In Australia, land generally retains its value; its ownership can be verified with certainty (particularly under the Torrens system); it is relatively indestructible; and its whereabouts cannot be concealed. The focus of this chapter is on mortgages over Torrens system land.
Nature of a mortgage
At general law
At general law, a mortgage operates as a conveyance of the legal estate from the mortgagor to the mortgagee with an undertaking by the mortgagee to reconvey the legal estate to the mortgagor on payment in full of the mortgage debt, including interest and costs.